Oct 1, 1977

The Crisis of Big Government

“We alone have the wisdom and honesty to…declare that the only way to reduce the size of government is to cut back on its functions.”

This special issue of Libertarian Review is about “big government,” which has become a cause celebre today, not only in America, but throughout the world. If anything has characterized the twentieth century thus far, it is an explosion of government power in all its forms, with horrible consequences becoming increasingly apparent to all observers.

But in the past few years, “big government” has come to face a crisis: it has not produced—anywhere—the results which were proclaimed as the goals of government policy; its cost has shot through the roof, requiring escalating raids on the personal income of its subjects; and it has begun to face massive desertions from the ranks of its friends and supporters, from both the intellectual elites of the planet and the masses of the State’s victims, who number among themselves the vast majority of mankind.

While big government is not yet on the run, no longer do we find the response to its demands for more money and power to be stuporous assent. There is resistance. And there will be more resistance in years to come: resistance to the interventionist foreign policies of superstates; resistance to violations of civil liberties, both in Communist nations and in liberal democracies; resistance to economic controls, regulations, taxation and “planning.” People are beginning to discover—as Messrs. Carter and Brezhnev have not—that economic freedom too is a “human right.”


But in order to understand better the contemporary crisis of big government, it will benefit us to sketch the trends in government power over the past few centuries. For while the 20th century has seen an explosion of state power, this constitutes a radical reversal of many trends throughout the 17th, 18th and 19th century.

During those centuries, political progress meant the loosening of many forms of political control: a rebellion against the “Old Order” of caste and privilege, led by classical liberals, entailed the ending of censorship, the separation of church and state, the freeing of economic activities and international trade from state control and manipulation. The classical liberal revolution, in short, meant the substitution of the “society of contract” for the “society of status,” the partial and incomplete triumph of individualism over an earlier form of state control.

Nowhere, however, did this classical revolution triumph completely, and as the 19th century progressed, two forms of radicalism paired off in addressing the problems of the age: an individualistic, “natural rights” version of classical liberalism, and the new ideology of socialism, which came to mean the use of state power to “solve” social ills. As classical liberalism won its partial and incomplete victories, however, it steadily abandoned its radical fervor: abandonment of natural rights in favor of utilitarianism, the acceptance of a meek gradualism in place of a demand that injustices be ended immediately, and, finally, a smug acceptance of “Social Darwinism,” spelled the end of the radicalism which was, once, the hallmark of the classical liberal revolution. Gradually shifting to an acceptance of piecemeal social engineering by the State, in area after area, classical liberalism faded, until by the onslaught of World War I, it has virtually disappeared as a force in the Western world. Such Fabian socialists as Beatrice and Sidney Webb could once denounce their classical liberal opponents as “laissez-faire and anti-imperialist,” because their opponents were against government power in both the domestic and foreign sphere. By the turn of the century, a significant group of liberals had abandoned “laissez-faire” in the domestic sphere—in favor of “positive” government action to promote a false “reform”—and anti-imperialism in the international sphere—so that the glories of the British (and other) empire could be extended across the international scene. Classical liberalism was no longer: with a drastic shift in meaning, the term “liberalism” was captured by a group of reformist socialists differing hardly at all from the more consistent socialists who laid claim to the mantle of radicalism formerly worn by the classical liberals themselves.

The ideal of the elimination of state coercion was dead; in its stead stood shades and degrees of statism, the elevation of state planning and control as a solution to the world’s problems, to the status of a universally accepted political ideal.


The twentieth century, as I have written elsewhere, “is the century of power: a century where State coercion and violence have become commonplace. Every conceivable form of Statism has been tried in this century: Fascism, Communism, Social Democracy, the Corporate State, and military dictatorships.”

One by one, these ideals have been blackened. Fascism and Nazism were the first to be abandoned, with the ruin and horror of World War II, the militant nationalism, brutality, concentration camps, and war. Intellectuals who had found virtue in these systems beat a quick retreat.

Stalinist communism was not far behind. In the 1930’s, we used to hear that Stalinism was the only alternative to Hitlerism, and apologists for Stalinism could be found everywhere. But as the truth leaked out concerning the reality of Stalinism, advocates of this point of view too, beat a quick retreat. Could we have a humanistic communism? At first intellectuals thought we could, but one by one, communist systems have been debunked: they offered neither economic prosperity nor any respect for civil liberties. And they proved usually as militaristic as any rival system. We heard first from those who revolted in Eastern Europe, then from the Russian dissidents themselves—led by Solzhenitsyn and Sakharov—and finally have begun to witness the debunking and deflation of the Maoist myth: Maoism has proved as pathetically totalitarian as any communist rival. The reception given to Simon Leys’ book, Chinese Shadows, shows that this last communist pillar has begun to crumble. The god had truly failed.


But if the god had failed, the temple remained erect. Why? What accounted for this hold that socialism had on the minds of the intellectuals? For Vilfredo Pareto, socialism was but another form of “spoliation,” which he identified as the process by which one group seeks to plunder another. And, indeed, some have been so unkind as to suggest that this power lust is all that is behind the advocacy of socialism by the “New Class,” that class of intellectuals and the like who would rule under socialism. Part of the truth that may be, but it is less than the whole truth.

