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Monday, July 29, 2019

Libertarians Are The New Neocons


Can libertarianism still claim to be the ideology that leads us back to Constitutionalism, liberty and limited government? In this article I suggest that the movement with the strongest claim to that leadership, is actually losing its way. Worse: it is beginning to show character traits eerily reminiscent of neoconservatism. 

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For reasons that have long eluded me, American libertarians have become infatuated with Sweden. I don't know if it is the classic beauty of Swedish women (my wife rising above them all), the ABBA-style chewing-gum music or the quirky ruggedness of the good old Volvo 240.

Whatever it is, a lot of otherwise smart American libertarians have decided that Sweden is neither socialist nor a bad example for America. For sure, one reason for this is the relentless marketing of the Swedish welfare state by self-proclaimed libertarians in Sweden. They have had some success in twisting the minds of otherwise intelligent people.

On June 20, as reported by the Daily Signal, Senator Rand Paul hosted an event together with the Fund for American Studies that featured Johan Norberg, a pop-tart libertarian from Sweden with the analytical depth of a two-dimensional entity. Norberg's mission, to sell Sweden as a role model for American politicians to follow, is deceptively centered on the false premise that his - and my - native country is not socialist. Instead, somehow, it is supposed to be a successful mix of capitalism and distributive justice. 

Libertarian Rand Paul and equally libertarian Fund for American Studies are not the only ones who have been befuddled by Swedish sweet talk. Back in January, John Stossel wrote an extensive piece on Norberg's mythological Swedish fairy tale. With remarkable disdain for facts, Stossel conveniently relied on Norberg's flat-out lies about the Swedish economy and its welfare state.

As a seemingly mundane example, let us listen to what Stossel/Norberg say about government reform in Sweden. Those reforms, which took place 25-30 years ago,
cut public spending, privatized the national rail network, abolished certain government monopolies, eliminated inheritance taxes, and sold state-owned businesses like the maker of Absolut vodka, They also reduced pension promises “so that it wasn’t as unsustainable” adds Norberg.
This quote is a big pile of lies and nonsense. To begin with, the reforms were not at all aimed at reducing the size of government. They were driven exclusively by austerity, aimed at protecting large government against the destructive macroeconomic consequences of its own foray into the private sector. I covered this in great detail in my book Industrial Poverty

Furthermore, there have been no privatizations of the kind Stossel/Norberg suggest. Case in point: the Swedish government never privatized its railroad network. It outsourced operations and maintenance. It wasn’t a libertarian reform. A libertarian reform would have – yes – privatized it. 

What the Swedish government did was to take a page out of a completely different playbook:

Neoconservatism

First you build a big government, including a massive welfare state, then you outsource some operations to make it run more efficiently.

This is exactly what the Swedes did (again, see my book). The same neoconservative theme guided the so-called pension reform, on which Norberg pulls more wool over Stossel’s eyes. It was not reformed to become more efficient and more libertarian. Government kept taxing away to pay for people’s retirement – about twice as high taxes as we pay here in America pay for Social Security – but they changed the formula by which they calculated people’s retirement benefits. 

To disguise the cut in benefits they allowed people to invest some of their money with a limited, government-approved set of options.

Government maintained its monopoly, but tried to run it a bit more efficiently. The consequence? Rapidly rising poverty and homelessness among Sweden's retired population. Widespread starvation problems in elderly care facilities. Denials of health care to patients over 75 - sometimes above 65 - for cost-cutting reasons, and no ability for the retirees to buy private health care.

Even if there were a market, their pensions simply would not allow it.

What we are witnessing in Sweden is a transformation of a socialist welfare state into a neoconservative one. This is held up as a shining example of success by American libertarians. 

Irving Kristol would be proud.

Norberg's statement about the abolition of “certain government monopolies” is also nonsense. The only examples of privatization worth mentioning in the past 100 years are the Vodka producer and the state church. Everything else that is touted as “privatization” is really just a case of outsourcing.

Again: what neither Norberg nor Stossel will admit, and Rand Paul and the Fund for American Studies appear to be completely ignorant of, is that the Swedish version of outsourcing is all about cost cutting. It is all about maintaining government monopolies and control, with some adjustments to a stagnant or shrinking tax base. 

As an example of this, public-sector procurement rules mandate that government contracts be awarded to the cheapest bidder. Quality doesn’t matter, productivity doesn’t matter, past performance of the contractor doesn’t matter. All that matters is that the contracted cost to government is lower than competing bids.

This has, of course, led to widespread deterioration of quality in government services, from maintenance of railroads and highway construction to health care. You get even less for your tax money than when government was providing the services itself. It has also opened up the Swedish public sector to corruption and waste at levels that would raise big eyebrows here in America.

If, that is, libertarians like John Stossel would take a closer look. 

