Breaking Down Conservative Fundamentalism–On Economics

I have often discussed the problems faced by the Republican Party due to their social conservative beliefs, their hostility towards  science and reason,  their poor record on civil liberties, and their national security policies which place the country at greater danger. They are also  increasingly losing support due to their economic views.

Their are two different problems which the Republicans face because of their economic views–the discrepancy between their theories and their policies and the problems with their actual economic theories. The discrepancy between their rhetoric and their policies has been losing them support for years. For example former Republican strategist Kevin Phillips, author of The Emerging Republican Majority, has gone on to write several books showing how Republican economic policies have turned into schemes to use government to transfer greater wealth to the ultra-wealthy. I’ve frequently quoted libertarian Will Wilkinson as saying that “the great success of the GOP over the last eight years has been to destroy the reputation of free markets and limited government by deploying its rhetoric and then doing the opposite.”

A more serious problem is that a growing number of economic conservatives have followed the route I have in questioning the validity of many conservative economic views when testing them against the real world. I’ve recently noted that Richard Posner of  has been criticizing the Republicans for essentially the same reasons I noted at the start of this post as well as questioning some aspects of his former economic beliefs in his recent book Capitalism in Crisis.

Bruce Bartlett in the past has criticized the Bush administration in Impostor: How George W. Bush Bankrupted America and Betrayed the American Legacy. His criticism was based upon failing to follow conservative economic policies. In his latest book he is now questioning these views:

As a domestic policy advisor to Ronald Reagan, Bruce Bartlett was one of the originators of Reaganomics, the supply-side economic theory that conservatives have clung to for decades. In The Next Economics, Bartlett goes back to the economic roots that made Impostor a bestseller and abandons the conservative dogma in favor of a policy strongly based on what’s worked in the past. Marshalling compelling history and economics, he explains how economic theories that may be perfectly valid at one moment in time under one set of circumstances tend to lose validity over time because they are misapplied under different circumstances. Bartlett makes a compelling, historically-based case for large tax increases, once anathema to him and his economic allies. In The Next Economics, Bartlett seeks to clarify a compelling and way forward for the American economy.

One problem is separating what we want from reality. Many of us who lean libertarian find the concept that everything would be better if the government also stayed out of the economy to be intellectually appealing. To adapt a saying from Special Agent Fox Mulder, “I want to believe.” Unfortunately reality doesn’t give a damn about what any of us want to believe.

This brief summary of Bartlett’s book also suggests another problem. Economic theories might be more valid at one time or under one set of circumstances, but those who religiously follow the views of economists of the past do not have the benefit of seeing how their gurus would respond to the problems of today. The pro-capitalism classical economics were very bright people and had many important things to say about the free market. If they had the benefit of seeing the modern world and could interpret the data which became available long after they died it is likely many would adjust their theories based upon this information. In contrast, many conservatives treat economic works of the past as other conservatives treat the Bible, feeling that their views must be taken literally without taking into account any additional information.

Ludwig von Mises has some important lessons about the failings of Bureaucracy which liberals as well as conservatives should consider. Conservatives use his views to argue that the free market is always superior to government. If he were alive to rewrite this 1944  classic he might see how giant corporations can develop the same bureaucratic problems as big government, and that business does not always use the signals from the market to make rational decisions. Friedrich von Hayek, whose work is often cited by conservatives, also wrote Why I Am Not a Conservative which criticized conservatives for failing to adapt their views to changing times.

Liberals sometimes question why the American right has been characterized by a union of two seemingly different viewpoints–religious conservatives and free market conservatives. Perhaps this is because at heart both are fundamentalists. Many economic conservatives have turned their views into a fundamentalist religion which ignores economic facts  just as religious conservatives ignore evolution and other aspects of science which contradict their fundamentalist views.

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8 Comments

  1. 1
    b-psycho says:

    Re: corporate bureaucracy: Kevin Carson actually released a book along those lines in December.

  2. 2
    Christoher Skyi says:

    “In The Next Economics, Bartlett goes back to the economic roots that made Impostor a bestseller and abandons the conservative dogma in favor of a policy strongly based on what’s worked in the past. Marshalling compelling history and economics, he explains how economic theories that may be perfectly valid at one moment in time under one set of circumstances tend to lose validity over time because they are misapplied under different circumstances. Bartlett makes a compelling, historically-based case for large tax increases”

    Ah, where was Mr. Bartlett back in, oh, 2005, or — let’s give him a break, and ask where was all this wisdom in 2007?

