Tag Archives: John Kenneth Galbraith

We’re Going To Tax Their Ass Off!

30 Aug

This past Sunday, I appeared on Up With Chris Hayes, where I spoke briefly about the rise of austerity politics in the Democratic Party (begin video at 2:13). My comments were sparked by Bruce Bartlett’s terrific piece “‘Starve the Beast’: Origins and Development of a Budgetary Metaphor” in the Summer 2007 issue of The Independent Review. Barlett is a longtime observer of the Republican Party, from without and within. He was a staffer for Ron Paul and Jack Kemp, as well as a policy adviser to Ronald Reagan and a Treasury official under George HW Bush.  Now he’s a critic of the GOP, writing sharp commentary at the New York Times and the Financial Times. He and I have argued about conservatism before. When it comes to fiscal policy, however, he’s one of the savviest analysts of the GOP out there. What follows is an extended summary/riff on Bartlett’s piece and what I said on Hayes’s show: to understand how austerity works in (and for) the Democratic Party, you have to understand how it once worked for the Republicans. Long story short: not so well.

• • • • •

Growing up in the 1970s, I had an almost primal association to the GOP as the party of the thrifty and the flinty. Republicans were the grownups at the table, forever cautioning the children against taking that extra piece of cake. Averse to spending money the country didn’t have, they were as leery of deficits as they were of rhetoric. Plainspoken, economizing men of austerity: that was the GOP.

There was some truth to this picture, extending back several decades. Herbert Hoover helped send the Republican Party into twenty years of exile via his ill-timed effort to balance the budget with a hefty tax increase in 1932. One of the first things Eisenhower did upon coming into office was to insist on balancing the budget. Thanks to the Korean War, tax rates were high, and many Republicans wanted Eisenhower to reduce them. He refused, saying “we cannot afford to reduce taxes, reduce income, until we have in sight a program of expenditures that shows that the factors of income and of outgo will be balanced. Now that is just to my mind sheer necessity.” Upon taking office, both Nixon and Ford pursued similar paths, and resisted similar tax-cutting calls from their party.

But by the time I was in middle school, that picture of the Republican Party had become a faded sepia print. During the 1970s, a new breed of conservative had emerged, calling into question the wisdom of balanced budgets. Men like Jude Wanniski, Milton Friedman, and Alan Greenspan took the lead in challenging the frugal dispensation on the right, claiming that Republicans had become what Newt Gingrich would later call “tax collectors for the welfare state.”

Interestingly, the most salient arguments of these new conservatives were less economic than political, focusing on the enabling dynamic of shitfaced Democrats being shepherded to safety by their designated drivers in the Republican Party, only to resume their drunken revels the following evening.

Here’s Friedman writing in Policy Review in 1978:

By concentrating on the wrong thing, the deficit, instead of the right thing, total government spending, fiscal conservatives have been the unwitting handmaidens of the big spenders. The typical historical process is that the spenders put through laws which increase government spending. A deficit emerges. The fiscal conservatives scratch their heads and say, “My God, that’s terrible; we have got to do something about that deficit.” So they cooperate with the big spenders in getting taxes imposed. As soon as the new taxes are imposed and passed, the big spenders are off again, and there is another burst in government spending and another deficit.

What was the takeaway for Friedman? In Newsweek, he wrote: “I have concluded that the only effective way to restrain government spending is by limiting government’s explicit tax revenue—just as a limited income is the only effective restraint on any individual’s or family’s spending.”

Greenspan made a similar claim before the Senate Finance Committee in 1978: “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending.”

But it was probably Wanniski, more than anyone, who best understood the political ramifications of a shift away from deficits and balanced budgets. With an almost Schmittian attention to what he called “the political tension in the marketplace of ideas,” Wanniski insisted that conservatives frame the Glaubenskrieg of the two parties as a struggle “between tax reduction and spending increases.” Without that stark choice, he wrote, the Republicans would forever play the part of the disappointed, disapproving, and ultimately powerless parent: “As long as Republicans have insisted upon balanced budgets, their influence as a party has shriveled, and budgets have been unbalanced.”

