20TH CENTURY FUTURECASTING ABSURDITIES:

YES, THEY REALLY SAID THAT!

FUTURECASTS online magazine
www.futurecasts.com
Vol. 3, No. 5, 5/1/01.

Homepage

Economic absurdities:

  Absurd contentions and absurd futurecasts concerning economic policy have been a deplorable feature of 20th century intellectual and political life.
  ?

The rapid pace of modern developments starkly reveals such economic absurdities - often before the ink is dry on the page proofs.

  One of the most interesting phenomena of modern life - and one that it is well to keep in mind as we enter the 21st century - is the many times that the most authoritative and respected intellectuals and professionals have voiced the most absurd contentions  about national and world economic policies  - and confidently provided us with the most absurd predictions based on those absurdities. Many of these contentions and predictions gained wide acceptance - becoming the "authoritative myths" of their time - among the credulous and the followers of these spokesmen.
  ?
  This is a cautionary tale for those intellectuals and other authoritative individuals who are tempted to eschew analytical objectivity in favor of the advocacy scholarship that supports their ideological or professional commitments. The rapid pace of modern developments starkly reveals such absurdities - often before the ink is dry on the page proofs of publications affected by advocacy scholarship.
  ?
  This list - ranging from Lincoln Steffens and the success of  Bolshevist communism on the left at the beginning of the century, to Newt Gingrich and the success of the conservative revolution on the right at the end - is limited to those absurdities clearly disproved by events.
 ?
  There are way too many examples to cover in a short essay, but it is instructive to set forth the FUTURECASTS  list of the grossest of these proven absurdities. However, additions to the list are welcome, so readers are invited to send their recommendations.

?

 For the love of socialism:

Lincoln Steffens

"I have seen the future, and it works!"

  Early in the century, in 1919, we had a classic. Lincoln Steffens, returning from a visit to Bolshevist Russia, pronounced: "I have seen the future, and it works!"
 ?
  Several accounts of this incident assert that Steffens had composed the statement even before entering Russia. In short, he was wearing ideological blinders. He was determined to see only what he wanted to see. This type of intellectual commitment and suspension of disbelief is a continuing characteristic of advocacy scholarship and a rich source of such absurdities.
?

  The automation scare:

Paul A. Samuelson

 

 

 

 

 

 

 

 

 

"One pretty machine does the work of 100 pretty girls."

 

 

 

 

"It is perfectly clear that this will produce an unemployment situation, in comparison with which the present recession and even the depression of the thirties will seem a pleasant joke."

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

`

 

 

 

"The Soviet economy is proof that, contrary to what many skeptics believed, a socialist command economy can function and even thrive."

  One would have thought it well neigh impossible for any century to contain another classic like the Steffens absurdity, but MIT Prof. Paul A. Samuelson actually managed to top it. What tips the scales in favor of the Samuelson absurdity is the fact that it was published in his widely used textbook - was apparently accepted without question by a vast number of the economics professors who used his textbook - and constitutes the kind of error that can only be made by someone who - regardless of vast learning of economic theory - really doesn't understand the dynamics of capitalist markets.
 ?
  Samuelson fell prey to the "automation scare." The myth that automation is going to wipe out more jobs than it creates is a derivative of Marxist propaganda mythology. Marxists believe that capitalism is inherently unstable, and will ultimately become so productive that its markets will not be able to absorb all its produce, leading to crisis and unemployment that is chronic and disastrous.
 ?
  Incredibly, there are actually many intellectuals who persist in taking some of the Marxist absurdities seriously (as does Samuelson). They have long awaited this crisis, even viewing the Great Depression as proof of the concept's validity.
 ?
  In the 1950s, Samuelson and some of his buddies thought they saw the automation handwriting on the wall. In his 1961 textbook - referring to the likelihood that computers would eliminate the office secretary - he expressed alarm that: "One pretty machine does the work of 100 pretty girls." He explained his fears with a quote from an MIT mathematician, Norber Weiner, who asserted in 1950:

  "The factory of the future . . . will be controlled by something like a modern high-speed computing machine . . . We can expect an abrupt and final cessation of the demand for the type of factory labor performing repetitive tasks . . . an intermediate transition period of disastrous confusion . . . Industry will be flooded with the new tools to the extent that they appear to yield immediate profits, irrespective of what long-time damage they can do . . . It is perfectly clear that this will produce an unemployment situation, in comparison with which the present recession and even the depression of the thirties will seem a pleasant joke."

