Limited government: Globally rejected and creates its own worst enemy

In the US there has a been a powerful, and increasing, swell in the limited government movement since 2008. However, in 2015 there was a counter reaction from the left: the rise of Bernie Sanders. Social media is buzzing about him, his campaign has raised large amounts of money, coming largely from lots of small donations, [1][2] and has drawn unexpectedly large crowds at his speaking events. In fact, over  a 3 month period earlier in the year Sanders fundraising fell just short of Hillary’s (26 million vs 28 million) shocking in itself, and more so that he’s achieved this with few fundraisers. [3] In just 4 hours after the first Democratic debate Sanders received $1.3 million in donations [4] and two days later that number was $3.2 million [5]

Over the last 3 months of 2015 Sanders raised $33 million, again just short of Clinton, bringing his total for the year to $73 million.[6] Over the year Sanders’ polling numbers jumped from 3% to over 30% as of Jan 10 standing at a highest yet 34% He currently leads Clinton in New Hampshire, and isn’t terribly far behind in Iowa.[7] He’s achieved all this despite the fact Clinton is the established candidate, and one of the most popular, powerful names in the Democratic Party… all while refusing to use a Super PAC, instead relying solely on individual donations. More important than fundraising and polls though, Sanders has influenced the party. He’s forced Hillary to the left on many issues and in her rhetoric. The first Democratic debate seemed dominated by his campaign, and Clinton was even asked to prove she’s a progressive. This is a drastic change from just 10 years ago, (more on this later).

It seems Bernie is the real deal.

Sanders has run a progressive campaign, advocating high taxes on wealth, taxes on financial transactions, breaking up the “too big to fail” banks, higher wages, creating jobs in the US, and stronger government support for the middle class, poor, elderly, workers rights in general, free public college and has been a fierce critic of inequality, wealth concentration and what he’s called a “rigged economy”. He’s also been a fervent supporter of environmental policies.

It’s not just Sanders though, there has been buzz around fellow progressive Elizabeth Warren, and inequality has become a major issue, seen in the Occupy Movement, 2012 election and Thomas Piketty’s bestselling “Capital in the 21st Century”. There has been open discussion of an unfair economy, even class warfare, much to the disdain of the right. There is an irony here: I think the limited government movement itself has helped create this environment, the very sentiments they loathe have been fueled by their movement. To understand why, a quick history lesson.

In the 19th and early 20th century there was laissez-faire (limited government) capitalism, and socialism. These were your only two options. So to oppose laissez-faire meant you had to support socialism. Laissez-faire (also known as liberal capitalism) was the dominant system for a long time, especially here in the US, though socialism always lingered and fought. Even in the US socialism was a force in the early 1900s. They often worked through the labor movement, but also won mayorships, local elections and Eugene V Debs won 6% of the vote in the 1912 Presidential election, running as a Socialist.

However, by the 1930s laissez-faire was under heavy attack from both sides: not just socialism, but communism, as well as fascism. Even in the US people turned to the government in an unprecedented manner, establishing what I’ll call moderate capitalism. While diverse, all these ideas shared some common ground: A rejection against laissez-faire.

As Hayek noted in his famous “Road to Serfdom” fascism was an outgrowth of socialism, and it was opposed to laissez-faire as well as communism. Mussolini was originally a socialist. Fascism featured central planning and government jawboned cartels. The Nazi Party was originally founded, under a different name, by a locksmith Anton Drexler who called for “socialism for the middle class” the small business owner, and was opposed to both liberal capitalism and communism.

In fact part of the reason fascism became so popular was because it branded itself a “third way” between wild, inefficient liberal capitalism, and barbaric communism. It also sought to put an end to class warfare, albeit in a diff way than socialism…unions and corporations were forced together into cooperation under the government. Different social classes and interests were given their role to play in, and share of, society under state cooperation. Both socialism and fascism wanted to end the social strife created by liberal capitalism, the former chose abolishing capitalism while the latter chose to organize society vertically, all people and sectors working together as parts in the whole machine…like a business or the military.

After WWII most of the developed world embraced moderate capitalism. There were variations, but they all shared some common features: Institutions to buffer people from the markets (unemployment, disability, social security), welfare, restrictions on the free markets, government investment in the country and more equitable distribution of wealth. It was widely agreed capitalism was the way to go, but we needed to “trim the excess” it can create, and give everyone at least some share of the pie.

So, be it socialism, communism, fascism, or moderate capitalism…most of the world rejected limited government. I’d say the best possible of those alternatives prevailed after WWII, but as time has gone on the world, and especially US, has been slowly drifting from this back to laissez-faire, the system that most of the world rejected.

A decent number of libertarians seem to understand this. Some have discussed a political spectrum ranging from less government to more, stating that many ideologies left and right are actually on the same “side” and all opposed to limited government. They are correct in this observation, but then choose the system they acknowledge has been widely opposed. This is due to ideological beliefs, which may blind them from historical observation: limited government capitalism produces extreme inequality, and with it social strife as well as concentrated political power. All of which has been repeating in the US. The middle class has shrunk and become poorer, and many feel the economy no longer works for them. That opportunity is becoming lesser, hard work means less, that social mobility is disappearing…that the system is becoming rigid and the government serves only the higher rungs of society. This sounds shockingly like Old Europe and is the very thing America was opposed to.

