The Profound Challenge We Face

|Peter Boettke|

I visited with Richard Cornuelle last Monday.  I have written before about how influential Cornuelle has been in my life and my work.  Cornuelle was Mises's research assistant at NYU in late 1940s, and he then worked at FEE and with the Volker Fund.  He is the author of many brilliant articles and books, focusing primarily on the role of non-market yet voluntary civil society, and the possibility of decentralized and non-hierarchical forms of business enterprise and entrepreneurship.  He also has a better understanding of the destructive influence of the "progressive" movement than anyone I have ever met.

During my visit, Dick gave me a copy of his book, Healing America: What Can Be Done About the Continuing Economic Crisis (1983).  Ironically, this is the one book of Dick's I had not previously read.  But as with Reclaiming the American Dream and De-Managing America, this book is full of brilliant insights and wonderfully written.

I particularly was struck by these paragraphs written in the context of the late 1970s early 1980s:

"The proposed fiscal prohibitions all represent some sound principle.  Government should not habitually monetize debt; government should not tax destructively; government should not grow so large as to crowd out the possibility of collective action outside of government."

"But these proposals are not cures; they are tardy preventatives masquerading as cures.  They may become practical after we have solved the problem, after the role of government has been reduced to a manageable dimension.  The enactment of such reforms could someday be one result of restoring institutional balance, but they could not bring that restoration about."

"Caps of whatever kind, put in place before the source of the fiscal pressure is confronted and relieved, will simply put new pressure on a system that is already showing serious signs of strain. ..."

"But these debates are premature.  Such constraints made sense before Americans came to depend on government for essentials it cannot deliver.  They may make sense again when these elemental dependencies have been corrected.  But now it is both too late and too soon for them.  Or, to reverse one of Lord Keynes' aphorisms, we cannot get thin by buying a smaller belt."

These paragraphs can be found on pp. 116-117 of Healing America in a chapter entitled "The Unmanageable State."  And to me they hit not only the supply side of government, but also the demand side.  In my opinion, only James Buchanan's "Afraid to Be Free" and Vincent Ostrom's The Meaning of Democracy and the Vulnerability of Democracies address this issue with the same profound understanding as Cornuelle.

I have repeatedly stressed on this blog the problem of deficits, debt and debasement and the need to identify the destructive policy cycle and to find institutional constraints to curb this natural proclivity of democratic politics.  But Cornuelle is right, we don't get thin by buying a smaller belt.  We have to address that demand side which puts expectations on what government is supposed to deliver for us.  This is a deeper cultural battle that we economists may in fact be ill-equipped to fight.  But we must.

Comments

[Steve Horwitz]

And just to show you how tough that battle on the demand side will be, consider this quote from a recent WaPo piece (which is pretty good) on the crisis of the welfare state in Europe:

"In Spain, billions in cuts to state salaries go into effect next month, and the Socialist government has frozen increases in pensions meant to compensate for inflation for at least two years.

"They've hit us really hard," said Federico Carbonero, 92, a retired soldier. He said he was unlikely to live long enough to see the worst of the pension freeze, but had no doubts he would have to start relying on savings to maintain his lifestyle. "

Note the last clause: he's 92 and apparently never touched his savings, or presumably had to worry much about saving. Cradle to grave indeed. How to break THAT cycle? I do not know.

[Greg Ransom]

The government workers run the state of California -- what's the solution for that?

[Eileen Norcross]

Excellent post Pete

[FC]

Soldiers traditionally get generous benefits both to keep them at their dangerous work and loyal to the regime. I would have thought a Spanish government would be more cautious.

[Michael Giampaoli]

Afraid Greg's comment has chilled the last flicker of optimism in your post. I expect that we will get thin, but involuntarily. The challenge is how to hold a community together during the impending collapse until appropriate policies can be rooted.

[loft insulation grant]

Government should not habitually monetize debt; government should not tax destructively; government should not grow so large as to crowd out the possibility of collective action outside of government.

[Ash]

Slightly off-topic--but what kind of duties would Mises give to a research assistant?

[K Sralla]

How to break THAT cycle?

Do more of what we're doing now. Its probably not optimal if we want to avoid significant social disorder, but it will certainly get the job done nonetheless.

[Troy Camplin]

Regarding your last point, consider Wenzel's article on constitutional culture in the Review of Austrian Economics. We need a liberty culture, free market culture, personal responsibility culture, etc. As a poet and playwright and scholar, I can contribute -- but only if and when I get things published or produced. But it is the popular stuff -- the plays and, when I can, editorials, etc., that will matter most.

[Russnelson]

I'm not sure that the concept of a 'free market' is a good one. People don't trust corportations to behave well. I think it's better to say that you can have customer regulation, or you can have government regulation, but a market free of regulation is not an option.

[Troy Camplin]

There is a world of difference between consumer and government regulation -- such that it is downright misleading to call them both regulation.

