Liberalism’s Legacy, Part II

What is liberalism? By that term I mean the intellectual effort to apologize for and defend economic programs primarily associated with Franklin Roosevelt and Lyndon Johnson. There are four main ones:

  • The substitution of regulation for markets,
  • The substitution of social insurance for private provision,
  • The nationalization of welfare, and
  • The manipulation of the economy by the government.

It is difficult to exaggerate how completely this intellectual movement dominated thinking in the post-World War II period. During the 1950s and 1960s there was virtually no book, no journal, and no college campus where you could find a serious competing point of view.

When I was an undergraduate at the University of Texas in the 1960s, there were only two people on the entire liberal arts faculty who you could describe as right of center ― a moderate Republican in the English department and a libertarian in the Political Science department. And this was a campus with 27,000 students!

Then in 1962 Milton Friedman wrote Capitalism and Freedom. Friedman called himself a “classical liberal” and his book was a wholesale assault on modern liberalism and all its major programs. In place of Social security, Freidman proposed private savings accounts. In place of the income tax system, a flat tax. In place of a monopoly public school system, educational vouchers. In place of the welfare state, a negative income tax. And so forth.

Whether you agree or disagree with Friedman, the book represented a coherent statement of a political philosophy. From cover to cover, you could see how it all fit together. Starting from a few simple values, you could see how the entire set of recommended polices cohered.

So here is the obvious question: Where can one find the counter to Friedman? Where is there a book that makes the case for modern liberalism as persuasively and as coherently as Friedman’s critique?

This may surprise you: there isn’t any.

Crazy

How could so many people hold a viewpoint that has never been written down, explained and defended? Hold that thought for a moment.

Since I can’t cover everything in a blog post, let’s stick with regulation. There are three things you need to know:

  1. Virtually every federal regulatory agency created in the 20th century came into existence as the request of the regulated industry.
  2. In virtually every case the regulatory body viewed maintaining industry profitability as its most important goal.
  3. In almost every case the bulk of the agency’s time was spent not protecting consumers from price gouging, but protecting the industry from “ruinous competition.”

However, to get economic favors from government, the industries were expected to make a devil’s bargain. Since the Republicans mainly believed in hands off government, the producers had to give political support to Roosevelt and other Democrats who were granting the favors.

This approach started with the progressives, who were the forerunners of modern liberalism. They were not the first to pass special interest legislation, of course. But they were the first to give an intellectual justification for the rejection of free markets while they were doing it, a justification that often belied their real intent.

For example, the Interstate Commerce Commission (ICC) — our first federal regulatory agency — was ostensibly established to protect the general public from greedy robber barons. But, as the leftist historian Gabriel Kolko has documented, the ICC was primarily dominated by, and served the interest of, the railroads themselves. The Meat Inspection Act of 1906 was passed ostensibly in order to protect the public from bad meat — exposed, for example, by the novelist Upton Sinclair. However, the regulatory apparatus the Act created served the interests of large meat packers instead. Safety standards were already being met — or were easily accommodated — by the large companies. But the regulations forced many small meat packers out of business and made it difficult for new ones to enter the industry. This same pattern — of regulatory agencies serving the interests of the regulated — was repeated with the establishment of almost all subsequent regulatory agencies. For this reason, Kolko called the entire Progressive Era the “triumph of conservatism.”

As I reported previously, in the Franklin Roosevelt era, the ICC became a cartel agent for the trucking industry as well as the railroads. The Civil Aeronautics Board became a cartel agent for the airlines. The Federal Communications Commission (FCC) became a cartel agent for the broadcasters.

Even the pretense of consumer protection was blatantly tossed aside with the passage of the National Industrial Recovery Act. The goal of the NIRA was to allow each industry to set its own prices, set its own wages and control its own output. Had Roosevelt gotten his way, we would have had predatory monopolies in every market.

What was happening at the national level during the 20th century was replicated in spades at the local level. Virtually every professional licensing requirement in the country was requested not by consumers, but by people in the trade. Today, one in every three jobs requires a license or a membership in a union.

Where can you find an intellectual defense of all this? You can’t. What I’m describing contradicts not only Adam Smith, but also almost all of modern economics. Special monopoly privileges designed for one group create benefits for that group, but harm everyone else. And the harm to society as a whole is inevitably much greater than the benefits to the special interests.