  It's true that stenographers no longer take dictation while sitting on your lap (more's the pity), but modern secretaries have hardly disappeared. Instead, they now perform myriad other tasks with those computers -- many of which were simply not economically feasible without computers. (We are also still waiting for the paperless office.) And, of course, the computer industry itself has turned out to be one of the greatest job creating industries worldwide of the 20th century.
 ?
  The automation scare demonstrates a fundamental lack of understanding on the part of these Luddites. It is impossible for automation to cause a loss of jobs for any flexible capitalist economy as a whole.
 ?
  First, there is the continuing role of creative destruction. The least efficient producers are continuously being eliminated, reducing capacity to a point where profits justify continued operation and development for the rest.
 ?
  Second, any increase in efficiency MUST permit an economy to provide new and additional goods and services that could not previously be economically provided. The United States currently gets more than 50 percent of its growth from industries that didn't exist in 1980. What's more, the vast majority of these new jobs are managerial, professional, high skilled or medium skilled. Only 20 percent are low wage unskilled "hamburger flipper" jobs.
 ?
  That academics and central planners have not a clue as to what those new and additional goods and services might be should hardly be surprising. It is just one of many reasons why no centrally planned economy can keep pace with modern capitalist profit driven market directed economic systems.
 ?
  With incredible stupidity, succeeding editions of Samuelson's editions of his widely used "Economics" textbook continued to state that private enterprise is afflicted with periodic acute and chronic cycles in unemployment, output, and prices, which government had a responsibility to "alleviate."
 ?
  "Acute," obviously yes. That's just the ordinary business cycle. "Chronic," obviously no. Yet there was apparently no objections from the hundreds of economics professors who continued to use his textbook. And then, he added another spectacular absurdity.
 ?
  As late as the 1989 edition, Samuelson said 'the Soviet economy is proof that, contrary to what many skeptics believed, a socialist command economy can function and even thrive.'"
 ?
  Belief in the existence of competence in the Soviet economy - and belief in "chronic" capitalist economic malfunctions - are just a couple of the many gross stupidities of Keynesian theory and beliefs.

?

The confidence game:

 

"My son and I have for some days been purchasing sound common stocks."

"The fundamental business of this country . . . is on a sound and prosperous basis."

Keynesian economics has made the business cycle "obsolete."

"Frankly, if I had any money, I'd buy stocks right now."

   The "Confidence Game" is a rich source of absurdities. It is played by authoritative figures whenever some crisis seems imminent. It is frequently continued with equal vigor after a crisis begins. Of course, the stock market crash of 1929 brought forth some fine examples.
 ?
  Soon after the crash:
 ?
  John D. Rockefeller: "My son and I have for some days been purchasing sound common stocks."
 ?
  Pres. Herbert Hoover: "The fundamental business of this country - - - is on a sound and prosperous basis."
 ?
  Within six months of the crash, the stock market seemed to take perverse pleasure by having its worst sell offs on the day following any such pronouncements by Hoover or by his cabinet chiefs.
 ?
  Nevertheless, in the late 1960s, as the dollar began to look vulnerable, Arthur Okun, economic adviser to Pres. Johnson, assured one and all that - because of Keynesian economic policies - the business cycle was "obsolete." Then, in the early 1970s - at the beginning of a 12 year period of economic turmoil and declining common stock values (in inflation adjusted terms) - Pres. Richard Nixon advised: "Frankly, if I had any money, I'd buy stocks right now."
 ?
  Obviously, whenever we hear words of calm reassurance from such authoritative voices, it's time to make sure that your economic storm cellar is well provisioned.
  However, such Confidence Game absurdities are normal and to be expected. To be a classic, an absurdity must come from a source with some colorable pretense of objectivity and knowledge. My favorites are two sources of economic wisdom - Yale economics Prof. Irving Fisher, and the analysts at the New York Times - who began to play the confidence game prior to the 1929 crash and then persisted for some months afterwards.

