The Conservative Sensibility Page 35
Fortunately, six centuries later, capitalism provided a nicer path to egalitarian results. Capitalism depends on what it makes possible: mass consumption. Hence capitalism’s principal beneficiaries are not the wealthy, for whom positional goods, which must be scarcities, are particularly important. Joseph Schumpeter illustrated this seventy-five years ago: “Electric lighting is no great boon to anyone who has money enough to buy a sufficient number of candles and to pay servants to attend to them. It is the cheap cloth, the cheap cotton and rayon fabric, boots, motor cars and so on that are the typical achievement of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”100 Similarly, Schumpeter said that the invention of nylon reduced the social distance, as measured by consumption, between the duchess who wore silk and the shop clerk who wore cotton. Time was, the upper crust rode in carriages, the lower orders walked. No such dramatic difference distinguishes the driver of a Mercedes from the driver of a Chevrolet. So “conspicuous consumption” has lost some of its saliency as a signal of status.
It is important to recognize that the consumption gap between the wealthy and the middle class is less dramatic than the income and wealth gaps. John Cochrane notes: “Rich people mostly give away or reinvest their wealth. It’s hard to see just how this is a problem.…Look at Versailles. Nobody, not even Bill Gates, lives like Marie Antoinette. And nobody in the US lives like her peasants.” Some Standard and Poor’s economists have written, “As income inequality increased before the [2008] crisis, less affluent households took on more and more debt to keep up with—or in this case, catch up with—the Joneses.” And economist Joseph Stiglitz argues that income inequality is a problem because it causes the problem of “a well-documented lifestyle effect—people outside the top one percent increasingly live beyond their means,” which Stiglitz calls “trickle-down behaviorism.” Cochrane is unconvinced: “Aha! Our vegetable picker in Fresno hears that the number of hedge fund managers in Greenwich with private jets has doubled. So, he goes out and buys a pickup truck he can’t afford.” Do we therefore need confiscatory wealth taxation in order to encourage thrift among the lower classes? Not so fast. The Standard and Poor’s economists also say that inequality is a problem because rich people save too much and poor people do not save much, so by redistributing money from the rich to the poor, overall consumption can be stimulated, avoiding “secular stagnation.” This, too, makes Cochrane grumpy: “I see. Now the problem is too much saving, not too much consumption. We need to forcibly transfer wealth from the rich to the poor in order to overcome our deep problem of national thriftiness.”101
There seems to be a pattern of egalitarians deciding on the result they want—expansion of redistributionist government—and then defining problems to justify this. This sometimes requires severe intellectual contortions, as when they locate the root of the evil of inequality in what they take to be the baneful nexus between money and politics. Their argument is that money, in the form of campaign contributions, determines electoral outcomes (a dubious empirical claim) and that if we purify politics by removing or regulating private money that can be given for the supposed purpose of corrupting politics, the wealthy will no longer be able to buy the political influence that translates into successful rent-seeking. At this point, the Grumpy Economist becomes the Incredulous Economist: “If the central problem is rent-seeking, abuse of the power of the state to deliver economic goods to the wealthy and politically powerful, how in the world is more government the answer?”102 America’s problem, Cochrane believes, is not that wealth is the primary determinant of political power but that political power is much too often the determinant of wealth. So the way to reduce the role of money in politics is to reduce the role of politics in the distribution of money, thereby lowering the stakes of politics and the incentive for investing in it.
