I started reading Man vs. the Welfare State by Henry Hazlitt. This book is a bombshell! Wait till the world sees thi… oh, right. It was published 40 years ago. The world saw and ignored — despite the clarity and power of this remarkable book.
Maybe the world could not buy Hazlitt’s theme in 1969, which is that the welfare state leads to dictatorship. This book is more relevant today than it was then.
Hazlitt quotes the Swedish economist Gustav Cassel:
The leadership of the State in economic affairs which advocates of Planned Economy want to establish is, as we have seen, necessarily connected with a bewildering mass of government interferences of a steadily cumulative nature. The arbitrariness, the mistakes and the inevitable contradictions of such policy will, as daily experience shows, only strengthen the demand for a more rational coordination of the different measures and, therefore, for unified leadership. For this reason Planned Economies will always develop into Dictatorship.
Hazlitt explains the process:
A hundred welfare programs, spending more and more billions, lead to chronic budget deficits, which lead to increase (sic) paper-money issues, which lead to higher prices. The government then denounces the sellers as “profiteers” and starts fixing ceilings on individual prices. Next it is led inevitably into the impossible task of trying to fix all prices and wages, which leads it to set up allocations and quotas of production for each producer and rationing for each consumer, and so to control of everybody’s means of livelihood and survival.
Just in the last year we have seen the government increase budget deficits dramatically. The next step is inflation.
Hazlitt notes an interesting point Herbert Spencer made about why the welfare state always grows:
It is not only precedent that prompts the constant spread of interventionist measures, Spencer points out,
“but also the necessity which arises for supplementing ineffective measures, and for dealing with the artificial evils continually caused. Failure does not destroy faith in the agencies employed, but merely suggests more stringent use of such agencies or wider ramifications of them.”
In other words, when the state fails, statists never say, “Our bad. We’ll back off now and let freedom work.” The mortgage crisis did not lead to the repeal of the Community Reinvestment Act; it led to bailouts. And just last week Paul Krugman called for “the temporary nationalization of some major banks” because the first $350 billion of the bailout has not gone so well.
The old saying goes, “To a man with a hammer, every problem looks like a nail.” To a statist, every problem looks like it needs the state to solve it.
America has flirted with a command economy twice, in World War II and during the Nixon administration. Both times it pulled back its controls. Does this disprove Hazlitt’s thesis?
I think we were lucky to be saved by America’s heritage of individualism. We were a mixed economy with a large enough free part to prevail in the end. In WWII, with the crisis over and FDR dead, Truman and a Republican Congress repealed the worst interventions such as rationing and released millions of military personnel back to the private sector. In the later case, Nixon quickly saw he’d made a mistake and repealed wage and price controls.
America has changed for the worse in the last 40 years. I’m not optimistic about the current crisis. Why not? The first paragraph of Hazlitt’s book says,
In America today most of the older generation — and many of the young — stand appalled at the nihilism of the self-styled Now Generation and its demands for unattainable reforms, or merely for the sheer destruction of whatever is established.
The Now Generation is no longer young hippies getting stoned and shouting idiotic chants in protest marches. That generation is now the establishment in charge. Nancy Pelosi, Hillary and Bill Clinton, Barney Frank — they wear nice suits and play within the system now, but they’re still the nihilists of the Now Generation working to destroy capitalism. Barack Obama was a child in 1969, but he would later become an adherent of Saul Alinsky, the communist mentor to the ’60s radicals.
The Now Generation is now in charge. Were I a theist, I might say, “God save America.” But since God does not exist, it looks like it’s up to you and me.