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The remarks of Adam Smith are all quotations from his book "The Wealth of Nations," first published in 1776.
Our guest today is Adam Smith, a major figure of the Enlightenment who is widely considered to be the father of modern economic theory. He is a former professor at the University of Glasgow and the author of "The Theory of Moral Sentiments" (1759) and "An Inquiry into the Nature and Causes of the Wealth of Nations" (1776), his best-known book. Professor Smith joins us from Scotland.
Professor Smith, the Obama administration recently imposed tariffs on China, after companies and unions in the U.S. complained that the Chinese tire industry benefits from Chinese subsidies as well as an undervalued exchange rate. Most editorial pages and magazines in the prestige press denounced the tire tariffs as a threat to free trade. You are generally considered the patron saint of free trade. What is your view of the tariffs on Chinese tires?
The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods is when some foreign nation restrains by high duties or prohibitions the importation of some of our manufactures into their country ... There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods. To judge whether such retaliations are likely to produce such an effect does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles which are always the same, as to the skill of that insidious and crafty animal, vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs.
It will come as a great surprise to many people to learn that Adam Smith favors retaliatory tariffs in some cases. Would you make any other exceptions to the general rule of free trade?
There seem to be two cases in which it will generally be advantageous to lay some burden upon foreign [industry] for the encouragement of domestic industry. The first is when some particular sort of industry is necessary for the defence of the country ... The second case, in which it will generally be advantageous to lay some burden upon foreign [industry] for the encouragement of domestic industry is when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the home market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it.
Interesting. Your second point brings to mind the argument that American exports are punished, because most countries in Europe and Asia impose a value-added or VAT tax on U.S. imports, and at the same time grant VAT rebates to products that they export -- penalizing American exports while subsidizing their own. Some argue that the adoption of a VAT in the U.S. could level the playing field.
It is often claimed that globalization is a force that cannot and should not be slowed down. And yet although you favor free trade in general, you argue that national economies should be opened up to foreign competition only slowly and carefully, in order to minimize economic and social disruption. Would you please explain your reasoning?
The undertaker of a great manufacture, who, by the home markets being suddenly laid open to the competition of foreigners, should be obliged to abandon his trade, would no doubt suffer very considerably. That part of his capital which had usually been employed in purchasing materials and in paying his workmen might, without much difficulty, perhaps, find another employment. But that part of it which was fixed in workhouses, and in the instruments of trade, could scarce be disposed of without considerable loss. The equitable regard, therefore, to his interest requires that changes of this kind should never be introduced suddenly, but slowly, gradually, and after a very long warning.
The minimum wage in the United States today is far below what it was a few decades ago, thanks to inflation. At the same time, in the last generation wages have stagnated while roughly half of the gains from economic growth have gone to a tiny number of rich Americans. Many conservative economists and business executives argue that companies cannot afford high wages for ordinary workers. Aren't high salaries and bonuses costs as well?
Our merchants and master manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.
One common theme of economic conservatives is that poor people in the U.S. are not really poor, compared to the truly destitute in developing countries. Many poor Americans own cars and television sets. Do you think that poverty should be measured in absolute, world-wide terms, or in relative terms, with reference to the living standards of particular societies?
By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into, without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England.
Many libertarians and conservatives argue that the only fair tax system would be a flat tax. In your opinion should the tax system be flat or progressive?
The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
American labor activists and many liberals support the Employee Free Choice Act (EFCA), which would make it easier for workers to form unions. Many conservative economists argue that greater unionization would cripple the U.S., causing higher unemployment and rendering the U.S. economy less competitive. Do you agree?
We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate ... Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate.
Speaking of combinations, here in the United States we are witnessing major lobbying campaigns by lenders to prevent Congress from creating a consumer credit protection agency and by health insurance companies that seek to defeat a public health insurance option. What do you think of organized lobbying by business interests?
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
During the 1980s, some followers of British Prime Minister Margaret Thatcher and American President Ronald Reagan wore neckties decorated by your profile. Thatcher said, "There is no such thing as society," and Reagan said, "Government is not the solution. Government is the problem." According to free-market conservatives, government should be run like a private-sector business and the noblest figures in society are business executives and entrepreneurs. Do you agree?
The violence and injustice of the rulers of mankind is an ancient evil, for which, I am afraid, the nature of human affairs can scarce admit of a remedy. But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot perhaps be corrected may very easily be prevented from disturbing the tranquility of anybody but themselves.
Much of Sam Tanenhaus's book is given over to the rating of recent presidents. We are told, for instance: "Of the last six Republican presidents, three (Nixon, Reagan, and George W. Bush) had strong ties to movement conservatism, while three (Eisenhower, Ford, George H.W. Bush) did not." He counts the last three superior to the first three. That was not the popular judgment of those men. After all, Nixon and Reagan were reelected, while Ford and Bush I were not. Furthermore, in the latest survey of historians ranking the presidents, Reagan is rated tenth while Bush I one is eighteenth, and Ford is twenty-second.[1] Clearly Tanenhaus is using his own measure of good and bad presidents, different from either electoral success or historical reputation. What is it? He notes that the first three, in line with "movement conservatism," broke the law (Watergate, Iran-contra, Geneva Conventions), while the latter three "respected the established boundaries of constitutional precedent."
This is a matter of more than sheer law-abidingness with him. He sees two types of what is called conservatism at work. "Movement conservatism" is revanchist—issuing, for example, an "urgent call 'to take back the culture'"—and revolutionary (or counterrevolutionary), in wanting untrammeled executive power when its candidates are in office. It prizes ideological purity above accommodation, even when that means fighting the government from within the government. This movement is mislabeled conservative. It does not preserve the given order, changing it to make it work better. That is the work of "true conservatives" like Edmund Burke and Benjamin Disraeli, who actually conserve instead of overthrowing.
