Prelude to the Total State; N. Hultberg

-EDWARD GmBON C apitalism died in 1929, according to the esteemed pundits of our day. Since that fateful year, the prominent intellectuals and politicians of our country have been promot ing the welfare state as a "safe, responsible, middle ground between the opposite poles of capitalism and socialism"-the perfect system to preserve freedom, maintain economic stability, and bring about the good life. Today'schaotic and corrupted America does lit tle to corroborate that notion. What the last 60 years have shown is that the welfare state is not a stable middle ground at all, but a highly unstable mixture of individual freedom and government coercion that is evolving steadily away from free dom toward an all-pervasive statism. It becomes more obvious each year that what Ludwig von Mises repeatedly declared through out his extensive writings is true, that there can never be a third way between capitalism and socialism-that is, a third way that does not de generate into socialism or progress to capitalism.

The Herculean task confronting us today is to convince the public, in clearcut terminology, why this is so. What cogent arguments can we articu late to warn America about the dangers of adopt ing th,e policies of welfare statism, and expose as Mr. Hultberg is a freelance writer in San Diego. well its tendency to evolve into some form of tyranny? The purpose of this essay is to examine three of the primary reasons why unchecked welfarism is only a "prelude to the total state." These argu ments have been expounded in the past by numerous insightful advocates of freedom, but they must be repeated and rearticulated by dif ferent minds and voices for new generations of Americans. InterventionsBring MoreInterventions The first reason why the welfare state cannot sustain freedom is the famous Misesian thesis: Government interventions always breed eco nomic dislocations that "necessitate" more gov ernment interventions.

For example, no government can pay for the extravagances of welfarism solely with taxes, for the productive members of society will tolerate only so much taxation. The politicians in power inevitably turn to the expedient of monetary inflation, and through manipulation of the Feder al Reserve System pay for their extravagance. Here is where the chain reaction of govern ment interventions and dislocations really begins to play havoc, for one cannot inflate the money supply through the Federal Reserve without eventually causing higher prices. If government then tries to prevent prices from rising through price controls, it eliminates profits, slows produc354 tion, and causes shortages. The lower supply of goods, combined with monetary expansion, tends to raise prices still further. What was intended to stop rising prices, price controls, causes prices to rise. If price controls remain in effect, the results will be more severe shortages, malinvestment, black markets, and corruption. If government then attempts to control all the means of produc tion and distribution in an effort to eliminate the chaos and corruption its actions have caused, it must also control consumer choices and personal ambitions, for they determine what goods are to be produced. Government cannot control con sumer choices and personal ambitions without attempting to control the human mind through education, the press, movies, and books. The log ical consequence of government intervention is totalitarianism.

The KeynesianRevolution The rationale for government intervention stems from many sources,one of the most impor tant being the Keynesian revolution of the 1930s and its emphasis on "macro" rather than "micro" economic theory. This revolution shifted concern from the actions of individuals to the interplay of aggregates or collectives. In practice this meant the subordination of the rights of the individual to allegedly higher "goods," e.g., the good of the economy, the ex pansion of the GN~ and the building of a Great Society. Because their emphasis is on groups and aggre gates, welfare state (or macro) economists think in terms of expanding the economy's supply of money,dispensing the public'srevenues, revamp ing the nation~ priorities, and using the nation's resources. Groups, cities, minorities, society rather than individuals-are the important enti ties. Because of the profound influence that Keynes had, macro-economists now seek to coor dinate the nation's aggregates by manipulating its money supply, taxation, wage levels, business profits, and savings from Washington.

Here lies the major flaw of the interventionist program: To think in terms of manipulating prof its, consumption, savings, and investments of a society presupposes thinking in terms of manipulating human beings. You can't control money, wages, price levels, and ratios of private 355 consumption to public expenditures without also controlling people themselves. These phenome na are all merely effects; people and their thoughts, ambitions, and actions are the causes. Sinceit does no good to attempt to alter or plan effects without also controlling causes, our plan ners in Washington,who wish to control and regu late our nation's economic productivity in an effi cient manner, must ultimately try to control and regulate the causes of that productivity-which are the thoughts, ambitions and actions of the men and women who create it. This will require some form of authoritarian political system.