Bartlett shows how this argument—the so-called “starve the beast” theory—got support from a surprisingly diverse array of voices on the right: James Buchanan’s public choice theory, the Proposition 13 movement, and the Kemp-Roth tax proposals.

Politically, it came to a head under Ronald Reagan. Unlike his Republican predecessors, Reagan did not resist the calls for tax cuts first, balanced budgets later. Having internalized the new thinking of the 1970s, he declared in a February 1981 television address:

Over the past decades we’ve talked of curtailing government spending so that we can then lower the tax burden. Sometimes we’ve even taken a run at doing this. But there were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.

In his 1982 State of the Union Address, Reagan doubled down on that claim:

Higher taxes would not mean lower deficits….Raising taxes won’t balance the budget. It will encourage more Government spending and less private investment…So I will not ask you to try to balance the budget on the backs of the American taxpayers.

Defenders of the Reagan-the-pragmatist thesis (with its corollary complaint that post-Gipper, the GOP has become a nest of anti-tax ideologues, fanatics, and zealots) like to point out that despite his philosophical opposition to taxes, Reagan repeatedly raised taxes throughout his administration—11 times no less.

But what’s often forgotten in these laments is that Reagan came to regret his tax increases, declaring them a colossal mistake. After he left office, he wrote in the Wall Street Journal:

Despite the “assurances,” “promises,” “pledges” and “commitments” you are given, the spending cuts have a way of being forgotten or quietly lobbied out of future budgets. But the tax increases are as certain to come as, well, death and taxes.

In 1982, Congress wanted to raise taxes. It promised it would cut federal spending by $3 for every $1 in new taxes. Being a new kid in town, I agreed to this. Unfortunately, although the new taxes went into effect, Congress never cut spending by even a penny.

James Baker came to a similar conclusion as Reagan. And taking to the Senate floor in 1993, Republican Bob Packwood—another moderate GOP declinists like to hold up against the anti-tax fundamentalists of today—spoke out against Bill Clinton’s proposed tax hikes on the same grounds.

The history of the U.S. Government is that when we increased taxes, we spent them; we did not apply it to the deficit. It does not matter that the President has stated, “Let us have a deficit reduction trust fund.” We have never followed that; we instead spent it. I predict that if we raise these new taxes, we will spend them, also. We will not cut spending. We will spend it on new programs or expansion of existing programs.

Of course, Packwood was proven wrong. By the end of the Clinton presidency, there was a surplus, and Gore ran on a platform in 2000 of using that surplus to—among other things—help pay down the debt.

Despite the record of austerity the Democrats had accumulated during the 1990s, George W. Bush refused to hold onto the surplus. Having come to maturity—to the extent one can say Bush ever matured—in the party of Reagan, Friedman, and Wanniski, he thought it imperative that any money the government had be returned to the tax payers. Neither debt nor deficits mattered. Tussling with Alan Greenspan over whether the surplus should be saved or spent, Bush insisted that “Mr. Greenspan believes that money around Washington, D.C., will be spent on a single item—debt reduction. I think it will be spent on greater government. He has got greater faith in the appropriators than I do.”

So we got tax cuts. Big time. If Lyndon Johnson’s Great Society was an extension of the New Deal, George W. Bush’s tax cut was the fulfillment of Reaganism.

• • • • •

Almost all of the above—the quotations, chronology, and narrative—comes from Bartlett.  But here are my three takeaways.

First, as I already suggested, we need to rid ourselves of the notion that the anti-tax fundamentalists of today’s GOP are somehow new arrivals, alien imports from the land of Grover Norquist. The anti-tax position in the GOP has been gestating on the right for decades. Whatever temporary concessions Reagan might have made, the forward thrust of the party has been in the opposite direction for nearly a half-century. The assault on George HW Bush for renouncing his no tax pledge was not a dramatic turning point; it was the consummation of a tendency decades in the making.