 

"an exceptionally brilliant twelve month period"

 

 

"the most remarkable year"

 

 

"Stock prices are not too high and Wall Street will not experience anything in the nature of a crash."

 

"The market itself will furnish the best clue as to its future course, and will give warnings of its culmination in plenty of time for the average trader to protect himself when necessary."

 

"the year will be one of the best, from an industrial and commercial standpoint, in the nation's history."

  In July of 1929, with reports of dire conditions developing all over the world, came this breathless masterpiece from the N. Y. Times:

  "When the financial and business history of 1929 is finally written, developments of the past fortnight will occupy a prominent place in what will doubtless be the chronicle of an exceptionally brilliant twelve month period."

  And, in August of 1929:

  "It becomes increasingly evident that, in many respects, 1929 will be written into the commercial history of the country as the most remarkable year since the World War in point of sustained demand for goods and services."

  By the beginning of September, 1929, a sense of unease, accompanied by extreme market volatility, had been initiated when "statistician" Roger Babson provided a remarkably prescient prediction of the mechanism and extent of the coming collapse. However, the prominent Prof. Irving Fisher was quickly brought in to calm the multitudes:

  "Stock prices are not too high and Wall Street will not experience anything in the nature of a crash."

  Again, on October 22, 1929 - as the market gyrated wildly at levels below its September high - Fisher provided calming assurances that market prices were not too high, and indeed had not yet reached their true value.
 ?
  In early September, 1929, the N. Y. Times also earnestly pursued the game, advising:

  "We would not be stampeded into selling stocks because of a gratuitous forecast of a bad break in the market by a statistician. The market has been advancing for three years, in spite of bearish utterances of such authorities. . . The market itself will furnish the best clue as to its future course, and will give warnings of its culmination in plenty of time for the average trader to protect himself when necessary. . ."

  And, again, in mid September, 1929, from the N. Y. Times:

  "[T]he final quarter of 1929 is approached with the confidence that, taken as a whole, the year will be one of the best, from an industrial and commercial standpoint, in the nation's history."

 

"A wild and abnormal chapter in financial history has been definitely closed and a new chapter of financial sanity opened."

No economic depression was foreseen, interest rates were plummeting and money was plentiful, and everyone was congratulating themselves that business that spring remained so strong.

The worst had already occurred and a slow but sure recovery was imminent.
  The New York Times began the second phase of the Confidence Game, on November 1, after the Crash, providing assurances to one and all. Noting the massive fall in margin loans, and continuing to ignore the worsening storm in the world outside the U.S., it stated confidently:

  "[A] wild and abnormal chapter in financial history has been definitely closed and a new chapter of financial sanity opened."

  In the months after the crash, the Confidence Game continued, with participants from business, labor, government, and the financial and academic community chipping in. In mid February, 1930, Prof. Fisher called the stock break "unreasoning," and firmly predicted that business would soon recover. The market crash would have only a temporary effect. The N. Y. Times reported that brokers were "mystified" by continued waves of heavy selling, and of course provided the ever popular assurance that the market was now at "bargain" levels. No economic depression was foreseen, interest rates were plummeting and money was plentiful, and everyone was congratulating themselves that business that spring remained so strong.
 ?
  As late as January, 1931, a N. Y. Times editorial oozed quiet confidence that the worst had already occurred and that a slow but sure recovery was imminent. However, the news sections of the paper now frequently carried major articles about other prominent economists and financial leaders, urgently calling for the elimination of the war debts, reparations obligations, and tariffs that were burdening the world's economic system and thus were preventing recovery.

  The Confidence Game didn't just fool some ordinary investors. Over 50% of industrial companies listed on the New York Stock Exchange bought in their own shares at the "low" prices available in 1930. However, among those who rejected the Confidence Game, and foresaw a long depression (lasting from two - to - five years from April, 1931), was an economist, John Maynard Keynes.
?

 A preternatural trust in government economic management:

  The competition between capitalism and socialism was a feature of intellectual discourse and the ideological foundation of the Cold War. Capitalism is not an utopian system and does not promise utopian results. The economic freedom of capitalism provides a rich, creative, but messy brew which many intellectuals find disquieting. In their desire to find a better, kinder, more orderly way, they inevitably fall prey to concepts that would substitute government economic management for the management mechanisms of profit driven market directed capitalism.
 ?

