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July/August 2008 -- Business columnists for the New York Times have been denouncing the pursuit of riches for at least a generation—the twenty-eight years since Ronald Reagan’s election supposedly ushered in a Decade of Greed. Now, several Times columnists seem to have discovered the bright side of capitalism.
Columnist Joe Nocera, after visiting China, wrote (April 26, 2008): “Modern China surely shows that trickle-down economics is not just supply-side propaganda. . . . Motivated by the prospect of wealth, people started companies. And as those companies succeeded, millions of new jobs were created.” President Reagan, thou shouldst be living at this hour. A columnist for the New York Times has announced, not as a possibility but as a certainty, that the route to national wealth lies in offering entrepreneurs the chance to get fabulously rich.
But perhaps we should not get our hopes up. Perhaps the Times’s reporters will show us that such increases in wealth destroy the authentic lives that poor people have lived from time immemorial and yet make them no happier. After all, didn’t the Easterlin Paradox—announced in 1974 by economist Richard Easterlin—prove that getting wealthy, beyond acquiring the basic necessities, does not make a nation’s people happier?
Enter Times business columnist Number Two: David Leonhardt. Seven years ago, he wrote an article called “If Richer Isn’t Happier, What Is?” In it, he recounted the data behind the Easterlin Paradox and said: “The obvious conclusion is that an everyday cliché may in fact have a more accurate take on modern life than Economics 101: money really cannot buy happiness.” This past April, however, he wrote a piece that bore the headline: “Maybe Money Does Buy Happiness After All” (April 16, 2008). In the piece, he noted that an accompanying map “clearly shows that life satisfaction is highest in rich countries.” Leonhardt even went so far as to admit that “economic growth doesn’t just make countries richer in superficially materialistic ways. Economic growth can also pay for investments in scientific research that lead to longer, healthier lives.” In sum: “Affluence is a pretty good deal. Judging from that map, the people of the world seem to agree.” (For a philosophical analysis of this question, see Tara Smith’s “Money Can Buy Happiness,” originally published in Reason Papers but reprinted as a pamphlet in 2007 by Stephen Hicks’s Center for Ethics and Entrepreneurship and available at Amazon.)
Still skeptical? Times columnist Number Three is the clincher. Last April 29, Andrew Ross Sorkin published an article celebrating the achievements and wisdom of (believe it or not) Michael Milken. Wrote Sorkin: “He may have made some mistakes along the way, but Mr. Milken helped create a new generation of companies and an entirely new way to finance nascent ideas that have helped fuel the global economy far beyond his exit from Drexel. The list of companies that would not exist without him is long.” I must say, having spent the last several years reading NYT business columnist Gretchen “Greed, Greed, Greed” Morgenson, I find it refreshing to encounter this change of tone in the Times’s business pages.
And yet I am wary. For I suspect that permeating these surprising celebrations of the world’s wealth producers is the philosophy of John Rawls. I detect in them an attitude that says: “We shall not kill the goose, so long as she agrees to hands over her golden eggs. We shall be nice to Atlas, so long as he pays for our economic desires.”
Consider, in this regard, the map that accompanies Leonhardt’s article on wealth and well-being. It makes clear in direct visual fashion that the United States, though marginally richer than the Scandinavian countries, ranks somewhat below them in reported happiness. And, of course, America’s democratic leftists have long and longingly gazed on Nordic countries as representatives of the ideal society. So what the left may now be realizing, if it perceives the virtues of entrepreneurship as clearly as Joe Nocera, is that Scandinavia never represented a “Third Way” between America’s free-market capitalism and the USSR’s state-controlled communism. What it actually represented was a free market yoked to a welfare state. It represented the policy of “be nice to Atlas.”
To quantify the matter, compare the United States and the Scandinavian countries in the Cato Institute’s latest Economic Freedom of the World report. You will see that, in the area of business regulation, the United States scores a 7.2 (out of a possible 10). But Norway scores 7.8, Sweden scores 7.9, and Denmark, being very nice to Atlas, scores 8.2. When it comes to the top marginal income tax rate, however, the United States scores 8.0. Norway scores 7.0. Sweden scores 3.0. And capitalist Denmark, making Atlas pay very dearly for his entrepreneurial freedom, scores 1.0.
Will the American left be able, credibly, to join a Scandinavia-inspired be-nice-to-Atlas coalition? Will it be able to overcome its historical hatred of unregulated markets and great wealth if it can thereby reap the material products of capitalism? We shall see. Barack Obama’s campaign remarks about raising the capital-gains tax rate suggests that the very far left may not be willing to cut a deal. As Cato’s Daniel Mitchell commented on the blog Cato@Liberty (April 13, 2008):
But perhaps more centrist Democratic politicians could bring themselves to be “tax collector for the welfare state,” assuming centrist Democrats can still be elected to high office.