Second, the “starve the beast” argument sits uneasily with the basic claim of supply-side economics: that tax reductions will spur growth and generate revenues, which will pay not only for the tax cuts but also for other expenditures, ultimately leading to a balanced budget. The two arguments don’t contradict each other—indeed, both are designed to lend support for tax cuts—but they press in different directions: towards a balanced budget in the case of supply side, toward shrinking government in the case of starve the beast. The Republicans, of course, haven’t been terribly good at the former, but they haven’t been terribly bad at the latter. Today, the ratio of public-sector employees to the overall population is the lowest it’s been since 1968. That, of course, isn’t the only measure of the size of government, but it’s a pretty damn good one.

Third, though Bartlett’s piece is about the GOP, it’s hard not to see how the Democrats have come to play the same role in the contemporary political order that Republicans once played under the New Deal.

Starting with Walter Mondale’s famous pledge in 1984 to raise taxes in order to bring down the deficit—one of Barlett’s footnotes reveals this delicious and disturbing anecdote: just after announcing his tax pledge at the DNC convention to wild applause, Mondale turned to Dan Rostenkowski and said, “Look at ‘em. We’re going to tax their ass off.”—Democrats have become the party of austerity. (Doug Henwood, Josh Freeman, and David Harvey have shown that that process actually began in 1975, during the New York City Fiscal Crisis, when Wall Street Democrats successfully pushed for drastic cuts in government spending. But it was the Mondale campaign that crystallized the shift at the national level.)

[Mondale's pledge is at 1:25, and check out a very youthful Rich Trumka at 1:38.]

Like Republicans of yore, the Democrats have repeatedly sought to reduce the debt and deficits, only to find themselves held hostage to the other side’s designs of depriving the welfare state of much needed cash.

Consider the two major presidential cycles of the last three decades: Reagan/Bush-Clinton and Bush-Obama.

During the 1980s, the Republicans cut taxes and ran up huge deficits. Then Bill Clinton came into office and announced his intention to reduce deficits. Anxious to appease Robert Rubin and the bond market, he abandoned whatever pretense of a progressive economic agenda he had set out during the campaign. He and the Democrats raised taxes and allowed government spending to decline dramatically as a percentage of GDP. By the end of his second term, Clinton had managed to generate a surplus—with the explicit purpose of not only reducing the debt but also shoring up Social Security—only to have the Bush White House squander that surplus through massive tax cuts and increased military spending.

When Barack Obama assumed office in 2008, he faced a similar conundrum as Clinton. The Bush Republicans had run up massive deficits and debt. Though the financial crisis (and his overwhelming victory) seemed to give Obama the warrant to spend—remember when we were all Keynesians again?—he was constrained by congressional Republicans and conservative elements in his own party, including the Wall Streeters who had been among his earliest supporters and happened to have a disproportionate influence in the White House. All of these forces seemed to worry more about the deficit than they did about the recession. The result, of course, was a much smaller stimulus package than many progressives had hoped for.

Then came the health care bill, which also has to be understood in the context of—indeed cannot be separated from—the politics of deficits and debt reduction. Throughout the health care negotiations, Obama took great pains to stress that his bill would not increase the deficit (CBO scores became as important to the national conversation as health care itself). Incredibly, this was an entirely Democratic, and self-imposed, constraint, which made the passage of health care reform more difficult than it might have been. As Jonathan Chait pointed out in 2010:

“Paygo” was a reform imposed by the 1990 budget agreement that required Congress to offset the cost of any new entitlement program or tax cuts with entitlement cuts or tax hikes. It was a significant factor in the decline of the deficit through the 1990s. Republicans hated it because it required them to offset the cost of tax cuts with either spending cuts or increases in other taxes, thereby making the trade-offs of tax cuts explicit. When they took control of Congress in 2001, Republicans ended the Paygo rule, which allowed them to pass a series of tax cuts along with a Medicare prescription drug benefit without any offsetting measures. The structural deficit exploded.

