The Conservative Sensibility Page 32
In 1914, the Bureau of Mines said US oil reserves would be exhausted by 1924. In 1939, the Interior Department said the world’s petroleum reserves would last thirteen years. Oil subsequently fueled a global war and the postwar boom, and in 1951 Interior said the world had…thirteen years of proven reserves. In 1970, proven reserves were estimated at 612 billion barrels. By 2006, more than 767 billion barrels had been pumped—and proven reserves were 1.2 trillion. In 1977, President Jimmy Carter said mankind could “use up” all the world’s proven reserves “by the end of the next decade.”66 Since then, the world has consumed three times more oil than was then in the proven reserves. Today, shale rock formations in Texas and Louisiana, Montana and North Dakota, and New York, Pennsylvania, and elsewhere may contain 2,000 trillion cubic feet of clean-burning natural gas.
Two generations ago, in 1972, humanity was warned (by computer models developed at MIT) that it was doomed. In fact, it was supposed to be pretty much extinct by now, or at least miserable. It is neither. So what went wrong? That year begat The Limits to Growth, a book from the Club of Rome, which called itself a “project on the predicament of mankind.” It sold 12 million copies, staggered The New York Times (“one of the most important documents of our age”), and argued that economic growth was doomed by intractable scarcities.67 Bjorn Lomborg, the Danish academic and “skeptical environmentalist,” says the book “helped send the world down a path of worrying obsessively about misguided remedies for minor problems while ignoring much greater concerns,” such as subsistence-level poverty, which only economic growth can ameliorate. MIT’s models foresaw the collapse of civilization because of “nonrenewable resource depletion” and population growth. “In an age more innocent of and reverential toward computers,” Lomborg writes, “the reams of cool printouts gave the book’s argument an air of scientific authority and inevitability” that “seemed to banish any possibility of disagreement.” Then—as now, regarding climate change—respect for “settled” science was said to require reverential suspension of skepticism about scientific hypotheses. Time magazine’s 1972 story about The Limits to Growth exemplified the media’s frisson of hysteria: “The furnaces of Pittsburgh are cold; the assembly lines of Detroit are still. In Los Angeles, a few gaunt survivors of a plague desperately till freeway center strips…Fantastic? No, only grim inevitability if society continues its present dedication to growth and ‘progress.’”68 The modelers examined nineteen commodities and said twelve would be gone long before now—aluminum, copper, gold, lead, mercury, molybdenum, natural gas, oil, silver, tin, tungsten, and zinc. Lomborg notes:
Technological innovations have replaced mercury in batteries, dental fillings, and thermometers, mercury consumption is down 98 percent and its price was down 90 percent by 2000. Since 1970, when gold reserves were estimated at 10,980 tons, 81,410 tons have been mined and estimated reserves are 51,000 tons. Since 1970, when known reserves of copper were 280 million tons, “about 400 million tons have been produced globally, and… reserves are estimated at almost 700 million tons.” Aluminum consumption has increased sixteen-fold since 1950, the world has consumed four times the 1950 known reserves, and known reserves could sustain current consumption for 177 years. Potential US gas resources have recently doubled. And so on.
The MIT modelers missed something—human ingenuity in discovering and innovating. This did not just appear after 1972. Aluminum, Lomborg writes, is one of earth’s most common metals. But until the 1886 invention of the Hall-Héroult process, it was so difficult and expensive to extract aluminum that “Napoleon III had bars of aluminum exhibited alongside the French crown jewels, and he gave his honored guests aluminum forks and spoons while lesser visitors had to make do with gold utensils.”69
In 1980, economist Julian Simon made a famous wager in the form of a complex futures contract. He bet with Paul Ehrlich, whose 1968 book The Population Bomb predicted that “hundreds of millions of people” would starve to death in the 1970s as population growth swamped agricultural production. Simon’s wager was that by 1990, the price of any five commodities that Ehrlich and his advisers picked would be lower than in 1980. Ehrlich’s group picked five metals. All were cheaper in 1990. The bet cost Ehrlich $576.07. But that year he was awarded a $345,000 MacArthur Foundation “genius” grant and half of the $240,000 Crafoord Prize for ecological virtue.70 One of Ehrlich’s advisers, John Holdren, became Barack Obama’s science adviser.
Mark Twain offered a droll response to those who confidently extrapolate prognostications from prior events. Noting that the Mississippi had several times shortened itself by cutting new channels, becoming straight where it had been serpentine, Twain said it was a lead pipe cinch that at the rate the river was becoming shorter, in 742 years the lower Mississippi would be just a mile and three-quarters long and Cairo, Illinois, and New Orleans would sit cheek by jowl, with a single mayor. Twain was tweaking the intellectuals for their tendency to first discern trends and then postulate that they will continue indefinitely. When the philosopher Michael Oakeshott said that we know no more about where history is going than we know about the future fashions in hats, he inadvertently proved his point: Since he said that, hats have gone out of fashion. Modern life is an ongoing tutorial about why it is reasonable to expect the unexpected. And about the folly of standing athwart economic dynamism shouting, “Stop!” Besides, government must promote growth to pay for the promises it has made.
