Archive for the 'liberalism' Category

Neo- and Other Liberalisms

Everybody seems to be worked up about “neoliberalism” these days. A review of Quinn Slobodian’s new book on the Austrian (or perhaps the Austro-Hungarian) roots of neoliberalism in the New Republic by Patrick Iber reminded me that the term “neoliberalism” which, in my own faulty recollection, came into somewhat popular usage only in the early 1980s, had actually been coined in the early the late 1930s at the now almost legendary Colloque Walter Lippmann and had actually been used by Hayek in at least one of his political essays in the 1940s. In that usage the point of neoliberalism was to revise and update the classical nineteenth-century liberalism that seemed to have run aground in the Great Depression, when the attempt to resurrect and restore what had been widely – and in my view mistakenly – regarded as an essential pillar of the nineteenth-century liberal order – the international gold standard – collapsed in an epic international catastrophe. The new liberalism was supposed to be a kinder and gentler — less relentlessly laissez-faire – version of the old liberalism, more amenable to interventions to aid the less well-off and to social-insurance programs providing a safety net to cushion individuals against the economic risks of modern capitalism, while preserving the social benefits and efficiencies of a market economy based on private property and voluntary exchange.

Any memory of Hayek’s use of “neo-liberalism” was blotted out by the subsequent use of the term to describe the unorthodox efforts of two young ambitious Democratic politicians, Bill Bradley and Dick Gephardt to promote tax reform. Bradley, who was then a first-term Senator from New Jersey, having graduated directly from NBA stardom to the US Senate in 1978, and Gephardt, then an obscure young Congressman from Missouri, made a splash in the first term of the Reagan administration by proposing to cut income tax rates well below the rates to which Reagan had proposed when running for President, in 1980, subsequently enacted early in his first term. Bradley and Gephardt proposed cutting the top federal income tax bracket from the new 50% rate to the then almost unfathomable 30%. What made the Bradley-Gephardt proposal liberal was the idea that special-interest tax exemptions would be eliminated, so that the reduced rates would not mean a loss of tax revenue, while making the tax system less intrusive on private decision-making, improving economic efficiency. Despite cutting the top rate, Bradley and Gephardt retained the principle of progressivity by reducing the entire rate structure from top to bottom while eliminating tax deductions and tax shelters.

Here is how David Ignatius described Bradley’s role in achieving the 1986 tax reform in the Washington Post (May 18, 1986)

Bradley’s intellectual breakthrough on tax reform was to combine the traditional liberal approach — closing loopholes that benefit mainly the rich — with the supply-side conservatives’ demand for lower marginal tax rates. The result was Bradley’s 1982 “Fair Tax” plan, which proposed removing many tax preferences and simplifying the tax code with just three rates: 14 percent, 26 percent and 30 percent. Most subsequent reform plans, including the measure that passed the Senate Finance Committee this month, were modelled on Bradley’s.

The Fair Tax was an example of what Democrats have been looking for — mostly without success — for much of the last decade. It synthesized liberal and conservative ideas in a new package that could appeal to middle-class Americans. As Bradley noted in an interview this week, the proposal offered “lower rates for the middle-income people who are the backbone of America, who are paying most of the freight.” And who, it might be added, increasingly have been voting Republican in recent presidential elections.

The Bradley proposal also offered Democrats a way to shed their anti-growth, tax-and-spend image by allowing them, as Bradley says, “to advocate economic growth and fairness simultaneously.” The only problem with the idea was that it challenged the party’s penchant for soak-the-rich rhetoric and interest-group politics.

So the new liberalism of Bradley and Gephardt was an ideological movement in the opposite direction from that of the earlier version of neoliberalism; the point of neoliberalism 1.0 was to moderate classical laissez-faire liberal orthodoxy; neoliberalism 2.0 aimed to counter the knee-jerk interventionism of New Deal liberalism that favored highly progressive income taxation to redistribute income from rich to poor and price ceilings and controls to protect the poor from exploitation by ruthless capitalists and greedy landlords and as an anti-inflation policy. The impetus for reassessing mid-twentieth-century American liberalism was the evident failure in the 1970s of wage and price controls, which had been supported with little evidence of embarrassment by most Democratic economists (with the notable exception of James Tobin) when imposed by Nixon in 1971, and by the decade-long rotting residue of Nixon’s controls — controls on crude oil and gasoline prices — finally scrapped by Reagan in 1981.

