Defining Ideas

Beware Of The Big-Government Right

Sunday, December 9, 2018
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Hill Street Studios, Blend Images

Traditional conservatives and modern progressive intellectuals have had pointed, often bitter, debates in recent years over the future of American domestic policy. One of the major arenas in that struggle is the law of labor and employment. The left wants to toughen minimum wage and overtime laws, strengthen antidiscrimination laws, and promote diversity, affirmative action, and, increasingly, inclusive hiring. They also hope to restore unions to their pre-1970 glory days. The right opposes each of these initiatives by seeking to deregulate labor markets in order to let competitive forces increase overall productivity, indirectly benefitting workers through higher wages. My classical liberal credentials put me squarely on the conservative side of this debate.

Oren Cass, a senior fellow at the Manhattan Institute, has written a forceful and well-received book, The Once and Future Worker, which he hopes will change the terms of the debate.  He has also summarized his position at length in an article in the American Interest, titled The Working Hypothesis, to which I also refer.  Cass rejects the gospel of growth that is touted by traditional conservative economists, whom his book berates for insisting that things would be better “if only government had been smaller, with lower taxes and spending, and thus more room for economic dynamism.”  It then chides progressives for wishing that government had been bigger, “with more infrastructure investment, more checks on the market, a more generous safety net, and thus a prosperity widely shared.” In contrast to both, his bottom line is that “we can provide a subsidy for low-wage work, funded with higher tax rates and reduced transfer payments”, and thereafter “we can repurpose unions to help workers and employers optimize workplace conditions.”

Cass treats these as conservative arguments that “prize self-sufficiency, assign a central role to family and community and prefer the private ordering of markets to the centralized dictates of government.” But he refuses to go the whole way with libertarianism because of its blindness to other conditions that are needed for flourishing.  As a classical liberal, I think that his thesis is wrong on both the broad and narrow points.  I believe that insuperable obstacles stand in the path of this utopian vision.  First, the ends of the system are underspecified.  How much of a subsidy?  How high the taxes?  Who decides and when? And even if we could answer those questions, is there any way to reduce transfer payments that are made, for example, to the elderly and the disabled?  And can we do better if growth becomes weaker?  Next, the mechanics of transformation are underspecified as well. Cass makes frequent use of the dangerous royal “we.”  Unions are large and powerful organizations.  Just who will take the lead in their redesign, and who will be able to increase their membership from the under 7% today?

These concrete questions lead to a larger inquiry.  Why do we want to undertake this mission to be begin with, if its likely effect will be to reduce overall economic wealth?  For Cass, the answer starts at a theoretical level as he claims that it is wrong for economists and political scientists to rely on “the insidious metaphor of the ‘economic pie,’ which measures success by the amount of gross domestic product available to every American for consumption.” I confess that I am completely baffled why he rejects this traditional mode of analysis. The point of the pie metaphor is to help political and social institutions work to create positive-sum games from which everyone benefits. As Cass acknowledges, no one should complain that U.S. GDP is today three times what it was in 1975. Some portion of that GDP derives from scientific research, public education, and charitable activities, all of which would be compromised by lower growth rates.

So where’s the beef? For Cass, it comes in “decades of stagnant wages, a labor-force exodus, too many unstable families and crumbling communities.” He despairs over falling expectations because “half of Americans born in 1980 were earning less at age thirty than their parents did at their age.” Throw in an opioid crisis of recent origins and Cass perceives a social decay in a sea of economic plenty.

What Cass does not supply is an explanation of how growth makes American malaise more acute. His general laments about the state of American society sound awfully like the frequent jeremiads of Barack Obama, who bemoaned the lack of good jobs to help all the hard-working folks at home. Indeed, the claims of stagnant wages and low labor-market participation during the Obama years ring true, for his pious rhetoric was never matched by sensible programs on the ground. Indeed, there is a sense that Cass did not revise his argument in light of recent developments under the Trump presidency, flawed as it is on foreign trade and presidential decorum. As Michael Strain and James Pethokoukis point out, all the indicators to which Cass points on wage levels and job formation have turned upward, happily increasing opportunities for lower-income workers. Cass rightly insists that a solid employment market is essential for forming successful families and easing high levels of social anxiety and distrust. But it is a huge mistake to think that any program targeted toward low-income workers and their families is likely to work. The government needs to get out of the way, not to reform national character, optimize employment, or create some national purpose.