Talking about income inequality is a way to avoid talking about all the ways the supposed cure for this—more ambitiously assertive government—has been failing to deliver brisk economic growth, competent education, adequate infrastructure, etc. “Restarting a centuries-old fight about ‘inequality’ and ‘tax the rich,’ class envy resurrected from a Huey Long speech in the 1930s,” says Cochrane, “is like throwing a puppy into a third-grade math class that isn’t going well. You know you will make it to the bell.”103
BEING RICHER THAN ROCKEFELLER
Some historians estimate that on September 29, 1916, a surge in the price of John D. Rockefeller’s shares of the Standard Oil Company of New Jersey made him America’s first billionaire. Others say he never reached this milestone and that Henry Ford was the first. Never mind. If Rockefeller was the first, his billion was worth $23 billion in today’s dollars. Don Boudreaux, an economist at George Mason University’s Mercatus Center, asks if you would accept this bargain: You can be as rich as Rockefeller was in 1916 if you will consent to live in 1916. Boudreaux says that if you had Rockefeller’s riches back then, you could have had a palatial home on Fifth Avenue, another overlooking the Pacific, and even a private island if you wished. Of course, going to and from the coasts in your private but un-air-conditioned railroad car would be time-consuming and less than pleasant. And communicating with someone on the other coast would be a protracted chore. Commercial radio did not arrive until 1920, and 1916 phonographs would lacerate 2017 sensibilities, as would 1916’s silent movies. If in 1916 you wanted Thai curry, chicken vindaloo, or Vietnamese pho, you could go to the phone hanging on your wall and ask the operator (direct dialing began in the 1920s) to connect you to restaurants serving those dishes. The fact that there were no such restaurants in your community would not bother you because in 1916 you had never heard of those dishes, so you would not know what you were missing. If in 1916 you suffered from depression, bipolar disorder, influenza, a sexually transmitted disease, erectile dysfunction, or innumerable other ailments treatable in 2017, you also would not know that you were missing antibiotics and the rest of modern pharmacology. And don’t even think about getting a 1916 toothache. You could afford state-of-the-art 1916 dentures—and probably would need them. Your arthritic hips and knees? Hobble along until you cannot hobble any more, then buy a wheelchair. Birth control in 1916 will be primitive, unreliable, and not conducive to pleasure. You could enjoy a smattering of early jazz, but rock-and-roll is almost four decades distant, and Netflix and Google are even farther over the horizon. Your pastimes would be limited, but you could measure the passage of time on the finest Swiss watch. It, however, would be less accurate than today’s Timex or smartphone.104
So, as a 1916 billionaire, you would be materially worse off than a 2017 middle-class American. An unhealthy 1916 billionaire would be much worse off than an unhealthy 2017 American. Intellectually, your 1916 range of cultural choices would be paltry compared with today’s. And your moral tranquility might be disturbed by the contrast between your billionaire’s life and that of the normal American. In 1916, life expectancy at birth was 54.5 years (today, 78.8), and fewer than 5 percent of Americans were sixty-five or older. One in ten babies died in the first year of life (today, 1 in 168). A large majority of births were not in hospitals (today, fewer than 1 percent). Only about 14 percent of people ages fourteen to seventeen were in high school, an estimated 18 percent age twenty-five and older had completed high school, and nearly 75 percent of women working in factories had left school before eighth grade. There were four renters for every homeowner, partly because mortgages (usually for just five to seven years) required down payments of 40 to 50 percent of the purchase price. Less than one-third of homes had electric lights. Small electric motors—the first Hoover vacuum cleaner appeared in 1915—were not yet lightening housework. Iceboxes, which were the norm until after World War II, were all that 1916 had.105
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Such facts from the first quarter of the twentieth century should serve as inoculations against America’s recurring bouts of social hypochondria. In the first quarter of the twenty-first century, however, another American affliction is political consensus. Yes, consensus. America today is more distant in time from the March 1933 beginning of the New Deal than that beginning was from the April 1865 end of the Civil War. Both episodes involved the nation’s understanding of equality: The war affirmed equality of natural rights, the New Deal addressed unequal social conditions. The New Deal’s redefinition of American politics and of the purposes of government supposedly still defines the parties’ differences. But in spite of all the discord and vituperation between the parties, the political class today seems more united by class interest than it is divided by doctrines.
Until well into the twentieth century, writes Michael Barone, Republicans were “the national, activist, even busybody party,” while Democrats, professing Jeffersonian defense of localisms, respected regional mores, “from segregation in the South to the saloon in the North.”106 In the 1920s and 1930s, some Republicans—Robert La Follette, George Norris, Fiorello La Guardia—were among the strongest congressional advocates of government policies of nationalization and redistribution. It was a Republican administration—Dwight Eisenhower’s—that undertook the simultaneous construction of two of the most ambitious modern public works, the St. Lawrence Seaway and the Interstate Highway System. At their post–Civil War apogee, nineteenth-century Republicans had been the party of activist government, using protectionism to pick commercial winners, gifts of land to subsidize railroads and other forms of corporate welfare, and promising wondrous benefits from government’s deft interventions in economic life. Which is to say, the Republican Party, like the Republic, got to the present by a serpentine path.
This much is indisputable: The Republican Party was the great “nationalizing” force and the architect of modern energetic government. America’s Founders learned (from John Locke, among others) that government exists for the modest purpose of protecting liberty, understood primarily as freedom from government. But the Republican Party’s commitment to minimalist government could not survive the first Republican presidency. As the Civil War changed from a war to restore the Union as it had been to a crusade for “a new birth of freedom,” the federal government came to be regarded differently. It was seen less as a threat to freedom and more as a provider and enlarger of freedom. The proximate cause of this changed perception was the Emancipation Proclamation, which was made possible by the Union victory at Antietam. In a sense, John Locke died at Antietam.