Although the neoliberalism 2.0 enjoyed considerable short-term success, eventually providing the template for the 1986 Reagan tax reform, and establishing Bradley and Gephardt as major figures in the Democratic Party, neoliberalism 2.0 was never embraced by the Democratic grassroots. Gephardt himself abandoned the neo-liberal banner in 1988 when he ran for President as a protectionist, pro-Labor Democrat, providing the eventual nominee, the mildly neoliberalish Michael Dukakis, with plenty of material with which to portray Gephardt as a flip-flopper. But Dukasis’s own failure in the general election did little to enhance the prospects of neoliberalism as a winning electoral strategy. The Democratic acceptance of low marginal tax rates in exchange for eliminating tax breaks, exemptions and shelters was short-lived, and Bradley himself abandoned the approach in 2000 when he ran for the Democratic Presidential nomination from the left against Al Gore.

So the notion that “neoliberalism” has any definite meaning is as misguided as the notion that “liberalism” has any definite meaning. “Neoliberalism” now serves primarily as a term of abuse for leftists to impugn the motives of their ideological and political opponents in exactly the same way that right-wingers use “liberal” as a term of abuse — there are so many of course — with which to dismiss and denigrate their ideological and political opponents. That archetypical classical liberal Ludwig von Mises was openly contemptuous of the neoliberalism that emerged from the Colloque Walter Lipmann and of its later offspring Ordoliberalism (frequently described as the Germanic version of neoliberalism) referring to it as “neo-interventionism.” Similarly, modern liberals who view themselves as upholders of New Deal liberalism deploy “neoliberalism” as a useful pejorative epithet with which to cast a rhetorical cloud over those sharing a not so dissimilar political background or outlook but who are more willing to tolerate the outcomes of market forces than they are.

There are many liberalisms and perhaps almost as many neoliberalisms, so it’s pointless and futile to argue about which is the true or legitimate meaning of “liberalism.” However, one can at least say about the two versions of neoliberalism that I’ve mentioned that they were attempts to moderate more extreme versions of liberalism and to move toward the ideological middle of the road: from the extreme laissez-faire of classical liberalism on the one right and from the dirigisme of the New Deal on the left toward – pardon the cliché – a third way in the center.

But despite my disclaimer that there is no fixed, essential, meaning of “liberalism,” I want to suggest that it is possible to find some common thread that unites many, if not all, of the disparate strands of liberalism. I think it’s important to do so, because it wasn’t so long ago that even conservatives were able to speak approvingly about the “liberal democratic” international order that was created, largely thanks to American leadership, in the post-World War II era. That time is now unfortunately past, but it’s still worth remembering that it once was possible to agree that “liberal” did correspond to an admirable political ideal.

The deep underlying principle that I think reconciles the different strands of the best versions of liberalism is a version of Kant’s categorical imperative: treat every individual as an end not a means. Individuals must not be used merely as tools or instruments with which other individuals or groups satisfy their own purposes. If you want someone else to serve you in accomplishing your ends, that other person must provide that assistance to you voluntarily not because you require him to do so. If you want that assistance you must secure it not by command but by persuasion. Persuasion can be secured in two ways, either by argument — persuading the other person to share your objective — or if you can’t, or won’t, persuade the person to share your objective, you can still secure his or her agreement to help you by offering some form of compensation to induce the person to provide you the services you desire.

The principle has an obvious libertarian interpretation: all cooperation is secured through voluntary agreements between autonomous agents. Force and fraud are impermissible. But the Kantian ideal doesn’t necessarily imply a strictly libertarian political system. The choices of autonomous agents can — actually must — be restricted by a set of legal rules governing the conduct of those agents. And the content of those legal rules must be worked out either by legislation or by an evolutionary process of common law adjudication or some combination of the two. The content of those rules needn’t satisfy a libertarian laissez-faire standard. Rather the liberal standard that legal rules must satisfy is that they don’t prescribe or impose ends, goals, or purposes that must be pursued by autonomous agents, but simply govern the means agents can employ in pursuing their objectives.

