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The Conservative Onslaught

In economic and social affairs we value controversy and take it for granted; it is the essence of politics, its principal attraction as a modern spectator sport. This regularly keeps us from seeing how substantial, on occasion, can be the agreement on a broad range of ideas and policies within which the political debate proceeds.

Such has been the case with economic and social policy in the industrial countries since World War II. There has been a broad consensus in the United States extending to most Republicans and most Democrats. Similarly as between Christian Democrats and Social Democrats in Germany and Austria, the Labour and Tory parties in Britain, Liberals and Progressive Conservatives in Canada. Policies in France, Italy, Switzerland, and Scandinavia have generally conformed. The rhetoric in all countries has been diverse. The practical action has been similar.

There have been three points of convergence. All governments in all of the industrial countries, although differing in individual emphasis, have agreed that:

—There must be macroeconomic management of the economy to minimize unemployment and inflation. This, at least in the English-speaking countries, was the legacy of Keynes.

—There must be action by governments to provide those services which by their nature are not available from the private sector or on which, like moderate-cost housing, health care, and urban transportation, the private economy defaults.

—There must be measures—unemployment insurance, welfare payments, old-age pensions, medical insurance, environmental protection, job safety and product safety regulation—to protect the individual from circumstances with which he or she cannot, as an individual, contend. Much of this last has been thought of as smoothing and softening the harsh edges of capitalism.

No accepted term exists for the consensus which these policies comprise. Keynesian policy refers too narrowly to macroeconomic action; liberal or social democratic policy has too strong a political connotation for what has been embraced in practice by Dwight D. Eisenhower and Gerald Ford, Charles de Gaulle, Edward Heath, and Konrad Adenauer. I will not try to devise a new term; instead I will refer to the broad macroeconomic, public-service, and social-welfare commitment as the economic and social consensus or just the consensus. It is the present attack on this consensus—notably by Mrs. Thatcher’s government in Britain and by numerous of Ronald Reagan’s supporters in the United States—that I wish to examine.

The ideas supporting the economic and social consensus have never been without challenge. Keynesian macroeconomic management of the economy, the first pillar of the consensus, was powerfully conservative in intent. It sought only to correct the most self-destructive feature of capitalism, the one Marx thought decisive: its tendency to recurrent and progressively more severe crisis or depression. It left the role of the market, current income distribution, and property rights unchallenged. But numerous conservatives, especially in the United States, long equated Keynesian economics with subversion. There was some conservative discomfort when, thirty years after Keynes’s General Theory was published and the policy it prescribed was tending visibly to obsolescence, Richard Nixon, in an aberrant moment, was led to say that all Americans, including Republicans, were Keynesians now. A reference to the social welfare policies of the consensus has always encountered a slightly disapproving mood: something expensive or debilitating was being done for George Bernard Shaw’s undeserving poor. The need to compensate for the failures of capitalism in providing lower-cost housing, lower-income health care, and mass transportation has been accepted in all countries; but in the United States at least not many have wanted to admit that this is an unavoidable form of socialism. In all countries at all times there has been much mention of the cost of government, the level of taxes, the constraints of business regulation, and the effect of these on economic incentives.

It has always been likely, one should note, that an attack on the economic and social consensus would be taken to reflect the views of a larger section of the population than was actually the case. That is because articulate expression on public issues is strongly correlated with income, and the consensus is of the greatest importance for those of lowest income. Also the perception of a movement in political attitudes can be as important in its effect on politicians as a movement itself. These matters deserve a special word.

That a large share of all economic comment comes from people of comfortable means will not be in doubt. High social, business, and academic position gives access to television, radio, and the press. And professional access to the media also gives a relatively high income. It follows that the voice of economic advantage, being louder, regularly gets mistaken for the voice of the masses. On the need for tax relief, investment incentives, or a curb on welfare costs, the views of one articulate and affluent banker, businessman, lawyer, or acolyte economist are the equal of those of several thousand welfare mothers. In any recent year the pleas by Walter Wriston of Citibank or David Rockefeller of Chase Manhattan for relief from oppressive taxation, regulation, or intrusive government have commanded at least as much public attention as the expressions of discontent of all the deprived of the South Bronx. So the voice of affluence being resonant, it is frequently thought to be the voice of the masses. And since it is so interpreted by politicians, it has much the same effect on legislatures and legislation as a genuine shift of opinion.

