Routing the Fabians; K. McDonald

-Elie Halevy FOUNDED in England in 1884, the Fabian Society's aim was. to spread the ideas of socialism gradually by democratic means. For almost a cen tury it succeeded. In Great Britain and North America, under liberal and conservative governments alike, the state's influence spread. As re cently as the late 1970s, every mem ber of (British) Prime Minister James Callaghan's cabinet was a Fabian. Kenneth McDonald is a freelance writer and editor living in Toronto. Nevertheless it was increasingly plain to majorities of British and North American voters that at tempts in the Fabian mode "to achieve through state action the co ordinated control of the economic forces of society" had built up a gov ernmental apparatus that was chok ing their economies. The election of Margaret Thatcher, Ronald Reagan and, later, Brian Mulroney signaled a rejection of Fabianism. What has not been signaled is the nature of the "ism" that will replace it. It is not enough to hail the bless ings ofindividual enterprise, or freer trade, or even individual freedom.

All three stand to be enhanced as the state assumes a less active role in the economy. Desirable though that en hancement may be, it lacks the ap peal that wins elections. Nor can we 603 604 THE FREEMAN October afford the luxury of the Fabians' gradualism in reverse. The acceler ating burden of debt-servicing charges alone demands action in years, not generations. The political task is to establish a principle, to form policies that ad here to it, and to explain the com bination to the people. Suppose that in North America the principle were to be that the best government is that which governs least, i.e., the antithesis of Fabian socialism. Policy would then be di rected toward dismantling the gov ernmental apparatus. Government corporations would be offered for sale. Any unsold after a stated in terval would be dissolved. Services provided solely by federal govern ments would be contracted out to private suppliers whose terms of contract would stipulate criteria of service and performance. Federal governments would withdraw from revenue-sharing programs of a ser vice nature (education, health and hospital care), leaving to states and provinces the options of making up the difference by direct taxation or contracting the services out.

Individual Choice The effect would be to transfer sig nificant amounts of spending power, and decisions about spending, from governments back to the individuals who contribute to their revenue. Two consequences would follow. First, as federal spending fell, bud gets would move into balance while providing for steady retirement of the public debt. Second, as states and provinces assumed full responsibil ity for matters now subject to reve nue sharing, the cost of discharging that responsibility would be met by direct taxation supplemented by borrowing on their sole credit. In short, the governmental appa ratus, which now absorbs about half of national incomes and is adding more to debt every day, would return to. solvency. State and provincial governments, whose seduction into shared cost programs has also forced them to share the debt that the pro grams have incurred, would regain control of their affairs.

Fabians and other critics would de nounce the foregoing as a return to laissez faire and the law of the jun gle. In fact, however, except for a pe riod in 19th century England, Fran ~ois Quesnay's laisser passer et laisser faire (free passage and free dom of action) has not been tried. One of many myths about laisser faire is that it caused the Great Depression. As Murray ·Rothbard wrote: "Hoover's role as founder of a revolutionary program of govern ment planning to combat depression has been unjustly neglected by his torians. Franklin D. Roosevelt, in large part, merely elaborated the policies laid down by his predeces sor. To scoff at Hoover's tragic fail1985 ROUTING THE FABIANS 605 ure to cure the depression as a typ ical example of laissez faire is drastically to misread the historical record. The Hoover rout must be set down as failure of government plan ning and not of the free market."!

By contrast, the period from the end of the Napoleonic War to 1890 saw England's governmental expen diture fall from 29 per cent of the na tional product to nine per cent. As H.S. Ferns described it: "This period of government expenditure declin ing in proportion to the total product of the community was one of eco nomic success measured by almost any indicator one cares to choose: population growth, production per capita, intake of food per capita, house building, technological inno vation, saving and investment, im provements in literacy, average length of life, etc."2 The irony is that laissez faire cap italism, which would engage every one's self-interest to everyone's ben efit, is hobbled by self-interest in league with the state. Powerful groups use elected governments as their agents to restrain trade in their favor. Industry associations, com mercial and financial interests, la bor unions, even the associations of consumers who have most to gain IMurray N. Rothbard, America's Great Depression (Princeton, N.J.: Van Nostrand, 1963), p. 168.

2H.S. Ferns, The Disease ofGovernment (Lon don: Maurice Temple Smith Ltd., 1978), p. 15. from laissez faire-all demand spe cial treatment. The results are seen in oligopolies, cartels, import quo tas, tariffs, restrictive labor laws and affirmative action programs. In Canada, goods often pass more read ily to and from the United States than they do between provinces. The truth is that all of us are de manding more from governments than they can provide at the cost we are prepared to pay. We won't pay more taxes-the growth of the un derground economy bears witness to that-yet we expect governments to supply the services below cost. It is the rising cost of subsidizing the ser vices, and politicians' reluctance to reduce the subsidies, that has put governments into debt. Invest in the Private Sector Nevertheless, appeals to self-inter est may constitute the best hope for change. It is a fact that the growing pro portion of federal budgets consumed by debt charges reduces the propor tion that is available to fund gov ernment services. As the debt rises, the taxpayers get smaller and smaller returns on their investment in the government that taxes sup port. If the government raises taxes to meet its rising costs, the taxpay ers will keep less of their income.

Everything points to the taxpayers getting less value for their money. It is also a fact, borne out by tax606 THE FREEMAN payers' daily experience, that pri vate suppliers give better service than governments. Take those two facts together and it is plainly in the taxpayers' inter est to invest less in the government and more in the private sector . .Getting politicians to subscribe openly to the proposition would call for a self-denying ordinance whereby they would resist the temptation to spend other people's money and start helping them to save some of it instead. This might be accomplished by looking upon taxes as an investment in government services rather than a levy to meet government's ex penses. Switching from the slow, cumbersome and costly supplier to the efficient and competitive one would be simply an act of good business. It remains to consider how powerful groups might be resisted in their claims for special treatment.

The remedy is to be found in appeals to the principle of equality before the law. "We're sorry, we sympa thize with your proposal, but we must treat everyone alike. Govern ment as it has been allowed to ex pand is a drag on the economy. You and everyone else will benefit through its withdrawal from active participation. " Thus two principles are involved: the best government governs least; and all are equal before the law. Having established them, the polit ical leadership would need a rally ing cry that would convey the mes sage to the people. Quesnay's free passage and free dom of action is ready made. There is an exuberant ring to it, a slogan to blow fresh air across the barriers to freedom. I Upcoming Articles NOVEMBER • Should American Business Give Up Smoking? - Gary North • Livingin Two Chinas - Dean Russell • Letters to the Editor Beginning a new section in The Freeman.We welcome your comments.

Send your letters (short ones, please) to Letters Editor, Foundation for Economic Education, Irvington-on-Hudson, New York 10533 DECEMBER • On the Bishops and the Market - Charles A. Baird • Getting There - John K. Williams • John Witherspoon: "Animated Son of Liberty" - Robert A. Peterson David Osterfeld African Famine: The Harvestof SocialistAgriculture David Osterfeld is Associate Professor of Political Science at St. Joseph's College in Rensselaer, In diana, and an associate of The Institute for Humane Studies. THE popular explanation of the cur-The United Nations (UN) has rent famine in Mrica is the drought. listed 24 African countries as threat But is this convincing? The North ened by famine. These countries American Great Plains has major - have one crucially important thing droughts about every twenty years, in common. They have all pursued the most severe being the 1934-36 policies which amount to nothing Dust Bowl. A major drought was re-short of an assault on agriculture.