Libertarianism: A Dead End

'The lumping together of libertarians and conservatives (by the Left) has long been a successful guilt-by-association attack on the latter.'

From The European Conservative

By Sven R Larson, PhD

Despite clear and unwavering opposition to socialism, the conservative movement remains reluctant to dip its toes into the debate over the welfare state, the foremost vehicle for socialist policies in democratic countries.

America, like Europe, needs more conservatism. To make a difference, the conservative movement needs a stronger policy portfolio, and one of the most pressing areas is government spending. Excessive welfare-state programs harm society well beyond the public purse: they discourage workforce participation, incentivize people to break up traditional families, restrict individual freedom, and trap some of the world’s most advanced economies in perennial stagnation. 

To be successful, we need to maintain a strong, unbreakable, and transparent line from principles to practice. To this effect, we offer the National Conservative Statement of Principles and its implications for putting our ideology to work. 

It is time to continue this conversation and overcome the remaining intellectual obstacles. There seems to be more of those in the European discourse about conservative practice than in the American one. It is time for European conservatives to embolden themselves and aim for more policy influence. The continent is home to one of the world’s most successful examples of conservatism at work, but it is always beneficial to broaden the approach to policy reform. In that respect, the European conversation could certainly benefit from the more vibrant policy end of its American counterpart.

One of the problems for conservatives is their association—real or perceived—with libertarians. When conservatives propose policy reforms, they are sometimes criticized by the left precisely for being ‘libertarian.’ This happens often in the field of welfare-state reform, where conventional socialist wisdom suggests that libertarians want to eradicate the welfare state. The picture painted is one of the poor left hungering in the streets, much like Danish author Hans Christian Andersen’s Little Match Girl. 

The lumping together of libertarians and conservatives has long been a successful guilt-by-association attack on the latter. It has stifled the right-of-center debate over welfare-state reform, with both libertarians and conservatives largely ignoring the field of entitlement-based government spending.

Fortunately, that is slowly changing for the better. Not a day too soon:

• Socialist ideas have had enormous success in expanding their welfare state, both in Europe and in America. Their socioeconomic engineering has reached the point where capitalism is in jeopardy. We need to protect it, but conservatives cannot leave it in the hands of libertarian anarcho-capitalist pundits who have overdosed on Murray Rothbard. We need to save capitalism by applying a conservative solution to the capitalist paradox.
• The socialist welfare state has been a frightfully effective tool for the destruction of traditional social institutions, first and foremost the traditional family. If we want to resurrect conservatism as the defining ideology of our time, we need to eliminate the conglomerate of tax-paid entitlements that incentivize the very opposite.

Conservatives stand on firm ground in terms of forceful arguments against socialism, especially in Europe. Unfortunately, despite clear and unwavering opposition to socialism, the conservative movement remains reluctant to dip its toes into the debate over the welfare state, the foremost vehicle for socialist policies in democratic countries. As mentioned, there are signs of improvement here, but conservatives are still held back by worries over ‘match-stick girl’ attacks from the Left.

Recently, such fears have become unwarranted, but not by advancements in conservative thought. The reason is, instead, an intellectual surrender of sorts among libertarians. As I explained a year ago in an analysis of the current state of libertarianism:

In the past 20 years, a tectonic shift has taken place, redirecting the libertarian spotlight away from economic freedom onto individual freedom. They have stopped advocating for reforms to big-government spending, campaigning instead for gay marriage and the legalization of narcotic drugs.

There is hardly a better example of warped libertarian priorities than the one I gave: the Cato Institute, America’s best-known libertarian think tank, is perfectly fine with new taxes, provided that they are levied on legalized heroin. 

The Cato Institute is far from alone among libertarians in leaving a walk-over on the welfare-state battlefield, but their position as a thought leader makes their priorities all the more conspicuous. It is not surprising, though: libertarians have been slowly capitulating on economic redistribution, the core principle of ‘democratic’ socialism, since at least the 1980s.

Some political theorists have noted this and explained the logic behind it. Two of the foremost among them are James Sterba (“A Libertarian Justification for a Welfare State,” Social Theory and Practice, Fall 1985) and Ruth Sample (“Libertarian Rights and Welfare Rights,” Social Theory and Practice, Fall 1998). Libertarian philosopher Matt Zwolinski proves them right, passionately making the case that government ought to hand out massive amounts of taxpayers’ money to everyone (“Property Rights, Coercion, and the Welfare State: The Libertarian Case for a Basic Income for All,” The Independent Review, Spring 2015).

A recent report from the Cato Institute confirms that libertarians no longer consider the socialist welfare state to be a problem. Titled “Empowering the New American Worker,” the report puts forward a number of ideas for how to improve the American workforce. Many of the suggested policy reforms are directly related to the design—the ideological architecture—of the welfare state, and not a single one of those reforms indicates an ambition to de-socialize it.

In practice, this means that the Cato Institute accepts the basic premise for tax-funded entitlement programs: that the ‘rich’ ought to pay more and get less from government so that the ‘poor’ can pay less and get more. This is the ideological banner under which socialists march toward their ideal: a society where there are no economic differences between individual citizens.