Legal rules of conduct are like semantic rules of grammar. Like rules of grammar that don’t dictate the ideas or thoughts expressed in speech or writing, only the manner of their expression, rules of conduct don’t specify the objectives that agents seek to achieve, only the acceptable means of accomplishing those objectives. The rules of conduct need not be libertarian; some choices may be ruled out for reasons of ethics or morality or expediency or the common good. What makes the rules liberal is that they apply equally to all citizens, and that the rules allow sufficient space to agents to conduct their own lives according to their own purposes, goals, preferences, and values.

In other words, the rule of law — not the rule of particular groups, classes, occupations — prevails. Agents are subject to an impartial legal standard, not to the will or command of another agent, or of the ruler. And for this to be the case, the ruler himself must be subject to the law. But within this framework of law that imposes no common goals and purposes on agents, a good deal of collective action to provide for common purposes — far beyond the narrow boundaries of laissez-faire doctrine — is possible. Citizens can be taxed to pay for a wide range of public services that the public, through its elected representatives, decides to provide. Those elected representatives can enact legislation that governs the conduct of individuals as long as the legislation does not treat individuals differently based on irrelevant distinctions or based on criteria that disadvantage certain people unfairly.

My view that the rule of law, not laissez-faire, not income redistribution, is the fundamental value and foundation of liberalism is a view that I learned from Hayek, who, in his later life was as much a legal philosopher as an economist, but it is a view that John Rawls, Ronald Dworkin on the left, and Michael Oakeshott on the right, also shared. Hayek, indeed, went so far as to say that he was fundamentally in accord with Rawls’s magnum opus A Theory of Justice, which was supposed to have provided a philosophical justification for modern welfare-state liberalism. Liberalism is a big tent, and it can accommodate a wide range of conflicting views on economic and even social policy. What sets liberalism apart is a respect for and commitment to the rule of law and due process, a commitment that ought to take precedence over any specific policy goal or preference.

But here’s the problem. If the ruler can also make or change the laws, the ruler is not really bound by the laws, because the ruler can change the law to permit any action that the ruler wants to take. How then is the rule of law consistent with a ruler that is empowered to make the law to which he is supposedly subject. That is the dilemma that every liberal state must cope with. And for Hayek, at least, the issue was especially problematic in connection with taxation.

With the possible exception of inflation, what concerned Hayek most about modern welfare-state policies was the highly progressive income-tax regimes that western countries had adopted in the mid-twentieth century. By almost any reasonable standard, top marginal income-tax rates were way too high in the mid-twentieth century, and the economic case for reducing the top rates was compelling when reducing the top rates would likely entail little, if any, net revenue loss. As a matter of optics, reductions in the top marginal rates had to be coupled with reductions of lower tax brackets which did entail revenue losses, but reforming an overly progressive tax system without a substantial revenue loss was not that hard to do.

But Hayek’s argument against highly progressive income tax rates was based more on principle than on expediency. Hayek regarded steeply progressive income tax rates as inherently discriminatory by imposing a disproportionate burden on a minority — the wealthy — of the population. Hayek did not oppose modest progressivity to ease the tax burden on the least well-off, viewing such progressivity treating as a legitimate concession that a well-off majority could allow to a less-well-off minority. But he greatly feared attempts by the majority to shift the burden of taxation onto a well-off minority, viewing that kind of progressivity as a kind of legalized hold-up, whereby the majority uses its control of the legislature to write the rules to their own advantage at the expense of the minority.

While Hayek’s concern that a wealthy minority could be plundered by a greedy majority seems plausible, a concern bolstered by the unreasonably high top marginal rates that were in place when he wrote, he overstated his case in arguing that high marginal rates were, in and of themselves, unequal treatment. Certainly it would be discriminatory if different tax rates applied to people because of their religion or national origin or for reasons unrelated to income, but even a highly progressive income tax can’t be discriminatory on its face, as Hayek alleged, when the progressivity is embedded in a schedule of rates applicable to everyone that reaches specified income thresholds.

