Classical Liberalism and the Welfare State: David Conway Responds to Tom Palmer

Tom Palmer has responded to several criticisms I made of his contributions to a recent anthology that he has edited on the welfare state. Despite what Palmer has written in defence of what I criticised, I stand by my original criticisms and want in this rejoinder to explain why.

My criticisms of Palmer occur in an otherwise favorable review of his anthology.

Below I consider each criticism I levelled in turn, summarizing Palmer’s response to it, and then explaining why I remain unmoved by his response.  

‘Palmer is guilty of a certain unfortunate hyperbole. He tends to exaggerate both the defects attributable to the welfare state, as well as the extent to which classical liberalism opposes all forms of it.’ 

 Palmer responded by denying he had been guilty of any hyperbole in what he had written. He writes in his reply:

‘One man’s “hyperbole” is another man’s urgency. The crisis of unfunded liabilities is a rather serious matter… The welfare state will not be able to make good on its current promises… Every day that those imbalances are not address [between public expenditure commitments and tax receipts to cover them] are not addressed is a day that, because of the positive rate of interest (long-term, at least) the situation worsens.’

Now, I agree with Palmer as to the gravity of the current crisis western democracies face as a result of their over-lavish welfare commitments. However, when I accused Palmer in my review of having exaggerated the defects of the welfare state, what I had in mind was not the scale of that crisis for which he rightly holds welfare states responsible. What I had in mind was his imputation to the welfare state of several other current social maladies which he had attributed to it in his publication, but which in my review of it I claimed could not rightly be attributed to the welfare state, but rather had other causes. One such social malady was the recent housing bubble in the US that had precipitated the global financial crisis into which the world was plunged in 2008 when that bubble burst. A second such social malady is xenophobia. I deal with each of these issues below.

‘For example, there was nothing integral to the welfare state, even in the USA, that necessitated successive US presidential administrations should in recent times have chosen to extend home ownership in the way they did. Hence it seems an exaggeration to attribute, as Palmer, does, the current global financial crisis to the welfare state, rather than to other, separate misguided interventionist policies.’  

Palmer responded to this criticism in his reply by contesting its validity. He argued that America’s welfare state should be considered responsible for the recent housing bubble there even though he concedes that it was not integral to its welfare state or any other such state that it should have sought to extend home ownership at all, or to have done so as successive US administrations did in the way that led to that bubble. He wrote in his reply:

of course there is nothing “integral” to the welfare state that necessitates this or that particular policy…It just so happens that the actually existing welfare state, in the history that we observe, is responsible [for the US housing bubble that led to the financial crisis that began in 2008]…The seeds of th[at]… crisis were planted in 1994 when the US administration announced a grandiose plan to extend homeownership rates… Government agencies… were directed to convert renters into owners by lowering down-payment rates, drastically lowering lending standards among banks, increasing the amounts of money going into the home market by buying and “securitizing” more mortgages, and a host of other measures. It was a bipartisan effort at social engineering… Conway suggests that it is not “integral” to a welfare state that it do that.  And so what?…  A systematic state policy to make “housing more affordable” is a welfare state policy.’ 

It is simply untrue that a systematic state policy to make housing more affordable is a welfare state policy. When UK Prime Minister Margaret Thatcher gave council house tenants the right to buy their own homes, her successful policy to sell off two million publicly owned units of accommodation was launched in an effort to roll back the size of Britain’s welfare state. It was most decidedly not a welfare state policy.

Whereas, therefore, a systematic state policy to make housing more affordable is not always a welfare state policy, a systematic state policy to make housing more available can be and, when undertaken to make housing available to all citizens regardless of means, it is. The reason for the distinction is that, whereas owning your own home is not an integral part of anyone’s welfare, having a roof over their head is. What welfare states undertake to ensure is that all their citizens have everything integral to their welfare, regardless of their means.  Besides accommodation, other integral parts of welfare that welfare states seek to ensure all their citizens enjoy, regardless of means, include basic health care, education and enough income to supply basic needs, like those for food and clothing. It is because owning your home is not an integral part of human welfare that America’s ill-fated attempt to extend homes ownership to previously under-represented groups was not a policy of its welfare state, but something else.