Anyway. Back to Stossel’s Reason article, where he pumps out more nonsense about Sweden:
[Norberg] acknowledges that Sweden, in some areas, has a big government: "We do have a bigger welfare state than the U.S., higher taxes than the U.S., but in other areas, when it comes to free markets, when it comes to competition, when it comes to free trade, Sweden is actually more free market." Sweden's free market is not burdened by the U.S.'s excessive regulations, special-interest subsidies, and crony bailouts.
God almighty. No crony bailouts??? SAAB, Volvo, Ericsson, the textile industry, the shipyards... the entire banking system.

Should I go on? Sweden has been home to some of the most outrageous bailout programs known to man. Let me offer just one example: when the Kockums shipyard in Malmö closed some 30 years ago, government gave SAAB a new auto plant on the property. The contribution from taxpayers was enough to pay for the full production cost for every car that rolled out of that factory for two years. 

Here's the $64,000 question: how long did the factory stay open?

No excessive regulations??? Perhaps Norberg should study his country's labor laws which give unions the power to literally shut down any business that does not comply and sign union contracts. Maybe he should take a look at Swedish hire-and-fire laws, zoning laws, environmental regulations...

I refuse to believe that even a pop tart like Johan Norberg can be this blatantly ignorant. For sure, he is a historian, with no formal or acquired skills in economic analysis, but he appears to be in the possession of reasonable reading skills in his (and my) native language.

Then Stossel/Norberg return to their neoconservative theme, with Norberg praising the Swedish paid-leave and universal child-care programs:
"Today our taxes pay for pensions—you (in the U.S.) call it Social Security—for 18-month paid parental leave, government-paid childcare for working families," says Norberg.
It is not just punditry to suggest that this is neoconservatism at work. The works of neoconservatives like Irving Kristol, Daniel Bell and Norm Podhoretz sound almost like an itemized script for the modern Swedish welfare state.

Let us start with Kristol. Once the villain of libertarians, Kristol has now become the intellectual herald of American libertarianism. His path to leadership took a detour through Sweden and Johan Norberg's mouth, but he got there. Just like Kristol, Bell and Podhoretz, Norberg wants a big welfare state with an appendix of "capitalism" as a tax base, and some outsourcing within the welfare state to make it run efficiently.

No other neoconservative (until Norberg, that is) has made a more passionate case for the welfare state than Irving Kristol. In his essay Capitalism, Socialism and Nihilism, Kristol starts out by stripping free-market capitalism of any moral content. Libertarian theory says the exact opposite, namely that the free market is an institutionalized form of individual freedom. Since individual freedom has inherent moral value, the free market is inherently moral.

Kristol, again, sees it differently. Whatever distribution of economic resources that comes out of the free market is morally just, therefore, he says, the market is nihilistic. This is a problem inherent to the classical liberal society that formed modern capitalism. It lacks what Kristol refers to as a moral preference for “distributive justice”. 

We can save the value-theory discussion for a later date; the point that Kristol makes is what matters. In his view, when capitalism leaves economic distribution to the organic process of the free market, society becomes "purely positive and secular rather than philosophical and religious"; inequalities "must be necessary, or else the free market would not have created them, and therefore they must be justified."

The welfare state was created to reconfigure the economy according to a specific moral preference for economic distribution. The Swedish welfare state is a good example of this. Therefore, when Johan Norberg and his American followers accept the Swedish welfare state, they bow their heads to Kristol's value statement regarding capitalism and economic distribution.

Kristol takes his welfare-state argument a step further. Capitalist societies function well, he says, because people think it is “reasonable and ‘fair’ that income should, on the whole, be distributed according to one’s productive input … measured by the marketplace”. In other words, on the one hand it is nihilistic by decrying any objective value-theory approach to the role of government in our economy; on the other hand he is firm in his support of distributive justice – a herald of socialism.

When American libertarians show such keen interest in Sweden, they do so because they want to find out if it is possible to run the welfare state more efficiently than is currently the case in America. In doing so, they accept the Swedish welfare state both as a matter of fact and, as Kristol notes, as a moral manifestation of distributive justice. 

The de facto acceptance of distributive justice necessarily includes the acceptance of a role for government that, again, follows Kristol beyond what moderate Republicans have often talked about. In his essay Social Reform: Gains and Losses Kristol declares that reforms aimed at only helping the poor, or those otherwise classified as selectively eligible, are undesirable. Instead, he wants programs with universal entitlements - just like in Sweden:
One wonders what would happen if all the money spent on Great Society programs had been used to institute, in however modest a way, just two universal reforms: (1) children’s allowance … and (2) some form of national health insurance? My own surmise is that the country would be in much better shape today. We would all – including the poor among us – feel that we were making progress, and making progress together, rather than at the expense of one another.
He then provides a declaration of ideological intent:
Social reform is an inherently political activity, and is to be judged by political, not economic or sociological, criteria. When I say social reform is “political”, I mean that its purpose is to sustain the polity, to encourage a sense of political community, even of fraternity. Toi the degree that it succeeds in achieving these ends, a successful social reform – however liberal or radical its original impulse – is conservative in its ultimate effects. Indeed, to take the liberal or radical impulse, which is always with us, and slowly to translate that impulse into enduring institutions which engender larger loyalties is precisely what the art of government, properly understood, is all about.
This is nothing short of a battle cry for the creation of a welfare state of Scandinavian proportions. Kristol believes that it is government’s role to gradually create “enduring institutions” where all citizens, on equal footing, are beneficiaries. He also believes that this can be done in some sort of conservative fashion, evidently by channeling – or, more accurately, moderating – more radical ambitions for the welfare state. Furthermore, when stating that the goal with these reforms is to “encourage a sense of political community, even fraternity” he harks back to his analysis of the free-market capitalist society as being void of a spiritual, common cause.