Intellectuals were not merely attracted to socialism and communism because of power lust, but because of two deeply felt ideals which they saw as imbedded in the socialist vision: equality and the planned economy. Surely if communism or socialism had any justification, it lay here. These, if nothing else, remained valid goals of social and political policy. Thus the retreat from Stalinist communism to a false “humanistic” communism to full socialism to … social democracy.

Social democracy was a muddied version of socialism, which tried to combine democratic freedoms with a pursuit of equality and a planned economy. Could it work? Fried-rich Hayek, in his masterly work The Road to Serfdom, claimed that it could not.

The Social Democrats were out to prove him wrong. But without success. Economic planning to produce economic prosperity led to international conflict, discoordination of resources, and economic chaos. The pursuit of equality produced a group of bureaucrats—the “New Class”—who controlled the egalitarian machinery, and became “more equal than others.” The inflationism behind both pursuits led to recession, unemployment, and the breakdown of the international system of economic cooperation. Nothing seemed to work. Was socialism dead? Or could it maintain its hold on the minds and passions of the intellectuals?


In his essay “The Socialist Myth,” in the Summer 1976 issue of The Public Interest, Peter Berger maintained that “ideologically Marxism is on the ascendancy everywhere—except in the countries that call themselves Marxist.” This, he claims, is because “socialism (is) the only good myth going.”

This, however, is not quite correct: socialism has been in retreat in socialist and non-socialist countries alike. Socialism has, after all, never delivered on any of its major promises, and there is a marked retreat even within socialist and communist political parties away from nationalization and other ideals which once formed the core of socialism. In and out of power, as Don Lavoie points out in his article in this issue, socialism is selling out.

Moreover, many former socialists and Marxists are in the forefront of this retreat from socialism.

This can be seen most clearly, perhaps, in the case of France, which has recently suffered not only a split between the Socialist and Communist parties, but has seen some of its most innovative and creative young intellectuals take up the struggle against Marxism and socialism. “For the first time in a hundred years,” wrote Andrew Greeley recently in the New York Daily News, “Marxist theory is in serious trouble in the left wing of the French intelligentsia. The elegant, polished Marxist model has begun to lose its grip on the elegant, polished French intellectuals. The virtual domination of Marxism among the world’s intellectual elites may be coming finally to an end.” These “New Philosophers” of France, as they are called, are “a group of young intellectuals, most of them lapsed Marxists, who are now attacking Marxism as an evil, obsolete ideology that leads inevitably to totalitarisnism.” (Time, 9/12/11) One of these “New Philosophers,” Bemard-Henri Levy, wrote recently (translated in The New Republic): “The Socialist utopia, once it has come about, is the consummate form of order and the police state. This gives birth, therefore, to a new extreme left whose program is reduced to one pure and simple commandment: govern as little as possible.”


Neither Levy nor any of the other “New Philosophers” has gone so far as to adopt an earlier classical liberalism—or the libertarian ideology—as a guidepost. Libertarianism has only just begun to penetrate the public awareness of the French. Nor have they even progressed as far as to adopt the radical classical liberal ideology of Marx’s libertarian predecessors: Charles Comte, Charles Dunoyer, Benjamin Constant and Augustus Thierry, to name only a few who are beginning to be rediscovered in America. But the retreat from socialism is crystal clear.

So too is the retreat from social democracy. Irving Kristol has recently written that “The world since 1945 had gradually been transformed … along the lines prescribed by the social-democratic vision. But without the anticipated consequences. Political orders were becoming less stable, jiot more so. Social tensions were increasing rather than decreasing. And neo-Keynesian economic policy—the economic basis for social democratic policies—began to promote a crippling inflation. Another political god was set to fail.”

But not, for Kristol at least, the god of the welfare state. For in the same article, he brags that his own brand of retrenchment from Social Democracy, i.e., “neo-(conservatism,” unlike “liberal individualism … is not opposed in principle to the welfare state.” For Kristol, the welfare state “can be an integral part of a conservative society.” Neo-conservatives are liberals who have discovered, as a recent cover feature of the liberal democratic magazine The Humanist has declared, that there are “limits to welfare.” But, not objecting to the welfare state “in principle,” it might be profitably asked whether they are competent to lead a retreat from the very same “big government” that all forms df socialism represent and defend.

Surely, it is by now apparent to all what the failings of social democracy and the welfare state are: redistribution-ism, even in a gradual form, has its limits. If you continually seize larger and larger portions of the personal income of people, sooner or later they start to die off like flies. Even if you proceed to give them government-provided food, the production process will eventually grind to a halt. You will reach what Ludwig von Mises called “the exhaustion of the reserve fund.” Government officials all over the world are beginning to realize this. In more and more Western countries, the percentage of personal income which governments seize to carry on their social programs has risen to astronomic proportions. Government expenditures in country after country are topping 50 and 60 percent. Government control over the economy has reached its limits, too: even in China, a delegation of Chinese recently sneaked into Yugoslavia to study the management of that communist country’s economy, which has less government involvement and planning than any other in the communist world.