The promises, however, become impediments to growth, for two reasons. The weight of the public sector—of the entitlement state—suffocates the energy of the private sector. And the cultural effects of economic growth are inimical to its continuation.
Government, Burke said, exists to deal with wants. Modern government, however, exists in part to generate wants, to stimulate appetites for public goods and services that the political class will be rewarded for providing. So government must promote economic growth that will throw off sufficient revenues to pay for an even richer menu of benefits. The problem is that the weight of benevolent, redistributive government can be inimical to the economic growth that such government presupposes. Marx, who thought that capitalism was doomed by its “contradictions,” did not foresee this one. Or the one that the Harvard sociologist Daniel Bell postulated: Capitalism produces affluence that is inimical to the virtues capitalism requires—thrift, industriousness, deferral of gratification. Bell’s worry resembled that of another Harvard man and virtuoso worrier, John Adams.
In 1819, he wrote to Jefferson: “Will you tell me how to prevent riches from becoming the effects of temperance and industry? Will you tell me how to prevent riches from producing luxury? Will you tell me how to prevent luxury from producing effeminacy, intoxication, extravagance, vice, and folly?”71 In 1976, this capitalist nation’s bicentennial, Bell warned about “the cultural contradictions of capitalism.” Capitalism, he said, flourishes because of virtues that its flourishing undermines. Its success requires thrift, industriousness, and deferral of gratifications, but this success produces abundance, expanding leisure, and the emancipation of appetites, all of which weaken capitalism’s moral prerequisites.
The cultural contradictions of welfare states are comparable. Such states presuppose economic dynamism sufficient to generate investments, job creation, corporate profits, and individuals’ incomes from which come tax revenues needed to fund entitlements. But welfare states produce in citizens an entitlement mentality and a low pain threshold. That mentality inflames appetites for more entitlements, broadly construed to include all government benefits and protections that contribute to welfare understood as material well-being, enhanced security, and enlarged leisure. The low pain threshold causes a recoil from the rigors, insecurities, and dislocations inherent in the creative destruction of dynamic capitalism. The recoil takes the form of protectionism, regulations, and other government-imposed inefficiencies that impede the economic growth that the welfare state requires. So welfare states are, paradoxically, both enervating and perve
rsely energizing.
There is a clear and present danger that America’s sterling contribution to the Great Enrichment might be petering out because Americans might be entering what will be called the Great Flinch, a reaction against the uncertainties and other stresses inherent in dynamism. This might be happening at the very moment when dynamism is needed more than ever. An aging population is retiring into the embrace of the entitlement state that has made expensive promises about pensions and, even more, medical care. For many Americans, slower growth seems less a menace than a promise—the promise of restfulness, of respite from the accelerated social churning imposed by globalization. “People suppose that the new societies are going to change shape daily,” wrote Tocqueville nearly two centuries ago, “but my fear is that they will wind up being too unalterably fixed with the same institutions, prejudices and mores, so that mankind will stop progressing and will dig itself in.”72 The digging in is far advanced in twenty-first-century America.
Ameliorative measures that might forestall or at least moderate the Great Flinch would help workers prepare to move from declining occupations to expanding ones. This, however, requires private individuals and entities to do something that few know how to do, and it requires governments to do something that they rarely know how to do and are disinclined to do. Preparing for a rapidly unfolding future requires the kind of forecasting that requires information that few can acquire. And it requires government not merely to discern the economy’s emerging contours, but also to encourage prospective rather than existing interests. So, ameliorative measures for those who are disadvantaged by trade or technology face two impediments. One is the knowledge limits about which Hayek warned (the “fatal conceit”). The other is the institutional inertia inherent in interest-group democracy functioning through the viscosity of the administrative state. Still, it is worth trying, in spite of its large transaction costs. More promising measures, which do not require difficult-to-acquire knowledge, would enable individual risk-taking by removing barriers to enterprise (e.g., rent-seeking occupational licensure) and by subsidizing workers’ mobility from stagnant to vibrant regions.
Senator Ben Sasse, the Nebraska Republican, believes that the opioid epidemic in the early twenty-first century is akin to the epidemic of alcoholism early in the twentieth century. Then there was a mass movement from farms to rapidly expanding urban centers, where the new arrivals were without the social capital—the local attachments of families, neighborhoods, churches, clubs—that could prevent an epidemic of loneliness, against which deracinated individuals self-medicate with substance abuse. If economic dislocations, created by new technologies and patterns of trade, tend to create loneliness, this is another reason for government to experiment with technology- and trade-mitigation policies as prophylactic measures to forestall a Great Flinch.
