Should libertarians embrace big government?

Posted by Marc Hodak on March 18, 2007 under Collectivist instinct | Be the First to Comment

Tyler Cowen has created a kerfuffle among libertarians by suggesting that they should stop worrying and learn to love big government. He says:

The more wealth we have, the more government we can afford. Furthermore, the better government operates, the more government people will demand. That is the fundamental paradox of libertarianism. Many initial victories bring later defeats.

I am not so worried about this paradox of libertarianism. Overall libertarians should embrace these developments. We should embrace a world with growing wealth, growing positive liberty, and yes, growing government. We don���t have to favor the growth in government per se, but we do need to recognize that sometimes it is a package deal.

Cowen is a thoughtful commentator on politics and economics, but I think that he suffers here from a version of Stockholm Syndrome. He accepts the growth of government as an inevitable complement to growth of wealth. He refers to government as a kind of discretionary product upon which ���people��� can choose to spend that wealth. Aside from the questionable conflation of which people are making which choices, I believe that his conclusion fundamentally misreads history.

The global trend is clearly toward greater wealth and greater freedom. The trend in America, however, appears to re-inforce the notion of a “package deal” that Cowen is espousing. But the U.S. is not evidence of a counter-trend so much as an example of a fortuitous starting point as a libertarian’s wet dream that could not last.

Globally, classical liberalism has become an unstoppable force. Although evidence of that force in unadulterated form is virtually invisible in the politics of any individual country at any particular point in time, it comes into clear view when one steps back from the temporal concerns and non-linear progress of the late 20th century to view the whole world since the Renaissance. From that vantage point, we can see that Gutenberg���s invention unleashed a tidal wave of understanding, transparency, and technological innovation that eventually, some would say inevitably, led to greater freedom and wealth. Sure, anyone can pick specific times and places in the interim where freedom was curtailed or squashed, or where wealth was confiscated or squandered by political folly. Still, the overall trend is unmistakable: Civilization is not trading off wealth for freedom���it is achieving greater amounts of both.

To some extent, the existence and example of America has likely driven the global trend toward greater wealth and freedom. But America itself seems to be a counterpoint to this general trend. Here, observers like Cowen see the growth of wealth along with the limitation of freedom as a ���package deal.��� He claims that Americans have come to embrace bigger government, and that libertarians must accept this. This verdict overlooks America���s highly anomalous starting point. Our Constitution was a radical construct for the late 18th century, far ahead of its time in trying to limit the sphere of government in favor of the individual. It embodied several experiments all at once in democracy, limited government, civil rights (aside from slavery), and capitalism. In hindsight, it probably created an unsustainably high degree of freedom, especially economic freedom, given the moral, legal, economic, and intellectual development of Tocqueville���s America.

The Constitution intentionally imbedded a massive power vacuum in our governance structure. The residual power was supposed to be retained by the states and the people. The document bravely defended itself against political entrepreneurship, but ultimately lost. As long as America could draw the best and brightest from around the world, our politicians could get away with siphoning personal freedom and wealth for ���public��� purposes. Populism was an easy political road.

Now, that road is getting more difficult. All governments are beginning to feel the hot breath of competition for capital and talent. Competition compels legislative restraint. We can already see powerful evidence of such restraint in other wealthy and powerful countries. In the last several years, we witnessed Germany reducing their taxes, the French trying to introduce labor market reforms (mon dieu!), and Communist China’s adoption of expanded property rights for its citizens. Public choice mavens would have wagered heavily against any of these. We’re seeing it here, too, with the scaling back of laws that hamper our global competitiveness, such as the elimination of the venerable Glass-Steagall Act.

Soon, even the U.S. government will no longer be able to do whatever it wants. The limitation won���t be a constitutional one. Our politicians have been successfully evading constitutional limits almost since the founding of the republic. The limitation won���t be an ideological one. Some of the most progressive Democrats are leading the charge to revisit Sarbanes-Oxley and the Alternative Minimum Tax because their constituents are the ones most hurt by current policies. The limitation won���t be a moral one. Most voters continue to be perfectly ready to impose on others or accept on themselves the threat of violence implied by government taxation and regulation.

The limitation on governmental expansion is coming from competition for wealth creation. Greater understanding and transparency will mean a clearer line of sight between government policies that enhance wealth creation versus those that destroy it or chase it away. Investors and entrepreneurs will be courted and consulted, as they have been recently throughout the developing world. Eventually, even the U.S. government will have to pay heed to the preferences of wealth creators, no matter how many votes it has to tax or regulate them. Like every once-dominant player, the U.S. will be forced to un-bundle the policies that it once got away with pushing as a package deal.