LIBERALISM IN THE TWENTIETH CENTURY
Another factor also contributed to the dominance of welfare over neoclassical liber-alism. By the beginning of the 1900s, capitalist competition looked quite different from what it had been a century before. In the industrialized world the lone entre-preneur who ran his (or her) own business had largely given way to the corporation, the trust, the syndicate, and the conglomerate. Business was now “big business,”
and many people began to call for government intervention in the marketplace, not to restrict competition, but to keep the large corporations from stifling it.
Historical Developments
In one form or another, however, the neoclassical liberals’ faith in individual com-petition and achievement survived into the twentieth century, most notably in the United States. This faith was severely tested by the Great Depression of the 1930s.
Individuals, no matter how rugged, seemed no match for this devastating economic collapse. The effects, political as well as economic, were felt throughout the world, as ideologues of every stripe sought to explain and exploit the situation. Many blamed the Depression on capitalism and turned either to socialism or communism, on the one hand, or to fascism, on the other. In the English-speaking countries, by con-trast, the main response was to turn to the welfare state.
The liberal case for active government gained further support from the theory advanced by the English economist John Maynard Keynes (1883–1946). In his General Theory of Employment, Interest and Money (1936), Keynes argued that gov-ernments should use their taxing and spending powers to prevent depressions and maintain a healthy economy. Put simply, Keynes’s theory holds that governments should try to manage the economy to damp down disruptive cycles of “boom and bust.” When prices are rising, the government should raise taxes to reduce consumer spending and prevent inflation. When inflation is no longer a threat, government should lower taxes, increase spending on social programs, or both, in order to stimulate the economy and maintain high levels of employment. Whatever the strategy at any particular time, Keynes’s “contra-cyclical” approach calls for active government management of economic matters—an approach welcomed by welfare liberals and now practiced by all advanced capitalist countries, including the United States.
Such governmental regulation of the economy began in earnest during the Great Depression of the 1930s. President Franklin D. Roosevelt’s New Deal regu-lated financial markets, banks, and other economic institutions, protected depositors from bank failures, provided public sector employment for unemployed Americans, and stimulated the economy by “priming the pump” with government spending on public works and other projects. Conservative critics cried “socialism” and “wasteful spending,” but Roosevelt replied that he was saving capitalism from its own excesses and that, in any case, massive expenditures for infrastructure—roads, bridges, dams that prevented floods and produced hydroelectric power, and the like—not only
alleviated suffering in the present but was actually a form of investment that would pay large dividends in the future.
The even more massive governmental expenditures of World War II finally brought an end to the Great Depression, but the welfare state remained. Welfare liberalism became the dominant ideology of the Western world. Welfare liberals usu-ally reached some sort of accommodation with their socialist and conservative rivals, as most parties accepted the desirability of the welfare state. Indeed, this consensus seemed so broad and firm that some political observers began to speak in the late 1950s of “the end of ideology.” That hope was soon dashed in the political turmoil of the 1960s and early 1970s and the resurgent conservatism of the 1980s.
For one thing, there were controversies within liberalism. In the United States, Martin Luther King, Jr., and other leaders of the civil rights movement pointed out that liberal promises of liberty and equality were still unfulfilled for African-Americans.
This was a painful truth that all liberals had to acknowledge, however reluctantly.
When King and others protested against the segregation laws that made black people second-class citizens, neoclassical and welfare liberals alike could join in support. But King went on to call for government action not only to eliminate legal discrimina-tion against African-Americans and other minorities but also to provide social and economic opportunities.39 This was acceptable to welfare liberals, but not to their neoclassical cousins. The neoclassical wing formed a distinct minority among liberals, however, as their losing battle against President Lyndon Johnson’s “Great Society”
programs of the 1960s testifies. These programs, which sought to end discrimination against racial minorities, to fight a “War on Poverty,” and to use the powers of gov-ernment to provide equality of opportunity, sprang from the welfare liberals’ belief that government can and should be used to foster individual liberty.