Events perversely refuse to conform to ideological expectations.

 

 

 

  To sustain their ideology, they must turn a blind eye to the obvious inherent limitations of government management. This they often do with commendable wit and style, influencing the credulous, but ultimately suffering from the perverse refusal of events to conform to their ideological expectations.
 ?
  Profs. John Kenneth Galbraith and Lester C. Thurow have produced whole library shelves of advocacy books filled with incredible absurdities - all quickly disproved by the events of an unkind reality.

?

 Convergence of socialism and capitalism:

 

 

 

 

The shareholder in the modern large corporation is without power and without function.

 

Government should pay off such functionless stockholders in bonds and have the dividends and capital gains accrue to the public.

  

 

It is illogical - part of a peculiar technocratic secular religion - that CEOs and other corporate officials routinely work six day, 60 hour weeks for the benefit of such powerless, useless shareholders.

 

The role of "shareholder value" is determinedly ignored.

 

 

 

 

 

 

The role of "profit centers" is also determinedly ignored.

 

 

 

?
  The most absurd of Galbraith's many absurdities - a true classic - is his prediction concerning "convergence." What separates it from his other absurdities, and makes it a classic, is the favorable response that it received amongst a substantial number of supposedly intelligent and learned economists and other intellectuals. The prediction was, of course, patently irrational and could only be seriously entertained by those who didn't really understand what makes capitalism work.
 ?
  Galbraith strongly asserted that socialist and capitalist systems were inevitably converging on a centralized command economy model with respect to their larger and most important economic entities. In 1972, he asserted that shareholders and even the top management of the larger and most important capitalist corporations had lost effective control.

  "The shareholder in the modern large corporation is without power and without function."

  With this view, Galbraith advocated that government "pay off such functionless stockholders in bonds and have the dividends and capital gains accrue to the public."
 ?
  This is a faithful restatement of the Marxist stupidity that - once capitalism had developed a nation's productive assets - they could be managed just as well without the capitalists, and the profits could be allocated for the general welfare. He apparently agrees with the Marxist propaganda myth that: "All profit is theft."
 ?
  Galbraith argued that the modern large corporation is governed by its wide array of technocrats, who collectively have the information and skills needed for problem solving and decision making. Their rewards and incentives flow from advancement and job security within their organization rather than from the profits of the corporation, which go mainly to those "functionless" shareholders. As long as those profits are adequate and show some modest growth, the technocrat's real interests in job security and advancement are taken care of.
 ?
  He finds it illogical - part of a peculiar technocratic secular religion - that CEOs and other corporate officials routinely work six day, 60 hour weeks for the benefit of such powerless, useless shareholders. Either corporate officers and technicians are too crazy to understand their own interests, or Galbraith is wrong. Galbraith would never even consider the possibility that it is he who might be wrong.
 ?
  Galbraith is aware that shareholders can always vote with their feet, by selling their shares. However, he never goes further into the implications of that power. Management concern for "shareholder value"- when successful - is rewarded by rising share prices, high price/earnings multiples, safety against takeover threats, and enhanced financial powers for acquisitions and expansion. Failure to enhance shareholder value leads to low share prices, low price/earnings multiples, a loss of financial power, and vulnerability to takeovers.
 ?
  Lack of concern for shareholder value has been widely identified as a primary cause for myriad economic ills in the economic systems of Europe and Asia. The equity capital provided by shareholders through the equity markets provides financial stability, especially in times of recession. An over reliance on debt capital is another primary cause for the myriad economic ills in the economic systems of Asia and Latin America, and is a problem even in Europe.
 ?
  Also, Galbraith never mentions "profit centers" - the key organizational factor that permits large capitalist entities to organize efficiently and retain entrepreneurial vigor. Every technocrat either reports to - or provides services to - profit center managers, whose careers hang on the performance of their sales charts and profit and loss statements. Organization by profit center exists because it serves shareholder interests - and it doesn't exist where there is no private ownership interest.
 ?
  Thus, Galbraith's expectations have not come to pass. He must have been amazed at the worldwide rush to develop equity markets - and the spread of concern for shareholder value as a guiding principal for corporate governance - and the continuing tendency for large foreign corporations to strive to qualify for listing on America's securities markets. Why would all this be happening if Galbraith's analysis was correct? If Galbraith was right, the rest of the commercial world would have had to be crazy.

