TCS Daily

Populism vs. Economics

By Arnold Kling - October 17, 2003 12:00 AM

"Each of the four schools that together represent the American foreign policy debate makes distinct contributions to national power, and each is well matched with the others -- capable of complementing one another and of flexibly combining in many ways to meet changing circumstances."
Walter Russell Mead


Historian Walter Russell Mead's Special Providence: American Foreign Policy and How it Changed the World is among the most stimulating books in recent years. Although it is focused on American approaches to foreign policy, the off-hand insights that Mead offers about attitudes toward economic issues are also valuable.


Special Providence divides American foreign policy positions into four schools. Mead's four schools are:


  • Hamiltonians -- They are the guardians of the international economic order. Think of Alan Greenspan or Robert Rubin.


  • Wilsonians -- They are the architects of an international order governed by treaties and international institutions. I think of the Clinton Administration, which supported both NAFTA and Kyoto.


  • Jeffersonians -- They are idealists, the most emotional of the four types, who believe in a moralistic approach to foreign policy. They believe that there are always better alternatives than war. The Jeffersonians are staunch opponents of the Iraq war, and many of them were none too keen on the war in Afghanistan.


  • Jacksonians -- They are the patriotic fighters for whom the worst sin is not going to war, it's losing one. Examples would be people who hung flags and attended pro-America rallies after 9/11. When Jeffersonians attack President Bush for acting unilaterally, they are probably helping his popularity with Jacksonians. For Jacksonians, unilateralism is a virtue not a vice -- or to put it in geekspeak, a feature, not a bug.


I am also tempted to re-interpret Mead as providing a model with three elitist viewpoints and the Jacksonian populist viewpoint. The Hamiltonians are the banking elite. The Wilsonians are the legal elite. And the Jeffersonians are the academic elite.


Where I Fit In


I am so enamored of our system of checks and balances, along with our Bill of Rights, that I distrust the Wilsonian project of bringing about international rule of law. I would be all for it if everyone were to adopt our system. However, compromising our elegant architecture for the sake of participating in a world architecture is repellent to me. Consequently, on foreign policy, and particularly after 9/11, I wind up a Jacksonian.


In the conclusion of Special Providence, Mead writes, "it seems to me that the voice of the Jeffersonian school is the one that currently most needs to be heard." This took me by surprise.


Mead argues that the other elites -- the Hamiltonians and the Wilsonians -- are prone to overreaching. The Jeffersonians are needed, he says, in order to provide self-restraint on our hegemony.


On the other hand, Mead warns that "Jeffersonians can do as they did in the 1930's... rest in denial concerning the true extent of the nation's vital interests... confine themselves to sniping at the moral inconsistencies, blunders, and costs of American foreign policy..." In that case, he says, they will marginalize themselves and their potential contribution will be lost.


It seems to me that the Jeffersonians have gone off-track in exactly the way that Mead feared. If they align the Democratic Party with our opponents in the UN, then as far as I am concerned, the best thing that can happen to this country would be an overwhelming Republican victory next year.


I also believe that the Jeffersonians are off base on economic policy. The academic elite is eager to embrace any ideology, such as Marxism or radical environmentalism, that denigrates the market. I have little patience for Economic Idiotarians.


The Economic Consequences of the Populists


While I find Jacksonian populist foreign policy rather congenial, I part company with the populists on economics. The three most important quarrels I have with economic populism relate to free trade, Social Security, and thrift.


Mead points out that Jacksonians see ordinary working people as virtuous, justifying resentment of foreign competition. In this view, it is not fair for decent, hard-working Americans to lose jobs to alien workers.


In my view, international trade is only one aspect of the overall phenomenon of Progress and Displacement. Technological change is rapid and inevitable. It means that the employment base is constantly shifting, with some skills made obsolete while other skills become relevant. This wide river of technological change will not be dammed up by tossing in a few trade barriers. For example, it appears that the infamous steel tariffs of the Bush Administration probably cost more jobs in steel-using manufacturing firms than they saved in the steel industry itself.


Mead says that Jacksonians support Social Security because they respect the elderly. What I have tried to point out in numerous essays is that in a couple of decades Social Security and Medicare are going to pose an immense burden on the working population. I believe that the solution is for the population of people aged 50 and younger to be promised fewer benefits and instead be encouraged to save for their own needs later in life. It is urgent to resolve this matter soon, because it would be unfair to cut benefits at the last minute, when people already are close to or beyond retirement.


On the issue of thrift, Mead says that Jacksonians believe "that money, especially borrowed money, is less a sacred trust than a means for self-discovery and expression... The strict Jacksonian code of honor does not enjoin what others see as financial probity." In other words, thrift is not a Jacksonian virtue.


Our popular culture exalts the consumer. Most adherents of the elite schools are appalled by the spending mentality. Even modern followers of Keynes do not share his fear of excessive thrift. Instead, the belief is that with rare exceptions monetary policy can be used to maintain sufficient aggregate demand to support full employment. Economists have shown that countries with high saving rates tend to have higher levels of income, because saving enables capital accumulation.


On this topic, I confess to being in the same camp as the elites -- I am in favor of more saving. In the wake of 9/11, when some Jacksonians talked about the need for consumers to keep spending as a patriotic duty, I was appalled. If we were truly at war, consumers would need to conserve resources, not spend them.


In my view, the Jacksonian exaltation of consumption is at odds with the Jacksonian emphasis on self-reliance. Without saving, people will find themselves unable to provide for their own retirement and unable to cushion their families from economic change and turbulence.


If Jacksonians strike me as overly casual about deficit spending at a personal level, they also strike me as overly casual about government deficits. I would like to see a tight lid kept on spending, so that deficits can be reduced. I would support deficits only in exceptional circumstances, notably a recession in which monetary policy is not sufficient to produce an adequate recovery.


The Bush Administration's supply-side economics strikes a populist chord. Combining tax cuts with spending increases, with little concern for deficits, is no problem for Jacksonians.


Jacksonians are happy with new government programs, such as a prescription drug benefit, that spend money on "deserving" middle-class families. Instead, what I see are the taxes that fund these programs. The tax bill falls on other middle-class families, creating new needs (such as more young people who cannot afford health insurance) for yet more government programs, in a vicious cycle.


As a Wilsonian architect, I like the elegant simplicity of my Bleeding-heart Libertarian tax-and-benefit formula, to replace the crazy quilt of government programs aimed at income redistribution. That tax formula also embodies my belief in encouraging saving rather than consumption. However, targeted government programs are what attract popular sentiment. Simple formulas have no emotional appeal to Jacksonians.


The Seeds of Education


If I were a demagogue, I would try to come up with emotional language that could be used to foist my economic policies on a reluctant Jacksonian populace. In fact, the game of manipulating the public is played by all members of the political elite, of both major parties.


Instead, I see myself as a teacher. The hope is to plant seeds so that the lawn of an educated viewpoint grows over the weeds of economic populism. In other words, my goal is that the Jacksonian middle class will come to support free trade, entitlement reform, and government that is small and efficient because people understand the arguments for these approaches.


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