There are other reasons to think that Hayek went too far in his opposition to progressive tax rates. First, he assumed that earned income accurately measures the value of the incremental contribution to social output. But Hayek overlooked that much of earned income reflects either rents that are unnecessary to call forth the efforts required to earn that income, in which case increasing the marginal tax rate on such earnings does not diminish effort and output. We also know as a result of a classic 1971 paper by Jack Hirshleifer that earned incomes often do not correspond to net social output. For example, incomes earned by stock and commodity traders reflect only in part incremental contributions to social output; they also reflect losses incurred by other traders. So resources devoted to acquiring information with which to make better predictions of future prices add less to output than those resources are worth, implying a net reduction in total output. Insofar as earned incomes reflect not incremental contributions to social output but income transfers from other individuals, raising taxes on those incomes can actually increase aggregate output.

So the economic case for reducing marginal tax rates is not necessarily more compelling than the philosophical case, and the economic arguments certainly seem less compelling than they did some three decades ago when Bill Bradley, in his youthful neoliberal enthusiasm, argued eloquently for drastically reducing marginal rates while broadening the tax base. Supporters of reducing marginal tax rates still like to point to the dynamic benefits of increasing incentives to work and invest, but they don’t acknowledge that earned income does not necessarily correspond closely to net contributions to aggregate output.

Drastically reducing the top marginal rate from 70% to 28% within five years, greatly increased the incentive to earn high incomes. The taxation of high incomes having been reducing so drastically, the number of people earning very high incomes since 1986 has grown very rapidly. Does that increase in the number of people earning very high incomes reflect an improvement in the overall economy, or does it reflect a shift in the occupational choices of talented people? Since the increase in very high incomes has not been associated with an increase in the overall rate of economic growth, it hardly seems obvious that the increase in the number of people earning very high incomes is closely correlated with the overall performance of the economy. I suspect rather that the opportunity to earn and retain very high incomes has attracted a many very talented people into occupations, like financial management, venture capital, investment banking, and real-estate brokerage, in which high incomes are being earned, with correspondingly fewer people choosing to enter less lucrative occupations. And if, as I suggested above, these occupations in which high incomes are being earned often contribute less to total output than lower-paying occupations, the increased opportunity to earn high incomes has actually reduced overall economic productivity.

Perhaps the greatest effect of reducing marginal income tax rates has been sociological. I conjecture that, as a consequence of reduced marginal income tax rates, the social status and prestige of people earning high incomes has risen, as has the social acceptability of conspicuous — even brazen — public displays of wealth. The presumption that those who have earned high incomes and amassed great fortunes are morally deserving of those fortunes, and therefore entitled to deference and respect on account of their wealth alone, a presumption that Hayek himself warned against, seems to be much more widely held now than it was forty or fifty years ago. Others may take a different view, but I find this shift towards increased respect and admiration for the wealthy, curiously combined with a supposedly populist political environment, to be decidedly unedifying.

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How Liberalism in America Became Synonymous with its Antithesis

In the run-up to, and immediate aftermath of, Hillary Clinton’s choice of Tim Kaine to be her running mate, one of the recurring comments was how unpopular Tim Kaine is with the liberals who supposedly comprise the bulk of Bernie Sanders’ supporters, and must somehow be coaxed, cajoled or persuaded to reconcile themselves with Kaine’s supposedly moderate centrist political views.

Here’s a typical description of Kaine’s liberal problem in the Washington Post:

Hillary Clinton has made her selection for vice president: Virginia Sen. Tim Kaine.

That will come as a disappointment to many liberals. After rallying behind Sen. Bernie Sanders in the Democratic primary and being teased with Elizabeth Warren as Clinton’s potential running mate — an audition that appeared to go very well — Clinton opted for a more boring, more moderate pick. This despite some liberal groups saying Kaine was unacceptable and even “disastrous.”

First, let’s run through why some liberals don’t love Kaine. Over at Wonkblog, Max Ehrenfruend details three issues on which Kaine could be a particular disappointment to the Warren/Sanders crowd: trade (he’s generally pro-free trade), banking (he has suggested softening some Dodd-Frank regulations) and abortion (he is personally pro-life but votes pro-choice).

