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Thursday, August 26, 2010
As if it wasn't confusing enough already.
As if it wasn't bad enough that the word "liberal" means something entirely different on one side of the Atlantic than it does on the other, leading to no end of confusion. Now they've come up with "liberaltarianism." This concoction is meant to denote a fusion (confusion?) between liberal and libertarian thought. As a phrase, "liberaltarianism" does not roll so much as it lurches off your tongue before shuddering and collapsing on to the carpet in a heap.
I'll admit that I'm rather new to this "liberaltarianism" thing. Scott Sumner sums it up thusly:
"Liberaltarianism is basically libertarians attempting to knock some sense into liberals on economic issues."He then proceeds to lay out some examples of successful bouts of "sense-knockings:" eliminating wage and price controls, lower marginal tax rates for the rich, reducing government involvement in industry.
I would view each of these examples as a generally positive development. Even what Sumner views as "setbacks" - for example the US government bailout/takeover of General Motors - are exceptions that prove the rule. GM is set to return to public financial markets shortly and the government's stake should be sold off in the next year or so. Even "liberal" governments now rightly accept that they should not be in the business of making automobiles.
But then I made a fatal mistake: I scrolled down to the comments section on Sumner's post. The very first commenter points out that, in the late 19th and early 20th centuries, laissez faire used to be the norm and the recent "victories" Sumner describes cannot undo the damage of decades of Liberal Big Government. This is infuriatingly wrongheaded. As Sumner rightly retorts, this laissez faire period was absolutely miserable. In addition to implicitly condoning rampant inequality, economic policy was often guided by a sort of moral puritanism which viewed the suffering of the working class as good for them.
Quite simply, that period's approach to laissez faire capitalism was unsustainable. It was precisely this model that millions of people revolted against, turning to communism or fascism as an escape. Modern day capitalism is softer (although the degree to which it is softer varies across Europe, North America, and Asia). By offsetting the harsh realities of capitalism with a stronger safety net and progressive redistribution, contemporary capitalism has succeeded in neutering many of the harshest criticisms against it.
To a certain extent, bigger governments are the product of greater wealth. Rich societies inevitably demand greater government involvement since, as wealth increases, so do expectations regarding standards of living. For examples, one need only look to capitalist Hong Kong, where welfare benefits far surpass those in communist mainland China. There is absolutely no good reason why wealthy countries should tolerate the levels of depravity suffered by those living in the glory days of laissez-faire.
But this is not a one-sided dynamic. The success of the social safety net is itself contingent upon the success of the capitalist model. It is not possible to continue to raise living standards without economic growth, and economic growth requires a free market. If government growth outpaces the economy, a painful re-adjustment will inevitably follow (viz. modern day United Kingdom).
To sum up: there is a mutual dependency at work here. One cannot long survive without the other. Despite its clunkiness, the concept of liberaltarianism seems to capture this understanding fairly well.
Unfortunately, finding the balance between the two is supremely complex. The sheer number of variables at play is overwhelming, and there are always unintended consequences. Designing policy in liberal democratic capitalist societies is bloody difficult, and our ongoing struggles with macroeconomic policy making is evidence of this. Of course, this is also what makes it so fascinating to nerds such as myself.
This is also why, dear readers, the next time you hear someone pining for the laissez faire days of yore, you should hit them over the head with a stick.
