All Commentary
Friday, July 1, 2005

Infatuated with Politics

Do Compelling, Preventing, and Taking Create a Better Society?

The most striking fact about modern-day “liberals” is their thoroughgoing infatuation with politics. In their worldview, almost every objective should be pursued through legislation, regulation, or legal action. It’s a reflex. What distinguishes liberals is not their objectives, which range from the laudable to the ridiculous, but their insistence that politics is the best or only way to achieve them. (From here on, I’ll drop the ironic quotes, assuming that the reader understands that contemporary liberalism has almost nothing to do with the original meaning of the word, which signified a devotion to liberty as opposed to state power over the individual.)

Liberals invariably say they have humanitarian goals and therefore must turn to political means for their swift and certain accomplishment. They want people to have higher incomes, better medical care, greater security, and so forth. Not to clamor for political solutions is, in their minds, tantamount to indifference. Waiting for voluntarism to work is unthinkable. Anyone who suggests that political means will be inappropriate or counterproductive is apt to have his motives impugned.

But what if this mindset is a mistake? What if the objectives to which liberals proclaim their dedication, such as the reduction of poverty, could be better achieved through nonpolitical means? If that could be shown to be the case, honest liberals should abandon politics and side with those of us who wish to depoliticize society and restore government to its proper role as protector of life, liberty, and property. Dishonest liberals–those who use humanitarian politics as cover for their desire to dominate and plunder others–would remain firmly in the camp of political action.

These thoughts were triggered by the book The Power of Productivity by William W. Lewis (University of Chicago Press, 2004). It’s a fascinating examination of the reasons why some nations’ economies are so much more productive than are others. Lewis understands that low production means a low standard of living, which sets a strict limit on how much anyone can do to improve the lives of the people, no matter what means is chosen. Poor nations simply don’t have the resources to improve health care, for example; trying to do so through politics is as futile as trying to turn lead into gold. He also understands that when nations distort their markets to pursue “social objectives,” the result is a sacrifice of the productivity that alone can make the pursuit of those (or any other) objectives possible.

Several features about the book make it particularly thought-provoking. Lewis is not a free-market economist, or even an economist at all–at least by training. (It is, of course, quite possible for someone to learn a great deal about economics outside formal classroom settings; we should abandon the notion that only individuals with Ph.D.s can have expertise in a field of knowledge.) His academic background was in physics, and he eventually found his way into the position of director of the McKinsey Global Institute, which does international economic analysis and consulting work. There, he figured out one of the central tenets of good economic thinking, namely that you must look at incentives and behavior at the micro level rather than surveying macroeconomic data if you want to comprehend a nation’s economic problems. What’s more, Lewis politically is a modern liberal. He enjoyed close ties to the Clinton administration and takes credit for having steered Clinton’s economic policy away from the heavily authoritarian path that many Democrats wanted and toward somewhat freer markets. Therefore, the book can’t be readily dismissed by liberals with their usual tendency to brush off any argument that comes from the hated “right wing” camp.

Lewis and his researchers carefully studied the economies of a dozen countries ranging from the most advanced (the United States, Japan, Britain) to the struggling (Russia, India, Brazil) and came to the conclusion that productivity is the crucial ingredient in economic success. The more a nation chooses to pursue “social objectives” through policies that distort its markets, the less it will produce and the less economic progress it will make. In short, Lewis condemns the infatuation with politics as the means of “solving problems”. (That condemnation, however, is not complete, as I’ll note later.) Far from aiding the poor, big government and its numerous economic interventions make it impossible for them to escape their poverty.

The most telling chapters of the book are those dealing with the poorest countries. In Brazil, for example, there is a vast chasm between the small percentage of the population that lives in comfortable circumstances and the large percentage of the population that lives in squalor. Why is that the case? Lewis answers that the obstacle to the economic progress that would benefit the Brazilian poor is the enormous, bloated government. To rake in the revenue the state needs to feed its minions, taxes must be high on “legal” businesses. High taxation, however, makes it impossible for such enterprises to compete with the “illegal” and therefore untaxed businesses that provide most of the items of commerce that the poor need–food, clothing, shelter, and so on. The problem is that the small-scale illegal businesses are inefficient. Prices are high and quality often low. Efficient production and marketing firms, such as we find in the United States, have no chance of gaining any traction in Brazil.

Most liberals would say that Brazil needs its big government to provide “needed government services” like formal education, but Lewis disagrees. Poor Brazilians don’t need public education or other services from the state; what they need is for the state to get out of the way of free-market competition in the production and distribution of goods. Everything else is a costly distraction.