Before the Civil War, the federal government had been barely visible to most Americans. By the end of the war the federal civilian bureaucracy, 53,000 strong, was the nation’s largest employer, and the Republican Party was going to use it, vigorously. The war inaugurated a Republican era. Reconstruction in the South, and government-driven economic development in the North and West, reflected a redefinition of American freedom as something served by, not threatened by, government power. As Eric Foner writes in his history of Reconstruction, the Emancipation Proclamation clothed federal power with moral purpose, and a new class put that power to the service of what that class considered moral—its interest in economic growth.107
The war stimulated industry, from railroads to meatpacking to clothing, and after the war the Republican Party became the instrument of a commercial class demanding activist government to keep the growth going. Republican administrations provided tariffs, a national paper currency, and a national banking system, public debt, encouragement of immigration by the Homestead Act, the Land Grant College Act to spread scientific agricultural and other remunerative knowledge, land grants and bond issues for railroads and other “internal improvements,” and wars against Native Americans who were reluctant to recognize the romance of railroading and ranching on their lands. The nineteenth century might have been a century of “individualism” but it also was a century of tariffs, subsidies, and monopoly grants to canals and railroad companies. Ten percent of the public domain was given in land grants to finance the transcontinental railroads. The Union Pacific alone was given 4,845,977 acres of Nebraska—one-tenth of the state—including every other section along its right of way for twenty-four miles on each side of the track.
By the end of the 1880s there was intense pressure to reduce tariffs, then the largest source of federal revenue. And because America was by then an industrial power, it was importing primarily raw materials, which were subject to lower tariffs than finished goods. Thus revenues were falling. Furthermore, federal land sales, another source of revenue, were declining. But spending was increasing, especially for the navy, which by 1905 received 20 percent of the federal budget. Congress, acquiring a taste for redistributing income, substantially increased pensions for veterans, a lobby then almost as potent as the elderly are today.
The post–Civil War Republican Party normalized vast government interventions in the nation’s economic life. Franklin Roosevelt took this to another level, making interest-group politics systematic and routine. New Deal policies were calculated not merely to please or placate existing constituencies but to create many constituencies—labor, retirees, farmers, union members—who would be dependent on the government whose programs summoned them to dependency. Before the 1930s, the adjective “liberal” denoted policies of individualism and individual rights; since Roosevelt, it has primarily pertained to the politics of group interests. Roosevelt’s wager was that by assiduously using legislation and regulations to multiply federally favored groups, and by rhetorically pitting those favored by government against the unfavored, he could create a permanent majority coalition.
In 1913, with the ratification of the Sixteenth Amendment and enactment of the income tax, the foundation of the modern state—the mechanism for raising vast streams of revenue—had been put in place. The mere existence of this mechanism altered America’s political culture by quickening the itch of the political class to provide benefits to client groups who were convinced that they would be net winners from income transfers. This, in time, hastened the growth of the politics of envy, clothed in the language of “fairness.” Today, such politics is practiced by a political class offering an ever-expanding menu of popular benefits that ostensibly will be paid for by unpopular minorities (“the rich,” “corporations”). The New Deal’s rupture with nineteenth-century liberalism was its abandonment of the premise that society, as sharply distinguished from government, produces most of the elements of happiness, and that most of government’s functions are to maintain a framework of order in which people pursue happiness. What made the New Deal truly new was the notion that government has a duty to provide people with some, and more and more, of the tangible elements of happiness. About this, FDR was, as we have seen, clear-eyed and candid in his October 6, 1932, radio address. There he explained that his phrase “new deal” was simply “plain English for a changed concept of the duty and responsibility of Government toward economic life.”108 So, the final responsibility would be removed from private life to the public sector. Thus was the “well-being” of the citizen defined exclusively with reference to material conditions, without reference to how the citizenry’s character might be affected by this new relationship to a caring and, inevitably, controlling government.
In his second inaugural address, FDR spoke of government’s responsibilities toward the “one-third of a nation ill-housed, ill-clad, ill-nourished.”109 Seven years later, in his 1944 State of the Union message, he upped the ante: Government had a “duty” to drive the standard of living ever higher, and “we cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-housed, and insecure.”110 The insertion of insecurity onto the list of intolerable conditions is telling, and problematic, for two reasons. First, it expands the list of intolerable conditions beyond th
e citizen’s material circumstances to the citizen’s mental or emotional condition, thereby opening a vast, potentially limitless new array of government “duties” and “responsibilities.” Second, this new entitlement to a particular mental or emotional state, that of feeling secure, is in tension with the constant social churning of a dynamic free society.
Roosevelt’s ambitious agenda was an incitement to permanent discontent on the part of citizens and government. It bestowed on government a roving commission to tweak the public’s material and mental states. In that 1944 message, he called for a “second Bill of Rights” to pull the nation up from what Roosevelt considered the cramped mission of merely insuring “equality in the pursuit of happiness.” From the idea that the government is negligent if even one-tenth (or, presumably, one-fiftieth) of the country is ill-housed, etc., “no matter how high” the general standard of living is, it is a short step to the stance that whether an individual is ill-housed, etc., depends on how that individual’s housing, etc., ranks relative to the general standard of living.111