As his exemplars of modern Burkeans, Tanenhaus comes up with another unusual ranking, pairing Dwight Eisenhower and Bill Clinton: "They are the modern era's two true conservative presidents—and the two best." Why? "Both Eisenhower and Clinton struggled to neutralize [conservative] movement forces in Congress. Both succeeded."
It is clear that Tanenhaus has an original way with history. He can write, for instance: "Nixon's gifts were prodigious. No modern president surpassed him in sheer ability." He was, in fact, "one of the most accomplished vote-getters in history." Though Nixon came into office as a movement conservative, he too turned Burkean as president—not only by his foreign policy (détente, the opening to China), but by his administration's domestic poverty and family programs inspired by Disraeli's disciple, Daniel Patrick Moynihan. It was only when Nixon's private demons brought him down that movement conservatives wrenched from him his achievements:
Watergate secured the ascendancy of movement revanchism. In the twenty-year period from 1968 to 1988, the Republicans captured four of the five presidential elections.
Did revanchism in fact ride triumphant after Watergate? Not really, since Tanenhaus discovers an inner Burke even in Reagan, another man brought in by movement conservatism only to betray it in the eyes of purists on the right. Reagan raised taxes, did not reduce the size of government, engaged in arms control talks ("friendly tête-à-têtes with Mikhail Gorbachev"), and conducted a flexible ending to the cold war. But Reagan remained revanchist in ways Tanenhaus conveniently ignores—for instance in his Justice Department under Edwin Meese, which invented and used the concept of the unitary executive, the founding doctrine of the Federalist Society.
t seems that revanchists vs. Burkeans is a rather messier schema than Tanenhaus first made it seem. He further complicates it by imposing a different polarity on it—Samuel Lubell's theory that we do not have a two-party competitive system but a "solar system" in which one party (the sun) dominates for a period, while the other party (the moon) is constantly subordinate. Tanenhaus says that the Democrats were the sun until the welfare-warfare state, dictated from above (LBJ's Great Society), lost the middle class in 1968. Then the Republicans became the sun (despite the Carter and Clinton interludes) until 2008, when the cold-war-type Manichaeanism and religious fundamentalism of the Bush years let the Democrats become the new sun. This is the "death of conservatism" of the title (though, confusingly, he does not think movement Republicans real conservatives).
Tanenhaus is a deep student of modern conservatives. He wrote a biography of Whittaker Chambers, a self-professed Beaconsfieldian (Disraeli was the Earl of Beaconsfield), and he has been working for some time on a biography of William F. Buckley Jr. This short book is a kind of bridge between his two great projects, and it fits his revanchist–Burkean paradigm. Chambers and Buckley, though friends, began at opposite ends of the "conservative" spectrum. Buckley, who admired Chambers's witness against communism, tried with all his lures and charms to recruit him as an editor of National Review when it began in 1955. But Chambers thought Senator Joseph McCarthy, whom the magazine championed, would doom Republicans. Besides, he was loyal to his ally in the Hiss case, Richard Nixon, and to Nixon's meal ticket Dwight Eisenhower, while the magazine opposed them both as impure compromisers. (In 1956, only one National Review editor, James Burnham, endorsed Eisenhower for reelection.)
But Buckley finally wore Chambers down—in 1957, with great misgivings, Chambers joined the magazine. Murray Kempton wrote that Chambers finally went to work for a boss he could respect—which was not saying too much, since "Chambers's former employers happened to be Colonel Bykov of the Soviet Secret Police, the late Henry Luce, and John F.X. McGohey, 'then United States Attorney' for the Southern District of New York."[2] Chambers soon had to withdraw from the magazine for health reasons, but he and Buckley stayed in constant communication, Chambers advising, Buckley deferential. Tanenhaus makes the case that Chambers finally converted Buckley from a revanchist to a Burkean. Kempton, who studied both men closely, doubts that Chambers's advice ever really took: "Buckley worshiped and did not listen: the Chambers of his vision is a saint whose icon stands in a Church where his message is never read."[3]
Tanenhaus traces an inverse symmetry in the progression of Irving Kristol from Burkean to revanchist, and the development of Buckley in the opposite direction.[4] Certainly as late as 1962 Buckley was as extreme as any of those people Tanenhaus condemns as movement conservatives. In that year, Buckley wrote a column saying that if defeating communism entailed nuclear annihilation, the achievement would be worth the price: "If it is right that a single man be prepared to die for a just cause, it is right that an entire civilization be prepared to die for a just cause."[5] But Tanenhaus thinks that Buckley began to be more realistic during his theatrical campaign for mayor of New York in 1965, after which his views converged more and more with those of Chambers. In an interview with Buckley in 2007, Tanenhaus found him dubious about the "conservatism" of the Bush era—for instance, he was highly critical of the Iraq war.[6]
t is true that Buckley worked for a long time to keep National Review free of the most extreme voices on the right—the anti-Semitism of the Liberty Lobby, the Objectivism of Ayn Rand, the nuttiness of the John Birchers, the racism of George Wallace. If the magazine still voiced hard-right opinions, Tanenhaus justifies this as a Burkean effort to hold conservatives together. Buckley took that view himself. When I wrote him in 1970 that the magazine was strident and careless of the truth, he wrote back: "You are right about Jeff [Jeffrey Hart].... I am grateful to you for pointing out that NR seems now and again to be teetering over the brink." Yet it is hard to believe in Buckley the Burkean when the very policies of Nixon and Reagan that Tanenhaus praises for that quality—détente and the China opening under Nixon, arms talks under Reagan—Buckley repudiated, well after the late-Sixties conversion to Chambers's views that Tanenhaus has charted.