When Democrats recaptured Congress, they re-imposed pay-go rules, leaving an exception for extension of the Bush tax cuts for income under $250,000. That’s one reason why the Affordable Care Act had to be offset with hundreds of billions of dollars in politically-painful Medicare cuts, rather than financed solely through borrowing like the Medicare prescription drug law. Naturally, this made the Affordable Care Act much harder to pass through Congress as well as less popular — bills that hide their cost pass more quickly and with less complaint than bills that make make explicit who is going to pay for their costs.

Just as the White House and Congress were wrapping up their negotiations on the health care bill in the early months of 2010, Obama announced that the great challenge of the age was debt reduction. Though it’s often argued that Obama was pushed into that position by the Republican takeover of the House in November 2010, the fact is that he created the Bowles-Simpson Commission in February 2010, with the declared purpose of balancing the budget by 2015 and reducing the debt. The committee’s membership, chosen by Obama, included on the Democratic side deficit hawks like Max Baucus and on the Republican side…Paul Ryan.

At every step, then, of the two major initiatives of his administration—the stimulus and health care bills—Obama shouldered the load of debt and deficits. Whether that was by default or design remains the subject of much debate. But what’s not in dispute is that the debt has become the Democrats’ burden and/or vocation, which the Republicans are free to flout at will.

This became especially clear during the debt-ceiling crisis of 2011 and since. Once the Republicans began to threaten a default in the spring of 2011, Obama made one concession after another in a desperate attempt to make a deal. He offered to cut Social Security benefits, raise the Medicare eligibility age to 67, increase premiums, and more. Thankfully, GOP intransigence saved those proposals from becoming part of the deal.

The final deal, announced at the end of July 2011, included $1 trillion in cuts, divided evenly between defense and non-defense spending. There would be no tax increase. Instead, the White House tellingly emphasized that the cuts would “reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President.” The deal also created a bipartisan congressional super committee tasked with coming up with an additional $1.5 trillion in savings. If the committee failed, an automatic process of savings measures would be triggered, which would include tax increases and spending cuts, with Social Security, Medicaid, and a few other programs exempted from the cuts.

Since the announcement of that deal, we’ve seen two developments. First, the congressional super committee tried—and failed—to come to an agreement. At each phase in the negotiations, which ended in November, the Democrats played the responsible adult, the Republicans the wild child. The Democrats came in with a proposal to raise taxes by $1.3 trillion and cut spending by $1.7 trillion (including cuts to Medicare and Medicaid). The Republican response: $2.2 trillion in cuts (not much more than the Democrats) and no tax increases. By the end of the negotiations, the Democrats had reduced their tax increase proposal to $400 billion and were offering nearly a $1 trillion in spending cuts; the Republicans tendered $640 billion in spending cuts and $3 billion in tax increases. In other words, not only were the Democrats promising to cut far more than were the Republicans, but they also promised to reduce the debt overwhelmingly through spending cuts rather than tax increases.

Second, now that that the super committee has failed, the GOP has predictably begun to balk at the defense cuts mandated by the deal. (I say predictably because just after the deal was announced, I got into a heated argument with a political scientist over that very issue. Where he was elated by the defense cuts, I warned that the Republicans would almost certainly renege on them.) Throughout this past summer, the GOP promised to make the so-called sequester a major issue in the election, and the 2012 Republican Party platform (see page 40) enshrines their opposition to it:

Sequestration—which is severe, automatic, across-the-board cuts in defense spending over the next decade—of the nation’s military budget would be a disaster for national security, imperiling the safety of our servicemen and women, accelerating the decline of our nation’s defense industrial base, and resulting in the layoff of more than 1 million skilled workers. Opposition to sequester is bipartisan; even the current Secretary of Defense has said the cuts will be “devastating” to America’s military. Yet the current President supported sequestration, signed it into law, and has threatened to veto Republican efforts to prevent it. If he allows an additional half trillion dollars to be cut from the defense budget, America will be left with the smallest ground force since 1940,the smallest number of ships since 1915, and the smallest Air Force in its history—at a time when our Nation faces a growing range of threats to our national security and a struggling economy that can ill afford to lose 1.5 million defense-related jobs.