Delusions of  grandeur:

  But that is not all. Galbraith had delusions of grandeur for himself and his fellow academic intellectuals.
 ?

The academic and scientific community would unite and eventually wrest substantial economic control from shareholders in the capitalist nations, and from the government apparatchiks in the Soviet Union.

  The propaganda myth created by Karl Marx is viewed quite favorably by Galbraith. He treated many of these quintessential absurdities as profound economic truths. His strongest criticism of Marx is that Communism is not the end of the line of economic evolution.
 ?
  Since the technocracy is dependent on educators and scientists for the training of additional technocrats and the provision of scientific advances, Galbraith expected the academic and scientific community to unite and eventually wrest substantial economic control from shareholders in the capitalist nations, and from the government apparatchiks in the Soviet Union. This development would thus provide a "convergence" on a command economy model in the further development of the two economic systems.
 ?
  The hand that grants the academic degree will rule the economic world!
 ?
  Of course, intellectual groups would continue - like other interest groups - to occasionally influence legislation of commercial significance. However, Galbraith's expectation that intellectual interests will displace shareholder interests as the controlling factor in corporate policy is yet another of his unfulfilled expectations - and a classic absurdity.
?

Government
"Industrial Policy:"

   In the 1980s, MIT economics Prof. Lester C. Thurow, in a string of authoritative books, was driven by his ideological passions towards support for government "industrial policy." He expressed very favorable views of those industries nationalized or otherwise controlled by foreign governments that could thereby be directed to fulfill various societal needs.
 ?
  Thurow's obvious intent was to achieve by industrial policy many of the same results achieved by nationalization. The privatization movement must have come as a shock to Thurow. Here's a breathless example of his reasoning:

  "[J]ust as an army can move only as fast as its slowest unit, so the economy can only be as good as its poorest motivated, least cooperative component."

  Clearly, if Thurow were a general, his tactics would be as disastrous as his proposed economic policies.
 ?
  Unlike Galbraith, Thurow did accept market mechanisms - albeit suitably altered by all-knowing, all-wise government policies. His elaboration on the methods and content of his industrial policy program produced a string of classic absurdities. The pace of events by the end of the 20th century highlighted these absurdities with distressing rapidity.
 ?
  However, once again, the widespread acceptance of the "industrial policy" absurdity by a substantial number of supposedly knowledgeable people makes it a true classic.

 

Adam Smith was wrong. Mercantilist policies are best.

 

 

 

The government knows best which corporations should be the winners and which the losers.

 

 

 

We should reject the "just in time" inventory management practices that modern technology makes possible.

 

We must buy enough oil at 1980 prices to fill our oil reserves.

 

Government knows best about union and management practices.

 

 

We should expend our resources in subsidy trade wars.

 

