Government's Expanded Role
NOVEMBER 01, 1959 by FIRST NATIONAL CITY BANK
The expanded role of government has brought about significant changes in our economic system. Old-style, individual-enterprise capitalism has given way to what Professor Calvin Hoover of Duke University describes in his recent book, The Economy, Liberty and the State,¹ as "Welfare Capitalism, Progressive Capitalism, or simply the Organizational Economy."
Picking up the last descriptive phrase, it would seem that organization headquarters are gravitating more and more toward
The federal government, in ways large and small, pervades our lives. Measuring its size and scope, to get some indication of its vast and growing influence, can take many approaches. Perhaps the simplest is to cite a few statistics, single out a few programs that point up the wide range of government economic-financial activities and responsibilities today.
For example, some 25 million Americans (veterans, federal workers, armed forces, farmers, social security recipients)—one adult in every five—get regular checks from the government. Countless others receive occasional payments.
At the end of 1958, federal warehouses were giving out food to more than five million "needy persons." The food got in the warehouses in the first place because of federal farm programs which, while regimenting the farmer with acreage controls and marketing quotas, have priced commodities out of markets and piled up mountainous surpluses.
Some two million persons live in government-subsidized public housing.
Taxes at all levels of government take more than one-quarter of our national production and are levied most heavily on work, enterprise, and capital accumulation.
The federal government directly competes with private business by operating thousands of commercial-industrial facilities (a 1956 tally placed the total at nearly 20,000 with capital assets of some $12 billion).
In the financial field there are over 100 federal insuring, lending, and guaranteeing agencies covering agriculture, housing, foreign trade and investment, local government organizations, commerce, and industry. It is estimated that by June 1960 existing lending programs will reach a total outstanding of $105 billion ($23 billion direct loans and $82 billion guaranteed or insured loans.) In June 1945 the total was $11 billion.
Federal aid to states, localities, and individuals, at $147 million in 1930, climbed to $7.2 billion by 1958.
Government-owned electric utilities accounted for one kilowatt in 18 generated in this country in 1920; last year public power facilities generated one kilowatt in every four.
One in every six employed Americans is on a government payroll. Since 1900 nongovernment employment has increased about 100 per cent while government employment—federal, state, and local—has increased about 650 per cent.
The Great Reaction
There is a chorus of pleas these days for an even bigger role for government—more central planning, goal setting, decision making. They are invariably put forth in the name of "progress."
Last month, for example, a panel of seven economists, including Professor John K. Galbraith of Harvard, stated: "We reject the notion that government governs best which governs least. The federal government is our only instrument for guiding the economic destiny of the country."
"Liberals" urge greater spheres of government to "beat the Russians" and "advance social welfare." Criticism is heaped on "reactionaries" who are obsessed with the "fetish of a balanced budget and stable prices" and who harbor "exaggerated fears about growth of government."
"Liberalism" is a good word; "reactionary" is a bad word. Yet the real reactionaries are those who urge statism in the name of liberalism. The true liberal opposes encroachment by centralized power; he respects the individual, his cherished freedoms, his sense of responsibility.
The "neo-liberals," on the other hand, have little faith in the capacity of freemen to take care of themselves, to overcome hardships, to exercise wise judgments. Supporters of the superstate aspire to decide for people what they shall have and to keep power by making voters beholden to them for handouts. This is openly expressed in the cynical observation, widely attributed to Harry Hopkins: "We will spend and spend, and tax and tax, and elect and elect."
It was Alexis de Tocqueville, that discerning French observer, who in the 1830′s warned of the ultimate fate of men who are tempted by a "benevolent" Welfare State:
"It provides for their security, foresees and supplies their necessities, manages their principal concerns, directs their industry, regulates the descent of property, and subdivides their inheritances—what remains, but to spare them all the care of thinking and all the trouble of living…?
"The will of men is not shattered, but softened, bent, and guided. Men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence. It does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, until each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd."
John Stuart Mill, the English philosopher and economist, pointed out more than a century ago:
"The worth of the State, in the long run, is the worth of the individuals composing it; and… a State which dwarfs its men, in order that they may be more docile instruments in its hands even for beneficial purposes—will find that with small men no great things can be accomplished."
Retreats from Socialism
A democracy, while preserving the outward forms, can destroy itself if the majority of the voters find themselves bound, out of selfish interests in benefit programs, to perpetuate in power a benevolent dictatorship. Sooner or later, however, people revolt when bureaucrats become too greedy for power and money.
As far back as 1949, the Australian people turned out of office a ruling Labor Party in favor of a Liberal-Country Party which reformed taxes to open opportunity for enterprise.
"In the past three years we have burned our identity cards, torn up our ration books, halved the number of snoopers, decimated the number of forms, and said good riddance to nearly two-thirds of the remaining wartime regulations. Now we have red meat—instead of red tape."
These illustrations of retreats from socialism show that, while people like to get Christmas presents, they are not so keen about the restraints, controls, and losses of opportunity that go with the fully developed socialist society.
From the Monthly Letter of the First National City Bank of
What They Said
Those who look to the action of this [federal] government for specific aid to the citizen to relieve embarrassments arising from losses by revulsions in commerce and credit lose sight of the ends for which it was created and the powers with which it is clothed. It was established to give security to us all in our lawful and honorable pursuits, under the lasting safeguard of republican institutions. It was not intended to confer special favors on individuals or on any classes of them, to create systems of agriculture, manufactures, or trade, or to engage in them either separately or in connection with individual citizens or organized associations. If its operations were to be directed for the benefit of any one class, equivalent favors must in justice be extended to the rest, and the attempt to bestow such favors with an equal hand, or even to select those who should most deserve them, would never be successful.
Martin Van Buren, 1837
Should the time ever arrive when the state governments shall look to the Federal Treasury for the means of supporting themselves and maintaining their systems of education and internal policy, the character of both governments will be greatly deteriorated.
JAMES BUCHANAN, 1859
‘The Twentieth Century Fund, N. Y.
2Quotes in "The Progress of Socialism," page 71, of the June 1959 issue of the First National City Bank Letter.