So here we are, entering a campaign with Obama begging the media to recognize him and the Democrats as the party of austerity—for being willing to make difficult and deep cuts to Medicare and Social Security—and Republicans happily calling for a constitutional amendment requiring congressional super majorities for tax increases (see page 4).

• • • • •

Ironically, it was during the heyday of the New Deal that we first got a glimpse of the way we live now—from none other than John Kenneth Galbraith. As Bartlett shows, when Galbraith learned of Kennedy’s plans for a large tax cut in 1962, he shrewdly observed in his diary that “lower tax revenues will become a ceiling on spending.” Though the economics of the tax cut were impeccably Keynesian, Galbraith was far more concerned about the politics, which he thought were dangerous. As he explained in his testimony to Congress in 1965:

I was never as enthusiastic as many of my fellow economists over the tax reductions of last year. The case for it as an isolated action was undoubtedly good. But there was danger that conservatives, once introduced to the delights of tax reduction, would like it too much. Tax reduction would then become a substitute for increased outlays on urgent social needs. We would have a new and reactionary form of Keynesianism with which to contend.

What Galbraith could not have foreseen—ensconced in the New Deal consensus as he was—was that that the real ceiling on social spending would be set not merely by the Republicans but also, and perhaps more fatally, by the Democrats.

Once upon a time Republicans were tax collectors for the welfare state. Now Democrats are the austerians of reactionary Keynesianism.

• • • • •

This post has been cross-posted at Crooked Timber of Humanity, where I am now also blogging.

Update (3 pm)

Digby has a great follow-up to this post, which includes this lengthy quote from an interview Obama just gave to Time‘s Michael Scherer.

My message to Democrats is the same message I’ve got to Republicans and independents, and that is, I want a balanced approach to deficit reduction that combines additional revenue, particularly from folks like me who can afford it, with prudent cuts on both the discretionary side and the mandatory side but that still allows us to make investments in the things we need to grow.

And that means I’m prepared to look at reforms in Medicaid. I’m prepared to look at smart reforms on Medicare. But there are things I won’t do, and this is part of the debate we’re having in this election. I do not think it is a good idea to set up Medicare as a voucher system in which seniors are spending up to $6,000 more out of pocket. That was the original proposal Congressman Ryan put forward. And there is still a strong impulse I think among some Republicans for that kind of approach.

I’m not going to slash Medicaid to the point where disabled kids or seniors who are in nursing homes are basically uncared for. We’re not going to violate the basic bargain that Social Security represents.

Now, the good news is, if you’re willing to raise taxes on millionaires and billionaires, then you can make modest reforms on entitlements, reduce some additional discretionary spending, achieve deficit reduction and still preserve Social Security and Medicare and Medicaid in ways that people can count on. The only reason that you would have to go further than that is if there’s no revenue whatsoever. And that’s a major argument that we’re having with the Republicans.

As Digby observes:

Well hell. I’m sure glad he isn’t willing to cut Medicaid to where the disabled aren’t “basically” cared for. And, you know, it’s good that he’s not going to violate the “basic bargain” that social security “represents.” Big relief.

Vote Obama/Biden 2012 — We won’t cut your benefits quite as much as the other guys.

Update (August 31, 12 pm)

Two follow-up posts you should check out.

Alex Gourevitch offers a fascinating take on the incoherence of the Democrats’ austerian position:

Now, the Democratic Party is a mere pastiche without purpose….With no welfarist project, maintained by a contingent set of historical forces, what is left? The project of responsible government, of taxing mainly for the purpose of balancing budgets….Even the Buffet Rule is not so much an invocation of a principle of social justice as it is an acknowledgement of indecency in the tax code. Only the party of Romney-Ryan can make that elemental act Mugwumpery look like more than what it is – an empty, election year gesture.

