Failure of Liberalism

In 1960 sociologist Daniel Bell claimed that ideology had ended. It did not. Ideology is but a set of integrated assumptions, hypotheses or theories about the world. Without integration social order would disintegrate, and without assumptions action would be pointless. In the decades following 1960 universities were imbued with a more aggressive ideological tone than that which had preceded 1960. More importantly, the dominant ideology of the post-war period, state-activist liberalism, faltered. Yet its proponents in both major political parties became increasingly shrill about their respective ideological versions. What faltered most was state-liberalism's claim of pragmatism and economic rationality. In failing to consider the outcomes of its own decisions, state-liberalism failed its chief premise of pragmatism. State-liberalism faltered because business was not efficient, rational or pragmatic, but rather was coddled (Lindblom) and benefited from the activist liberal state that acted not in the public interest but rather in firms' private interests. Coddling connotes inefficiency, and inefficiency leads to the failure of state-activist liberalism's chief premise that it can produce economic growth and that the state can ameliorate inefficiencies, the business cycle and the anxieties characteristic of laissez-faire capitalism. Although economic growth in the immediate post-war period was ample and well distributed, by 1970 the liberal-Progressive system had failed to deliver what Herbert Croly called "the promise of American life". Real wages sputtered and income inequality grew in the wake of stock market growth and plant relocations. In the following decades, the decline has been mitigated by borrowing and the increasingly widespread distribution of credit, but little more. In other words, the American economy has been living on borrowed time. A few technological breakthroughs have masked a widespread failure of innovation. As executives have seen plant relocation as the sole avenue for increasing efficiency, they transferred America's rusting infrastructure to the third world. But the activist state displaced the innovation that ought to have replaced the now-globally based manufacturing infrastructure. The result is ever-slower economic and technological progress if not outright permanent declines.

Oswald Spengler argued that the west would decline because of natural historical cycles. The decline of American liberalism is not due to an inevitable cycle but rather to the choices that the American public has made in response to the failure of the progressive ideologies and institutions that came to dominate American politics beginning in the late 19th century and have increasingly dominated liberalism--those of the activist state. The proponents of the activist state claim that it serves the poor and argue for the establishment of large edifices to do so. But they have not solved the poor's problems, and in many cases have intensified them. State activist liberals, on behalf of their altruistic claims, establish a centralized monetary system whose chief result is not just the reduction of unemployment in ever-less productive jobs, but the distribution of credit hence wealth into the hands of large corporations, their stock holders, their executives, their service firms and Wall Street. State-activist liberalism calls itself "progressive" but progress in terms of real wage growth and innovation has fizzled. Hence, while the proponents of state activist liberalism claim to have improved things, much of what they have accomplished has been destructive of the ends that they proclaim. Following more than a century of state activist liberalism, Americans are less economically secure than they were under laissez-faire because job creation has slowed and has been funneled into the kinds of jobs in the kinds of firms to which entrenched economic interests have chosen. These are not the firms and jobs that best serve the public and do not produce sustainable growth. Alternatives have been staunched by the centralized approach to credit allocation that progressivism, backed by banking and corporate interests, has favored.

State activist liberalism has faltered because it has not fulfilled the promise of pragmatism that post-war liberals proclaimed. America's large corporations have not performed, and instead have relied on the public support that efficient private organizations ought to obviate. This is not because the public cannot afford seeing large companies fall or because industry is necessarily inefficient, but because the firms' control of the media is sufficient to forestall intelligent debate about policy options.

The state-activist liberal stance was always present in American history. In the late 18th century it was called Federalism and in the early 19th century it was represented by the Whig Party. The Republicans briefly rejected the state liberal philosophy in favor of social Darwinism in the late 19th century for two or three decades, which had the effect of preempting working class Jacksonian democracy, and then reasserted it in the form of Progressivism. The Democrats under Woodrow Wilson followed. Under Franklin Roosevelt the Democrats made one major change: painting the image that their Whig philosophy was in the interest of the poor and that the redistribution of wealth that Hamilton and the Whigs had advocated was a matter of social justice. At the same time, Roosevelt intensified the power of the Fed to transfer wealth to politically connected investment banks and their client corporations.

Although both political parties are genealogically descended from Jefferson, both advocate the ideology of Hamilton. But management theory has advanced since Hamilton's death. Today's state activist liberalism fails to integrate advances in management theory, and in effect is a relic-ideology that has slowed economic growth and has increasingly crippled the American economy.

It is time to consider alternatives. The current path is one of impoverishment and the failure of the American economic system.