[Russnelson]

Legislation and regulation are not the same thing. The first is the making of law; the second is the regularization of something. Of course consumer regulation and government regulation are different, but they both serve to constrain the activities of corporations in the marketplace. Free markets, on the other hand, are undesirable because they impose no limits on what a corporation may do. <------ or so goes the thinking of the people we need to convince that government regulation is inferior.

[Richard Ebeling]

It is worth recalling that Adam Smith explained the difficulties of eliminating the stranglehold of the State on economic affairs very clearly in "The Wealt of Nations."

At the end of his critique of Mercantilism, he ended with a tone of despair. He said that it was as likely to see freedom of trade in Great Britain as it would be to see the establishment of Utopia.

Why? Because, Adam Smith said, "the prejudices of the public" and "the power of the interest."

The first referred to the difficulty of getting many people in society to understand the nature and superiority of free markets vs. the regulatory and interventionist hand of the State. Economic arguments, after all, often seem so counter-intuitive: what is seem vs. what is not seen; intended vs. unintended consequences; etc.

The second referred to the power and influence of special interest groups determined to maintain and expand their privileges and favors. And, Smith said, were willing to destroy a man's good name and even threaten physical harm. (A germ of an understanding of a "public choice" insight into the dynamics of the political process, perhaps.)

When Adam Smith died in 1790, not only was the Mercantilist system still in power, but the next 25 years of war between France and much of the rest of Europe including Great Britain, only saw the growth of State power and intervention, government deficits and accumulating debts, and inflation.

But when these wars ended in 1815, and in spite of the "triumph" of counter-revolutionary governments against radical political ideas, an economic revolution in thinking had been growing during this quarter of a century, especially in Great Britain.

Beneath the surface of war, powerful government, and collectivist economic policies, an undercurrent of classical liberal ideas and conceptions of a free trade economy had been at work.

In the 1820s and 1830s, there emerged the Anti-Corn Law League. The advocates of free trade published books and pamphlets, they lectured and debated, they lead rallies, and began to get free traders elected to Parliament.

In the early 1840s, a good number of the manufacturing trade restrictions had been reduced or eliminated. But the worst of the offenses against freedom -- the trade barriers against agricultural -- stood in place.

But, then, a natural disaster played into the hands of the cause of economic liberty. In 1845-1846, Great Britain suffered the worst rains in living memory. The domestic crops were ruined. Food prices rose dramatically, the poor in England and Ireland were facing famine, and social unrest threatened the nation. Graffiti began to appear on walls of buildings against agricultural protectionism: "I be protected, and I be starved."

The free trade leaders in Parliament were able to win over the conservative Prime Minister, Sir Robert Peel, in the face of social and economic catastrophe. And against the interests, pressures and power of his own conservative, landed-interests he pushed through a free trade bill that finally passed in June of 1946, unilaterally abolishing all agricultural restrictions on freedom of trade virtually all at once.

And Great Britain practiced and prospered under a regime of free trade over the Empire for almost 70 years, until the "visible hand" of the State returned in 1914 with the economic controls that accompanied the start of the First World War.

You see, Adam Smith had been proven wrong. Ideas like his were more powerful and had great consequences than he believed. They overcame both the prejudices of the public and the power of the interests.

It had not happened over night; it depended upon the historical circumstances; and on a particular crisis that made it necessary to implement a radical change -- in this case, for greater economic freedom.

But, as Ludwig von Mises (and others) have sometimes reminded us, trends can change; they have in the past, and they will again in the future.

It takes moral courage, reasoned ideas, and not to be despondent, as even Adam Smith had been in the pages of "The Wealth of Nations."

Richard Ebeling

[Michael Rulle]

This comment could appear anywhere, but I chose this. SpringerLink charges $35 for Buchanan's 15 page PDF article in the Public Choice Journal. This is typical for many academic journals. The only thing I can figure is there is some kind of distribution monopoly with Universities and Think Tanks. Cornuelle's text is $105 new on Amazon, though one can buy it under $10 second hand apparently.

Also, rarely are these kinds of articles/books purchasable on e-readers. I have no idea who controls such matters, but as good as websites as this are, if we want the public to be broadly educated, the pricing system for the general public needs to radically alter. Who would pay such prices unless subsidized or forced to by one's school or think tank?

[John A]

Well said. Economics is an expression of culture and values. A free society has to be, to a large degree, self-policing. Without morals, there's no self-policing. Morals have been historically delivered by religion, although what religion is is certainly a question.

Thank you for your post.

[Free Pension Review]

I think they become a practical to solve that problem We have to address that demand side which puts expectations on what government is supposed to deliver for us. This is a deeper cultural battle that we economists may in fact be ill-equipped to fight.

[ugg bailey button]

Happiness is about using each and every tiny desire are available accurate. It is not about getting immortal nor owning food or rights inone's hand.

[topills.com review]

"But among the physically talented, those who work smart and work hard are the ones who make it. And that was the real point of my posts on work ethic."

So in other words, you are stressing the blindingly obvious, while safely posing as socially acceptable (ie, anti-hereditarian). That's helpful, truly.