For full disclosure, I should add here that Tanenhaus says some nice things about me in this book, principally because when I was twenty-six years old I wrote an essay that Buckley included in an anthology of conservative writings.[7] Tanenhaus predictably finds my effort Burkean, which may be just, though I draw mainly on Saint Augustine and John Henry Newman. I never saw the essay have any influence on Buckley, in part because he knew little of Augustine or Newman—which is a shame. What I quote from Newman is his series of antiwar public letters during the Crimean conflict. He said that the British constitution is good for muddling along, as it should be, since—here is the Burkean note—what is to be conserved is "a certain assemblage of beliefs, convictions, rules, usages, traditions, proverbs, and principles."[8]
But muddling along is not enough in war—as was proved in the Crimean War by the Balaclava "Charge of the Light Brigade," or in Vietnam by My Lai, or in Iraq by Fallujah. War is at odds with constitutional government, Newman said, because "a despotic government is the best for war, and a popular government the best for peace."[9] Buckley stuck by the Vietnam War to the bitter end, and though he did at last see the folly of Iraq, he did not need Burke's help to do that—most Americans discovered it on their own.
Tanenhaus has studied Buckley very closely, and he must know more about him than I do, so perhaps his biography will validate the judgments just sketchily indicated in this brief book. Meanwhile we have his very original take on the last few decades of American politics, prickly, revisionist, and provocative. He makes us look at everything through a different lens. And whatever Buckley's final views, Tanenhaus makes a scathing and convincing case against what George W. Bush tried to present as a legitimate conservatism:
And then there was Iraq, the event that shaped Bush's presidency and, by most accounts, brought both him and the movement to ruin....The Iraq war was the event most at odds with classical conservative thinking. So indifferent to the actual requirements of civil society at home, Bush's war planners gave no serious thought to how difficult it might be to create such a society in a distant land with a vastly different history. Those within the administration who tried to make this case were marginalized or removed from power.
At least there was no whiff of Burke in that.
Notes
[1]C-Span survey of sixty-five presidential scholars, February 2009.
[2]Murray Kempton, "A Narodnik from Lynbrook," in Rebellions, Perversities, and Main Events (Times Books, 1994), p. 86. McGohey directed the prosecution of Alger Hiss.
[3]Kempton, Rebellions, p. 98.
[4]For Kristol, he writes, "Parties are accountable to movement purists, while purists incur no reciprocal obligation to the party, despite its institutional authority."
[5]William F. Buckley, Jr., "On Dead-Red," syndicated column of November 10, 1962.
[6]Sam Tanenhaus, "How William F. Buckley Turned Against the War— and His Own Movement," TheNew Republic, March 19, 2007.
[7]Garry Wills, "The Convenient State," in Did You Ever See a Dream Walking?: American Conservative Thought in the Twentieth Century, edited by William F. Buckley Jr. (Bobbs-Merrill, 1970).
[8]John Henry Newman, "Who's to Blame?" (1855), in Discussions and Arguments on Various Subjects (Longmans, Green, 1891), p. 315.
[9]Newman, "Who's To Blame?," p. 326.
On Sept. 18, Irving Kristol died. On Feb. 27, 2008, William F. Buckley Jr. passed away. Kristol was known as "the godfather of neoconservatism," while Buckley was the founder of the "movement conservatism" of Goldwater and Reagan. The intellectual conservatism that they, in different ways, sought to foster had passed from the scene before they did.
I was a friend of Bill Buckley and an employee of Irving Kristol for several years in the early 1990s, as executive editor of the National Interest, the foreign policy journal published by Kristol and brilliantly edited by Owen Harries. A neoconservative of the older, Democratic school, I broke with the right in the early 1990s and warned about where right-wing radicals were taking the country in my book "Up From Conservatism." The train wreck I predicted occurred during the Bush years, and the postmortems have begun. One is Sam Tanenhaus' indispensable and just-published study "The Death of Conservatism." Another is found in a May 10 blog post by Richard Posner: "My theme is the intellectual decline of conservatism, and it is notable that the policies of the new conservatism are powered largely by emotion and religion and have for the most part weak intellectual groundings. That the policies are weak in conception, have largely failed in execution, and are political flops is therefore unsurprising ... By the fall of 2008, the face of the Republican Party had become Sarah Palin and Joe the Plumber. Conservative intellectuals had no party."
Historians of intellectual conservatism often claim that it consisted of three intellectual movements: the movement conservatism centered on Buckley's National Review, libertarianism and neoconservatism. I am not so sure that the first two qualify as intellectual movements. In the 1950s and 1960s National Review featured some brilliant mavericks like James Burnham, Willmoore Kendall and Russell Kirk, but for most of its subsequent history it was simply a partisan opinion journal. As for the libertarian intellectual movement, isn't that a contradiction in terms? How intellectual can a movement be, if it reflexively answers "the market!" to every question of domestic and foreign policy, before the question is even asked?
That leaves neoconservatism. But in its origins neoconservatism was a movement of the center-left, not of the right. Here is Nathan Glazer, co-editor with Irving Kristol of the Public Interest, in that magazine's final issue in spring 2005, recalling the origins of the journal in the 1960s: "All of us had voted for Lyndon Johnson in 1964, for Hubert Humphrey in 1968, and I would wager (?) that most of the original stalwarts of The Public Interest, editors and regular contributors, continued to vote for Democratic presidential candidates all the way to the present. Recall that the original definition of the neoconservatives was that they fully embraced the reforms of the New Deal and indeed the major programs of Johnson's Great Society ... Had we not defended the major social programs, from Social Security to Medicare, there would have been no need for the 'neo' before 'conservative.'"
The "neoconservatism" of the 1990s, defined by support for the invasion of Iraq and centered on Rupert Murdoch's magazine the Weekly Standard, edited by Irving's son William Kristol, had little to do with the original impulse, as Glazer points out: "There is very little overlap between those who promoted the neoconservatism of the 1970s and those committed to its latter day manifestation." While Irving Kristol and Norman Podhoretz set aside any differences with the Republican right by the 1990s, other first-generation neocons like Glazer and the late Daniel Patrick Moynihan remained true to their New Deal/Great Society principles. Several of them told me over the years that they thought of themselves as "paleoliberals," not "neoconservatives," a term that was coined as an insult by the socialist Michael Harrington and embraced as a badge of honor by Irving Kristol.