David Dayen drives home the political costs of the austerian position:

The fact that you can draw a line in inverse proportion between what party embraces austerity and what party has the dominant position in the politics of the age should tell you what you need to know about its importance. By and large, we saw a liberal era in the 1950s and 1960s (regardless of what party actually ruled) followed by a conservative era in the 1980s that stretches to this day. And the factor of austerity politics plays a big role in that.

Over time, Republicans stopped trying to be the responsible “tax collectors for the welfare state,” and started becoming the starve-the-beast Republicans we know now. These theories are flawed – cutting taxes does not, actually, lead to cutting spending, at least not when Republicans are in office – but politically they force the other side into an extremely disadvantageous position.

Update (August 31, 8:30 pm)

Thomas Nephew alerts me to the fact that today’s Democrat and liberal actually embraces the identity of being an Eisenhower Republican. I did not know that.

Hayek von Pinochet

8 Jul

It’s no secret that Friedrich von Hayek was a warm supporter of Augusto Pinochet’s bloody regime. As I wrote in The Nation a few years back:

Hayek admired Pinochet’s Chile so much that he decided to hold a meeting of his Mont Pelerin Society in Viña del Mar, the seaside resort where the coup against Allende was planned. In 1978 he wrote to the London Times that he had “not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende.”

Greg Grandin, Naomi Klein, Brad DeLong, John Quiggin (twice), and Michael Lind also have written about the Hayek-Pinochet connection.

By contrast, Alan Ebenstein, Hayek’s biographer (sympathetic doesn’t quite capture the tone), does not mention the connection at all. Ebenstein does, however, quote Hayek making the rather astonishing claim in 1981 that there were not “any totalitarian governments in Latin America. The only one was Chile under Allende.”

I had thought there wasn’t much more to say about Hayek in Chile, but a new article in the American Journal of Economics and Sociology—”Preventing the ‘Abuses’ of Democracy: Hayek, the ‘Military Usurper’ and Transitional Dictatorship in Chile?” by Andrew Farrant, Edward McPhail, and Sebastian Berger—provides some fresh details.

Here is just a taste:

For instance, Hayek—writing to The Times in 1978 and explicitly invoking Pinochet by name—noted that under certain “historical circumstances,” an authoritarian government may prove especially conducive to the long-run preservation of liberty: There are “many instances of authoritarian governments under which personal liberty was safer than under many democracies.”

[Hayek] noted that if “Strauss (who I met during a reception in Chile briefly)” had been “attacked for his support for Chile he deserves to be congratulated for his courage.” [Franz Josef Strauss was a right-wing German politician, who had visited Chile in 1977 and met with Pinochet. His views were roundly repudiated by both the Social Democrats and the Christian Democrats in Germany. Hayek apparently wanted to help Strauss become chancellor of Germany.]

Though Hayek’s 1981 interviews with El Mercurio have attracted much attention, scholars have ignored El Mercurio’s coverage of Hayek’s initial visit to Chile in 1977. In particular, El Mercurio notes that Hayek—quoted as saying that Chile’s efforts to develop and reform its economy provided “an example at the global level” (1977: 27)—had met with Pinochet: “At the end of his visit . . . Hayek . . . was received by President Augusto Pinochet. He [Hayek] told reporters that he talked to Pinochet about the issue of limited democracy and representative government. . . . He said that in his writings he showed that unlimited democracy does not work because it creates forces that in the end destroy democracy. He said that the head of state listened carefully and that he had asked him to provide him with the documents he had written on this issue.”