So back to the question posed earlier: why do so many intellectuals apologize for and defend the indefensible? The only answer I can think of is that what we call liberalism is not an ideology at all. It’s a sociology. And that would be okay, if it were comparable to ones preference for natural food or artsy movies.

It’s not okay when it imposes costs on millions of innocent people.

Comments (17)

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  1. Ken says:

    Good post.

  2. Andrew Thorby says:

    Excellent post. I think it’s important to preface any discussion that includes the term “liberal” or “conservative” with a definition that includes the context – in this case economic. Absent that context the terms become meaningless black or white labels. An interesting question. The basic premise of the article is that special interests exert undue influence over our elected officials to the detriment of the broader electorate. I don’t know anybody who would disagree with that basic notion to some degree. On the other hand the Citizens United decision was lambasted by a “Liberal” President and supported by a “Conservative” GOP. Seems like it should have been the other way around.

    • JD says:

      The labels “liberal” and “conservative” lose their meaning in politics. There is very little difference beyond rhetoric.

  3. Devon Herrick says:

    When I was a PhD student, Nobel laureate, James Buchanan, spoke at our university. He told us that virtually all of his colleagues at the University of Chicago were socialists when he began his doctoral studies just after WWII. According to Buchanan, only a short while into the program — just a few weeks — about two-thirds of his fellow students began to understand how markets worked and were no longer so enamored with central planning.

    He indicated there was still a notion of elitism among some of his fellow students who wanted to be the central planners even though they knew markets were better at allocating resources than central planning. I suspect there was a similar idea among the academic elites in other disciplines.

    • Timothy says:

      As an MPA student, I can relate. Many of the professors and students support and promote liberal solutions. Many probably don’t understand free market economics.

    • JD says:

      That is an interesting selection issue. Our best and brightest are most likely to be corrupted by allure of power.

  4. CBrady says:

    Interesting note Devon. Hopefully more people will learn about the magic of the free market.

  5. Greg Scandlen says:

    Would one of you economists explain how this “progressive” system differs from fascism — private ownership under a state-sanctioned monopoly? Mussolini was very popular among the progressives.

    • JD says:

      Exactly. It is amazing how easily and universally leaders are decried, but their ideas are readily supported by the sheeple.

  6. Chaz says:

    I agree. We need to get rid of needless regulations and laws such as child labor laws, anti-monopoly laws, discrimination prohibitions, clean air and water laws, and other things that those libtards are shoving down our throats.

    While we are at it, why do I have to pay for fire and police protection? I’m perfectly able to protect myself from both. Why should my tax dollars go to protect someone without the foresight to have multiple firearms and fire extinguishers?

    • Greg Scandlen says:

      Hoo boy, here we go — Child labor laws enacted some hundred years ago are good, so therefore every law and regulation ever passed must also be good. I like the laws that require people to stop at red lights, too, so how could I ever object to anything the government has ever done? This is like saying since I like the iPhone, every product ever manufactured by every private business must be near perfect.

      Meanwhile, I notice you completely failed to address John’s points about liberal orthodoxy —
      — The substitution of regulation for markets,
      — The substitution of social insurance for private provision,
      — The nationalization of welfare,
      — The manipulation of the economy by the government.

      Since you like child labor laws, you no doubt are gung-ho about all that, too.

  7. Patrick Pine says:

    One problem with this argument: If this is indeed the situation, why would the large business interests (like the Kochs, for instance)want to arguably eliminate many of the so called regulatory agencies and regulations? If, as you seem to suggest, the regulatory agencies are captives of large businesses, why would large business interests be unhappy with them?
    I suspect you will respond that I am misreading your argument – which is ok if you can clarify it for me.

    P.S. When unions represent less than 10% of the private work force, I have trouble seeing why they are considered such a major factor in supporting our regulatory framework. Witness the unhappiness of many unions with the ACA as an example of the presumption that unions have undue influence on a Democratic administration perhaps being unfounded.

    • Greg Scandlen says:

      The Kochs are an exception to the rule. Since this is a health care blog, consider Certificate of Need laws. Who supports them? Existing hospitals that don’t care to be competed against. Who brought about medical licensing? The AMA. Who pushed for the prohibition on physician-owned hospitals in the ACA? The American Hospital Association. Regulations always protecting incumbant companies from competition.

  8. DR. LAURENCE BRODY says:

    I like John’s presentation, which is simple, and all of Greg’s comments.

    Why would government elected officials and goverment civil service workers want free markets and reduced employment and benefits. Government has become the protection racket industry. Just burns and prints and taxes money.