In its origins, neoconservatism was a defense of New Deal/Great Society liberalism at home and abroad, both from the radical, countercultural left of the era and from its own design defects. The early neocons were Kennedy-Johnson liberals who believed that liberal reform should avoid naive utopianism and should be guided by pragmatism and empirical social science. The '70s neoconservatives were so focused on the utopianism of the '60s campus left, however, that most paid too little attention to a far greater threat to their beloved New Deal tradition, the utopianism of the libertarian right. Ultimately Milton Friedman and other free-market ideologues did far more damage to America than the carnival freaks of the counterculture.
But the early neoconservatives were right to defend mainstream liberalism against countercultural radicalism. Like today's right, the '60s and '70s left was emotional, expressivist and anti-intellectual. (One of its bibles was Abbie Hoffman's "Steal This Book!") Like today's right, the '70s left favored theatrical protest over discussion and debate. The prophets of the Age of Aquarius and the "population explosion" were every bit as apocalyptic as Glenn Beck. And just as today's right-wing radicals play at Boston Tea Parties, so Abbie Hoffman dressed up as Uncle Sam. The teabaggers are the Yippies of the right.
Boomer nostalgia to the contrary, in the case of practically every domestic issue disputed by the counterculture and the original neoconservatives the mainstream progressive position today is that of the neoconservatives of the '70s. While the neoconservatives of the Committee on the Present Danger in the 1970s exaggerated Soviet power, the kind of muscular liberal internationalism that Pat Moynihan defended against the left in the 1970s and against Reaganite unilateralism in the 1980s is today's progressive grand strategy. Neoconservatives like Moynihan were denounced as racists in the 1970s for saying the same things about the importance of law and order and functioning families that Clinton and Obama have been able to say without controversy. The original neoconservatives like Moynihan and Glazer sought to help the black and Latino poor by means of universal, race-neutral programs instead of race-based affirmative action, which, they warned, would spark a white backlash to the benefit of conservatives. They were right about the political potency and longevity of that backlash, too, even though today's progressives still refuse to admit it.
The enduring legacy of the original neoconservatives is less a matter of policy positions than a particular intellectual style. David Hume defined the essayist as a messenger from the realm of learning to the realm of conversation. Between the late '60s and the mid-'80s, the public intellectuals of the neoconservative movement shuttled between the two realms, writing essays with academic rigor and journalistic clarity for the general educated public in Commentary, edited by Norman Podhoretz, and the two quarterlies that Irving Kristol founded, the Public Interest and the National Interest. Here are a few of the essays in the inaugural issue of the Public Interest in fall 1965: Daniel Patrick Moynihan on "The Professionalization of Reform"; Robert M. Solow, "Technology and Unemployment"; Jacques Barzun, "Art -- by act-of-Congress"; Nathan Glazer, "Paradoxes of American Poverty"; Daniel Bell, "The Study of the Future." The journal in its ecumenical first issue included Robert L. Heilbroner from the left and Robert A. Nisbet from the right. If you were interested in the scintillant collision of philosophy, politics and policy, bliss was it in that dawn to be alive. In an era as inhospitable as our own to the essay as a form, it is encouraging to see an attempt by conservatives to revive the Public Interest under the name of National Affairs. The influence of the neoconservative style of informed debate is evident as well in the flourishing new liberal quarterly Democracy: A Journal of Ideas.
In the 1950s, Irving Kristol, with the British poet Stephen Spender, had co-edited Encounter. In my view Encounter was the best magazine in the English language ever (sorry, Addison and Steele). Here is an anthology of the best of Encounter, including essays and poems by W.H.. Auden and Daniel Bell and Isaiah Berlin and short stories by Nadine Gordimer and Edmund Wilson. There was a scandal in 1965 when it was revealed that this transatlantic journal of ideas was secretly funded as part of the cold war of ideas by the CIA (both Spender and Kristol claimed to have been deceived). Never was CIA money better spent.
Irving Kristol; his wife, the distinguished historian Gertrude Himmelfarb; and many of their friends and allies had begun on the anti-communist left, battling Stalinists in the U.S. and Europe on the intellectual front of the Cold War. Because Soviet-controlled communists in Western democracies set up cultural and intellectual front groups to battle for public opinion, the anti-Stalinist left decided to fight fire with fire by setting up its own network of front groups and publications, often funded, as in the case of Encounter, by the CIA. This kind of Leninist popular-front strategy, using little magazines, committees and manifestos like the Committee on the Present Danger and the Project for a New American Century, was the organizational contribution of the neoconservatives in the 1990s to their creationist and libertarian allies in the Republican right. But by the time Kristol fils had succeeded Kristol pere as the new godfather of neoconservatism, most of the public intellectuals of the first generation like Moynihan, Bell and Glazer had distanced themselves from Neoconservatism 2.0.
The sins of the sons should not be visited upon the fathers. I hope that, in the judgment of history, the "paleoliberal" neoconservatism of the 1970s will overshadow the crude, militaristic neoconservatism of the 1990s and 2000s. For two decades, between the Johnson years and the Reagan years, neoconservatism really was the vital center that Arthur Schlesinger had called for in the late 1940s. A robust new liberalism, if there is to be one in the aftermath of the opportunistic triangulations of Clinton and Obama, cannot leapfrog back to the Progressives or New Dealers, but must begin closer to home, with the early neoconservatives, who had learned from the failures and mistakes as well as the successes of the Progressive Era, the New Deal and the Great Society.
Today is Labor Day, when we celebrate the wealth destroyers – at least if the libertarian right is to be believed.