So, according to this article, which I think accurately reflects the current understanding of what it now means to be a liberal in America, we have arrived at a state of affairs in which supporting free trade is sufficient justification for casting Tim Kaine out of the liberal fold. Or to make the point in a slightly different way, on international trade at least, Donald Trump’s views are more liberal than those of either Tim Kaine or Hillary Clinton. In this crazy year of 2016, we have witnessed all kinds of farcical events that no one ever dreamed would actually happen. But for protectionism to now be identified as a defining tenet of liberalism surely belongs on any list of the improbable plot twists in the tragicomedy of an election campaign that we have been watching in disbelief in America’s political theater of the absurd.Considered historically, the notion that you can’t be a liberal if you support free trade is nothing short of preposterous, the British Liberal Party having came into existence in the nineteenth century largely as a result of the great political battle over free trade in Britain in the 1830s and 1840s.

The Conservative Party was founded in 1834 as a combination of the Tories and a number of Whig followers of William Pitt the Younger. Led by Sir Robert Peel, the Conservatives were committed to protecting the interests of the landed aristocracy from whom the Tories were largely drawn, and were generally solicitous of the royal prerogatives. Although they too were drawn from the landed aristocracy, the Whigs were hostile to the royal prerogatives, seeking to enlarge the powers of Parliament and limit those of the Crown. In opposing royal powers, the Whigs were the natural allies of the Radicals, who represented the interests of the rising industrial and commercial sectors and the growing middle classes.

Reflecting the predominant influence of the Tory landed aristocracy, the Conservatives supported protective tariffs to keep domestic grain prices and land values high. Although the economic interests of the Whig landed aristocracy were also served by protection and high grain prices, the Whigs were prepared to sacrifice their economic interests (perhaps more diversified than the Tories’ interests) and to accept free trade as the price to regain power in concert with the Radicals, whose laissez-faire principles and economic interests strongly inclined them to oppose protection and high grain prices.

As Prime Minister in the 1840s, Peel reversed his previous opposition to free trade, having been persuaded by Richard Cobden, a Radical and the chief Parliamentary advocate of free trade, that allowing foreigners to increase grain exports to Britain would increase foreign demand for British manufactured goods. The famous, possibly legendary, story of Peel’s conversion to free trade has it that, after one of Cobden’s compelling Parliamentary speeches in favor of repealing the Corn Laws restricting grain imports into Britain, Peel, turning to his colleague Sidney Herbert, said: “Sir, you must answer him, for I cannot.” Whatever the motivation for Peel’s conversion to free trade, Peel’s decision split the Conservative party, with most Conservatives still opposing free trade, while about a third of Conservative MPs, including the future Liberal Prime Minister W. E. Gladstone, sided with Peel to form a separate faction.

Eventually, in 1859 the Whigs, Radicals and most of the Peelite Conservatives, joined to create the Liberal Party. So the British Liberal Party was formed as a coalition united by their support of free trade. Although the Conservative Party later came to support free trade, at the beginning of the twentieth century Conservatives turned against free trade, renewing the old conservative-liberal ideological divide.

Given the origins of liberalism as a political movement supporting free trade, it’s disconcerting to watch self-styled liberals transform liberalism into its own antithesis. I’m not trying to suggest that there is such a thing as a true liberalism, or that any departure from the original creed is a kind of heresy. All I’m saying is that leftist critics of Kaine show their own ignorance and ideological illiteracy — not to mention sheer arrogance — when they claim that support for free trade, which for almost two centuries was considered a basic liberal tenet, invalidates Kaine’s standing as a liberal.

I am also not saying that there are no good arguments to be made against free trade, though there are certainly a lot of bad ones, especially those that focus on the trade deficit as a measure of the harm caused by trade. I have actually written previously about the inadequacy of standard economic defenses of free trade, which doesn’t mean that attacks on free trade are right, just that those attacks are not necessarily countered by the standard defenses.