Welfare state theQreticians are now concerned mostly with relatively haphazard controls over human actions (through economic regulations), and over human thoughts and ambitions (through educational controls). But the laws of human action will mandate further evolution of control. A Modelfor the West? Despite the fact that individual freedom shriv els to minimal levels under Swedish-style wel farism, America's "liberal" academic leaders subtly applaud such a system, considering it to be a model for the West. As The Los Angeles Times recently reported in reference to the "Swedish Model": "Concerned Swedish economists are questioning whether the welfare benefits are still worth what they say is the cost: the overwhelming taxes, economic slowdown, high inflation, falling productivity, lowering worker morale, and rising unemployment that seem now to characterize this nation of 8.6 million people." 1 Several writers in the past two decades have exposed the nightmarish cost of Sweden's state welfarism, Roland Huntford's The New Totalitar ians being the most celebrated. Under the bene volent guardianship of an all-powerful, central ized state, the Swedes relinquished their indepen dence for the numbing existence of the hive, where soul-crushing bureaucracies stretch their tentacles into every nook and cranny of life. Tax es exceed 90 percent of income, children become wards of the state, names become numbers, obse quiousness is admired, alcoholism and drug addiction are rampant, and anxiety is everyone's constant companion.

Naturally, statist intellectuals here in America 356 THE FREEMAN • SEPTEMBER 1992 solicitously denounce such a development, main taining that they want only to intervene a little bit, and just "redirect resources," "smooth out disparities," "create a perpetual prosperity." They don't intend to regiment all of life. They don't intend to build a monster bureaucracy. But, eventually they must, if they intend to control things from Washington. In his monumental study of 20th-century bureaucratism, The Myth of the Welfare State, Jack D. Douglas analyzes this self-reinforcing nature of statist growth, and why interventionist governments tend to evolve into more and more dictatorial governments: "The megastate ratchets up slowly,always in the guise of 'serving the com mon welfare' and generally in the pretense of meeting a crisis. Once the bureaucratic regimen tation of everyday life has become pervasive, it begins to trigger" acute socio-economic crises (inflation, recessions, shortages, monopolies, corruption, etc.), which create "alienation and outrage" throughout the country. "These crises triggered by the higher levels of statist bureaucra tization then become the enabling crises of fur ther ratchets-up in statist powers-it becomes a vital necessity for 'the common welfare' to 'solve' the problems being caused by the drift into statist collectivization by increasing the bureaucratic regulations, which in turn produce new crises that must be solved by further ratchets-up.

"The drift into statist regimentation of life is, thus, an autocatalyticprocess-it reinforces itself, or feeds upon itself. The drift upward into greater regimentation accelerates because the new statist attempts at solutions to problems destroy the old ways of dealing with them, and build ratchets under the dependencies on the new statist 'solu tions' as people restructure their life commitments in expectation of continuing those statist depen dencies. At the extreme, statist bureaucracies first breed a generalized dependency in individual per sonalities and then in whole subcultures, whose members transmit this dependency to new gener ations."2 Thus all welfare states, utilizing a mixture of economic freedom and government intervention, tend to establish pervasive controls over most of the political, economic, and educational activities of their people. It might take many, many decades for a nation to work itself into the position where by its regimentation is widespread and insufferable, but that day will come when there is such socio-economic chaos and stultification resulting from all the "ratchets-up" and "crisis solutions,"

that the government will finally give up on even the pretense of freedom, and suspend the basic rights of the people. SpecialPrivilegesto Factions The second reason why the welfare state cannot sustain freedom is that government welfarism destroysa limitedand objectiveframeworkof law by extendingspecialprivilegesto certainsegments of societyat the expenseof othersegments. For example, it conveys welfare services to the less productive at the expense of the more produc tive, protective legislation to various corporations at the expense of consumers and other businesses, job preferences to some at the expense of better qualified applicants, and labor lawspassed to favor unions at the expense of employers and workers. To put it more bluntly, the welfare state destroys the philosophy of "equal rights for all" in favor of "special privileges for factions." It is a doctrine of legalizedfavoritism,that must by its very nature lead to dissension, corruption, and tyranny.

Our intellectual leaders should consider the following: What possible hope for peace and good will can there be when some men and wom en (by joining forces with a large enough group) are allowed to use government coercion and intervention to gain their desires? What possible kind of life can people live when the degree of their freedom is determined, not equallyby the law of the Constitution, but unequallyby the vari able whims of bureaucrats and voters? What kind of social climate develops when people are penal ized for their ability and self-reliance, and rewarded for throwing tantrums en masse? What kind of individual freedom and economic stabili ty can we have when men and women are subject ed to such injustice? What type of country will evolve from such nonsensical and arbitrary rule? The last three decades of political-economic turmoil in America have shown us what type of country we can expecta chaotic assemblage of special interest groups (such as labor unions, eth nic minorities, welfare recipients, and activists working to promulgate the "rights" of women, homosexuals, and others) all demanding special privileges, controls, and handouts from the federal government. None of them is willing to con template the destruction of individual freedom they are perpetrating in the process. In fact, many feel they are enhancing freedom.