Competition Stifled in India

India is another fascinating case. Government regulation of the economy is pervasive. Competition is stifled at almost every turn. One of many examples Lewis cites is the “Small-scale Reservation” law, which restricts investments in fixed assets to a maximum of $200,000 for firms producing more than 50 percent of their output for the domestic market. This is the sort of protective legislation that liberals generally applaud–shielding “the little guy” from the “cutthroat competition” of big business. But the law has devastating economic consequences, Lewis observes, in that it prevents the growth of efficient, American-style businesses. India’s many small-scale producers don’t have to face competition, so the nation is stuck with businesses that are unchanged from the nineteenth century. Most Indians remain desperately poor because of political interference with the free market.

Sadly, after much excellent analysis of the reasons why politics is the obstacle to progress (and not just in the Third World nations), Lewis shrinks from applying the lesson to the United States. Yes, government in the United States has grown vastly over the last century; but, he says, “we wouldn’t want to go back even if we could.” I won’t speculate as to why he declines to drive home the point that market distortions through politics have the same bad consequences here as anywhere else and that if you truly care about the plight of poor people, you ought to favor a radical scaling back of laws and policies that interfere with the efficient use of resources and maximization of production.

I will simply say that anyone who is troubled by poverty should want to go back to minimalist government, here and abroad. Liberal social objectives will not be achieved through market-distorting laws or tax-and-spend welfare programs. Relying on politics is a foolish infatuation.

Consider just a few of the “products” of politics. Thanks to politics we have a host of laws that artificially boost the price of basic foods––milk, fruits, and sugar to name just three. You would have to look far and wide to find any liberal politician or academic who vigorously supports the elimination of such laws, but they undoubtedly make it harder for poor families to get by.

Thanks to politics we have occupational licensing that simultaneously drives up the cost of many services and reduces the number of employment opportunities for people who would like to improve their lot in life. One might think that the elimination of licensing statutes would be a high priority among liberals, but it is not.

Thanks to politics we have a host of laws that drive up the cost of housing for poorer people. Zoning, building codes, rent controls, and more all work to depress the number of inexpensive homes and apartments available on the market. Opposition to those laws from liberals? The silence is deafening.

And thanks to politics we have a system of “public education” that is so busy with matters like teacher pay and tenure, multicultural posturing, and self-esteem that large numbers of young people now graduate (or drop out) without even the ability to read or do elementary arithmetic. But while many liberals individually choose to have their children educated in private schools or at home, as a political force, liberalism is irrevocably committed to the defense of public education.

Interest-Group Domination

The great blind spot of modern liberalism is its inability to see that strong interest groups will always dominate the political system in order to obtain more for themselves than they could get in a free, unpoliticized society. That “more” almost always hurts the poor. In the realm of politics, all the real or feigned compassion is no match for the concentrated lobbying power of dairy farmers, labor unions, producer cartels, the education establishment, government officials, and so forth. If liberals even acknowledge that political machinations can have adverse effects on the poor, they prefer, as Lewis does, to use the redistributive power of the state to try setting things right. The trouble is that the crumbs of government largess (Medicaid, for example) are dwarfed by the damage done by other political interventions.

There is an enormous gap between the United States and countries like Brazil and India, and William Lewis has made it clear that the chief reason for that gap is political intervention that upsets the efficient functioning of markets. What he and other liberals fail to see is that there is an equally enormous gap between the United States as it is, with its vast governmental apparatus that interferes with productivity and soaks up resources like a black hole, and the United States as it would be if we had been able to stick with Thomas Jefferson’s advice: That government is best which governs least.

Those who are infatuated with politics have a basketful of ear-pleasing terms for what they do, but the truth is that politics boils down to three actions: compelling, preventing, and taking. Supposedly, the will of a few people in government can be counted on to lead society to better outcomes by such actions. Therein lies the great deception. Politics cannot lead to better societal outcomes because those who practice it, even if they have the best of intentions, cannot know enough to dictate the channels that our energy and resources must take. The result of politics is inevitably laws like India’s “Small-scale Reservation” and our minimum-wage law, which interfere with freedom and progress.

If people came to understand that politics as a means to social betterment is a losing game and that it “works” only to enable some to get what they want at the expense of others, we might have a more sensible philosophical division–not between “liberals” and “conservatives,” but between people who approve of state-sponsored compelling, preventing, and taking, and people who do not.

  • George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.