According to many free-market conservatives, economic growth is almost exclusively the result of investment decisions by a small number of rich individuals – the "wealth creators." The wealth creators, according to the conservative press, are constantly being threatened from above by government, which seeks to destroy wealth by taxation, and from below by workers, particularly those organized into unions, who threaten to destroy wealth by insisting that capitalists share a decent amount of their profits with employees. The entire basis of conservative "trickle-down" economics is the idea that the economy will grow faster if the supposed wealth creators keep more of the profits of private enterprise, with less going to taxes and worker compensation.
If you believe this theory, then Labor Day should be a cause for national mourning. We should all pause to mourn the loss of capital that might have gone to a fifth or a sixth mansion or a private jet, but instead was conscripted against its will to pay for a public school or higher wages in a factory.
We should weep for the capital that might have given its life for high-end caterers but instead was forced by government to be spent on public hospital nurses. And we should grieve for the dollars that were wasted on public police protection, when they might have gone instead to private security guards in a gated community.
But maybe instead of mourning we should celebrate. Maybe Labor Day should be replaced by a new holiday to celebrate the tiny number of brilliant investors who, more or less single-handedly, are responsible for long-term economic progress. We should abolish Labor Day and replace it with Capital Day – a festive time when we, the majority of parasitic wealth destroyers whose income comes from wages rather than investments, can give our collective thanks to the small number of people who have most of the money.
I'm not sure that the above would be recognized as satire in all quarters. Here, for example, is an article in Investor's Business Daily from last fall, denouncing candidate Barack Obama's plan to raise taxes on the top 5 percent: "At this delicate time in our economic history, talk of tax hikes on wealth creators and capital is irresponsible – a recipe for the kind of market meltdowns we've seen repeatedly in recent weeks. Spread the wealth? More like, destroy it."
You would expect that in Investor's Business Daily. But here's British Prime Minister Gordon Brown, addressing the British Chambers of Commerce back in 2003: "You are the wealth creators, the men and women who make our nation more prosperous." Really? So soldiers and police officers and research scientists and mechanics and teachers and nurses are not "wealth creators" who make a nation more prosperous? The statement was particularly odd coming from the future head of what is still called the Labour Party.
There was a time when even Republican presidents in America felt it necessary to defend labor against the claims of capital. Here is the first Republican president, Abraham Lincoln, in his first annual message to Congress during the Civil War on Dec. 3, 1861:
In my present position I could scarcely be justified were I to omit raising a warning voice against this approach of returning despotism.
It is not needed nor fitting here that a general argument should be made in favor of popular institutions, but there is one point, with its connections, not so hackneyed as most others, to which I ask a brief attention. It is the effort to place capital on an equal footing with, if not above, labor in the structure of government.
What on earth is he talking about? Lincoln appears to be referring to the theory of the "balanced constitution" or "mixed constitution," which goes back to ancient thinkers like Polybius. The idea was that in the ideal constitution, different branches of government represent different social classes with different functions in the economy and society. For example, the Roman constitution balanced aristocratic and popular branches.
Some of the nation's founders had argued that the U.S. Senate should at least informally represent the rich, to defend their interests against the more populist House of Representatives. For Lincoln, then, the demand of Southern slave owners – capitalists whose "capital" consisted chiefly of the human laborers they legally owned – that their interests be permanently preserved in the U.S. Constitution by the informal institution of the slave-state/free-state balance was a threat to popular democracy, in which all branches of government should represent only worker-citizens.
Having declared that the very idea of representing capital as well as labor in government is undemocratic, Lincoln goes on to demolish the assumption made by those today who talk about investors as "wealth creators":
It is assumed that labor is available only in connection with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it induces him to labor.
Lincoln goes on to point out that many Americans were self-employed, and that many others were laborers at one point in their lives and capitalists at others. With the war against the slave-owning South in the background, he concludes:
Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not existed.
While progressives and members of the labor movement are fond of quoting Lincoln's statement, conservatives and libertarians tend to ignore it or to dismiss it as reflecting the discredited "labor theory of value," shared by Lincoln with Adam Smith and Karl Marx, which, we are told, was replaced by the marginal utility theory of value. But Lincoln's statement is both historically and morally true.
Human beings labored for themselves for tens of thousands of years before the appearance of rentier elites like warlords, landlords and investors. Those groups, whether benevolent or parasitic, can exist only in a highly specialized society in which wealth creation is a society-wide enterprise, including peasants as well as knights, renters as well as landlords, and workers as well as capitalists.
How did we get from Lincoln, for whom labor was prior to capital, to the Investor's Business Daily writer for whom the "wealth creators" are the richest 5 percent of society? The answer, I think, is the machine. The dependence of the Southern slave owner on slaves was pretty obvious. But as machine production becomes more important in industry and agriculture, labor becomes only one factor of production along with technology. Technological progress means that fewer and fewer workers are needed to operate ever more productive machines.
The response of many 20th-century liberals was to make the consumer equal to, or superior to, the worker in economic importance. Fewer and fewer workers might be employed making goods, but economic growth requires an ever-growing number of prosperous consumers who can buy the goods. Since the Depression, Democrats and Republicans alike in practice have been Keynesians trying to prop up aggregate demand to keep the industrial machinery rolling. Democrats prefer redistribution or public employment, while Republicans prefer military Keynesianism and tax cuts whose real purpose is to encourage spending, not investment, by the rich. So maybe we need to replace Labor Day with Consumer Day, a holiday on which, instead of going on vacation, we will patriotically increase the aggregate demand by shopping.
In a "Fordist" society, named after Henry Ford's system of paying his workers enough to afford the cars they made, the producer and the consumer were joined in the well-paid factory worker. But factory workers were never more than a minority of the American workforce, and even in the absence of outsourcing their number would diminish as a result of automation. In a society where robotic factories and robot farms make almost everything, who are the wealth creators?
