TCS Daily

The Left's Tactical Weapons

By Arnold Kling - June 17, 2004 12:00 AM

"So if last week's Reagan retrospectives emphasized his lasting influence on history, it's worth remembering that his small-government crusade is one area in which his influence has come and gone. The dominant assumption of most political commentary in the 1990s -- that, as Bill Clinton put it, the era of big government is over -- now needs to be discarded. Political and intellectual forces, coupled with the swelling ranks of retirees, suggest that an era of steadily bigger government is upon us."
-- Sebastian Mallaby

The last 25 years have seen an intellectual victory by the Right over the Left on the topic of central planning. It was commonplace in the 1950's and 1960's to assert that the market economy was too chaotic, so that it needs the guiding hand of intelligent government bureaucrats. That view has dissipated, at least in the United States. Thus, conservatives might be lulled into thinking that we have beaten back the argument for big government.

However, the Left has not gone away. It has mutated, and as Sebastian Mallaby suggests, those of us who advocate small government may very well be losing. What I will argue later in this essay is that the Left is using two weapons effectively:

(a) Corruption -- making the case that there is evil carried out by corporate officials and Republicans, and only the righteous crusading of the Left can bring the villains to justice; and

(b) Compassion -- making the case that large groups in society are victims who require and deserve government assistance

The Argument We Won

Before discussing the tactics that are giving small-government advocates difficulty, I want to review the argument, which we won, concerning the effectiveness of central planning relative to free markets. Reviewing the intellectual bidding provides a perspective that can help us to understand (a) why the Left wants to run away from its intellectual roots, as National Review's Jonah Goldberg noted; and (b) why some of our standard arguments which worked against the older forms of Leftist bacteria are less effective against the Compassion/Corruption strain that is rampant today.

In the 1950's, many on the Left believed that some form of central planning is necessary in any economy. They viewed the Great Depression of the 1930's as evidence of the failure of unbridled capitalism. They viewed the World War II experience of price controls, rationing, and national control of industry as indicative of the ability of bureaucrats to successfully manage an economy. They viewed the achievements of the Soviet Union in overcoming Nazi Germany and taking the lead in the space race as indicative of the strengths of the Communist system.

John Kenneth Galbraith typified the Left of that period. In his book The New Industrial State, conceived in the late 1950's and first published in 1967, he laid out the following line of argument:

1) Large capital projects, such as new jet airplanes, nuclear power plants, and automobile assembly lines, require complex information processing and careful planning.

2) Companies that engage in capital-intensive industry will use bureaucratic decision processes. The goal will be to integrate technical expertise, market forecasting, and number-crunching before committing to major capital expenses.

3) Unlike small enterprises, which take prices and market conditions as given, large industrial companies will seek to manage demand with advertising.

4) Unlike entrepreneurial firms, large industrial companies will try to avoid taking risk.

5) Only the large industrial firms are significant. Small enterprises and entrepreneurial firms are quaint relics, serving only to sustain the myth of a competitive market economy.

6) The really important part of the economy, the capital-intensive industrial sector, requires planning by technocratic experts. Neither small entrepreneurs nor purely political government officials are qualified to make the key decisions in the new industrial state.

7) Therefore, the capitalist West and the Communist East are, in spite of superficial differences, fundamentally the same. Both are controlled by a technocratic elite (called "the technostructure" by Galbraith) capable of superceding both the market and political parties.

8) Because we operate in a planned economy, anyway, it is irrational to resist government involvement in the economy. Intelligent bureaucrats are just as qualified to direct the industrial state from within the government as from within the corporate sector, and in fact government can do a better job of stopping the "wage-price spiral" (the Left's theory of inflation at the time, based on the notion that monopolistic firms and unions kept fighting for higher wages and prices).

Of the points listed above, the last four are horribly mistaken. The first four points have merit. However, the environment in which large corporations find themselves, with globalization and rapid technical change, means that their attempts to manage demand and to avoid risk often are unsuccessful.

The view that only large industrial enterprises matter seems preposterous now. If Galbraith had been right, then the industrial structure of the 1960's would still exist today. Instead of what Alvin Toffler in 1980 called the "third wave," a Galbraithian economy would still be dominated by automobile and steel manufacturing. Galbraith would never have predicted Wal-Mart, Federal Express, Apple, Microsoft, eBay or Amazon, much less the tens of thousands of less spectacular entrepreneurial enterprises that have had a large cumulative impact on our economy.

The view that the Soviet Union was morally and economically equivalent to the United States also now seems misguided. Certainly, there is no economist who is not aware of the enormous GDP gap between Communist countries and similarly-situated capitalist countries, such as North Korea vs. South Korea.

Most importantly, the idea that government planning of the economy is rational has been dealt a series of mortal blows, including:

-- the failure of wage-price controls in the United States and other countries in the 1970's

-- the poor performance of state-run enterprises in Europe and the success of Margaret Thatcher's privatization initiative in the United Kingdom in the 1980's

-- Japan's "lost decade" of the 1990's, which ended the last myth of rational central planning, as Japanese industrial policy foundered in stagnation

-- the ability of computers on the Internet to self-organize in the 1990's, demonstrating that Friedrich Hayek's concept of "spontaneous order" is valid. It was Hayek who argued strenuously that the market's ability to process local information makes it more efficient than central planning.

With all this evidence in favor of markets and decentralization, the good news is that much of the Left now recognizes the efficiency of markets and is in favor of them, with some exceptions. The bad news is that the exceptions include the sectors of education, health care, and retirement security, which have been and are likely to continue to be increasing as a share of GDP. Although all of the arguments against central planning apply to government provision of these services, the Left employs its Compassion weapon there, while using the Corruption weapon to fight a rearguard action against markets everywhere else.