    While not addressing taxes, Alex Tabarrok of the Marginal Revolution blog takes on that other scapegoat, deregulation, and is less than impressed with this type of 20/20 hindsight, esp. when the wise man is about as blind looking back as he was looking forward:

    “Human beings are as good at devising ex post facto explanations for big disasters as they are bad at anticipating those disasters. It is indeed impressive how rapidly the economists who failed to predict this crisis — or predicted the wrong crisis (a dollar crash) — have been able to produce such a satisfying story about its origins. Yes, it was all the fault of deregulation.

    There are just three problems with this story. First, deregulation began quite a while ago (the Depository Institutions Deregulation and Monetary Control Act was passed in 1980). If deregulation is to blame for the recession that began in December 2007, presumably it should also get some of the credit for the intervening growth. Second, the much greater financial regulation of the 1970s failed to prevent the United States from suffering not only double-digit inflation in that decade but also a recession (between 1973 and 1975) every bit as severe and protracted as the one we’re in now. Third, the continental Europeans — who supposedly have much better-regulated financial sectors than the United States — have even worse problems in their banking sector than we do. The German government likes to wag its finger disapprovingly at the “Anglo Saxon” financial model, but last year average bank leverage was four times higher in Germany than in the United States. Schadenfreude will be in order when the German banking crisis strikes.”

    “Bartlett makes a compelling, historically-based case for large tax increases”

    I’d like to know more details about this, specifically about how this did not happened during periods of massive tax increases:

    Soak the Rich, Lose the Rich
    Americans know how to use the moving van to escape high taxes.

    Massive tax increases “worked” historically, I’m guessing, because there was no place to run. Today, tax havens are playing a crucial role in wealth preservation, e.g.,

    10 great tax havens for retirees and
    Why We Need Healthy Overseas Tax Havens

    Today, there’s plenty of places to run, thank goodness.

    But that aside, Alex Tabarrok of the Marginal Revolution blog speak for me on the one condition for rasing taxes: “I today would take a deal combining tax increases with serious cuts in entitlement spending.”

    but “cuts in entitlement spending . . . ?”  That’ll be the day. Until then viva la tax havens!

    See: Libertarians for tax increases?

  3. 3
    Ron Chusid says:

    To quote from the last link: “I today would take a deal combining tax increases with serious cuts in entitlement spending.”

    On the one hand that gives the impression of supporting true fiscal conservatism. On the other hand it is an easy deal to offer as we certainly are not going to see it happen.

  4. 4
    Christoher Skyi says:

    Well, the deficit will drive the issue. Taxes will go up, for all of us to a lesser or greater extent (see http://www.youtube.com/watch?v=yREOUxo6Qdc to understand why):

    Responding to a question from Sen. Jack Reed, (D., R.I.), Mr. Greenspan said he preferred offsetting the tax cuts with spending cuts, but said the focus should be on addressing the deficit “rather than how it is done.”

    This is the only reason people will put up with big tax increases However, w/out serious cuts in entitlement spending, well, prepare for massive tax evasion, out of anger, and out of brute material necessity.

  5. 5
    Christoher Skyi says:

    Here’s yet another reason why I don’t believe that people will — nor should they — take the coming massive tax increases lying down.

    Watch again Stop Spending Our Future – The Crisis

    There’s no economic growth with rising tax revenue coming that will support this level of spending, so they have to either borrow the money (which is what they’re doing now), printing money (that too), and eventually raising taxes. 

    And where is a lot of that money going to?  The radical left cheers the idea of America becoming a European style country where the government sector dominates instead of the private sector, and their hopes and dreams seem to be coming true.

    Now watch:

    Chris Edwards on pay gap between federal and private workers on CNN

  6. 6
    Christoher Skyi says:

    “Ludwig von Mises has some important lessons about the failings of Bureaucracy which liberals as well as conservatives should consider. Conservatives use his views to argue that the free market is always superior to government. If he were alive to rewrite this 1944  classic he might see how giant corporations can develop the same bureaucratic problems as big government, and that business does not always use the signals from the market to make rational decisions.”