‘It seems equally as misguided of Palmer to attribute xenophobia to the welfare state or to have claimed classical liberalism opposed to all restrictions on immigration.’

In response to this criticism, Palmer denies having attributed xenophobia to the welfare state. Instead, he claims all he had contended in his anthology was that ‘the welfare state contributes to xenophobia.’  This is a contention, he claims, which it is hard to rebut, given how vehement is the hatred and anger shown by some sections of indigenous populations of welfare states towards foreign immigrants as a result of the latter being eligible for welfare benefits towards the costs of which they have not contributed. Palmer rounds off his response to my criticism by observing:  ‘When immigrants are seen as being after welfare benefits, they are treated in a far more hostile manner than when they are seen as seeking honest work. That hardly seems controversial.’

 Well, one man’s platitude is another man’s contentious statement, and I think Palmer’s last claim is anything but uncontroversial. To cite just the case of America, the first US federal immigration controls were imposed in the Chinese Exclusion Act of 1882 which placed severe limits on Chinese immigration into the US that lasted until1943. These controls were placed on Chinese immigration precisely because of the deep disquiet so many indigenous Americans began to feel towards them, especially in California, after the end of the gold rush and of the completion of the Union Pacific Railroad, which was precisely on account of their willingness to work for so much less than Americans. It had nothing to do with the Chinese exploiting public welfare benefits which as yet were hardly in existence then. It is, thus Palmer, and not as he claims it is I, whose ‘form of argumentation seems divorced from both history and an understanding of the dynamics of social interaction and incentives.’

Palmer’s knowledge of what classical liberals have had to say about immigration is equally as defective as his historical knowledge and sociological understanding are on this subject. In his reply, Palmer writes:

Regarding the attitude of classical liberalism to restrictions on immigration, I argue that freedom of movement is a fundamental human right, just as is freedom of trade.  Restrictions on freedom of movement, when justified by classical liberals, typically emerge from the incentives created by welfare states.  That’s my point.  Without those externalities created by welfare benefits, there would be little reason to restrict movement. 

Palmer may well think freedom of movement to be a fundamental human right, but by no means all fellow classical liberals share that opinion. Not only would many of the most eminent ones have denied there was any such right, equally many of them supported immigration controls for reasons that had next to nothing to do with them being needed to protect welfare states of which few indeed if any have approved. Their primary reason for supporting immigration controls was always that they would preserve social cohesion through maintaining the national homogeneity they considered needed for it.

Among the many eminent classical liberals to argue for immigration controls primarily on such grounds, rather than on grounds of their being needed to preserve welfare states, are Henry Sidgwick and Ludwig von Mises. They also include John Hospers, the first US presidential candidate standing on behalf of the Libertarian Party. Writing in 1998, Hospers observed concerning the so-called ‘fundamental right to freedom of movement’ Palmer posits:

[D]oes a person have a right to go to whatever country he chooses? Doesn’t that depend in the approval of the proposed host country, or its political leaders?… Should we admit murderers who have served their sentences in foreign prisons?… Does the immigrant still have the right to enter regardless of the conditions? I suggest that we say “It depends.”… Today many California gardeners and landscapers are out of work because laborers from south of the border have replaced them at a lower wage. This condition can be defended, of course, as being beneficial for the consumers. But it is not beneficial for the displaced American workers… Those who advocate a policy of “open borders” would be well advised to… pay a few days’ visit to the towns and countryside of the southernmost counties of California (or for that matter Arizona and Texas). Let them stay in the motels that ordinary citizens use, and walk the streets of any once-flourishing town which is now a shantytown… and dangerous to walk in or even to drive through by night… [P]eople… who pontificate about open borders..,. would do well to reflect, on whether the freedom they profess for those who are immigrants, if it occurs at all, is to be brought  about at the expense  of the freedom of those who are not.’ 

‘Moreover, not only was it woefully inaccurate of Palmer to cite, as he does, the British economist Phillipe Legrain as a  classical liberal, because of his support for open borders and free trade, he is arguably as wrong to equate classical liberalism with opposition to immigration controls.’