The turmoil of the 1960s also presented another challenge to welfare liberalism—
the New Left. Vaguely socialist in its orientation, the New Left rejected both the
“obsolete communism” of the Soviet Union and the reformist welfare liberalism and “consumer capitalism” of the Western liberal democracies. Most New Left-ists accepted the liberal emphasis on individual rights and liberties, and most also supported government programs to promote equality of opportunity. But they com-plained that liberal governments worked first and foremost to protect the economic interests of wealthy capitalist corporations. Although they agreed that these govern-ments did take steps to improve the material circumstances of their people, the New Leftists charged that most people were reduced to the status of mere consumers when they ought to be encouraged to be engaged and active citizens. This led to the call for “participatory democracy,” a society in which average people would be able to exercise greater control over the decisions that most closely affected their lives.40
If welfare liberalism remains the dominant ideology and the dominant form of liberalism in the Western world—and as we enter the second decade of the twenty-first century it seems that it does—it has clearly not gone unchallenged. A particularly strong challenge, in the form of a mixture of neoclassical liberalism and conservatism, appeared in the 1970s and 1980s as first Margaret Thatcher in Great Britain and then Ronald Reagan in the United States became heads of government. Neither leader dismantled the welfare state, although both moved in that direction. But dismantle it we must, the neoclassical liberals continue to insist. So the contest within liberalism continues, with neoclassical and welfare liberals engaging in ongoing disputes at the philosophical as well as the political level.
Philosophical Considerations
The ongoing debate within liberalism is captured nicely in books by two influential philosophers: John Rawls’s A Theory of Justice (1971) and Robert Nozick’s Anarchy, State, and Utopia (1974).41
Rawls and Justice. According to Rawls (1921–2002), the classical liberal device of the social contract can help us to discover the principles of social justice. Rawls be-gins by asking the reader to imagine a group of people who enter into a contract that will set out the rules under which they will all have to live as members of the same society. Imagine, too, that all of these people are behind a “veil of ignorance”
that prevents anyone from knowing his or her identity, age, gender, race, or abilities or disabilities. Although all act out of self-interest, no one will be able to “stack the deck” by fashioning rules that promote his or her personal advantage, because no one will know what is to his or her personal advantage. Thus the veil of ignorance ensures impartiality.
What rules will emerge from such an impartial situation? Rawls believes that the people behind the veil of ignorance will unanimously choose two fundamental ciples to govern their society—the two principles of justice. According to the first prin-ciple, everyone is to be equally free. Everyone is to have as much liberty as possible, provided that every person in society has the same amount. According to the second principle, everyone is to enjoy equality of opportunity. To help ensure this, each person is to have an equal share of wealth and power unless it can be shown that an unequal distribution will work to the benefit of the worst-off persons. If an equal distribu-tion means that each gets $10, say, it is more just than a distribudistribu-tion where half the people get $18 and the other half only $2. But if an unequal distribution would give everyone, even the worst-off person, at least $11, perhaps because of incentives that encourage people to work harder and produce more, then justice requires the unequal distribution, not the strictly equal distribution in which each receives only $10.
Why does justice require this? Isn’t it just to pay or reward people according to their efforts and abilities, not their position at the bottom of the social scale? Rawls’s response is that the people who make the greatest efforts and display the highest abilities do not really deserve a larger reward than anyone else. Effort and ability are generally characteristics that people come by through heredity and environment.
Someone may be an outstanding surgeon because she was born with superior mental and physical potential that she then worked hard to develop. But this person can-not take credit for talent she was born with, nor even for her hard work if her family instilled in her the desire to work and achieve. If justice requires us to give greater re-wards to some people than to others, Rawls concludes, it is not because they deserve more but because this is the best way to promote the interests of the worst-off people in society. If justice requires us to pay physicians more than coal miners or barbers or secretaries, then it can only be because this is the best way to provide good medical care and thus promote everyone’s vital interest in health—including the vital interests of society’s worst-off members.
The significance of Rawls’s second principle is that it takes welfare liberalism in a more egalitarian direction. An equal distribution of wealth and resources is Rawls’s starting point, and an unequal distribution is justified only if it is better for those at the bottom of society. If the wealth and power of those at the top of the social scale do not
indirectly benefit those at the bottom, then Rawls’s theory calls for a redistribution of that wealth and power in a more nearly equal manner and argues that under blind or impartial conditions this is what any rational self-interested individual committed to liberty and democracy would want. For people can enjoy neither equal liberty nor equal opportunity when there are great and unjustified inequalities of wealth.
Nozick and the Minimal State. Three years after Rawls’s Theory of Justice appeared, Robert Nozick (1938–2002) published Anarchy, State, and Utopia. There Nozick asserts that all individuals have rights that it is wrong to violate. But if this is true, he asks, can there ever be a government or state that does not violate the rights of its people? Nozick answers by drawing on another old liberal idea—the state of na-ture. Like Hobbes and Locke, Nozick wants the reader to imagine a condition in which there is no government, no state, no political or legal authority of any kind.