To be fair, the Cato report begins on a different note, with a chapter by Jeffry Miron, Cato’s vice president for research, and economics graduate student Pedro Aldighieri. They explain that economic growth is important if people are going to have opportunities to work and make more money. They suggest (but do not prove) that policymakers have to choose between more economic redistribution and more economic growth. 

This is a good point, and it is ostensibly the first time that Miron talks about economic growth in contrast to economic redistribution. It is nice to see that he has studied up on the tension between these two policy goals. Unfortunately, Miron’s and Aldighieri’s emphasis on economic growth falls on deaf ears across the rest of the report. Not one of the welfare-state-related policy reforms aims to change the actual, ideological function of government spending.

Most of the reform ideas are centered on removing economic regulations, which is not a bad idea. The problem is that regulations are generally half as costly to the economy as taxes are, and to cut taxes you first need structural spending reforms. 

Again, the Cato report is void of such reform ideas. It could have proposed a re-focusing of the welfare state from economic redistribution to the provision of a basic last-resort support system. Instead, it spends a lot of the reader’s time promoting increased immigration. 

The idea behind increasing the workforce from abroad is that when labor supply grows, it suppresses wages and makes it more affordable for businesses to hire workers at any given level of sales. 

This is just a modern iteration of the erstwhile Say’s Law. As such, it suffers from the same problem that economist Jean Baptiste Say left unsolved a long time ago. When real wages are suppressed, organically or artificially, the overall standard of living declines. Consumers spend less money, at which point it does not matter how cheap labor becomes through increased immigration. There won’t be spending enough in the economy to even keep the domestic workforce employed. 

But we don’t have to resort to high theory to see the flaws in Cato’s immigration mantra: all we need to do is compare the economic stagnation in immigration-friendly Germany, to immigration-skeptic Hungary—now a powerhouse of economic growth, labor earnings, and foreign direct investment.

The Cato report’s desire for increased immigration becomes almost comical when in the chapter on how to expand access to childcare for working parents, the authors suggest that Congress removes the “English proficiency requirement” for childcare workers. Meänkieli for your kids, anyone?

On a serious note, though: the U.S. economy is operating at an employment-to-population ratio that is a full percentage point below where it was three years ago (before the pandemic). Right there, the Cato scholars could find 2,645,000 idling workers, who should reasonably be given priority to new jobs before anyone pundits for higher immigration. 

Regardless of how comical or illogical these pro-immigration arguments are, they are telling of a libertarian policy priority that is just as well highlighted by what the Cato report does not talk about. As mentioned, there is not a single proposal for how to reconfigure government entitlement spending, a.k.a., social-benefit programs. At no point do the policy experts who contributed to the report suggest that government stop handing out cash and in-kind benefits to the gainfully employed. Not even the chapter on welfare reform (pp. 149-158) dares to talk about structural changes to social-benefit programs. 

By replacing welfare-state reforms with unending efforts to talk up immigration, the intellectual firepower of the Cato Institute de facto ignores the high economic price that both America and Europe have paid for their socialist welfare states. This exhibition of libertarian complacency toward economic redistribution also raises concerns regarding what modern-day libertarians mean when they say they are for individual freedom. As the welfare state grows, with more and more of our needs being provided for by government, the room for our own individual choices in life shrinks proportionately. 

Fortunately, there are conservative thought leaders at work, and some of them are in close geographic proximity to the Cato Institute. Recently, the Heritage Foundation, America’s best-known conservative think tank, released its own policy-reform report, with an impressive amount of ideas for how to turn the American welfare state more conservative. While the report failed to reach its goal on many accounts, it was nevertheless a respectable effort at replacing economic redistribution with social compassion as the ideological hallmark of tax-paid entitlement spending.

The difference between the approaches taken by Cato and Heritage is one of applied political theory. Cato operates on an ad-hoc basis, constrained by their self-imposed ambition to not provoke ‘Little Match Girl’ attacks from the Left. Heritage, on the other hand, has emboldened itself to the point where it is willing to demonstrate that you can indeed reform the welfare state without exposing yourself to such attempts at moral stigmatization. 

Welfare state reform is not just about restraining government spending. It is about bringing economic freedom to families and individuals, and with it, individual freedom. It is about breaking incentives and the forces of government monopolies that cram people into preset standards—life templates—for decisions on work and family. 

When government outlays are dictated by the doctrine of economic redistribution, spending programs monopolize the services for which they are designated. Government decides what health care we can get, and when; government determines when your kids go into daycare, what school they attend, what they learn there. When government controls your income security, a tax-paid bureaucrat will determine when you can take time off from work, and why. 

And then there is the classic example that Ronald Reagan mentioned in his epic “Time for Choosing” speech. Social benefits reward divorce over marriage and leisure over workforce participation.

Taxes that fund a welfare state often have the same ideological architecture as spending programs do. High marginal income taxes, such as they have in Scandinavia, punish families that try to live on one income, and they reward parents who have few kids, leave what kids they have to government care, and work full time. 

For these reasons, conservatives should pay more attention to the welfare state, and how it can be reconfigured in the image of conservatism. As mentioned, we have an excellent example right in the heart of Europe; let’s make the list longer.