Personally, though, I find the most fascinating faction in the be-nice-to-Atlas coalition to be its libertarian wing. I first wrote about this more than a year ago when discussing the proposal for a liberal/libertarian alliance (“liberaltarianism”) put forward by Brink Lindsey, Cato’s vice president for research. Lindsey’s article in The New Republic pleaded with liberals to recognize the truth of market economics, in return for which libertarians would concede the truth of the liberals’ altruism. “The basic outlines of a viable compromise are clear,” Lindsey wrote. “On the one hand, restrictions on competition and burdens on private initiative would be lifted to encourage vigorous economic growth and development. At the same time, some of the resulting wealth-creation would be used to improve safety-net policies that help those at the bottom and ameliorate the hardships inflicted by economic change.”
The left, to put it kindly, wasn’t buying Lindsey’s proposed alliance. They were especially vehement in rejecting the notion of limiting the welfare state to safety-net programs and forsaking such broad, middle-class programs as Social Security, universal health care, and higher education for all. And, indeed, if one takes the Scandinavian nations as the proper model for liberaltarianism, perhaps the left was correct. Perhaps if we are very nice to Atlas, he can be counted on to sustain even the huge middle-class welfare programs.
At any rate, Cato’s Will Wilkinson, managing editor of the website “Cato Unbound,” seems willing to consider that possibility. Earlier this year, he commented on a dispute between Cato’s Mitchell, who portrayed Iceland as a fast-growing Nordic Tiger, and Matthew Yglesias of The Atlantic, who wrote that it seems to be more of a Scandinavian welfare state. Wilkinson asked: Can’t it be both? “Iceland, much like Denmark, is more or less Hong Kong with a huge welfare state. It is possible to have high tax rates, lots of redistribution, and no other policies regulating the operation of the market. . . . Perhaps the greatest unheralded discovery of the late 20th/early 21st century is that relatively unfettered capitalism is a much better complement to the comprehensive welfare state than is dirigisme. I for one plan to herald this.”
How should political individualists respond to this new movement to separate free market production from collectivist distribution? to separate freewheeling capitalism from a generous welfare state?
First, I think, we should respond with welcome. To be sure, this be-nice to-Atlas approach has led a few libertarians away from laissez-faire and toward the welfare state, which is a negative. But the straying of those few from the pure individualist cause seems to me more than compensated by the other half of the equation: the large number of welfare-statists who are coming to see the virtue of free markets. I recently listened to the Teaching Company’s forty-eight-lecture course “Contemporary Economic Issues,” and I was impressed that lecturer Timothy Taylor, again and again, warned his auditors about the disasters that occur when politicians try to fight markets and incentives. That was quite the reverse of the anti-market message I received in my 1960s college economic course. This shift, I believe, is the payoff from decades of efforts made by the right to expound market theory and market history. Leonard Read, founder of the free-market Foundation of Economic Education, should be proud, as should his successors at today’s many pro-capitalist think tanks.
But respect for markets, as the Teaching Company course made clear to its listeners, does not preclude direct government intervention in civil society. If you want to preserve small farms, don’t try to accomplish that by fiddling with agricultural prices; just take tax revenue and give it to people who operate small farms. Of course, this direct, market-respecting approach to “the good society” is the foundational understanding of the be-nice-to-Atlas coalition.
What strategy can political individualists employ against such welfarism and social planning? That is precisely what we now need to discover. The starting point should be the old adage “You can’t beat a horse with no horse.” You cannot defeat government’s promise to help people handle the difficulties of life by saying that, under freedom, individuals will take care of those matters however they wish. Quite reasonably, people want to see exactly how problems such as old age and ill-health will be dealt with through private initiative. And they want to see those solutions in practice, not theory. For all the theoretical arguments against the old Civil Aeronautics Board, it was price data from the operation of intra-state airlines in Texas and California that finally convinced bureaucrats and congressmen. Thus, today, we need to devote the same detailed research and analysis to the means of strengthening a free civil society as past generations of individualists devoted to the strengthening of free markets.
But even after political individualists have come up with proven alternatives to government assistance programs, I fear that they are going to meet with stiff resistance from the liberals and libertarians of the be-nice-to-Atlas coalition. The problem will be similar to the hard left’s inability to reconcile itself to the fundamentally selfish motivation at the heart of markets, regardless of how productive those markets may be. In like fashion, I expect, liberals and libertarians will not wish to accept the best private solutions for social challenges, because of their disdain for the Toryism that lies at the heart of the non-market institutions those approaches require—extended families, men’s clubs, ladies’ auxiliaries, conservative churches, and neighborhood associations.
But at that point, the debate will be philosophical, not political.
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