I suppose you could answer "the robots," but I doubt that theory will prove widely popular. That leaves only two possibilities: In the robot economy, the wealth creators are either the owners of the robots, or the public as a whole. The first theory might be plausible in the case of Rossum, the inventor-capitalist in Karel Capek's play "R.U.R. (Rossum's Universal Robots)" – which introduced the term "robot," the Czech word for worker. But in what sense are Rossum Jr. or Rossum IV "wealth creators" if they merely inherited title to the robot factory?
The alternative theory is that the true creator of wealth is, ultimately, the commonwealth – not only the political community, but the civilization that it shares with other nations. No technical invention or business innovation is a creation of something from nothing. All depend on the intellectual capital that the human race has accumulated since the Paleolithic period. The argument for property rights then becomes a utilitarian one – which set of property rights will spur individuals and groups and whole societies to engage in useful innovation? (Not all innovation is necessarily useful, as we have seen in the case of financial innovation.)
The commonwealth theory defines wealth broadly, as everything that conduces to the well-being of a community. Material production is only one of many activities that enrich a society. Public goods like safety and utilities and infrastructure and parks are part of the wealth that we share in common. So are many private goods that sometimes are best provided by the public, like public education and inexpensive healthcare.
By all means, then, let us celebrate virtuous capital owners and visionary investors as "wealth creators" on Labor Day. And let us celebrate as well as the other creators of private wealth, on the assembly line and in the office cubicle and in the janitorial closet, and the creators of public wealth in the form of roads and subways and parks, and the police officers and soldiers without whom a high level of public and private wealth could neither be created nor preserved. There are criminals and parasites among all classes of society, but most of us are wealth creators, and we deserve to be recognized as such.
The editor of The New York Times Book Review and the paper's "Week in Review" section, Sam Tanenhaus is the biographer of Whittaker Chambers and is at work on the life of William F. Buckley Jr. In a new, short book, The Death of Conservatism, he argues that the right needs to find its footing for the good of the country. In an e-mail exchange with Jon Meacham, Tanenhaus reflected on the book's themes. Excerpts:
Meacham: So how bad is it, really? Your title doesn't quite declare conservatism dead.
Tanenhaus: Quite bad if you prize a mature, responsible conservatism that honors America's institutions, both governmental and societal. The first great 20th-century Republican president, Theo- dore Roosevelt, supported a strong central government that emphasized the shared values and ideals of the nation's millions of citizens. He denounced the harm done by "the trusts"—big corporations. He made it his mission to conserve vast tracts of wilderness and forest. The last successful one, Ronald Reagan, liked to remind people (especially the press) he was a lifelong New Dealer who voted four times for Franklin D. Roosevelt. The consensus forged by Buckley in the 1960s gained strength through two decisive acts: first, Buckley denounced right-wing extremists, such as the members of the John Birch Society, and made sure when he did it to secure the support of conservative Republicans like Reagan, Barry Goldwater, and Sen. John Tower. This pulled the movement toward the center. Second: Buckley saw that the civil disturbances of the late 1960s (in particular urban riots and increasingly militant anti-Vietnam protests) posed a challenge to social harmonies preferred by genuine conservatives and genuine liberals alike. When the Democrat Daniel Patrick Moynihan called on liberals to join with conservatives in upholding "the politics of stability," Buckley replied that he was ready to help. He placed the values of "civil society" (in Burke's term) above those of his own movement or the GOP.
Today we see very little evidence of this. In his classic The Future of American Politics (1952), the political journalist Samuel Lubell said that our two-party system in fact consists of periods of alternating one-party rule—there is a majority "sun" party and a minority "moon" party. "It is within the majority party that the issues of any particular period are fought out," Lubell wrote. Thus, in the 1980s, Republicans grasped (and Democrats did not) that new entrepreneurial energies had been unleashed, and also that the Cold War could be brought to a conclusion through strong foreign policy. This was the Republicans' "sun" period. The reverse is happening today. The Democrats now dominate our heliocentric system—first on the economic stimulus, which is already proving to be at least a limited success, and now on the issue of health-care reform. These are both entirely Democratic initiatives. The Republicans, so intent on thwarting Obama, have vacated the field, and left it up to the sun party to accept the full burden of legislating us into the future. If the Democrats succeed, Republicans will be tagged as the party that declined even to help repair a broken system and extend fundamental protections—logical extensions of Social Security and Medicare—to some 46 million people who now don't have them. This could marginalize the right for a generation, if not longer. Rush Limbaugh's stated hope that Obama will fail seems to have become GOP doctrine. This is the attitude not of conservatives, but of radicals, who deplore the very possibility of a virtuous government.
Is there an analogous historical moment? Conservatives argue that this is 1965 and that a renaissance is at hand.
I disagree. Today, conservatives seem in a position closer to the one they occupied during the New Deal. The epithets so many on the right now hurl at Obama—"socialist," "fascist"—precisely echo the accusations Herbert Hoover and "Old Right" made against FDR in 1936. And the spectacle of citizens appearing at town-hall meetings with guns recalls nothing so much as the vigilante Minutemen whom Buckley evicted from the conservative movement in the 1960s. A serious conservative like David Frum knows this, and has spoken up. It is remarkable how few others have. The moon party is being yanked ever farther onto its marginal orbit.
Would Chambers recognize the right as it stands today?
He might recognize it, but with dismay. Even in 1959, Chambers withdrew from National Review—where he had been writing occasional essays—because it seemed out of step, for instance, in its failure to see that the Soviet Union must be negotiated with, not simply threatened with nuclear extinction. Chambers opposed the arms race, favored civil liberties, distrusted the unregulated free market. His model was Benjamin Disraeli, the 19th-century English conservative who regarded unchecked capitalism, and the upheavals it wrought, as a potential threat to the social order. Above all, Chambers was a humanist intellectual, deeply learned in the literature of several languages. He urged Buckley (his young protégé) to read the radical novels of André Malraux. He admired Nabokov's Lolita.
Is there an inherent contradiction in the idea that conservatives need to put forward an agenda for the future?
