04 August 2010

Safeguarding the Liberal-Tory Consensus

Whitehall’s renewed interest in once-mighty British think tanks is the focus of a column in a recent edition of The Economist. In these uncertain times, when politicians seek to avert financial meltdown and the risks of sovereign debt, what are the implications for One Nation Toryism?

After years of creeping irrelevance and funding difficulty, political, economic, and social organisations devoted to policy formation/programme implementation once again have the attentive ear of Government. The change in Ministries following the general election may account for this resurgence; more relevant still is the economic crisis in which the Conservative-Liberal Democrat coalition government finds itself, as ‘the most ambitious think-tanks believe the crisis could lead to a fundamental rethink of the way government is run.’ Equally important, newly sworn-in servants of the Crown are eager to buttress the substance of party manifestos, motivated in no small part to reconciling ‘the competing philosophies of the Tories and the Lib Dems.’

The report highlights the work of several groups in particular: the Institute of Economic Affairs, the Adam Smith Institute, the Centre for Policy Studies, and ResPublica. I can attest to the scholarship of all, having personally benefited from their numerous publications and from communication with staff members.

Besides reviewing some of the policy recommendations these think tanks will be presenting the new government, the Economist article includes a provocative sentiment from the Director General of IEA, Mark Littlewood, who

thinks the government should have started with a blank sheet of paper, worked out what the state should do and eliminated unneeded programmes entirely.

Framed thus, this is an axiomatic viewpoint: its contrary is rendered meaningless, since it advocates the State to undertake what it should not undertake.

The problem, of course, lies in deciding just what legitimate activities lie within the State’s purview. From one end of the spectrum, the libertarian position best described as anarcho-capitalism or market anarchy, the answer is short: individuals within reciprocating society are paramount, and there should be no State at all. [1] From the other end, of full-blown social democracy that morphs into socialism (whether openly articulated as such or hidden euphemistically), the answer is equally concise: there are relatively few areas of public interaction into which the State should not intervene. The coalition government has ambitions to resolve this dilemma, according to The Economist, and is intent on ‘an attempt to break away from the idea that political action is a simple choice between big government and isolated individuals.’

Let me set these two extremes aside for present purposes, and focus on what may be assumed to be Littlewood’s aim, that of promoting the liberal tradition—given the IEA’s mission ‘to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems’—which, I believe, is closely allied with organic Toryism, so as to form what can be called the Liberal-Tory consensus.

Thus, herein lies the first quandary: What programmes should the State legitimately perform?

The classical liberal position confines itself to maintaining law and order (comprising domestic security and contractual obligations) and defence from foreign threats. Yet, within the contemporary Anglo-Canadian tradition as practised, this list has come to include such provisions as education, healthcare, and basic welfare (encompassing national insurance/old age pensions and unemployment benefits—the social security net). Liberals may differ as to whether the State should provide these as either standard prescriptive entitlements (contingent, but not absolute) or as measures of last resort, preferring individuals to exercise responsibility where at all possible (while making basic services available to those in obvious need). Regardless, this liberal practice is very far from the night-watchman minimalism of its classical liberal forebear.

Simon Heffer is an example of the standard-entitlement liberal; in a recent Telegraph column, he wrote:

The state’s functions, in a compassionate and ordered society, can be confined to relatively few things. It should protect the public with a police force and armed services. It should provide education and health care, while perhaps finding ways to incentivise people to use non-state provision wherever possible. It should give the support that the elderly and the disabled require to live with dignity. It should see that public hygiene and essential infrastructure are maintained; and that’s about it. This requires a revolution in our way of viewing the state’s relationship with us.

As for the last-resort liberal, Philip Booth, IEA’s Programme Director, stated in a recent BBC Analysis programme, ‘Time to Get Real’ (broadcast 12th July and available on-line until January 2099!):

The State must defend itself, protect private property, and so on—what was often called the night-watchman State, the sort of thing that the State did in the nineteenth century. But there are other things which in a democratic society the majority of people believe ought to be in some way financed by the State. And so health, education—make some basic safety net welfare provision—and so on. But what the State should be doing in providing those things is assisting people to obtain education, healthcare, &c and not designing bureaucratic mechanisms which are inflexible and which they impose upon the population. (Professor Booth articulates the ‘last resort’ aspect particularly with respect to pension provision, further along in this broadcast.)

What intrigues the organic Tory is how closely this variant of liberalism hews to One Nation Toryism; perhaps the most important distinguishing feature consists of determining the absolute/prescriptive quality of entitlements. Unlike market anarchists who view the State only as a coercive entity, organic Tories conceive it as a means of realising communal ends that can only be met by the united efforts of all, over an indefinite period of time—through the obligatory State.

This school of conservatism may adopt some goods that liberalism forswears to the private sphere—e.g., museums and galleries and other cultural organisations that the Tory believes the State should support as part of a civic, patriotic entitlement. Nevertheless, it can be argued that contemporary liberalism and One Nation Toryism exemplify what Aristotle called ‘the golden mean’, the former presenting a variant of deficiency, the latter of excess, but both clustered around ‘the right course’.