One clear illustration of how government is the problem and not the solution involves collective bargaining laws under the National Labor Relations Act (“the NLRA”). The NLRA was meant to create industrial peace and higher living standards for workers. It has done neither. Cass rightly attacks it for its “disastrous effects” in creating “hyper-adversarial relationships that neither side wants.” But he offers no alternative strategy to achieve his goals. I have long held that it is best to start over, by returning to the pre-NLRA policy which allows firms to announce in advance that they refuse to hire any worker with union affiliations. Critics moan that this hard-line position spells the end of worker participation in the firm. But in fact, the opposite is true. One little-noticed provision of the NLRA is Section 8(a)(2), which condemns as an “unfair labor practice” the formation of company unions, i.e. those that are organized and dominated by the firm itself. Labor unions demanded this prohibition to avoid competition from firms whose worker committees could, and did, give workers a chance to participate in formulating company policies, without posing the risk of strikes and the burdens of collective negotiation. The targeted legislative boost to union monopolies raises wages and lowers consumer welfare. It does not heal the collective soul. To better meet Cass’s goal, we need less regulation—and more growth.

Putting this stress on growth, moreover, does not denigrate the importance of caring for and assisting others. Indeed, one of the odd features of Cass’s work is that it uses a far too narrow definition of markets, which ignores the key role of private charity and philanthropic activities more generally. Of course, personal disabilities and natural catastrophes will persist no matter how much we preach the gospel of self-sufficiency. But massive government transfer payments are far from the best way to repair the social fabric. The government may be able to tax and spend, but it is hardly able to make sure that the assistance that is so desperately needed goes to the right recipients in the right form.

One term that has gone out of common usage is the old expression “imperfect obligation,” which stated that people in all walks of life should take care of those who need assistance as a matter of personal conscience and social obligation. This notion is a central part of the classical liberal tradition. That principle often plays out modestly, entailing such actions as providing food and other support for neighbors who have suffered injury—or sometimes less modestly, as in the provision of free or low-cost medical services to families of limited means, to the creation of large charitable hospitals and clinics to help sick and injured people without the means to pay.

These imperfect obligations were, by definition, not enforced legally. No one could sue anyone else for a lack of benevolence. But the absence of legal enforcement was-- especially at the height of laissez-faire--the secret of their success. To keep these activities at a high pitch required the service of intermediate institutions—churches, clubs, fraternal organizations—to work. So it was that great hospitals like Sloan-Kettering, and great universities like the University of Chicago (Rockefeller), Johns Hopkins, and Stanford, were formed to fill that that social niche. Ironically, the rise of large government programs imposes taxes that drain support from these programs and increase the government role in transfer payments that only increase social dependence on government.

The bottom line, therefore, is this: Cass has a very restricted view of how a well-regulated economy works. No one conceives that GDP is the be-all-and-end-all of social life. But it is hard to imagine how all the sociological and psychological concerns that Cass stresses can be better solved with lower growth that makes fewer resources available to help human welfare. The single best measure of welfare is not wealth but life-expectancy. Cass and others are right to lament that it has fallen slightly in recent years. But it is even more critical to recognize that the greatest extensions in life expectancy all took place at the height of laissez-faire, increasing from about 40 years in 1850 to about 65 years in 1940. Long lives are highly correlated with subjective well-being and economic growth, and the one point that does not need empirical verification is that those gains cannot all be concentrated in the top one-percent. And so it is that the path to greater happiness and social cohesion lies in deregulation, not in some unspecified, new-fangled form of collective intervention.