The success of a society often produces a congealing as successful people apply their social skills to the task of reproducing in the rising generation the conditions in which they became comfortable. What the Italian economist Vilfredo Pareto called the “circulation of elites” slows as the elites reproduce themselves through “assortative mating”—people of similar educational and professional backgrounds marrying.73 There is a determined, skillful transmission of cultural capital to their children in the competition for access to elite educational institutions that impart momentum for success.
Deirdre McCloskey notes that in 1800, at least 80 percent of American workers were on farms; today, thanks to the mechanization of agriculture and hybrid crops, fewer than 2 percent are. But the displaced agricultural workforce was not consigned to unemployment. By 1910, one in twenty workers were working on the railroads. In the late 1940s, of the approximately 66 million in the workforce (43 million men, 17 million women), AT&T employed 350,000 as manual telephone operators, almost all of them women. In the 1950s, hundreds of thousands of jobs operating elevators in hotels, department stores, and office buildings disappeared when elevator passengers were trusted to push buttons by themselves. More recently, 10,000 people lost their jobs when Borders bookstores disappeared, partly because of competition from Amazon. More than 100,000 people who in 2000 worked in video rental stores are working elsewhere because Netflix and other entities killed rentals. In today’s America, with about 160 million jobs, about 1.7 million jobs—more than 1 percent of the total—disappear every month as companies downsize, fail, merge, or decide that this or that job is dispensable. So about 10 percent of jobs vanish in a year. Says McCloskey, “In just a few years at such rates—if disemployment were truly permanent—a third of the labor force would be standing on street corners, and the fraction still would be rising.”74
Various public policies could drastically slow the employment churning that is caused by innovations. But who wants to live in a stagnant society? Invoking John Rawls’ idea of a “veil of ignorance,” McCloskey says that people should ask which kind of society they would rather be born into—without knowing where within the society they will end up.75 Do people want to live in a society where jobs are protected by policies that suppress economic dynamism—meaning growth—and government decides who gets subsidies and other protections? Or in a society in which workers are expected, and helped, to adapt to a constant stream of uncertainties—and opportunities?
In creating a commercial republic replete with a saving multiplicity of factions, the Founders hoped that potentially disruptive passions might be tamed by being diverted from factional politics into commerce. They hoped that dangerous energies would be sublimated in the creation and acquisition of wealth. But what was to prevent acquisitive people from coming to regard government as just another arena in which they could strive for material well-being through political advantages? Nothing did prevent that, because the nation abandoned the Constitution’s underlying ideas of limited government. And because some new ideas emerged to encourage the conception of government as deliverer of material well-being. In October 1932, the Democratic Party’s presidential nominee said, “I have…described the spirit of my program as a ‘new deal,’ which is plain English for a changed concept of the duty and responsibility of Government toward economic life.”76 The “changed concept” of government put America on the straight path to the present.
In the first quarter of the twenty-first century, American government is increasing like what Andrew Jackson warned against in the second quarter of the nineteenth century. In his prescient 1832 message explaining his veto of the bill to re-charter the Bank of the United States, Jackson began by acknowledging that such a bank would be “in many respects convenient for the government and useful to the people.”77 But near the end of his 8,086-word attack he described the bank as a government intrusion in the allocation of economic benefits, the granting of “monopolies and exclusive privileges” that would presage “a fearful commotion”:
It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society—the farmers, mechanics, and laborers—who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.78
What Jackson knew, Madison did, too. In Federalist 62 he tried to warn posterity about “instability” born of government’s incon
tinent interventions in society:
Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the moneyed few, over the industrious and uninformed mass of the people. Every new regulation concerning commerce or revenue, or in any manner affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest reared not by themselves but by the toils and cares of the great body of their fellow citizens. This is a state of things in which it may be said with some truth that laws are made for the few not for the many.79
This is much more urgently true today, in the vast shadow cast by the administrative state, than it was when Madison wrote. Note well his deft and prescient choice of words. Regulation inherently confers advantages on those who have the education and time to “watch” and the skill, or perhaps the hired representation, to “trace” what goes on in government’s labyrinthine interior. Today, what Jackson denounced and Madison feared is called rent-seeking and explains modern Washington, including the fact that five of the nation’s ten most affluent counties are in the Washington area. The libertarian theorist David Boaz says, “When you lay out a picnic, you get ants. When you hand out more wealth through government, you get lobbyists. The federal budget is the biggest picnic in history.”80 Big government incites, by enabling, a flight from entrepreneurship—other than the enterprise of rent-seeking, which is a degenerate diversion of entrepreneurial energies. The more government spending and regulating disposes or influences the disposition of wealth and opportunity, the more opportunities there will be to make money by manipulating the political system. To get a feel for what is ominous about this, take a step, in your imagination, behind a veil of ignorance.