Thursday, July 24, 2008

The Social Democratic Fetishization of the State and In Praise of Reaction

Louis Hartz argues that the New Deal was pragmatic. The claim that the state solves problems is one that reverberates throughout the twentieth century and into the 21st. But is that so? Whiggery has often been a reaction to government initiatives. In the 18th century the Whigs were a reaction to the establishment of the Bank of England and what they saw as the corruption of the English court and Parliament by Sir Robert Walpole. In the Federalist era in America, the Jeffersonian Republicans were a reaction to the Federalism of Alexander Hamilton. The Jacksonian Democracy, which was more Whiggish than Jackson's opponents, who changed their name from the National Republican to the Whig Party, was similarly a reaction to the Bank of the United States. In general, freedom is not a cause that rallies support until it is violated. Hence, Whiggish or libertarian movements always have the quality of reaction.

The Progressives confounded reaction to their policies with opposition to progress. Reaction to change can can be progressive if an initiative does harm. Progress means improvement toward a goal, so if change impedes improvement, reaction and removal of the change is progressive. There is no necessary conflict between reactionary and progressive ideas. American politics became overly rigid because of the equation of change and progress. Change is progressive if it improves human beings, if it does not cause harm and if society is better off because of it. Most change is complex and has unforeseen effects. The minimum wage, for instance, may cause unemployment and it may forestall the poorest segment of society from gaining work experience that in turn prevents the development of work habits and so leads to dependency and a welfare culture. This may be true even if the unemployment rate is not visibly raised following an increase in the minimum wage because employers may reduce training and other fringe benefits that are difficult to discern. On the other hand, a low minimum wage may not have these effects. If demand for labor is wage inelastic, then a small increase in the minimum wage may have little effect on employment or working conditions and cause a significant improvement in the welfare of low-wage workers. This is a question that is fairly simple to conceptualize, but there is no way to resolve it scientifically because the effects of the real wage on employment decisions are not completely measurable. There is no debate that a large increase in the minimum wage will reduce employment. In nations with high minimum wages and work standards unemployment is consistently higher than in more competitive nations. Similarly, union contracts may improve the wage level and introduce greater job security and employee "say" into the workplace, but it may also cause spillover effects under which lower employment levels in unionized plants cause higher unemployment and lower wages in non-union plants. The reverse may also be true, that the high wages that unions cause may threaten non-union employers to offer higher wages so that their employees will not unionize.

The effects of state intervention are difficult if not impossible to predict. The assessment of such effects takes many years, perhaps five decades. One would expect a pragmatic advocacy of New Deal policies to be open to such assessment.

In general, most ideas fail. Inventors find that they must fail many times before coming up with a single success. Four fifths of new product innovations in large firms fail, and the same percentage of business start ups fail. Yet, social democrats seem to feel that the programs that they advocate never fail. There was some welfare reform under the Democratic Clinton administration, but the left opposed this reform and continues to do so despite empirical evidence that it has worked. Welfare was certainly a hot button issue until Clinton initiated the reform, and it is something of an exception. Few other government programs have been revised, adjusted for quality reasons or terminated outright.

If government managers and politicians are no smarter than entrepreneurs, then we would expect four fifths of government programs to be terminated. Yet, few government programs die once initiated. Rather, they create a vested interest group that economically depends on the program (teachers, professors, government employees, health workers, police officers and the like) and the reactionary interest group radically opposes the program.

This may be viewed as a kind of fetishization. New Deal social democrats fetishize government policies and view them as sacred, much as a tribal culture views a totem as sacred. This religious fixation on government programs likely has religious roots in early America. The Whig Party, for instance, believed that social concerns commingled with economic concerns. Protestantism saw a link between social morality and economic success. Later in the nineteenth century, the Social Gospel held that there was a religious motivation for socialistic reform. The laissez-faire conservatism of late nineteenth century Republicanism that led to today's Republicans being associated with free market and conservative ideas was a deviation from the earlier association. The Federalists and the Whigs, the first two conservative parties that represented wealthy interests, were big government parties. They were also the more religious parties in comparison with the Jeffersonian Democratic Republicans and the Jacksonian Democrats. Thus, until the Civil War, big government and imposition of social morality was associated with the economic elite. It was not until American business began to mature in the late nineteenth century that the Whigs' descendants, the Republicans, began to adopt laissez-faire positions. But even these laissez-faire positions were heavily qualified. In particular, as the late nineteenth century Republicans had begun to adopt professions, they began to advocate government intervention on behalf of the professions. Thus, a new constellation of professional interests began to evolve. By education, these professionals advocated laissez-faire, and it was not for two generations that the advocates of the professions were to dispense with laissez-faire in the interest of Progressivism and then the New Deal. Of course, Progressivism and the New Deal had the incidental effect of stimulating demand for the professions and enforcing professional standards.

The social democratic fetishization of the state, then, has its roots in elitism and in a communitarian interpretation of religion associated with the early evangelicals. There is therefore considerable tension within the Republican Party. There is no necessary connection between laissez-faire economics and religion. In fact, for much of American history the evangelical Protestants believed in big government. The Democratic Party has always been the more diverse of the parties, but it has only since 1932 been the more social democratic of the parties. Thus, the Democratic Party has increasingly become the party of the professions, of academics, lawyers and physicians. The Republicans have retained the support of the evangelical Protestants, but have done so through an uneasy alliance of the remnant of the individualist liberals and with big business Progressives, i.e., Rockefeller Republicans, who in many ways have more in common with the Democratic professional interests than with the evangelicals or the individualist liberals.

How do these views correspond with those of Americans? It would seem that they capture some of the viewpoints of most Americans. However, given the range of cultural orientations, it would be difficult for the Republicans to consistently capture the portion of the country that is primarily individualist-oriented in its voting, since big business and individualist interests are in conflict. At best, only some of the time can the Republicans represent each of the three orientations in its fold, the individualist, the Progressive and the religious. It is true that religious orientation can be combined with the others, as it has, but the individualist and big business interests are almost necessarily in conflict.

Similarly, there are likely a significant percentage of Democrats who differ from the left wing perspective and who are not supportive of the economic interests of medicine, law and academia. Thus, the Democratic Party has been fairly "conservative" under the Clinton administration but more governmentally expansive under earlier administrations. Due to simple arithmetic, at the national level the two party system cannot capture the ideological diversity of the American public.

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