Not only does Palmer seem have only the most tenuous grasp of what classical liberals have actually thought and written about immigration, he seems only to have the slenderest insight into who actually should be considered one, as shown by his response to my fourth criticism.  In response to my assertion that he was wrong to cite Phillipe Legrain as a classical liberal supporter of open borders, Palmer wrote:

‘I concede that my footnote that references Philip [sic] Legrain’s arguments for freedom of movement…  might lead one to think that he is more [of a classical] liberal on all other issues than he is.  Mea culpa.  His website states, “My outlook is broadly liberal, socially and economically. I am passionate about individual freedom, think markets (outside finance) generally work well and believe that competition is usually a powerful force for good. But I am also convinced that governments need to intervene vigorously to make a reality of equality of opportunity and help the less fortunate.”  That would still make him, by Conway’s definition, a classical liberal, so I am not sure what Conway’s complaint is, other than that I should have appended an essay on Philip [sic] Legrain to a footnote citation of his rather good book.’

This is what my complaint is. As is notorious, the word ‘liberal’ is hopelessly equivocal as the description of someone’s political outlook. The fact Legrain so described himself and supports the market no more makes him a classical liberal than does the fact he supports open borders. Had Palmer looked more closely on Legrain’s website he would have seen published views of Legrain’s that categorically rule him out from being considered a classical liberal.

They include a 2004 book review by him of the Cato Institute publication, Cowboy Capitalism.

In that review, the self-declared supporter of markets, competition and open borders wrote in criticism of it:

[This] newly published and expanded American edition…  seeks to demonstrate that the US economy is not only much more successful at delivering higher living standards and employment than Europe’s, but that it does so without causing greater injustice and insecurity… Unfortunately…[it] fails to prove either point convincingly. Repeatedly… [it]  gives America the benefit of the doubt, while interpreting the facts about Europe in the darkest light…[It] is simply not true that Europe is a basket case. Nor, therefore, is it true that it needs to remodel itself along American lines – smaller government, lower taxes, less regulation -in order to prosper. Just look at countries like Sweden and Finland… Clearly, France, Germany and Italy need to implement [economic] reforms…  But there is no basis for… [supposing] that they must deregulate their labour markets along American lines to do so.’

I wonder whether Palmer is still so sure Legrain is a fellow classical liberal.

‘More importantly, it creates an unfavorably wrong impression of classical liberalism in those who need to be won over to its cause to state, as Palmer does in the concluding to his volume that, “Classical liberal thinkers… all agree that… [among] means for the alleviation of poverty, the least preferred option… [is] state compulsion.’

To this criticism, Palmer responded:

‘I suggest that Conway ask himself what “least preferred” might mean before rather rashly claiming that my essay will create “an unfavorably wrong impression of classical liberalism in those who need to be won over to its cause” because I argue that classical liberals agree that “the least preferred option” is state compulsion…‘When welfare can be produced without compulsion, liberals favor that…  A prosperous and wealth creating society offers other means of flourishing than relying on the state, and state compulsion should be the “least preferred” option when people seek to flourish or to help those who are suffering.’

If, as Palmer says here, ‘state compulsion should be the “least preferred option” when people seek to… help those who are suffering’, then, at least according to my understanding of that assertion, it means people who seek to help others who are suffering should always opt for voluntary ways in which so to do. That means, according to my understanding of what Palmer here contends, classical liberals should always prefer minimum government, plus voluntary measures for ameliorating poverty and dispensing welfare, to even the most residual form of welfare state that offers a bare safety net to those otherwise totally destitute and without means.

For me, that presents an inaccurate and unduly unflattering account of what the classical liberal view is of the role of the state in relation to welfare. By far the majority of the most eminent classical liberals have always favored a state welfare safety net, paid for out of taxes, to the minimum night-watchman state, supported briefly early on in his career by Robert Nozick (and even David Conway) before he saw the error of his ways. To suggest otherwise, as do several remarks of Palmer in his anthology, is to present an inaccurate and off-putting portrait of classical liberalism. Had Palmer never intended to suggest otherwise, then, to use his own language in relation to one of my criticisms of what he wrote, I can only say: mea culpa.