In this state of nature, individuals have rights, but they lack protection. Some sharp-eyed entrepreneurs will notice this and go into the business of providing protection, much as private security guards and insurance agencies do. Those who want protec-tion may sign on with a private protective agency—for a fee, of course—and those who do not must fend for themselves. Either way the choice is strictly theirs—a choice denied, Nozick says, to people who live under governments that make them pay for protection whether they want it or not.
When people subscribe to a private protective agency, in other words, no one vio-lates their rights by forcing them to do something they do not want to do. But out of a large number of competing protective agencies, Nozick argues, one will grow and pros-per until it absorbs the rest. This single protective agency, so large that it serves almost everyone in an area the size of a modern nation-state, will become for all practical pur-poses a state itself. And it will do so, Nozick claims, without violating anyone’s rights.
This new state, however, performs only the functions of a protective agency.
Nozick claims that this “minimal state” is legitimate or just because no one’s rights are violated by its creation. But it is also the only legitimate state. Any state or gov-ernment that does more than merely protect the people must violate someone’s rights and therefore must be unjust. The policy of using taxation to take money from some people for the benefit of others, for instance, is “on a par with forced labor.”42 Someone who earns $100 and has $20 taken in taxes probably has no com-plaint if that $20 goes to provide him or her with protection; but if, say, $10 goes to provide benefits for others—health care, education, unemployment compensation—
then the worker is effectively forced to spend 10 percent of his or her working time working for others. This is the equivalent of forced labor, according to Nozick, and therefore a violation of individual rights.
Like other neoclassical liberals, Nozick holds that government should protect us against force and fraud, but otherwise should leave us alone to compete in an unre-stricted free-market economy. Government should not forbid capitalist acts between consenting adults, as he puts it. Like other neoclassical liberals, Nozick defends the individual’s right to think, say, and do whatever he or she pleases—as long as no one else’s rights are violated. But the individual can enjoy these rights only if the state is a “minimal” one.
Nozick’s philosophical defense of neoclassical liberalism extends the argu-ments of several contemporary theorists, notably Friedrich Hayek (1899–1992) and
Milton Friedman (1912–2006). Ayn Rand (1905–1982) also gave fictional form to similar ideas in such popular novels as The Fountainhead (1943) and Atlas Shrugged (1957). In the last forty years or so, in fact, neoclassical liberalism has enjoyed a re-vival in both philosophy and politics under the name of libertarianism, playing an important part, as we have seen, in the “conservative” economic policies of Margaret Thatcher and Ronald Reagan. Hayek and other neoclassical liberals, however, insist that they are not conservatives who want to preserve society’s traditional arrange-ments, but true liberals who are committed to protecting and extending individual liberty, even if that means upsetting customs and traditions.43 Inspired by Hayek, Friedman, Rand, and others, neoclassical liberalism in the United States has given rise to the Libertarian Party, which sponsors candidates who want to move the coun-try in the direction of the minimal state. But for some libertarians, even the minimal state is too much government. In their view, true devotion to liberty demands that government be abolished altogether.
Libertarian Anarchism. In many respects libertarian anarchism is simply the most extreme extension of liberalism. Libertarian anarchists share the liberal belief in the value of individual liberty and equal opportunity. They also agree with classical and neoclassical liberals that the state is the major threat to individual freedom. But lib-ertarian anarchists go beyond other liberals to argue that the state is an altogether unnecessary evil. Because it is both evil and unnecessary, they conclude, govern-ment ought to be eliminated entirely. In their view, true liberalism leads to anarchy (from the Greek an archos, meaning “no government”). In other words, anarchism is the logical culmination of liberal individualism.
Although this position has never enjoyed broad popular support, it has had some articulate defenders, such as the American economist Murray Rothbard (1926–1995). Rothbard and other libertarian anarchists maintain that free-market anarchism is both desirable and practical. It is desirable because when there is no coercion from government every individual will be free to live as he or she chooses.
And it is practical, they claim, because anything governments do private enterprise can do better. Education, fire and police protection, defense, traffic regulation—
these and all other public functions can be performed more efficiently by private companies competing for customers. Someone who wants police protection can
“shop around” to find the company that provides the right level of protection at the best price, just as consumers nowadays can shop for a car, house, or insurance policy.
Roads can be privately owned and operated, just as parking lots are now; all schools can be private, just as some are now; even currency can be provided by private en-terprise, just as credit cards are now. There is, in short, no good reason to retain the state. Once enough people recognize this, the libertarian anarchists say, we will be on the way to a truly free and truly liberal society.44