    Ludwig von Mises stood in stark contrast to the Keynesian theory. Keynes promoted a mixed economy or a mixture of capitalism and socialism. It seemed new and interesting. It gained popularity, yet Mises believed that government interference would always eventually lead to full blown socialism, a model that had never been workable before.

    von Mises would pin the blame on  giant corporations  developing the same bureaucratic problems as big government and  not always using the signals from the market to make rational decisions as symptom of the  highly regulated mixed economy.

    Corporations cannot serve two masters, i.e., the customer via capitalism or big government.  He would say trying to do both leads to market distortion and unnecessary complexity.  Eventually, big government would win leading us further down the path of socialism — not because anyone “choose it,” that’s just what would have to happen. 

  7. 7
    Mike says:

    I’d like to take the line you said: “….giant corporations can develop the same bureaucratic problems as big government,” I would say that isn’t such a bad thing in the free market.  It is that very weakness that allows other, small businesses to have a chance to compete and have an advantage against big companies unless the rule makers (government) step in and interfere with that process.  I know this is where Dr. Chusid would likely say that, that government interference to help protect the big companies against the little guy is what conservatism is all about. (Am I right Dr?)  Well, I’ll concede in practice, that is exactly what a lot of republicans (and democrats) did with the Tarp bill.  I’m not sure of other examples but I’m sure there are endless examples.  Tarp was way over the top in my opinion.  I mean I’m almost resigned to the fact that choosing between the two main political parties are choosing between the Mafia and Yakuza.   The Tarp bill is really what activated me beyond just voting.  Now the new administration has passed even bigger spending than the Tarp. Bush pushed this country into taking on debt at warp speed and Obama changes it to debt at the speed of light.  If I could have but one wish magically granted it would be TERM LIMITS on all of congress.

  8. 8
    Ron Chusid says:

    When you are saying the same bureaucratic problems in giant corporations is a good thing you are essentially agreeing with me with regards to my fundamental point in agreeing that this does happen in giant corporations. Some Austrian and other free market fundamentalists would argue that businesses are always going to be more efficient than government due to responding to market forces and due to the inherent problems with bureaucracy.

    In general I tend to agree with the idea that it is beneficial for small companies to have a competitive advantage. I think the tech world would be quite different if everything came from Microsoft as opposed to having further innovation and greater variety from small companies. I’m essentially in the position of a small business competing with a bureaucratic big business as the hospital owns a tremendous number of practices and in a way is my primary competitor. I almost wrote hospitals–when I first started practicing here there were three. Now we are down to one. I was far more involved in seeing how the hospital worked back when there were three and I had positions such as department chair. They had serious bureaucratic problems back them–which I’m sure is typical of most hospitals and many businesses of its size. I’ve shied away from getting involved in the hospital now that it has become an even huger organization so I can’t say as clearly first hand, but anyone really doubt that it isn’t an even bigger bureaucracy now? Fortunately there are many things which the hospital does which gives me a tremendous advantage as I often get patients because of the way the hospital-owned practices operate.

    The one counter example I can think of where in some ways I wish the big companies managed to survive is with the auto companies. Living in Michigan it certainly isn’t a good thing to see their problems. On the other hand, from a free market perspective I recognize there are good reasons why they deserved to fail.

    I actually did work for one of them during one summer vacation. While it is only one person’s experience and is from a long time ago, I wonder if such inefficiencies persist. I got a summer job in outside maintenance–which wasn’t a bad deal for a student during the summer (thanks to knowing an executive at the company who pulled some strings for me). Initially I was assigned to solo jobs. I found I could finish whatever I was assigned to do in well under half of the time I was given. I quickly figured out that neither my coworkers or the foreman wanted me to let anyone know.

    Later on four of us were assigned to a slightly bigger job to be done daily. Of the four of us, one of them actually left the plant after clocking in. A second hung around but zero work. It was down to two of us to do a four man job and it only took us a small part of the day. I never got so many novels read as when I worked at Ford.

    I see where you are coming from with regards to term limits but I fear it wouldn’t help. It takes someone years in Congress to even get a handle on dealing with the federal bureaucracy and understanding the problems, assuming they are going to do the right thing. I fear that with term limits members of Congress would be even more dependent upon their staffs and subject to the influence of lobbyists. I would like to see something done about the manner in which Congressional districts are played with in order to give many members of Congress a safe district. If they had more competitive elections this would act as a form of term limits for some without forcing everyone out.

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