February 11, 2002

Rich Lowry needs a basic lesson in free market economics

The utter cluelessness of what passes for ostensibly "conservative" leaders these days was brought home to me when I read the following item by National Review editor, Rich Lowry:


"I love James Surowiecki of The New Yorker. He's a great financial writer. So, I wonder about his argument in the current issue that defense spending hurts the economy, by gobbling up all the good scientists and researchers, thus diverting them from more economically productive work: ‘Between 1994 and 2000, the percentage of research and development that was financed by the government fell to its lowest point ever. Corporate R. & D., meanwhile, accelerated by 8.5 per cent a year. Productivity rates jumped to levels not seen since the nineteen-sixties, fueling the longest economic expansion in America’s history.’ Does that make sense? If anyone has special insight on the question, drop me an e-mail, richardlowry@hotmail.com."

Yes, by all means, please email the befuddled Lowry and let him in on a little secret: militarized markets are not free markets. Yes, Mr. Surowiecki makes sense, and I’ll tell you what also makes perfect sense: that the tousle-headed young editor of America’s premier conservative magazine should be baffled by what is, after all, an elementary lesson in free market economics – and from a writer for the liberal New Yorker, yet! Because, you see, it all started with Lowry's predecessor, Bill Buckley...


In the first year or so of National Review’s founding, back in 1956, its then-young tousle-haired editor, William F. Buckley, Jr., solicited an article from the noted conservative writer and radio commentator, John T. Flynn, who promptly complied with a denunciation of President Dwight D. Eisenhower’s policies as just another variant on the socialistic "rackets" of the New Deal and Harry Truman’s "Fair Deal": "It is," Flynn averred, "nothing more than the use of government money, acquired through taxes and created by debt, to buy the votes of numerous minorities and thus remain in power." Well, so far, that’s some pretty uncontroversial stuff, at least in conservative circles. But wait:

"In pursuit of this racket, the politicians are confronted by the problem of finding defensible activities on which to spend. There must be visible in the spending some utility to justify the heavy taxes. Of course the oldest of all rackets for spending the people’s money is the institution of militarism. It creates a host of jobs – at low wages – in the armed services plus the far better paid and numerous jobs and dividends in the industries which produce the arms, provide the sailors and soldiers with food, clothes, medical care, and, juiciest of all, the weapons of war."

~ "A Rejected Manuscript," from Forgotten Lessons, by John T. Flynn [Greg Pavlik, editor] Foundation for Economic Education, 1995.


Flynn, a grizzled old America Firster who warned -- in 1954 -- against the dangers of US involvement in Southeast Asia, received a letter from young Buckley not only rejecting the piece but also upbraiding him for failing to see the "objective threat from the Soviet Union" which "threatens the freedom of each and every one of us." It was an outrage, of course: here was the obstreperous young punk Buckley, solemnly lecturing Flynn – the renown anti-Communist and best-selling author of While You Slept: Our Tragedy in Asia and Who Made It, and The Lattimore Story – on the dangers of the Red Menace! Adding insult to insolence, Buckley enclosed a "kill fee" of $100 – real money back in those days – as if to underscore that the courageous old conservative warhorse had indeed fallen on hard times.

Flynn promptly returned the check, along with a note to Buckley in which he assured the neo-conservative whippersnapper that he was "greatly obligated" for "the little lesson." Although Buckley apologized for his incredible arrogance the next day, and tried to flatter Flynn by calling him "a mentor in whose writings I never cease to delight and from whose courage I draw strength," it was clear that there was no room for Flynn and other libertarian conservatives in the "New Right" of Bill Buckley and National Review.


That the Gen-X Buckley clones of today’s National Review understand the dynamics of expanding state power no better than the original is hardly surprising. What is astonishing, however, is the childlike simplicity of Lowry’s ignorance, almost touching in its plaintive appeal to anyone with "special insight" to solve this conundrum. Out of charity, then, let us clue the editor of the nation’s leading free market conservative magazine in on the ABCs of market economics, as well as the history of the last century:


War has been the great engine of State expansion in the twentieth and every other century. State interventions enacted in wartime became permanent, and constituted a "great leap forward" for Big Government in every instance. A partial list: protective tariffs and internal federal taxation (War of 1812), the income tax, bigger tariffs, excise taxes, conscription (Civil War), large-scale economic planning and pervasive government controls (World War I), and the culmination of these trends was surely the New Deal, which, during World War II, combined the welfare state and the warfare state in one streamlined package. The "war on poverty" of Lyndon Baines Johnson was accompanied, appropriately enough, by an equally disastrous war abroad. And we are already hearing, from the left, enthusiastic accolades to Bush’s war policy on the grounds that it will lead, inevitably, to bigger government – and defang the supposedly "anti-government" conservatives. Their jubilation is, unfortunately, justified.


As conservatives call for the iconization of Ronald Reagan in honor of his recent birthday, one of their main arguments for engraving his image on our currency, or adding it to the other Presidents on Mount Rushmore, is that here, after all, is the man whose military buildup so drained the Soviets that their system went kaput. Forced to divert an increasing proportion of limited resources to military hardware and research rather than the production of consumer goods and capital investment, the Soviet system eventually lost popular support and imploded in on itself. Why couldn’t this process work in the same way in the US?

