Robin celebrates socialism as “freedom from rule by the boss,” but is being ruled by bureaucrats better?
Of all the divisions splintering the American right these days, disagreements about economic policy are among the deepest. They are also central to understanding those conservatives who invoke the phrase “the common good” to explain why they believe more state intervention in the economy is necessary. For too long, such conservatives contend, the prioritization of free market policies has inhibited necessary government action to realize social and foreign policy goals essential for America’s general welfare.
In some cases, invocation of the common good by these conservatives refers to the need for state economic action to secure certain goals. A good example is employing tariffs to try to protect American manufacturing jobs from foreign competition. Such policies, it is argued, promote broader ends like preventing particular communities in parts of America from descending further into social dysfunctionalism. On other occasions, reference to the common good is about rehabilitating a long tradition of thought about the ends of politics which goes back to Aristotle.
To my mind, renewed attention to the common good—especially the political common good as understood by the natural law tradition—is a worthy enterprise. Not only does it provide a more coherent framework for thinking through the foundations of politics than alternatives like utilitarianism, Rawlsian liberalism, and social democracy. Attention to the political common good also helps identify principled limits to government power.
Unfortunately, much of the present agenda associated with those conservatives calling for more activist economic roles for the state would, I’d suggest, significantly damage the economic dimension of the sum total of conditions that allow individuals and groups to pursue human flourishing freely. But, just as significantly, it is also obscuring clear thinking about the state’s economic role in societies that believe liberty and justice matter.
Reinventing Broken Wheels
One feature of the economic policies advocated by common good conservatives is their piecemeal character. They are not arguing for something as sweeping as LBJ’s Great Society. Instead, the picture is one of selective application of industrial policies, regulations, tariffs, etc., to parts of the economy with the aim of producing better results in different sectors than would otherwise be delivered, they believe, by markets.
Sometimes the policies are narrowly targeted. A recent American Affairs article argued for entrusting “a federal agency with the power to decide how the votes associated with index fund shares are cast” in shareholder meetings of publicly traded companies. Other proposed policies have a broader scope. A good example is the advocacy of European-style corporatist arrangements whereby unions who represent workers in specific industries would negotiate wages, conditions, productivity goals, etc. with trade associations that represent employers.
But the area which animates many conservatives who favor more interventionist positions in the name of the common good is trade. In articles like “Make America Autarkic Again” and in policies like the Trump Administration’s imposition of 25 percent levies on imported steel and aluminum, free trade is presented as often (if not usually) inimical to America’s general well-being or downright harmful to specific American communities and industries.
In responding to these arguments, free traders have not made life easier for themselves by exaggerating trade liberalization’s benefits (there is, in fact, no strong correlation between free trade and peace) or by letting themselves become associated with Davos Man imagery and rhetoric. Many were also slow to acknowledge that China’s compliance record with WTO rules has been poor and that Beijing has, if anything, deepened its commitment to neo-mercantilist policies.
Notwithstanding these failures, there is a formidable amount of empirical and historical evidence that highlights protectionism’s negative effects upon countries adopting such policies. And these harms often fall on the particular groups they are intended to help. Consider, for instance, the aforementioned steel and aluminum tariffs.
The trade economist Douglas A. Irwin points out that the costs of these tariffs were borne by American consumers. They ended up paying “more either directly for imported consumer goods or indirectly for imported intermediate inputs that increase production costs and ended up raising consumer prices.” As far as those who work in manufacturing are concerned, Irwin writes, “the steel and aluminum tariffs reduced overall employment in manufacturing by 75,000 workers.” These tariffs imposed higher costs on those American companies which extensively use steel, thereby “harming their competitive position in domestic and foreign markets.” That translates into fewer jobs as a way of reducing costs and improving their market position.
The tragedy is that this was very predictable. The long-term damaging economic effects of tariffs and related policies are clear. This is not a matter of spouting libertarian ideology. It’s a question of the steady accumulation of empirical evidence and the development of sound theory over a long period of time. At a minimum, anyone who claims to be concerned about the common good should take all this into account.
What about Justice?
But, some conservatives may counter, the common good goes beyond economics. Surely economic life is as much about the provision of work as lower prices for consumers. After all, work is something good in itself and lends itself to all sorts of morally and culturally beneficial behavior. Perhaps, the argument goes, every American should be willing to pay an extra 20 dollars a year to help keep manufacturing workers—their fellow Americans—in particular parts of America employed.
