All Commentary
Sunday, November 1, 1959

Government’s Expanded Role


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 Wash­ington—as President Eisenhower warned at the 1957 Governors’ Conf erence.²

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 Canada a Liberal Government launched a similar tax policy beginning in 1952. A year earlier, in 1951 in the United Kingdom, the Labor Government went down to defeat before a Conservative Party pledged to halt nationaliza­tion, end controls, reform taxes. As R. A. Butler, Chancellor of the Exchequer in the Conservative Government, put it in 1954:

“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 New York, August 1959.


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.


Foot Notes

‘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.