Ideas on Liberty

BY JOHN CHAMBERLAIN

IN THE late Forties and early Fifties a lot of things happened to challenge the dominant belief in collectivism. Leonard Read, coming East from California, started The Foundation for Economic Education, familiarly known as FEE. Friedrich Hayek, the Austrian economist, and a chosen group of old-fashioned classical liberals met on a mountain top in Switzerland to found the Mont Pelerin Society. The Freeman magazine, reviving a name that recalled the libertarianism of Albert Jay Nock in the Twenties, began publication, helped by Alfred Kohlberg’s willing switch of money he had been giving to sustain Don Levine’s Plain Talk, an excellent magazine that had made common cause with socialists in opposing the Stalinism of the times.

It was with some difficulty that Henry Hazlitt, Suzanne LaFollette and I, as the first Freeman editors, assembled eight pertinent articles for a first issue. The aim was to support the true liberal position as well as to fight what was happening in Russia. Once our flag was unfurled, with the faith of The Freeman succinctly stated by Henry Hazlitt, the articles began to flow. Robert Morris, minority counselor of the Tydings Subcommittee in Washington, reported on the testimony of various individuals who had had a hand in shaping our disastrous China policy. Ludwig von Mises contributed an illuminating essay on Lord Keynes and Say’s Law. And Frank Chodorov, in a sardonic defense of the bookmaker’s function in the gambling world, observed for us that human nature simply refused to be collectivized.

Chodorov, who delivered his articles and reviews in person, was both amused by and tolerant of our gung-ho expectations. He told us we were going to win, but it would take more than twenty years to do it. He reminded us of the history of the Fabian Society in England. What we must do, he said, was to invoke a Fabianism-in-reverse. The “inevitability of gradualism” that had led to British socialism must be turned in an opposite direction. And so it was. But it took time and persistence even to build to the exciting Goldwater year of 1964, which made the later triumph of Ronald Reagan possible.

Frank Chodorov was himself the editor of The Freeman for a brief period before it was turned into a monthly purveyor of “ideas on liberty” for FEE. He gave way to failing health, but not without getting in some trenchant last licks before handing over the editorial pencil to Paul Poirot. Meanwhile Willi Schlamm, who had been Henry Luce’s war-time adviser on European affairs, had persuaded Bill Buckley to start National Review. Bill had just written his God and Man at Yale.

It was Fabianism-in-reverse for Bill Buckley to mount the first attack on an entrenched Keynesian economics faculty at an Ivy League University. He couldn’t hope to win all at once by commanding history to stop. Paul Samuelson, perhaps the leading American economist of the time, was already riding high when Frank Chodorov was warning us to get ready for a twenty-year battle. Samuelson’s textbook advocating Keynesian fine-tuning to keep the economy on an even keel was being adopted in elementary economics courses everywhere. John Kenneth Galbraith predicted that a whole generation would get their economics from Samuelson. It was a good prediction but, ironically, it was Samuelson’s own vulnerability to events that was to undermine the bright Keynesian confidence of the early editions of his text.

Year by year Samuelson was to lower the limits of a permissive rate of inflation. The changes in twelve successive editions of Samuelson have been ably charted by Burton Yale Pines in his Back to Basics and by Professor Thomas J. DiLorenzo in a notable article in the Heritage Foundation’s Policy Review. Little by little, as the reverse Fabians have had at him, Samuelson has surrendered his certainties. The culminating irony, as DiLorenzo has noted, is the endorsement by Samuelson (and his Yale collaborator William D. Nordhaus) of the theory of public choice. This theory insists that political supporters of “planning,” or of monetary and fiscal intervention, have their own career decisions to consider. They are by no means disinterested guardians of the general welfare. Because of this, as Samuelson now says, “we must be alert to government failure—situations in which governments cause diseases or make them worse.” (The telltale italics are Samuelson’s own.)

Samuelson now asserts that “politics, like the market, has its framework and its players.” Who are the players? They include consumers who have the vote. But the “other major players examined in public choice theory are the elected representatives, or politicians. This group performs a function much like that of firms in a market economy—they match up tastes and technology. They interpret the public’s demand for collective goods and find ways of supplying these goods.”

The Entitlement Game

Samuelson now asks what drives politicians? A few will risk defeat on issues that they care about deeply. A few would rather be right than be president. But it is a reasonable assumption that most of them “behave so as to maximize their chances of reelection . . . they are assumed to be vote maximizers—just as firms are taken to be profit maximizers.”

Vote maximizing leads to logrolling, horsetrading and all the manifestations of political “pork.” The game of entitlements is played without any regard for the overall budget. In default of a gold standard to impose limitations on the money issue to pay for entitlements, inflation is the end result. It can come, as Howard Ruff has indicated, in malarial spurts.

Samuelson recognizes all of this now. The ironic thing is that his opinions are a distinct echo of what Nobel Prize winner James M. Buchanan, the foremost partisan of the public choice theory, has been telling his non-Keynesian colleagues. Buchanan has just completed a term as President of the Mont Pelerin Society. The Buchanan echo mingles with that of Milton Friedman, another Mont Pelerin president and Nobel Prize winner in economics.

To be sure, Samuelson might say that his lucid paraphrasing of public choice doctrine does not wholly commit himself or his collaborator, Nordhaus, to it. But his admission that Keynesian fine-tuning can result in government failure is what is new under the Samuelson sun.

It is also new to witness Samuelson’s concern for the Federal deficit, which according to the latest Consumers’ Alert figures, stands at $221 billion. “We need to stop the bleeding,” says Buchanan, “stop eating up what belongs to future generations. We’re literally eating up goods and services through our public sector that taxpayers in future periods are going to have to pay for.”

Samuelson now talks about government programs that, once begun, “take on a charmed existence . . . governments often behave like the little boy who said, ‘I know how to spell bananas, but I don’t know when to stop.’”

With the colleges turning to free market texts (an Alchian-Allen text is having a good run), and with Samuelson himself now criticizing those who are “nonchalant about inflation,” Frank Chodorov’s predictions are certainly being borne out. Twenty and more years of Fabianism-in-reverse have significantly altered the political and economic climate.

Alas, our logrolling lobbies haven’t yet caught the pitch. They are still attempting to function as they have always functioned. Witness the drive for protectionism. But they are now getting something of a comeuppance. Almost every week in Washington brings news of the doings of what might be called the “anti-lobby lobby.” We have the new conservative think tanks such as Ed Feulner’s Heritage Foundation and the American Enterprise Institute. We have the Citizens for a Sound Economy and the Cato Institute. We have the Washington offshoot of the London Adam Smith Institute.

With good watchdogs on Capitol Hill the anti-lobby lobbies are in a position to forestall the more egregious “vote maximizers.” Frank Chodorov would have been amused to observe that Paul Samuelson has done something to bring this about.

As a critic, a journalist, and an editor of such periodicals as Fortune, Harper’s, and National Review, John Chamberlain is regarded as one of America’s most distinguished men of letters.