I don't think they need to put forward such an agenda. The best policies are formed through cooperation between the two parties. Most voters aren't ideological. They choose leaders for reasons of trust and affinity. It's worth remembering that even at this supercharged moment, with so much fervor in the air, this country elected a relatively inexperienced African-American product of Hawaii, Kenya, Columbia, and Harvard, with some years spent as a social organizer on the South Side of Chicago. And a majority voted for him for they same reason they have voted for other presidents, because they liked and trusted him, and because he seemed attuned to them and their problems. Hannah Arendt identified the ability to listen—to place oneself inside the mind of others—as the essential requirement of democratic statesmanship. The function of conservatives is not to meet every liberal program or scheme with a denunciation or a destructive counterscheme, but rather to weigh its advantages and defects, supporting the first and challenging the second. A declaration of ideological warfare against liberalism is by its nature profoundly unconservative. It meets perceived radicalism with a counterradicalism of its own.
One criticism of your book will no doubt be that you are an egghead sellout from The New York Times and aren't a true conservative anyway.
Egghead? I wish. I'm a working journalist, plus biographer and self-taught historian. I claim no expertise as a political thinker, and even less in the realm of policy. As for my having sold out to the Times, anyone masochistic enough to review my writings over the years will see my point of view has changed very little. Nothing I say in my new book conflicts with anything I wrote in my biography of Chambers. I'm not registered with either party and never have been. I'm interested in politics as a theater of ideas and as a place where intellectuals now and again exert some visible influence. It is this confluence of ideas and action that I like to write about.
Who do you see as the plausible leaders of the right in the next decade? for that matter, will there be one "right," or possibly a Palin party and a Pawlenty party, to put it very roughly?
This is the crisis now facing the right and principal reason I wrote this book. The movement has exhausted itself and depleted its resources. Before the GOP finds a new leader, it will need a new vocabulary. Political ideas don't change much over time and political debates don't either. (Remember, TR, FDR, and Truman all favored national health care. So did Nixon.) But the tonal difference between a Joe McCarthy in 1950 and a Reagan in 1980 is enormous. And it is the intellectuals who must reinvent the conservative vocabulary, by thinking hard again. I once asked Bill Buckley what brought him to Goldwater and then Reagan. He said, "They came to me." Bill Buckley had the ideas and the language. These ascendant leaders needed to master both.
Where is the evidence that everything would be better if Republicans were in charge? Does anyone believe the economy would be growing faster or that unemployment would be lower today if John McCain had won the election? I know of no economist who holds that view. The economy is like an ocean liner that turns only very slowly. The gross domestic product and the level of employment would be pretty much the same today under any conceivable set of policies enacted since Barack Obama’s inauguration.
Until conservatives once again hold Republicans to the same standard they hold Democrats, they will have no credibility and deserve no respect.
In January, the Congressional Budget Office projected a deficit this year of $1.2 trillion before Obama took office, with no estimate for actions he might take. To a large extent, the CBO’s estimate simply represented the $482 billion deficit projected by the Bush administration in last summer’s budget review, plus the $700 billion Troubled Asset Relief Program, which George W. Bush rammed through Congress in September over strenuous conservative objections. Thus the vast bulk of this year’s currently estimated $1.8 trillion deficit was determined by Bush’s policies, not Obama’s.
I think conservative anger is misplaced. To a large extent, Obama is only cleaning up messes created by Bush. This is not to say Obama hasn’t made mistakes himself, but even they can be blamed on Bush insofar as Bush’s incompetence led to the election of a Democrat. If he had done half as good a job as most Republicans have talked themselves into believing he did, McCain would have won easily.
Conservative protesters should remember that the recession, which led to so many of the policies they oppose, is almost entirely the result of Bush’s policies. According to the National Bureau of Economic Research, the recession began in December 2007—long before Obama was even nominated. And the previous recession ended in November 2001, so the current recession cannot be blamed on cyclical forces that Bush inherited.
Indeed, Bush’s responsibility for the recession is implicit in every conservative analysis of its origins. The most thorough has been done by John Taylor, a respected economist from Stanford University who served during most of the Bush administration as the No. 3 official at the Treasury Department. In his book, Getting Off Track, he puts most of the blame on the Federal Reserve for holding interest rates down too low for too long.
While the Fed does bear much responsibility for sowing the seeds of recession, it’s commonly treated as an institution independent of politics and even the government itself. But the Federal Reserve Board consists of governors appointed by the president and confirmed by the Senate.
Because the president appoints the board, he has primary influence over its policies. This is especially the case for chairmen of the Fed appointed by Republicans because they often have ties to Republican administrations. Chairman Ben Bernanke was originally appointed as a member of the Fed in 2002, serving until 2005, when he became chairman of the Council of Economic Advisers in the White House, a position that made him Bush’s chief economic adviser.
As early as 2002, a majority of the seven-member Federal Reserve Board was Bush appointees, and by 2006 every member was a Bush appointee. While many critical decisions about monetary policy are made by the Federal Open Market Committee, the board’s position always prevails.
The Treasury secretary also has had breakfast with the Fed chairman on a weekly basis for decades. Consequently, most economists generally believe that every administration ultimately gets the Fed policy it wants. Therefore, one must conclude that if there were errors in Fed policy that caused the current downturn, it must be because the Fed was doing what the Bush administration wanted it to do.
To the extent that there were mistakes in housing policy that contributed to the recession, those were necessarily committed by Bush political appointees at the Department of Housing and Urban Development, Fannie Mae, Freddie Mac, and other agencies. To the extent that banks and other financial institutions made mistakes or engaged in fraudulent activity, it was either overlooked or sanctioned by Bush appointees at the Securities & Exchange Commission, the Comptroller of the Currency, the Commodity Futures Trading Commission, and elsewhere.
But in a larger sense, the extremely poor economic performance of the Bush years really set the stage for the current recession. This is apparent when we compare Bush’s two terms to Bill Clinton’s eight years. Since both took office close to a business cycle trough and left office close to a cyclical peak, this is a reasonable comparison.