The independence of the Federal Reserve Bank should be eliminated and its decisions politicized.
  And what type of foresight and wisdom does Thurow believe such "industrial policy" would provide us?
 ?
  Industrial policy would:
  • Mimic the results of Japanese industrial policy. Thurow asserts that Japan has changed the rules of international commerce - and their rules are superior. "Japan may go on to rule the waves for the next 25 years or longer." (Thurow judges the success of Japan's mercantilist policies by their effect on the industries that they favor, while ignoring their impact on the rest of the economy. Japan, and other Asian economies, are burdened by agricultural subsidies, overstaffed industries, inflexible mega-firms, and all the sins of crony capitalism and mercantilist trade policies. Of course, our government is not exactly free from these sins, either.)
  • Encourage the establishment of huge, increasingly formalized and stable economic entities. (How perverse of our markets to force restructuring in the opposite direction since that time. We have, in fact, accepted those Japanese management techniques that made sense, but the markets have dictated downsizing and increased flexibility. Our "industrial policy" has stressed deregulation and the breakup of utility monopolies wherever possible. I guess this has all been some terrible mistake.)
  • Concentrate resources on our industry leaders. "The industries that are going to be important players in the next two decades are already here [in the early 1980s]." (Thank goodness that Bill Gates and the other Silicon Valley geeks didn't learn their economics from Thurow.)
  • Require the maintenance of ample inventories, and make sure we have a full oil reserve. "Every inventory control model shows that if one tries to run a business without inventories the result is very erratic prices and occasional shortages." Thurow believes that econometric models actually reflect reality. Here he chooses to ignore Japanese "just in time" inventory management practices. (How perverse of those maligned and ineffectual capitalist markets. They actually somehow found the strength to apply competitive pressures and force substantial reductions in the expense of carrying large inventories. After they were released from energy price controls, the energy markets were somehow able to overwhelm OPEC and flood us for two decades with an abundance of oil at constantly declining prices - much to the surprise and amazement of the government's energy warriors.)
  • Eliminate management and union practices and organizations that aren't working. "The current social organizations don't work and aren't going to automatically collapse simply because they don't work." (But, of course, they did. The ruthless destruction of economic entities that don't work is exactly what free markets do, and they do it automatically, without Rube Goldberg government procedures and politically slanted government policies.)
  • Equal the worst subsidy practices of any nation that our firms compete with. The United States should pour resources into the competition for the markets of perennially low-profit, surplus capacity industries. (Of course, to some extent our government does this, for such industries as sugar and textiles.)
  • Require the Federal Reserve Bank to respond to political pressures and sustain economic growth despite inflation. Thurow believed that the deceleration of inflation between 1979 and 1983 was just "luck." He predicted that it would be unsustainable, and would surge again, accompanied by an interest rate surge back to double digit levels, as soon as the recession of that period ended. (Of course, events again perversely failed to conform to his expectations, and our independent central bank went on to slay inflation and provide the monetary basis for sustained prosperity.)

 The Rube Goldberg of social engineers:

  It's when Thurow starts to explain his system for government "industrial planning" that we get a good idea why we must never allow Government - with or without the assistance of intellectuals like Thurow - to direct economic development. He advocates a Rube Goldberg reorganization of U.S. business organizations and commercial arrangements.

 Government banks to allocate credit:

 Government Restructuring Board to influence corporate restructuring decisions:

Industrial Policy Board to establish industrial policy:

  Proposal: There should be Government banks to allocate credit. (Government should pick the winners and losers among competitive business entities, just like in Asia.)
 ?
  Proposal: There should be a Government Restructuring Board, which would "negotiate" with firms as to which facilities they would be permitted to close down, and which should be restructured. (The application of political imperatives, bureaucratic imperatives, and a due process decision-making process would make our economy even less flexible than that of India.)
 ?
  Proposal: There should be an Industrial Policy Board to direct broad economic policies. (And Lester Thurow or similar intellectuals should be placed in control, of course.)
?

The Conservative Revolution:

The ultimate outcome of conservative victories is hardly evidence of a conservative turn in government policy.

  House Speaker Newt Gingrich was the most prominent of the purveyors of the late 20th century myth of the Conservative (or "Reagan") Revolution.
 ?
  That conservative forces had many policy and electoral victories in the last 20 years of the 20th century against the previously predominant liberal Democratic majority is not in question. Nor is there any question concerning the reason for those victories. However, the ultimate outcome of those victories is hardly evidence of a conservative turn in government policy.
 ?

 

Conservative opposition has actually served to strengthen liberalism.

 

 

 

Conservative successes in the 1980s have provided the basis for the great prosperity that today funds an ever greater array of liberal government programs.