One difficulty with this position is that it downplays the ways in which tariffs damage the common good by facilitating cronyism, incentivizing rent-seeking, discouraging adaptation to wider economic and technological changes, and promoting the highly-questionable proposition that technocrats can outguess markets. As far as jobs are concerned, tariffs cannot protect an industry and those it employs over the long-term if that industry’s comparative advantages are fading. Government intervention is a costly and generally ineffective way of trying to impede or reverse such changes and thus an ineffectual way of trying to save jobs. Indeed, if we really care about employment, we should question the wisdom of using government to indirectly encourage people to enter occupations that aren’t going to be there in ten years or that won’t be available in the same quantities.
Then there are issues of fairness. These are illustrated by the same manufacturing industry example. If the goal is to use the state to promote work as something good in itself, what is it about low-skill manufacturing jobs that merits special treatment compared to, say, work in low-skill retail?
Or, to approach the fairness issue from another angle, should the state really be prioritizing the interests of one segment of the employment market over the overall well-being of 330 million American consumers? As Richard M. Reinsch observes, “We are all consumers, but we are not all manufacturing workers.” One of Adam Smith’s crucial insights was that it is through meeting consumer demand that economies grow and adjust as humans are incentivized to specialize and exercise their creativity in light of people’s changing needs and wants.
An important side-effect of this process is that employment markets develop and mature over time. This not only provides more and different types of work for people with varying talents, needs, and wants. It also helps ensure that someone who grows up in, for instance, a manufacturing town in Ohio may have many other job possibilities if they decide, like millions of other Americans, they want to follow a different line of work than that of their parents and grandparents. That is just one way in which markets indirectly contribute to the realization of goods like work.
What Should Government Do?
For all the weaknesses of conservative proposals for particular state economic intervention to protect the common good, the subsequent debate has created space for conservatives to consider a related question: what can governments do to advance the economic dimension of a society’s common good in ways that avoid the problems detailed above?
One way to think through this question is to consider what government institutions must do if markets are going to meet consumer demand and thereby create wealth, jobs, etc. Some immediate responsibilities that come to mind, and which were spelled out with varying degrees of explicitness in Book V of Smith’s Wealth of Nations, include: upholding the rule of law; protecting property rights; maintaining monetary stability; adjudicating contractual disputes; providing public works; establishing law and order; and securing national defense. To this list, some would add a minimal welfare safety net (hardly a minor or inexpensive undertaking) and enforcing basic health and safety standards.
Some might view this as rather minimalist. Yet none of these are small, simple, or inexpensive tasks. Determining the particular rights and obligations of all parties embroiled in contractual disputes requires courts and the development of a body of law that helps judges to make just rulings. Establishing conditions that help protect us from criminals and enable us to go to work every day requires police forces. Protecting America and its economy from hostile powers necessitates a military and national security apparatus.
Truth be told, the present involvement of federal, state, and local governments in the U.S. economy goes way beyond all the tasks listed above. Just over the past three years, government spending has averaged 38.1 percent of America’s GDP while government welfare and healthcare spending has increased. The number of pages in the Federal Code of Regulations has been growing for decades. Nor can anyone claim that there is a shortage of industrial policies in America.
Put bluntly, this is not limited government. Nor should we forget that much of this is funded by public debt. Even before the coronavirus, public debt as a percentage of domestic GDP amounted to 106.68% in the last quarter of 2019.
If we truly want to promote the economic dimension of America’s common good, perhaps we should ask ourselves the following question: how would this aspect of the common good be enhanced by even more government intervention than we already have, even if it is of the selective, targeted type being suggested by some conservatives? Would it not be better to think about how to focus government on those tasks that it is uniquely able to address instead of steadily expanding its potential to produce sub-optimal outcomes or, worse, make serious mistakes?
The ways in which such reflection would cash out in terms of specific policies wouldn’t resolve intra-conservative policy debates. What, for example, qualifies as public works in the early 21st century? Or consider the challenges involved in trying to resolve real conflicts between good but not always compatible options, such as the demands of national security versus commercial freedoms. Adam Smith’s dictum was that “defense . . . is of much more importance than opulence.” Few conservatives (or, I suspect, classical liberals) would disagree. But how do we determine what constitutes a genuine national security imperative, especially given many businesses’ proclivity to seek government protection from competitors—including American competitors—by asking for national security exceptions on flimsy grounds?
Such are the inexactitudes with which political leaders must grapple every day. Yet focusing on those objectives that only the state can accomplish, I’d argue, would produce a far more constructive discussion about the role of politics vis-à-vis markets and the common good than the arguments currently preoccupying many conservatives. It is also a debate that is long overdue.