In the last thirty-five years we have had many such shifts of opinion—all drastically to the right. Immediately after World War II, Professor Friedrich Hayek emerged as the messiah of a modern and comprehensive rejection of the state. His Road to Serfdom was hailed as the new sacred tablet. In 1964, Senator Goldwater was thought to represent a growing conservative mood that was sweeping the country. Messrs. Richard Scammon and Ben Wattenberg then identified this conservative mood with an unpoor and distinctly unradical Dayton housewife; this lady was for some months the new American archetype.1 The applause for Spiro Agnew was taken to mean the rejection, at long last, of the liberal elite. George Wallace was once thought to have a highly conservative message for the American people. Based on all past experience, it is the beginning of wisdom to doubt the depth and durability of great shifts of American opinion to the right.

However, even after an appropriate discounting, it seems certain that not only in the United States but in other industrial countries as well there is now an attack on the economic and social consensus that has a deeper substance. Mrs. Thatcher and Mr. Reagan have won elections. Much, if not most, of Mr. Reagan’s success must be attributed to President Carter’s economists—to the macroeconomic management that combined a severe recession with severe inflation, with a drastic slump in the housing industry, with particular economic distress in the traditional Democratic industrial states—and all these in the year of the election. Economists do some things with precision. But effective macroeconomic management was one part of the consensus. Obviously there is something wrong with the way it now functions.

There is, indeed, substance to the conservative attack on the economic and social consensus. It strikes at genuine points of vulnerability. This, however, is not true of all of the attack; some of it is merely a rejection of reality—or compassion. The conservative onslaught we now witness needs careful dissection and differentiation.

Three different lines of attack can be identified, and the relevant nomenclature readily suggests itself. There is the simplistic, the romantic, and the real attack. These terms, needless to say, are intended to be purely descriptive; they have no pejorative connotation.

The simplistic attack consists in a generalized assault on all the civilian services of modern government. Education, urban services, and other conventional functions of government; government help to the unemployed, unemployed, unemployable, or otherwise economically incapable; public housing and health care; and the regulatory functions of government are all in the line of fire. People, in a now famous phrase, must be left free to choose.

In its more elementary form this attack on the consensus holds that the services of government are the peculiar malignity of those who perform them; they are a burden foisted on the unwilling taxpayer by bureaucrats—public servants. The most eloquent American spokesman for this view is William Simon, once a prominent Cabinet prospect under Mr. Reagan. “Bureaucrats,” Mr. Simon has said, “should be assumed to be noxious, authoritarian parasites on society, with a tendency to augment their own size and power and to cultivate a parasitical clientele in all classes of society.” There must, he urges, “be conscious, philosophical prejudice against any intervention by the state into our lives.”2 If public services are a foisted malignancy—if they are unrelated to need or function—it follows that they can be reduced more or less without limit and without significant social cost or suffering. This is implicit, even explicit, in this case.

Other participants in this line of attack are, superficially at least, more sophisticated. Professor Arthur Laffer of the University of Southern California has supported the case with his now famous curve, which shows that when no taxes are levied, no revenue is raised, and that when taxes absorb all income, their yield, not surprisingly, is also zero. Taxes that are too high, as shown by a curve connecting these two points, have at some point a reduced aggregate yield. The Laffer Curve, which in its operative ranges is of purely free-hand origin, has become, in turn, a general case against all taxes. Let there be large horizontal reductions and the resulting expansion of private output and income—supply-side economics for those who will believe anything—can be great enough to sustain public revenues at more or less the previous level. For the less gullible, the Laffer Curve still argues for a large reduction in the cost and role of government.3

Yet another attack on the public services comes from Professor Milton Friedman and his disciples. It holds that these services are relentlessly in conflict with liberty. The market accords to the individual the sovereignty of choice; the state, as it enlarges its services, curtails or impairs that choice. And its tendency is cumulative and apocalyptic. By its acceptance of a large service and protective role for the state, democracy commits itself to an irreversible descent into totalitarianism and communism. Professor Friedman is firm about the prospect. “If we continue our present trend,” he has said, “and our free society is replaced by a collectivist society, the intellectuals who have done so much to drive us down this path will not be the ones who run the society; the prison, the insane asylum, or the graveyard would be their fate.”4 “Or,” he has asked, “shall we have the wisdom and the courage to change our course, to learn from experience, and to benefit from a ‘rebirth of freedom?’ “5

  1. 1

    Richard Scammon and Ben Wattenberg, The Real Majority (Coward, McCann, 1970).

  2. 2

    William Simon, A Time for Truth (Reader’s Digest Press, McGraw-Hill, 1978), pp. 219, 218.

  3. 3

    Professor Laffer’s inspired use of purely fortuitous hypotheses, it is only fair to note, has been a source of some discomfort to some of his more scrupulous conservative colleagues.

  4. 4

    Professor Friedman’s foreword to William Simon’s A Time for Truth, p. xiii.

  5. 5

    Milton and Rose Friedman, Free to Choose (Harcourt Brace Jovanovich, 1979, 1980), p. 7.

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