It is here in the nature of welfarism and its evolution that we get a glimpse of one of the most important issues of political philosophy: Governments can be organized under one of two types of law: limited and objective, or open ended and arbitrary. Which type we choose determines our way of life. The first leads to individualism and freedom; the second to collectivism and tyranny. Limited and objective law means that the statutes enacted by the governingpower are prede termined to do only certain things for the people, and they are equally applicable to all citizens. In other words, there are no special privileges con veyed to some citizens,e.g.,entitlements, subsidies, controls, tariffs, and monopolies. The laws passed do not favor any individual or group over another. They do not help or hinder one in relation to anoth er. Whatever they do, they do for everyone. Open-ended and arbitrary law means that the statutes enacted by the governing power are hap hazard and unequally applicable to the citizens of a country. They are up-for-grabs,so to speak, con cerned with dispensing preferential treatment to powerful interest groups. They are not predeter mined, but flexible, and their meaning and appli cation are based upon the whim of the rulers (whether the rulers are one man, a council of men, or a plurality of the voters). There are either no limits, or poorly defined limits, placed upon the application of such laws.

Throughout history all governments have been organized, to some degree or another, upon an open-endedand arbitrarybasis. There has never been a country with a truly limitedand objective system of law. America came close in 1787, but even she allowed "special privileges" to be enact ed into law. Naturally there are gradations of arbitrariness. Some systems are more arbitrary than others in their exercise of governmental power, and thus more despotic than others. The welfare state vision is based totally upon , open-ended and arbitrary law (i.e.,the conveyance of special privileges according to the whims of the rulers· and the pressures of factions, with poorly defined limitations). The fact that it is democratic does not change the arbitrary nature and poorly PRELUDE TO THE TOTAL STATE 357 defined limits of its statutes, nor does such a fact convey legitimacy to the arbitrariness and open ness of its power, nor does it justify the vast array of privileges that its factions and majorities vote for themselves. Tyranny is still tyranny, whether it is one man, ten men, or millions of men usurping the rights of the individual. Welfarism, despite its democratic implementation, is just another form of despotism, and will, unchecked, evolve into a more despotic form.

A Moral-PhilosophicalShift The third reason why the welfare state cannot sustain freedom is rooted in the moral-philosoph ical shift this country has made since the turn of the century. Prior to 1913, America was predominantly a laissezfaire society, and definitely a much freer society. I say predominantlyhere, for America of course has never been a completely laissezfaire society. Even from the start in 1787, the govern ment arbitrarily exercised its power to dispense special privileges to various sectors of society (it passed protective tariffs, subsidized canals and railways, sanctioned various public-works bills, and until 1865 allowed the limited practice of slavery). But such interventionist favoritism was minimal throughout the 19th century, with the determination of most human action left up to the people themselves, according to their own desires. Thus what is important is that the great bulk of what was achieved by individuals during this peri od had to be done with their own peaceful effort and voluntarytrade among themselves.The law of the land was simple and just. No man could force another man to givehim the basiceconomic neces sities of life, either directly through robbery or indirectly through the government's power to tax.

This was the beauty and strength of Americathe key to her freedom. Young people were raised to expect protection, never provision, from their gov ernment. And thus they grew up as individuals in search of achievement,not as protesters in search of guaranteedincomes. The ratification of the 16th Amendment and the enactment of the Federal Reserve Act in 1913 changed all this. They established the Fed eral income tax and a central bank, which led to a surge of government intervention into the 358 THE FREEMAN • SEPTEMBER 1992 economy, which led to the Great Depression and the New Deal. The New Dealers opened wide the floodgates of government coercion in men's lives, by establishing the right of the government to take the wealth of some and give it to others. In this way, they altered the entire conception of what government's role in life should be. Amer ica was formed and built upon the idea of gov ernment being an objective preserver of the peace. The New Dealers made government an arbitrary manipulator of the people.