According to Hayek, Pinochet had requested copies of Hayek’s writings (“documents”) explaining why unlimited democracy would inevitably lead to the destruction of democracy (1977). Consequently, Hayek asked Charlotte Cubitt (his secretary from February 1977 until his death in 1992) to send Pinochet a draft of Hayek’s ‘A Model Constitution’ (Cubitt 2006: 19). Importantly, Hayek’s chapter—‘A Model Constitution’ (1979b: 105–127)—provides a three-page discussion of the conditions under which the adoption of Emergency Powers (124–126) and the suspension of democracy are supposedly justified: The “basic principle of a free society . . . [“the coercive powers of government are restricted to the enforcement of universal rules of just conduct”] . . . may . . . have to be temporarily suspended when the  long-run preservation of that order [the free society] is itself threatened” (1979b: 124).

When Hayek visited Chile in 1981 he “took time off from his official commitments to walk around and see for himself whether people were cheerful and content. He told me that it was the sight of many sturdy and healthy children that had convinced him.”

As Hayek notes, “democracy needs ‘a good cleaning’ by strong governments.”

The Pinochet junta “enacted a new constitution in September 1980. . . . The constitution was not only named after Hayek’s book The Constitution of Liberty, but also incorporated significant elements of Hayek’s thinking.”

Farrant et al demonstrate that Hayek’s support of Pinochet was not contingent or begrudging—an alliance of convenience due to Pinochet’s embrace of free market economics—but was rather the product of two longstanding ideas and commitments.

First, a belief that welfare/socialist states of modern democracies have a tendency toward totalitarianism. This has been the subject of some debate over at Crooked Timber, but Farrant et al show just how consistently Hayek held this belief throughout his career: from The Road to Serfdom to volume 3 of Law, Legislation and Liberty, in which he describes his “growing apprehension about the direction in which the political order of what used to be regarded as the most advanced countries is tending” and his “growing conviction, for which the book gives the reasons, that this threatening development towards a totalitarian state is made inevitable by certain deeply entrenched defects of construction of the generally accepted type of ‘democratic’ government.” As Hayek put it in a 1981 interview with Renee Sallas of El Mercurio: “All movements in the direction of socialism, in the direction of centralized planning, involve the loss of personal freedom and end up ultimately in totalitarianism.”

In his defense of Pinochet (and elsewhere), Hayek invokes the oft-repeated distinction between totalitarian and authoritarian societies, and though Farrant et al don’t mention this, it struck me that this old saw—so beloved of figures like Jeanne Kirkpatrick—might have served as some of the glue holding together neoconservatives like Kirkpatrick and neoliberals like Hayek, especially in the 1970s.

Second, a belief in the virtues of temporary dictatorships as a means of saving these totalitarian-bound democracies from themselves. In 1981, Hayek told Sallas:

[A]s long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally, I prefer a liberal dictator to democratic government lacking in liberalism. My personal impression. . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.

While critics have cited this quotation before, Farrant et al note that Hayek had been offering similar encomia to Portuguese dictator António de Oliveira Salazar as early as 1962.

Interestingly enough, Hayek had sent Salazar a copy of Hayek’s The Constitution of Liberty (1960) in 1962 and Hayek’s accompanying note to Salazar is particularly revealing: Hayek hopes that his book—this “preliminary sketch of new constitutional principles”—“may assist” Salazar “in his endeavour to design a constitution which is proof against the abuses of democracy.”

Unlike most defenses of temporary dictatorship, Hayek’s was not framed around a foreign threat to the security of the state or a domestic insurrection (though he does offer a brief discussion of “emergency powers” in such situations in Volume 3 of Law, Legislation and Liberty); his was explicitly designed to countermand the creeping tyranny of social democracy. If the visions of Gunnar Myrdal and John Kenneth Galbraith were realized, he wrote in Volume 3 of Law, Legislation, and Liberty, social democracy would produce “a wholly rigid economic structure which…only the force of some dictatorial power could break.” Dictatorship, as he put it in his El Mercurio interview, was “a means of establishing a stable democracy and liberty, clean of impurities.”

As Farrant et al note, Hayek’s faith in the stewardship of good dictators flies in the face of his own warnings against trusting in the good intentions of government bureaucrats—not to mention his admonitions against an earlier generation of liberals and leftists, who were prepared to accept the allegedly temporary dictatorship of the Bolsheviks as a way station to the future.