In the US both parties are accomplices. While the Democrats are more supportive of moderate capitalism, starting in the 90s they largely abandoned this and embraced limited government, more on this in another post. 10 years ago the goals of liberal Democrats were shockingly mild in terms of economics: A return to Clinton era taxes for top earners, a 4.6% increase, middle class tax cuts (or at least maintaining reduced tax rates) and some discussion of re working trade agreements, (which never happened and President Obama has in fact expanded them). The boldest plan was universal healthcare, though this was only vaguely discussed and when it was, did so timidly. As Paul Krugman said in 2006 “Even liberal economists and scholars at progressive think tanks tend to shy away from proposing a straightforward system of national health insurance. Instead, they propose fairly complex compromise plans. Typically, such plans try to achieve universal coverage by requiring everyone to buy health insurance, the way everyone is forced to buy car insurance, and deal with those who can’t afford to purchase insurance through a system of subsidies.”[8] This is exactly what we ended up getting with ACA (“Obamacare”).

This platform of mildly higher taxes on top, vague middle class benefit, discussion of jobs and universal healthcare is what more liberal candidates such as Howard Dean and Barack Obama ran on. What many on the right didn’t realize is how mild these demands were. It was unthinkable even in 2008 to suggest any higher taxes than Clinton era, job programs, significantly higher min wages, middle class wages, increasing social security and direct universal healthcare. To do so got you looked at like an insane person, and such things were advocated by the small, fringe group of progressive Democrats. Fast forward to 2016: The 3 Democratic candidates are vying to show who’s the most dedicated/successful progressive. There’s talk of a $15 minimum wage, boosting middle class wages, job programs, (Bernie is the most detailed calling for 13 million jobs to be created rebuilding the US infrastructure) and Sanders has called for greatly higher taxes on the wealthy. This all has shocked the right, but it didn’t just pop out of nowhere for no reason. It has been a response to both long and short run movements in the  right.

We have all forgotten that when no moderate alternative is present, people must turn to more radical options. This is what smart leaders like FDR and Otto von Bismarck understood, and that to keep socialism at bay you need to give up some to the masses. It was Bismarck, an aristocratic conservative who hated socialism, who implemented the first modern welfare state. The US pioneered moderate capitalism, which killed socialism as a legitimate idea here, because it worked. Socialism was unnecessary, we created a capitalist system that was able to boost the working class, provide opportunity and protection for the masses, ensured some amount of wealth turned over, and kept many people connected to the political process. The abandonment of this since the 80s, hastened since 2008, caused the economic and political conditions that fueled the left’s continual drift. It’s the result of economic stagnation for many, and lack of/frustration with current liberal options.

Its not a US thing either. The UK Labour Party has recently elected Jeremy Corbyn as their new leader in a massive victory, despite the fact he was considered a fringe candidate and that he would doom the party. Corbyn has advocated positions such as reversing austerity policies, re-nationalizing railroads and public utilities, and a “People’s Quantitative Easing” saying the Bank of England should print money to fund government projects. In Spain there has been the meteoric rise of Podemos, a populist left wing party. It was when researching Podemos for this blog post I found the first person to make the same observations I have. A Chantal Mouffe said “There is too much consensus and not enough dissent [in leftwing politics],” and that “To her, the rise of rightwing populists such as Marine Le Pen’s Front National in France or Nigel Farage’s Ukip in the UK is proof that the post-Thatcherite consensus – cemented by “third way” social democrats such as Tony Blair – has left a dangerous vacuum.”[9]

So the limited government movement, in trying to slowly dismantle government by calling everything socialism, is actually creating an environment more conductive to real socialism. It has helped fuel the ideas it wants to destroy. To those who want to take the US back to the laissez-faire days, I say prepare then to battle the same battles of the old days.














3 thoughts on “Limited government: Globally rejected and creates its own worst enemy”

  1. Great post. A welfare state remains non negotiable. I dare say it will become even more relevant when the full effects of automation-led jobless growth are unleashed in the future; even more people will turn to government for help then. Meantime, what the capitalists don’t seem to realise is the extreme inequalities created by a laissez faire system will only be the death of capitalism in the sense of free market competition in the long run. Why? Because it’s killing demand and degrading labour. As labour and demand become irrelevant, old wealth will become even more powerful and they will be better able to hold on to their fiefdoms. What will new businesses sell if there’s nobody to sell to? As you said, the situation will mirror old Europe and we will go back to the mercantile age rather than the industrial age where competition spurred innovation that reaped benefits for society at large. In a way, this is logical as we are long past the industrial days now.


    1. Thanks for the comment!

      Great point. I fear the answer to “Who will they sell to?” may be growing markets abroad. Perhaps that is the future. Jobs and investment not only moving overseas to sell products to us, but eventually to sell products overseas.

      We would of course have an economy, but one that would need to be quite altered, otherwise I do see the end result as aristocracy and neo feudalism. I’m glad you don’t see this as hyperbole! It seems very real.


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