  Twentieth century liberalism - even if by some other name - will continue to drive American political policies for the foreseeable future. Now that "liberal" is a dirty word - and politicians of both major political parties -  like Presidents Clinton and Bush - carefully occupy centrist territory - it is time to acknowledge the tremendous victory of 20th century liberal ideals during the past 100 years. Assertions that "the era of big  government is over" are certainly premature - and constitute nothing more than just another Clinton prevarication. The proclamation by Gingrich and other conservatives of a new  conservative majority is an obviously absurd myth.
 ?
  The Democratic Party has, in fact, lost its half century status as the nation's majority party. The electorate has abandoned it in sufficient numbers to reduce it to approximate equality with its Republican rivals. This is its punishment for the multiple liberal sins that culminated in the 1970s. Opposition to these liberal sins have provided conservative political forces with their electoral and policy victories during the last 20 years of the 20th century.
 ?
  However, conservative opposition has actually served to strengthen liberalism by forcing the strengthening of liberal programs - the elimination or rollback of the weakest liberal initiatives - and by restraining the growth of liberal programs to levels that are not overly burdensome. Indeed, the conservative effort is like a labor of Sisyphus. Its successes in the 1980s have provided the basis for the great prosperity that today funds an ever greater array of liberal government programs.
 ?
  The U.S. electorate - like those of all other republics and democracies both before it and now - still favors politicians who promise to provide benefits from the public treasury. The electorate supports retrenchment only when liberal leadership clearly screws up, and liberal programs clearly fail. The only way the Republicans can cash in on their new electoral competitiveness with the Democrats is to make grand promises of their own.
 ?

The conservative role:

   Conservative opposition to 20th century liberal expansion of the domestic role of the Federal government has had several primary impacts.
 ?
     First, it has forced liberal forces to generate wide support for their measures - to make the political compromises essential for that support - and to sometimes more carefully delineate the objectives and boundaries of their initiatives. When conservative opposition has been weak, liberal programs have frequently been overdrawn or obviously impractical - leading to embarrassing failures and conservative political advantage.
 ?
 

   Second, it has facilitated reduction or elimination of those liberal initiatives that work so poorly that they lose public support. Examples include:

  • The "energy crisis war" of the 1970s was eliminated so that market mechanisms could efficiently allocate energy resources and assure ample cheap energy supplies for the rest of the 20th century. The current cyclical surge in energy prices will similarly be easily handled by market mechanisms, unless inflationary monetary policies or administered prices are imposed on the economy.
  • The federal welfare entitlement has been eliminated, and federal welfare programs have been scaled back and placed within state jurisdiction. This has permitted states to pursue a variety of flexible alternatives that have been far more successful than the centralized federal effort.
  • Socialist and "industrial policy" initiatives have been checked and substantially scaled back by the destruction of their intellectual legitimacy. The disasters of European socialism have been avoided, and the burdens of "industrial policy" have been substantially limited. Although far from being eliminated, they have been substantially reduced by the conservative "privatization" and "deregulation" movements. Creative approaches for promoting some competition for markets previously dominated by monopoly utilities have enabled substitution of market disciplines for inefficient regulatory and administrative decision making. The Clinton administration, however, did see a substantial return to heavy-handed economic regulations, and our troubled health care system is probably heading for yet one more disastrous experiment with socialist and administrative decision making approaches.
  • Keynesian policies - that were supposed to "obsolete" the business cycle but instead led to the stagflation and other double digit miseries of the 1970s - have been substantially modified. Renewed stress on a strong currency and  reasonably balanced budgets provide the basic requirements for current prosperity.
     Thirdly, it has concentrated public opposition to judicial decisions that go beyond legitimate "interpretation" of the law - that amount to judicial "legislation" and judicial "amendment" of the Constitution.
 ?
  Judicial activism is thus not totally "undemocratic." Activist decisions that have substantial public approval  become established - while decisions that the public comes to dislike - such as those that undermined the effectiveness of the criminal law - are ultimately themselves undermined or reversed. Those that the public simply doesn't care about become points of contest on a continuing litigation battle ground.
 ?
  Conservatives have succeeded in making judicial appointments a political issue. Contested judicial elections have become increasingly common where judicial elections are provided, and judicial nominations are increasingly a political issue nationwide. The courts will thus not be permitted to get too far out ahead of public opinion.
 ?
  The existence, however attenuated, of this political check on judicial activism is vital. As we have seen with the abortion rights controversy - when you remove contentious issues from determination by the ballot, there will inevitably be some who will resort to the bullet.

  The size and expense of government at the state and local level has exploded in the last decade.

 

Only the federal government makes its mistakes "from sea to shining sea."

Conservative opposition to liberal programs does not gain traction until failure or gross wastefulness can be demonstrated - or until their cumulative burdens undermine economic prosperity.

