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Monday, August 1, 1983

A Reviewers Notebook: Political Economy and Freedom

Before his untimely death Warren Nutter had made a number of timely contributions to economic thought. But many of them were in the form of comments at conferences, notes made for class lectures at the University of Virginia, speeches at gatherings of the Philadelphia Society and the like, and essays published in journals that were not readily accessible to the general public. Nutter had not been given time to do his own gathering and synthesizing. So we are indeed indebted to the Liberty Press of Indianapolis, and to his widow Jane Couch Nutter, for a first-rate winnowing job that has resulted in a fine posthumous volume, Political Economy and Freedom: A Collection of Essays (314 pp., cloth $10.00, paper $5.50), which comes with a foreword by Paul Craig Roberts, one of Ronald Reagan’s early supply-side advisers.

From the beginning Warren Nutter insisted on the primacy of microeconomics. In a world in which choosing is done at the margin, Nutter thought it self-defeating to depend on Keynesian central planning. When transactions are made in the millions, there is no way of arbitrarily setting wages and prices, or determining quotas, without strangling human ingenuity and dampening incentives of all kinds.

Even so, Nutter knew that economies exist in political frames. The decisions of politicians often play hob with economic choice. So, unlike many of his fellow libertarians, Nutter kept a wary eye on nonmarket forces. Neither the Soviets in Moscow, nor our own interventionist politicos on Capitol Hill, ever took him by surprise. He spent four fruitful years working as an economic and political adviser to the Pentagon, where much of this time was devoted to judging the intentions and capabilities of Soviet leaders who, though they could put their fingers on the most advanced nuclear weapons, had to reckon with a back-up society that was more interested in vodka than in conquest.

In Search of a Cause

The key to Nutter’s thinking is supplied in some remarks he made to the National Association of Manufacturers in 1974. “The world,” he said, “is bigger than the marketplace, and many valuables are simply not marketable. The concept of the economic man works to explain markets because most people behave that way most of the time. But some behave differently all the time, and all do some of the time. Otherwise, why do we have wars, hot and cold? No theory of social behavior is complete unless it allows for the passion of the mob, the zeal of the martyr, the loyalty of the palace guard, the insatiability of the ego-maniac . . . The principal problems of the day are at root not economic but social, ethical, and political. We are people in search of a cause.”

Nutter’s own cause, as Paul Craig Roberts says, was to ground our economic and foreign policies in “our heritage of freedom.” He made a profound study of the structure and growth of Soviet industry. At the same time he conducted parallel studies of growth of government in western societies. He was impressed by the progress of the Russians in their earlier planning periods, when they cleverly combined “knout and honey.” But he noted, in a later essay, that “in the Soviet case, industrialization has been pressed forward at the neglect of virtually everything else.” Swords had displaced plowshares. “Housing, transportation, agriculture, service trades, and light industry have been left to straggle along on scraps tossed to them from time to time.”

A strong West, in Nutter’s estimation, would be quite capable of handling the Soviet menace. But, unfortunately, the “unhindered growth of government in societies that have considered themselves free” was sapping western development at the same time the Russians were floundering at home.

Government Spending

Nutter picked out sixteen countries, all democracies, for special investigation. They were Australia, Austria, Belgium, Canada, Denmark, France, West Germany, Italy, Japan, Luxembourg, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States. In the early Nineteen Fifties the “median percentage of national income accounted for by government spending in these sixteen countries was around 30 percent. By the mid-1970s, that median had risen to over 50 percent. That is to say, for an average free country in 1950, government was spending about a third of national income. For an average country today, government is spending more than half of the national income.”

Nutter was distressed because he saw few signs of a stopping point to the process. He was encouraged by the “possibility of a taxpayers’ revolt.” He did not live to see the success of Proposition 13 in California.

Writing before Nutter, Colin Clark had laid it down as a dictum that when governments begin to spend more than 25 percent of national income decay was bound to set in. Nutter saw this decay all around him when he reflected on what was happening to property rights. The free society must disappear, he thought, when “the tax claims of government have become so large that a government claim against property begins to be considered a government right to property.” It has not taken long, Nutter observed, “for the proponents of big government to turn the principle of private property on its head, maintaining that government is the ultimate owner of property against which the private individual may have a claim, instead of the other way around.”

Working for the Pentagon sharpened Nutter’s perceptions of the troubles involved in living in a disintegrating world order. He found himself writing essays on the ebb and flow of American foreign policy. Henry Kissinger’s conception of detente bothered him. Stripped of rhetoric, he said, Kissinger’s detente “amounts to giving the assets away without requiring any strategic benefits in return.” Though Kissinger called his policy “creative,” Nutter described it as “romantic.”

Warren Nutter took an enthusiastic part in the annual meetings of the Mont Pelerin Society. I remember him particularly for his exuberance on some of the Mont Pelerin mid-week field trips. Looking at a palace in the middle of an island in Lake Maggiore in Italy, Nutter pretended he was making notes for the palace he said he would someday build in Virginia. He did not live to build that palace (would it have been a new Monticello?). But he had his fun.

John Chamberlain’s book reviews have been a regular feature of The Freeman since 1950. We are doubly grateful to John and to Henry Regnery for now making available John’s autobiography, A Life with the Printed Word. Copies of this remarkable account of a man and his times—our times—are available at $12.95 from The Foundation for Economic Education, Irvington-on-Hudson, New York 10533.

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.