And so we return to Littlewood’s ‘blank piece of paper’ and the thesis that Liberalism and Toryism have more or less shared ideas about what constitutes legitimate State activity. The next hurdle concerns funding.

According to the Rahn Curve—a measure of optimal government spending, in relation to Gross Domestic Product, for economic prosperity [2]—20 per cent approximates the ideal level of government involvement in the economy. Positive outcomes begin to decline (and disincentives to personal initiative rise) past this level. It is hoped that the State where the Liberal-Tory consensus thrives straddles this percentage.

Taxation rates must be set to meet these obligations, ceteris paribus, in a balanced budget framework; that is, government revenue should be sufficient to pay for government expenditure. Unfortunately, most countries have deficits and debts that make this equilibrium impossible.

Within the Liberal-Tory consensus, two alternatives are available—one minor, one draconian:

  1. Governments may raise taxes beyond what is necessary to support the Rahn ideal, with the excess revenue devoted to reducing deficits to zero and then to attacking the debt. However, according to the Laffer Curve—a measure of optimal government taxation, in relation to GDP, for economic prosperity [3]—if taxes are raised too high (especially on investors and entrepreneurs), the initiative of private enterprise will be compromised, with resultant lower taxes than expected.

  2. Another possibility is to compromise the Liberal-Tory consensus; One Nation Tory programmes will be sacrificed in the short term, and last-resort liberalism will be more prominent than the standard-entitlement variant. It is possible to conceive of even more stringent measures of a minarchist or libertarian character (i.e., the night-watchman model), but given the popularity of current entitlement programmes, it is doubtful that the public would tolerate such strict austerity measures except in the most dire economic conditions imaginable. In Canada, however, slaying the deficit and a return to balanced budgets and surpluses, achieved by the Liberal government in the mid-1990s, was accomplished by just such a public consensus.

    I call this the ‘Franklin Effect’, after the ill-fated attempt by Sir John Franklin’s Arctic expedition to return to civilisation after his crew abandoned their ships to impassable ice floes: minor concessions are taken initially in pursuit of one’s goal—in the case of Franklin’s men, leaving the comfort of the ships and carrying the accoutrement of society (such as books and silver tea sets) in their trek southward —but, confronted with mounting obstacles that hinder progress, more stringent measures become necessary (later adventurers discovered a trail of ‘household debris’ in the frozen tundra as Franklin’s men despaired of their condition and jettisoned more personal belongings in a vain attempt to lighten their loads and reach safety). [4]

So much for a theoretical examination of determining what functions of civil society belong to the purview of the State and of addressing how to pay for them. The key measure of success of such a governing framework—as in most things in life—is achieving it in reality.

Herein, then, lies the second quandary: How does the State finance its chosen programmes?

Given the nature of the deficits and debts in most Western countries, and the growing burdens placed upon them by their largely unfunded, ever expanding, entitlement programmes—particularly healthcare and social security requirements—the prospects appear grim.

Britain has taken the leading role (at least cosmetically) in prescribing austerity measures and implementing a series of retrenchments that will doubtless be studied by similarly indebted countries. Yet far from being sanguine of long-term results, the record of effectively curbing the appetite of the welfare State isn’t encouraging. Eamonn Butler, Director of ASI, was disappointed that the recent UK Budget ‘looked like salami-slicing, but that is not a sustainable way to cut spending.’

Will the twenty-first century echo the seventeenth’s penchant for radically recasting the role of the State? With socio-political norms having coalesced in the mid-twentieth century, will looming economic catastrophe in the new millennium end politics as we’ve known it?

And what of the Liberal-Tory consensus? How will the organic values of One Nation Toryism withstand the financial pressures to further restrain the obligatory State—if a minimum level of basic entitlements cannot be sustained? For however much the organic Tory stares at his own blank sheet of paper, he cannot change the laws of economics. Ultimately, they will shape the contours of the obligatory State. But he can act now to safeguard more of its contribution to the Common Good rather than less, and ensure better odds for One Nation Tory values to flourish again in the future.


ENDNOTES

1. See, for instance, Murray Rothbard’s ‘Society without a State’, Hans-Hermann Hoppe’s ‘Reflections on the Origin and the Stability of the State’, and the short monograph by Robert Murphy, Chaos Theory. [back]

2. For more information on the Rahn Curve, see Daniel Mitchell’s Center for Freedom and Prosperity Foundation video, plus his chapter in A Beginner’s Guide to Liberty (ASI, 2009), ‘Taxation and government spending’. [back]

3. For more information on the Laffer Curve, see Daniel Mitchell’s CF & P Foundation videos I, II, and III, plus his aforementioned chapter in A Beginner’s Guide to Liberty. Also see Thomas Woods, Jr’s entry in American Conservatism: An Encyclopedia. [back]

4. In Man and the State, Jacques Maritain wrote that while at the beginning of the modern age many reformers envisioned various welfare measures for the Common Good—for instance universal education—these plans could not be put into practice until the market economy advanced to the point where a portion of its bounty could be channelled to these public endeavours. In the Franklin Effect scenario sketched above, it may be necessary to scale back public policy advances on the same principle—that current economic conditions can no longer justify their expenditure. [back]

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