But we are now so disconnected from history that we habitually use terms as labels or as epithets in ways that are completely at odds with the meanings that the terms used to have. President Obama, for example, is routinely described as a socialist and even as a Marxist based, as far as I can tell, on nothing more than that he wants the federal government to reduce the inequality of income and wealth in the US. I have written some posts in the past suggesting why a lot of high income earnings from finance and intellectual property do not increase net social welfare, but I don’t  have a well-thought-out position about overall income and wealth inequality. As a starting point, I think Rawls’s difference principle that income inequality is justified only insofar as the inequality redounds to the absolute benefit of the least well-off members of society is a good way to think about how to handle income and wealth inequality in a free and democratic society. But I don’t think that Rawls gets us very far. The problem with the Rawlsian difference principle is that, in practice, it is nearly impossible to make the principle operational. I have no doubt that Ludwig von Mises would have been totally comfortable arguing that laissez-faire capitalism actually satisfies the difference principle. I believe that he actually made such an argument in Human Action.

But the point that I am making here is simply that it is entirely possible for someone to favor non-trivial redistribution of wealth and income from the wealthy to the less wealthy without being either a socialist or a Marxist. And in fact there have been many non-socialists and non-Marxists who have favored some degree of wealth and income redistribution. So the routine smear attacks on Obama for being a socialist or a Marxist as just typical of the degradation of our semantic environment.

Of course, there is nothing to stop anyone from defining “socialist” and “Marxist” so that anyone who supports redistributing income and wealth is both a socialist and a Marxist. But such definitions would be a trivial exercise with no historical basis. The exercise would be self-defeating if it’s artificiality were acknowledged. What “socialism” has meant historically is a political doctrine favoring the state ownership and operation of all or most of the non-human means of production. But as the number of people who believe in government ownership and operation of the means of production has fallen steadily over the last half century or so, the term “socialism” has gradually been transformed into a vague and nearly meaningless catchword.

What makes Bernie Sanders a socialist is not a belief that government should own and operate most industries, but a general ethos that he feels is captured and communicated by the term. “Socialism” is a convenient way to signal hostility to capitalism – though not a desire to replace it with state ownership and control — and support for wealth redistribution. Similarly, those on the right find “socialism” a handy term of abuse with which to vilify their opponents.

I am no expert on Marxism, but my understanding is that it is a belief in a particular theory of the (supposed) historical laws governing the past and future development of society, supposedly leading to the creation of a socialist state. I assume that there are still some Marxists out there, but if you really do believe that Barack Obama is one of them, there is a good chance that you are delusional.

But what strikes me as especially interesting is not just that liberalism, like socialism, no longer means what it used to mean, but that it has come to mean, in the minds of many, the exact opposite of what it used to mean. So I’d like suggest my own linguistic theory of how liberalism in America has come to take on a meaning so very different from what it once meant. What led to the transformation of liberalism in America was, I conjecture, the lack of a successful socialist political movement in the US. In one sense that was a good thing,  because socialism is not now and never was a sensible way to organize a society or to promote widespread prosperity. However, the failure of socialism in the US to become a politically viable left-wing alternative meant that “liberal” became one of the two default terms for moderately left-leaning political activists to use for self-description and self-identification, the other being the peculiarly American term “progressive.”For similar reasons, liberalism and progressivism also came to be associated with the political activism of organized labor. In Europe, however, socialism aka “social democracy” became a politically powerful movement, gaining the support of much, if not most, of the labor unions. So the contrast between the middle-class orientation of European liberalism on the one hand and the labor activism and socialist ideology of the left-wing parties on the other was much sharper than the contrast between middle-class liberalism and labor activism in the US.

Similarly, because American political parties were almost totally non-ideological, having developed as loose coalitions of diverse sectional and economic interests, the Democratic and Republican parties, unlike the European parties, developed few systematic political doctrines. The antebellum Democratic Party, for example, purported to espouse the doctrine of states’ rights, but professed adherence to that doctrine did not prevent the Democrats from insisting on a federal fugitive slave law requiring Northern states to cooperate with slaveholders to return runaway slaves to their owners, thereby overriding the laws of those Northern states that recognized runaway slaves as free human beings rather than the property. Until the Civil War, the slavery issue dominated political discourse, making the Democratic Party the pro-slavery, or the slavery-neutral, party. For sectional reasons, the Democratic Party also tended to be the anti-tariff party, while the Republican Party was the high-tariff party, rendering both parties unsuitable homes for liberal doctrines, thereby depriving liberalism of a coherent political voice.