Surowiecki is absolutely correct because the immutable laws of economics are universal. Under socialism, as the free-market economist Ludwig von Mises was the first to point out, in the absence of real prices, resources are misallocated. This leads to massive error, and, eventually, complete collapse. Resources better spent on research into some arcane but ultimately profitable and beneficial field are, instead, spent on a "war on poverty," urban "renewal," and, say, an $800,000 grant for research into "aromatherapy" and other "alternative" remedies.


Conservatives have a hard time applying the same principle to what free market economist Robert Higgs calls the military-industrial-congressional complex: the gigantic "national security" bureaucracy and the big military contractors, who hardly operate in anything remotely resembling a free market. What Lowry somehow misses is that the major source of income for these defense mega-giants, such as Lockheed Martin, Boeing, Raytheon, General Dynamics, Northrup Grumman, Litton Industries, etc., is our tax dollars. As much creatures of government as they are corporate entities, these guys gobble up resources that might have been put to other, more efficient and productive uses. Why is that so hard for Mr. Lowry to understand?

Socialism, in which the state seizes and redistributes the wealth of a nation, comes in many varieties, not all of them egalitarian. While the left wants to redistribute the wealth and dole out it to the poor, socialists of the rightist variety want handouts for those who are already rich, and military contracts are a rich source of corporate welfare. Military socialism – in which the costs of acquiring and protecting, say, Middle Eastern or Caspian oil fields, are funded by tax dollars, but the profits are "privatized" – is the program of our wartime neocons, as they forget everything they ever knew about market economics and shout down calls to rein in the Leviathan State with cries of "Don’t you know there’s a war on?"


War, as Randolph Bourne famously put it, is the health of the State. It is the engine of government power, the great regulator, the all-purpose tax hiker, the one sure way to get conservatives to climb on board the Big Government bandwagon. In his magazine’s current love affair with budget deficits, its online editor’s self-interested disdain for even the meekest criticism of John Ashcroft’s war on our civil liberties, its constant calls for sending military spending into the stratosphere, the National Review crowd has thrown overboard its always-weak support for economic freedom and individual liberty in favor of "national greatness" conservatism" – which means, as far as they’re concerned, widening and intensifying this war.


Andrew Sullivan fatuously proposed that "We do the national greatness stuff abroad and the leave us alone stuff at home." It doesn’t work that way. We can’t have an Empire abroad, and a Republic at home (except in name only) for the simple reason that the tax monies it takes to build mighty fleets and bases all around the world, to police the earth and humble the wicked, must be enormous. Furthermore, the sheer power it takes to direct these armies, to say whether there shall be war or peace on a global scale, is necessarily imperial, and cannot be republican in any meaningful sense of the word. For this sort of power, i.e. military power, must be highly centralized in order to be effectively wielded: an interventionist foreign policy necessarily turns the President into an Emperor, as Congress has learned partly to its relief and often to its sorrow.


In a [January 5] 1952 article for Commonweal, the liberal Catholic magazine, in which the young Buckley sought to prove that he was no real threat to the liberal welfare-warfare state consensus, the enfant terrible of American conservatism wrote that the inherent and "thus far invincible aggressiveness of the Soviet Union" posed an emergency during which the normal principles and practices of conservatives would have to be suspended:

"We have to accept Big Government for the duration – for neither an offensive nor a defensive war can be waged … except through the instrument of a totalitarian bureaucracy within our shores."

Forget about opposition to confiscatory taxation: conservatives, Buckley wrote, must become apologists for

"The extensive and productive tax laws that are needed to support a vigorous anti-Communist foreign policy," not to mention the "large armies and air forces, atomic energy, central intelligence, war production boards and the attendant centralization of power in Washington – even with Truman at the reins of it all."


Today, Buckley’s heirs are demanding that conservatives make the same bargain with a nearly identical Devil: all this can be yours – the oil fields of the Middle East, a terror-free world, American hegemony from Baghdad to Pyongyang – if only conservatives will stop griping about having to give up a larger share of their income to the government every year. So stop complaining, and go with the flow – don’t you know there’s a war on?


This ubiquitous phrase is true enough, but not in the way our warrior intellectuals mean it. For the State is perpetually at war with its own citizens. It is, furthermore, loath to give up any opportunity to expand its wealth and extend its reach – which is why we have been promised that this war will last a generation. The war on Communism, the war on terrorism, there is always some alien "ism" that appears at just the right moment to get conservatives to tone down if not completely eliminate their opposition to tax-and-spend Big Government. Will they fall for it this time around? So far, it appears so – but not in all cases, and certainly over time the faint rumblings of rebellion will grow louder. Until then, will someone please help Rich Lowry out with a crash course in economics? He really really needs your insightful comments; email him at richardlowry@hotmail.com.

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Justin Raimondo is the editorial director of Antiwar.com. He is also the author of Reclaiming the American Right: The Lost Legacy of the Conservative Movement (with an Introduction by Patrick J. Buchanan), (1993), and Into the Bosnian Quagmire: The Case Against US Intervention in the Balkans (1996). He is an Adjunct Scholar with the Ludwig von Mises Institute, in Auburn, Alabama, a Senior Fellow at the Center for Libertarian Studies, and writes frequently for Chronicles: A Magazine of American Culture. He is the author of An Enemy of the State: The Life of Murray N. Rothbard.


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