   Fourth, questions of federalism and tax rates have become the primary political battleground.
 ?
   The "big government" battle has been clearly lost.

  • The conservative effort today has been reduced to limiting the growth of the federal government - rather than cutting it back.
  • The conservative effort is to reduce taxes - or to at least prevent further tax increases - and to restrain the expansion of government to a rate that is less than that of the economy, so that government programs absorb a declining proportion of our growing gross national product.
  • The conservative effort has frequently been reduced to the attempt to have liberal programs administered by state - rather than federal - government whenever practicable.

  There thus is at present little political restraint on the growth of state and local governments and their programs. As a result, the size and expense of government at the state and local level has exploded in the last decade, and most of the reduction at the federal level has been as a result of the end of the Cold War. And the Bush administration has proposed federal programs of its own.
 ?
  Thus, as a matter of political tactics, we currently see Democrats championing "fiscal conservatism" - but only as a stratagem for retaining as much tax revenues as possible for future federal programs. Also, we see Republicans championing a variety of government programs - but only as a stratagem to prevent enactment of those programs as "entitlements," and to limit federal participation to programs that the electorate has clearly indicated that it wants.
 ?
  The electorate clearly indicates that it wants a broad range of benefits and services from its governments. This is a democracy, after all, and what the electorate can be convinced that it wants, the electorate will get - whether it likes the results or not. Conservative opposition to liberal programs does not gain traction until failure or gross wastefulness can be demonstrated - or until their cumulative burdens undermine economic prosperity.
 ?
  Today, the results of this process can most dramatically be seen in the nation's largest cities. In both New York City and Los Angeles, successful Republican administrations have cleaned up much of the mess left by liberal predecessors. Now, the city electorates eagerly and overwhelming turn back to liberalism, in the hope of getting more goodies from City Hall.
 ?

State governments collectively are subject to greater disciplinary forces, and are more flexible, than the federal government.

 

Only the federal government makes its mistakes "from sea to shining sea."

  Success in funneling jurisdiction and funds to the states, and in restraining rates of federal growth, are no mere minor matters, however. Liberal social programs - despite the use of "investment" terminology - are economic burdens that can retard or even reverse economic growth.
 ?
  Within broad limits, state and local governments must, at least, compete with each other with respect to their effectiveness and efficiency. They are far more subject to budgetary disciplines. They do not have the power - and thus do not have the temptation - to pay for programs merely by expanding the money supply.
 ?
  Moreover, the states collectively are far more flexible in implementation of programs than the central authority of the federal government. Only the federal government makes its mistakes "from sea to shining sea."

 The triumph of 20th century liberalism:

  Modern liberalism needs its conservative opposition. Conservative opposition has served to strengthen liberalism by forcing the strengthening of liberal programs, the elimination or rollback of the weakest liberal initiatives, and by restraining the growth of these programs to levels that are not overly burdensome. To repeat - the conservative effort is like a labor of  Sisyphus. It's successes since 1980 have provided the bases for the great prosperity that today funds an ever greater array of liberal government programs.
 ?
    While the main repository of the liberal cause remains in the Democratic Party, the Republican Party is carving out an increasingly liberal role for itself. Although philosophical differences remain that are far from meaningless, both parties now vie to offer the electorate benefits from the public treasury.
 ?
  The vast resources of a staggeringly prosperous 21st century will be accompanied by a vast expansion of domestic government programs - at the state and/or federal level. This struggle has continued for 100 years, now, and there is every indication that it will continue somewhat in this same manner through the next 100 years.

  However, because governments will always deliver much less than they can promise - and because most of what governments undertake will be poorly executed and frequently disappointing in its results - "liberal" will remain a dirty word in American politics.

?

Ideological scholarship:

 

  As the pace of events continues to accelerate during the 21st century, events will deal with such advocacy scholarship with increasing brutality. Events will not be kind to those who sell their intellectual souls for a mess of ideological pottage.
 ?

  This is the FUTURECASTS list of 20th century economic policy myths that have been clearly demonstrated to be absurd by the course of events. Please e-mail any additions you might think worthy of this list.

  Please return to our Homepage and e-mail your name and comments.
   Copyright  2001 Daniel Blatt