The Corruption Weapon

The left uses the Corruption weapon to attack the legitimacy of business enterprises, conservatives, and Republicans. Examples of circumstances in which the Left has wielded the Corruption weapon include:

-- corporate scandals, such as Enron

-- lung cancer among smokers, and the rise in obesity worldwide

-- crusades like those of Ralph Nader or NY Attorney General Elliot Spitzer (see also here)

-- the war in Iraq (intelligence failures; Abu Ghraib; etc.)

In each case, the Left can genuinely point to something wrong: corporate executives ripping off shareholders and others; cancer and obesity; inability to find weapons stockpiles; mistreatment of prisoners. They then proceed to personalize the issue, blaming President George Bush for the Enron scandal (since it involved Texas and oil), blaming Big Tobacco and Big Food, and blaming "the neocons" for the intelligence failures and prisoner abuses.

The Left goes on to use the Corruption weapon to delegitimize the target. They use the issue to justify heavy regulation, confiscation of assets by governments and lawyers in the case of the tobacco industry, and calls for resignations of those trying to lead the war in Iraq.

Faced with the Corruption charge, the Right faces a dilemma. Nobody wants to defend mistakes or adverse results. However, if the Right caves in to every demand, then the corporate profits that do not disappear under a mountain of regulation will be extracted via shakedowns (called "settlements"). If business and war had to be conducted perfectly to be conducted at all, then we would have not have any private enterprise in our economy and we would not have won a single war in our history.

One approach for the Right is to engage in tit for tat. That is, we could try to make a mountain out of very molehill of misbehavior by an individual or institution on the Left. There are many instances of this, from Joseph McCarthy to the Clinton impeachment. However, I think that for our side to engage in this sort of over-reaching attack is unwise, because it gives legitimacy to something that the Left does more ruthlessly and effectively. We would be better off in an environment in which neither side abused the Corruption weapon, and instead political criticism were constructive. Regardless of which side does it, I believe that gravitating toward "gotcha" politics signifies the lack of a credible positive vision for the country.

Instead of adopting the Corruption weapon and thereby reinforcing it, I believe that we should try to place limits on its use. In my experience in the corporate world, there were always employees who went too far in criticizing management. Criticism has value when it is constructive and conducted in the spirit of a loyal employee seeking to improve processes. However, when it is clear that the employee's sole goal is to bring down management and undermine the company, you need to fire the employee.

In principle we can mobilize public opinion to place similar limits on use of the Corruption weapon. Just as the public intuitively understands when a jury makes an outrageous award in a civil lawsuit, the public can understand when a crusading attorney, a critical journalist, or a Congressional Committee is going overboard. Such non-constructive critics can be "fired" in the sense that most people start to ignore them.

In order to reduce the abuse of the Corruption weapon, we need to make a habit of always pointing out cases where it is used to attack rather than to strengthen our society. Our goal should be to help sensitize the public to the difference between constructive criticism on the one hand and efforts to undermine our economy and our foreign policy on the other.

For example, it is difficult to see anything constructive in the way that the Left is approaching the Iraqi prisoner abuse scandal. It would be one thing if there were an ongoing controversy over whether the treatment of prisoners at Abu Ghraib was appropriate, in which case Congressional hearings and extensive public debate would be warranted. However, given that there is consensus that the treatment served no useful purpose and reflected sick behavior by the guards, it strikes me that the controversy is being used more to undermine our reconstruction effort than to improve it. I think that point, which has been made by some in Congress, is one that needs to be repeated.

We also need to emphasize to the public the large costs of Nader-esque crusades. Hasty legislation, such as Sarbanes-Oxley, tends to penalize decent, well-run corporations a great deal, for very little benefit in constraining the future behavior of unscrupulous individuals.

The Compassion Weapon

The other banner under which the Left marches is Compassion. If you favor more market-oriented approaches to health care, education, or Social Security, you will be accused of a lack of compassion -- of throwing grandma out of her wheelchair.

One counter-weapon to government compassion is tax cuts. The idea is to "cut Congress' allowance." Perhaps this works, but since much of the increase in government spending in the future is built in automatically through Medicare and Social Security entitlements, I worry instead that in the coming decades the tax cuts are going to be reversed with a vengeance.

President Bush's approach to the Compassion weapon is to try to turn it around. Rather than argue against compassion, he claims to be a "compassionate conservative." So far, the results have been disappointing. The Left continues to label Bush an anti-government ideologue, while those of us who really do favor small government mutter, "If only."

Instead of trying to placate the Left on Compassion, I believe that we ought to emphasize the ways in which government compassion is an oxymoron. In particular:

-- Many of the arguments against central planning also apply to government compassion. See What's Wrong with Paternalism?

-- The taxes to fund government compassion create new groups of needy people. For example, many of the young families without health insurance pay thousands of dollars a year in Social Security taxes.

-- Government compassion does not target the needy, but instead leads to state control of everyone's education, health care, and retirement security. In Thomas Sowell's phrase, "The left uses the poor as human shields"

-- The proportion of the truly needy in the population is shrinking. Most of today's "poor" would be affluent by the standards of a generation ago, or by the standards of Europe today.

-- For reducing the population of the needy, economic growth works better than government aid. As Robert Lucas (Nobel, 1995) put it recently, "of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production."

The Corruption weapon is being used by the Left to de-legitimize private enterprise and the war against radical Islam. We need to do a better job of drawing the line between constructive criticism and nihilistic efforts to destroy decent, well-meaning Americans in business and politics.

The Compassion weapon is used by the Left to build the size of government while exacerbating the problems that it claims to solve. We need to emphasize the overwhelming evidence that progress against poverty comes from free markets, not government.

Arnold Kling is a TCS contributing editor. He recently wrote about a 2020 vision for education.


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