The political failure of socialism in the US compelled reformist political movements to focus on piecemeal rather than comprehensive social and economic changes, e.g., the unsuccessful free-silver movement of the last quarter of the nineteenth century, and the whole panoply of Progressive measures enacted in the early twentieth century under the Republican and Democratic administrations of both Theodore Roosevelt and Woodrow Wilson. With no competing popular doctrine available, liberals and progressives occupied almost all of the left side of the political spectrum. So left-wing political activism in the US was co-opted by the liberal and the progressives instead of socialists or social democrats. In Europe, competing with the socialists to their left, liberals had good reason to emphasize their differences with the socialists as well as their similarities, and there was only limited incentive for liberal parties to try to compete with the left-wing parties by shifting to the left. In the US, however, there was an incentive for liberals to shift to the left to foreclose the entry of a new left-wing party or movement that might drain support from liberals and progressives.

Similarly, insofar as liberals shifted to the left to foreclose a more left-wing alternative, it became easier for moderate or right-leaning liberals to shift their  political allegiance to conservatism than it would have been for European liberals to switch their allegiance to conservatism, because many American conservatives more or less shared the liberal values espoused by liberals, as those values were enshrined in the founding documents of the American Republic. European conservatives, unlike most American conservatives, were ideologically hostile to the basic democratic and liberal values that most American conservatives also acknowledged, notwithstanding the hypocrisy of supporting or tolerating legal segregation and other forms of legal racism. Even in Britain, the cradle of liberalism, the Liberal Party, which had governed Britain for most of the second half of the nineteenth century up to and including the First World War, was eventually reduced to insignificance when the rise of a Labour Party to its left drove Liberal voters, fearing a Labour victory, into the Conservative camp.

Thus, liberalism in Europe retained a more distinct character as a middle-class, democratic, secular, non-socialist ideology than American liberalism. American liberalism was drawn steadily to the left, becoming increasingly attuned to the political agenda of organized labor and becoming increasingly identified with left-wing economic ideas that were not necessarily socialist in the traditional sense, but were also not compatible with liberal doctrines like free trade. Many moderate and right-leaning liberals found it preferable to adapt to the political program offered by an American conservatism that seemed to have embraced many of the key elements of classical nineteenth century liberalism, but without totally rejecting the post-war consensus of a limited welfare state providing a social safety net for the less fortunate, than to follow the leftward drift of American liberalism.

So with the transition of many American moderates and liberals into conservatives, American liberalism has evolved into a left-wing ideology that has animated and energized the Sanders political revolution of 2016, thereby creating the impression in America, among both liberals and non-liberals, that liberalism is more or less interchangeable with left-wing or socialist ideas, albeit socialist ideas that have little relationship to socialism in the original sense of the term. This doesn’t mean that all American liberals are leftists. Many, if not most, American liberals w remain politically moderate, but the ideological energy of American liberalism seems now to be headed in a leftward direction. Years of ideological confusion have obliterated the distinction between liberalism and “leftism,” so that liberalism as an economic doctrine no longer stands for anything — in the American context — other than a demand for government intervention to reduce income equality, to raise wages, which is basically all that socialism now signifies. Disconnected from its historical origins and meaning, American liberalism now represents nothing more than a vague term more or less synonymous with an equally vague “socialism” whose meaning is no more definite than the sentimental message of John Lennon’s song “Imagine.”

 


About Me

David Glasner
Washington, DC

I am an economist in the Washington DC area. My research and writing has been mostly on monetary economics and policy and the history of economics. In my book Free Banking and Monetary Reform, I argued for a non-Monetarist non-Keynesian approach to monetary policy, based on a theory of a competitive supply of money. Over the years, I have become increasingly impressed by the similarities between my approach and that of R. G. Hawtrey and hope to bring Hawtrey's unduly neglected contributions to the attention of a wider audience.

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