Throughout the Bush years, many conservative economists, including CNBC’s Larry Kudlow, extravagantly extolled Bush’s economic policies. As late as December 21, 2007, after the recession already began, he wrote in National Review: “the Goldilocks economy is outperforming all expectations.” In a column on May 2, 2008, almost six months into the recession, Kudlow praised Bush for having prevented a recession.
But the truth was always that the economy performed very, very badly under Bush, and the best efforts of his cheerleaders cannot change that fact because the data don’t lie. Consider these comparisons between Bush and Clinton:
• Between the fourth quarter of 1992 and the fourth quarter of 2000, real GDP grew 34.7 percent. Between the fourth quarter of 2000 and the fourth quarter of 2008, it grew 15.9 percent, less than half as much.
• Between the fourth quarter of 1992 and the fourth quarter of 2000, real gross private domestic investment almost doubled. By the fourth quarter of 2008, real investment was 6.5 percent lower than it was when Bush was elected.
• Between December 1992 and December 2000, payroll employment increased by more than 23 million jobs, an increase of 21.1 percent. Between December 2000 and December 2008, it rose by a little more than 2.5 million, an increase of 1.9 percent. In short, about 10 percent as many jobs were created on Bush’s watch as were created on Clinton’s.
• During the Bush years, conservative economists often dismissed the dismal performance of the economy by pointing to a rising stock market. But the stock market was lackluster during the Bush years, especially compared to the previous eight. Between December 1992 and December 2000, the S&P 500 Index more than doubled. Between December 2000 and December 2008, it fell 34 percent. People would have been better off putting all their investments into cash under a mattress the day Bush took office.
• Finally, conservatives have an absurdly unjustified view that Republicans have a better record on federal finances. It is well-known that Clinton left office with a budget surplus and Bush left with the largest deficit in history. Less well-known is Clinton’s cutting of spending on his watch, reducing federal outlays from 22.1 percent of GDP to 18.4 percent of GDP. Bush, by contrast, increased spending to 20.9 percent of GDP. Clinton abolished a federal entitlement program, Welfare, for the first time in American history, while Bush established a new one for prescription drugs.
Conservatives delude themselves that the Bush tax cuts worked and that the best medicine for America’s economic woes is more tax cuts; at a minimum, any tax increase would be economic poison. They forget that Ronald Reagan worked hard to pass one of the largest tax increases in American history in September 1982, the Tax Equity and Fiscal Responsibility Act, even though the nation was still in a recession that didn’t end until November of that year. Indeed, one could easily argue that the enactment of that legislation was a critical prerequisite to recovery because it led to a decline in interest rates. The same could be said of Clinton’s 1993 tax increase, which many conservatives predicted would cause a recession but led to one of the biggest economic booms in history.
According to the CBO, federal taxes will amount to just 15.5 percent of GDP this year. That’s 2.2 percent of GDP less than last year, 3.3 percent less than in 2007, and 1.8 percent less than the lowest percentage recorded during the Reagan years. If conservatives really believe their own rhetoric, they should be congratulating Obama for being one of the greatest tax cutters in history.
Conservatives will respond that some tax cuts are good while others are not. Determining which is which is based on something called supply-side economics. Because I was among those who developed it, I think I can speak authoritatively on the subject. According to the supply-side view, temporary tax cuts and tax credits are economically valueless. Only permanent cuts in marginal tax rates will significantly raise growth.
On this basis, we see that Bush’s tax cuts were pretty much the opposite of what supply-side economics would recommend. The vast bulk of his tax cuts involved tax rebates—which failed in 2001 and again in 2008, because the vast bulk of the money was saved—or tax credits that had no incentive effects. While marginal rates were cut slightly—the top rate fell from 39.6 percent to 35 percent—it was phased in slowly and never made permanent. Neither were Bush’s cuts in capital gains and dividend taxes.
I could go on to discuss other Bush mistakes that had negative economic consequences, such as the Sarbanes-Oxley Act, which imposed a massive regulatory burden on corporations without doing anything to prevent corporate misconduct, and starting unnecessary wars in Iraq and Afghanistan, which will burden the economy for decades to come in the form of veterans’ benefits.
But there is yet another dimension to Bush’s failures—the things he didn’t do. In this category I would put a health-care overhaul. Budget experts have known for years that Medicare was on an unsustainable financial path. It is impossible to pay all the benefits that have been promised because spending has been rising faster than GDP.
In 2003, the Bush administration repeatedly lied about the cost of the drug benefit to get it passed, and Bush himself heavily pressured reluctant conservatives to vote for the program.
Because reforming Medicare is an important part of getting health costs under control generally, Bush could have used the opportunity to develop a comprehensive health-reform plan. By not doing so, he left his party with nothing to offer as an alternative to the Obama plan. Instead, Republicans have opposed Obama's initiative while proposing nothing themselves.
In my opinion, conservative activists, who seem to believe that the louder they shout the more correct their beliefs must be, are less angry about Obama’s policies than they are about having lost the White House in 2008. They are primarily Republican Party hacks trying to overturn the election results, not representatives of a true grassroots revolt against liberal policies. If that were the case they would have been out demonstrating against the Medicare drug benefit, the Sarbanes-Oxley bill, and all the pork-barrel spending that Bush refused to veto.
Until conservatives once again hold Republicans to the same standard they hold Democrats, they will have no credibility and deserve no respect. They can start building some by admitting to themselves that Bush caused many of the problems they are protesting.
Bruce Bartlett was one of the original supply-siders, helping draft the Kemp-Roth tax bill in the 1970s. In the 1980s and 1990s, he was a leading Republican economist. He now considers himself to be a political independent. He is the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. His latest book, The New American Economy: The Failure of Reaganomics and a New Way Forward, will be published by Palgrave Macmillan in October.