President Franklin Roosevelt and the statists of the 1930srose to power by establishing what they termed an "Economic Billof Rights," whichstated that all men have certain economic needs (hous ing, food, medicine, income, security); and if they won't provide themselves with those needs, it is the duty of the government to step in and do it for them through higher taxation and the political redistribution of property. This in essence established morally and philo sophically that whatever a person "needs" he has a "right" to. As a result, a whole new generation of Americans has come to believe that their govern ment is not just their protector but also their provider. Thus they think nothing of now demand ing more government favors and handouts every year as a "right." And why shouldn't they? The prevailing morality of our society has told them that all men deserve not just the right to produce, but now the right to confiscate the economic "necessities" of life, the right to define those "needs" by majority vote, and the right to use the power of the state in the confiscation process.

FromSelf-Relianceto Dependency The endless protest movements, wars on pover ty, ever higher taxes, inflation, regulation, and spe cial interest legislation that have come to be such prominent factors in our lives in America today are the long-range results of the moral-philosoph icalshift we made at the turn of the century-from a country built upon self-reliance and individual freedom, to a people dependent upon government handouts and state control. Government growth requires a moral rationale. If we were never to furnish such a rationale, we would be immune to state dictatorships. We have provided that rationale, though, by teaching the younger generation that their "needs" are "rights," and that the redistribution of private wealth is a legitimate policy. Once such a redistributionist philosophy is accepted, all factions' demands for more welfare, better housing, guaranteed incomes, special sub sidies, loans, and favors provoke more demands and an ever growing deluge of taxes, bureaucracy, deficit spending, and inflation.

Collectivistswill approve of it by vote. "It's the least disastrous of our alternatives," they will cry, not bothering to contemplate that it was their gov ernment controls in the first place that brought on the very chaos that they willthen use to justify all pervasive government control. But collectivist mentalities are not concerned with getting at the actual causes of our problems. They are concerned only with increasing the power of the government to feed their delusions. These then are three of the more important rea sons why the welfare state philosophy will ulti mately lead to tyranny: (1) government interven tions lead to more and more intervention; (2) dispensing special privileges leads to arbitrary law; and (3) freedom's moral base is subverted with redistributionist tax policies. The alternative to this insidious drift of our welfare state system is the one course our intel lectual and political leaders refuse to face restoration of a true capitalist economy, where no special privileges are dispensed by government to anybody, where men and women are taxed equal ly, where government is strictly controlled by the Constitution, and where productive peaceful people are left alone to build their lives to what ever level they are capable, while helping those who can't through the many voluntary charitable organizations that spring from the American people's abundant compassion and goodwill.

Such a system worked splendidly for 125 years here in America, and only began to fizzle as the government began to intervene. This is not a plea to return to the simplicity of the horse and buggy age. This is an exhortation to restore the principles of a free market and a strictly limited constitutional government, for these are the only proper principles, and the only system of social organization that will provide enduring freedom, prosperity, and dignity. The lessons of history are clear.If a country will not respect the concept of private property, allow freedom in the marketplace, and refrain from dis pensing favors and subsidies to special interest groups, then it is on its way to economic deteriora tion, mob rule, and an arrogant, overweening form of government. The countries of most of the rest of the world have already dropped over the philosophical precipice to collectivism, and are gradually evolv ing into various forms of "benevolent authoritariPRELUDE TO THE TOTAL STATE 359 anism." America remains as a bastion of individual freedom, but even she is under severe attack, and faltering. America still has a chance because she still has a choice. But her people must identify the nature of the ideological struggle and make the right choice. D 1. "The Swedish Model Doesn't Seem Quite So Lovely These Days," The Los Angeles Times,June 18, 1991.

2. Jack D. Douglas, The Myth of The Welfare State (New Brunswick, New Jersey: Transaction Publishers, 1989), p. 24. FreemanEditorAwardedPrize The Foundation for Economic Education is delighted and proud to announce that Edmund A. Opitz, a member of the Founda tion's Senior Staff since 1955and a contributing editor of The Free man, has been awarded a $5,000 prize in the Amy Foundation Writing Awards for 1991. Mr. Opitz's award-winning essay, "Biblical Roots of Ameri can Liberty," appeared in The Freeman in July 1991. Its thesis is that "Nations of the West were founded on biblical principles of justice, freedom, and a work ethic." Mr. Opitz is an ordained Congregational minister, the founder and coordinator of The Remnant, a fellowship of conservative and libertarian ministers, and a founder and secretary of The Nockian Society. He has published more than one hundred fifty articles and reviews in a score of publications. He has written two books, The Powers That Be and Religion and Capitalism: Allies, Not Enemies and co-authored a third, The Kingdom Without God. Mr. Opitz has lectured widely and participated in more than two hundred FEE seminars.