Sweden, as described above by Johan Norberg, is indeed the hybrid between capitalism and the welfare state that Kristol sought after. Or, rather, the other way around: In Sweden, Irving Kristol's ideal came to fruition. The same point was expressed by C Bradley Thompson in The Rise and Fall of Neoconservatism, a 2011 essay series for the Cato Institute. Thompson explained that neoconservatism, by the words of its proponents, is a “syncretic intellectual movement influenced by thinkers as diverse as Plato, Trotsky, and Hayek.” 

The Economist once noted that leading neoconservative Daniel Bell, the “sociologist of capitalism”, characterized his own views as spanning most of the political spectrum: he was “a socialist in economics, a liberal in politics, and a conservative in culture”. This is a fair characterization of neoconservatism in general; if we delete the last point we also have a good definition of the modern-day American libertarian movement.

Kristol himself emphasized the "socialist in economics" part by citing Franklin Delano Roosevelt as a 20th century neoconservative hero. His espousing large, redistributive government goes farther than that. Neocons, he explains, “do not feel that kind of alarm or anxiety about the growth of the state” that conservatives do, who follow in the intellectual tradition of Calvin Coolidge, Barry Goldwater of F.A. Hayek. On the contrary, Kristol suggests, neocons see the growth of the state “as natural, indeed inevitable”.

This very premise is built into the modern welfare state, especially in Sweden. Today, there is not a single politician or pundit in Sweden (Johan Norberg included) who believes that there is anything inherently wrong with the welfare state. Just like Kristol, they all think it just needs some tweaks and twists to function more efficiently.

Rather than wholesale buying this notion of distributive justice, American libertarians should realize that they cannot have it both ways. To accept the neoconservative vision of a welfare state is also to distance oneself from, as Thompson put it,
individual rights, limited government, and laissez-faire capitalism, and its rejection of the modern welfare-regulatory state
Precisely. The Swedish model forces you to choose between these values and the distributive justice of the welfare state. Neoconservatives had no problem doing so, Thompson notes, believing as they did that they could master the welfare state:
The neocons … believe it to be both necessary and possible for wise statesmen to find the golden mean between altruism and self-interest, duties and rights, regulation and competition, religion and science, socialism and capitalism. Norman Podhoretz, for instance, has argued that neoconservative statesmen should be able to figure out the “precise point at which the incentive to work” would be “undermined by the availability of welfare benefits, or the point at which the redistribution of income” would begin “to erode economic growth, or the point at which egalitarianism” would come “into serious conflict with liberty.”
This is what the Swedish model is all about. Contrary to what Kristol expressed in the Weekly Standard in August 2003,
There is nothing like neoconservatism in Europe, and most European conservatives are highly skeptical of its legitimacy.
there is indeed a vibrant neoconservative experiment in Sweden. It has failed abysmally, both socially and from a macroeconomic viewpoint. If nothing else can convince American libertarians to stop mouth-piecing blindfolded opinions by some pop-tart libertarian back in Stockholm, then hopefully an account of Sweden's deplorable economic track record can do the job.

Libertarian infatuation with the Swedish welfare state inevitably raises the seminal question: When is government big enough? C Bradley Thompson touches upon this question by pointing to Irving Kristol's principle of governance as one of political method, not ideological vision. Once the welfare state is viewed as inevitable, one also accepts that welfare state's inherent tendency to grow and provide more entitlements to more people. Distributive justice, namely, is a blank check on the growth of government. 

As a de facto answer to the "big enough" question, neocons tried to strike a "golden mean": as expressed by Podhoretz, that rule limits government growth to where one more step of expansion would infringe on economic growth.

Welfare state theoreticians like Gunnar Myrdal and John Kenneth Galbraith have devised macroeconomic strategies for pushing this point almost into the horizon. Their central-planning theories for economic policy have - again in theory - removed the cap on government expansion. But American neocons are not far behind: tax cuts under Reagan, Bush and Trump have all given the U.S. economy an infusion of growth to keep it strong enough for the ever growing welfare state.

This is Norberg's point, conveyed by Stossel, appreciated by Rand Paul and infatuated by the Fund for American Studies. It is a point about how the Swedish government permits a just-large-enough sector of "capitalism" to maintain a big tax base for the welfare state.

Is this really the future that America's libertarians envision?

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