Indeed, Hayek (1948: 207) took H. D. Dickinson—one of his opponents in the interwar socialist calculation debate—to task for defending the supposedly naive idea of a ‘transitional’ socialist dictatorship. Dickinson—like Hayek tellingly invoking the example of Oliver Cromwell—had argued that “[d]uring the . . . transition from a capitalist to a socialist society . . . [economic and political] liberty may be abridged, just as during the early phases of the struggles which made possible . . . political liberty those very liberties were temporarily eclipsed . . . Cromwell and Robespierre ruled arbitrarily, yet the ultimate influence of their rule was to establish civil liberty…. [Although] Lenin and Stalin have shown scant respect for the preferences of the . . . consumer . . . if they shall have been the means of establishing a classless society, their ultimate influence will be for economic liberty. After a socialist order has been safely established, the raison d’être of restrictions on liberty will have ceased” (Dickinson 1939: 235–236). As Hayek tartly noted, any adoption of transitional socialist dictatorship would more likely culminate in a permanent regime akin to that of Hitler or Stalin than in the “beautiful and idyllic picture . . . of ‘libertarian socialism’” painted by Dickinson (Hayek 1948: 207). Much the same criticism, however, can be readily leveled against the best case (or implicitly maximax) assumptions underlying the giant leap of faith that is implicit in Hayek’s own defense of transitional dictatorship.

But, it seems to me, in the course of defending Pinochet and Salazar—and the whole idea of temporary dictatorship— Hayek was prepared to entertain an even deeper betrayal of his own stated beliefs. As he said to Sallas in 1981, when any “government is in a situation of rupture, and there are no recognized rules, rules have to be created.” That is what a dictator does: create the rules of social and political life. (Again, Hayek is not referring to a situation of civil war or anarchy; he’s talking about a social democracy in which the government pursues “the mirage of social justice” through administrative and increasingly discretionary means.)

Yet Hayek is famous—arguably most famous—for his notion that the rules of social order are neither known nor made; they are tacit and inherited. As he argued in Volume 1 of Law, Legislation and Liberty:

The first of these attributes which most rules of conduct originally possessed is that they are observed in action without being known to the acting person in articulated (‘verbalized’ or explicit) form. They will manifest themselves in a regularity of action which can be explicitly described, but this regularity of action is not the result of acting persons being capable of thus stating them. The second is that such rules come to be observed because in fact they give the group in which they are practised superior strength, and not because this effect is known to those who are guided by them. Although such rules come to be generally accepted because their observation produces certain consequences, they are not observed with the intention of producing those consequences—consequences which the acting person need not know.

Hayek was hardly the first conservative intellectual to write paeans to the slow accumulated wisdom of the ages by day, only to  praise Jacobin interventions of the right by night. Edmund Burke, I’ve argued, did much the same thing. Hayek even went so far as to defend his preferred brand of politics as a kind of dogmatic utopianism.

A successful defence of freedom must therefore be dogmatic and make no concessions to expediency.

Utopia, like ideology, is a bad word today…But an ideal picture of a society which may not be wholly achievable, or a guiding conception of the overall order to be aimed at, is nevertheless not only the indispensable precondition of any rational policy, but also the chief contribution that science can make to the solution of the problems of practical policy.

How one squares Hayek’s praise of dictatorship with his conception of a spontaneous order, I’m not yet sure. But with his vision of an unmoved mover knowingly and forcibly creating rules, by design, from a lawless firmament (not to mention his conception of democratic drift), Hayek puts himself within the orbit of Carl Schmitt, with whom he maintained a running dialogue, and who famously described the moment when a new order is brought into being—a new order of rules and routines—as a “an absolute decision created out of nothingness,” as the moment when “the power of real life breaks through the crust of a mechanism [the democratic state] that has become torpid by repetition.”

Update (July 11, 10 am)

Here’s a pdf of the piece by Farrant et al.

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