Can the neo-conservatives call a halt to this process? There is no indication or evidence that they can. Neo-conservatives are retreating liberals who eschew “ideology” in the name of “practicality.” They recognize the limits of statism … but do they uphold any contrary vision, goal, or ideology? Quite the contrary. While Irving Kristol and others realize the bankruptcy of the ideal of equality—and that liberty is its only logical foe—they also claim that the ideal of liberty can never successfully replace equality as a public ideal and vision.

The neo-conservatives are, today, the social equivalent of those classical liberals of the 19th century who moved away from the vision of individual liberty in the name of “practicality ” Today, the neo-conservatives are leading the retreat from socialism, without any contrary ideal or ideology accepted in its place. They accept “some” government redistribution of wealth, “some” egalitarianism, “some” elements of the welfare state, “some” restrictions on personal liberties, and “some” (often a good deal more than “some”) foreign policy adventurism. They are obstacles to increased statism in some fields„ not leaders determined to fight for any different goals. While they may provide a brake on “big government,” they do not provide a true alternative.

But can the conservative? Many think that, after the neoconservatives, the best hope for stopping the growth of government lies with American conservatives.


The credentials of conservatives as opponents of big government are, however, in sad shape indeed. Not only are conservatives congenital defenders of government intrusions against personal liberties, such as the victimless crime laws, they are the most enthusiastic supporters of an aggressive foreign policy, as well. It often seems as though conservatives regard the Pentagon and military expenditures as being outside of the government, not to be counted as part of that selfsame “big government” which, elsewhere, they oppose. Nowhere is this better seen than in the case of Ronald Reagan. In his standard speech while running for President, between two forceful sentences railing against welfare expenditures and the growth of government spending, Reagan would sandwich a trumpet call for more military spending, for more armaments and extensive foreign policy commitments, as though the Pentagon and its activities were not part of the very “big government” that he had spent so much time denouncing.

Yet in his book The Governmental Habit, reviewed in this issue by Walter Grinder, Jonathan R.T. Hughes notes the essential consequences of war and the interventionist foreign policies which led to American involvement in war:

Each war inflated the economy and gave the federal spending mechanism a scope it did not previously have. The historical expansion of the federal sector has been mainly achieved by a few short bursts of wartime spending, not by a steady rise related to the country’s population growth, or the GNP it produced…. Once a new plateau of expenditures was achieved the gains were held. For this reason alone, those who proposed some abatement of federal expenditures in the post-Vietnam War period has little reason to hop. The tax-system ensured self-financing of government expansion.

Looking at expenditures alone, it is easy to see that every war brings massive growths in the role of the government, which growth is substantially maintained after the war comes to an end. A quick glance at any almanac will show this to be the case.


Government expenditures in America had reached an average of $60 million by 1860. The Civil War, however, saw such spending skyrocket to $684 million. After the war, spending dropped by half, but remained five times as high as before the war.

By the First World War, expenditures had crept back up to $746 million, but hurled upward to $12.7billion in 1918. Then spending dropped, but again remained at about five times what it had been before, with increased tax revenue going to other projects and government programs.

During the pre-war New Deal, expenditures doubled, from $4.6 billion in 1933, to $8.8 billion in 1939 (not the least cause of this was military “preparedness”). But spending shot upward to more than $98 billion by the end of the war. Once again, expenditures dropped at the close of the war, but remained at about half the peak during the war, again about five times the pre-war spending levels.

During the period of perpetual “preparedness” and incessant interventionism of the Cold War, government spending both in military and social welfare spheres was continually increased, reaching the peak levels of World War II only by the early 1960’s. With the advent of the war in Indochina, spending increased constantly; with the end of the Vietnam War, there was no decrease, but only a shift in spending to welfare programs. “Defense” spending decreased as a percentage of total federal spending, but not absolutely.

In short, the greatest single cause of growing government spending and control over the American economy is war. The same is true elsewhere, in other countries. No attempt to deal with “big government” without coming to grips with that fact can be considered anything more than a sham and a lie.


All this leads inevitably to the conclusion that if there is to be a true revolt against big government, it must of necessity be led by libertarians. We see the evidence in every article in this issue: in Lawrence White’s “The Decline of New York,” the consequence of “big government” in microcosm; in Henry Ferns’ “Great Britain: The Radicalism the Case Requires,” the consequence in macrocosm. In Don Lavoie’s “The Decay of Radical Socialism,” we see the result of socialism in power. Walter Grinder reminds us of the failure of government planning, and the promise of a free market economy. Joseph Peden shows us the consequences of state control over education.

The “statesmen” of the future will of necessity be anti-statesmen: political figures whose leadership will be judged by their genius in reducing the size and scope of government, by their ability not in erecting new government structures, but in dismantling existing ones. As Tom Bethell has written, “If the climate of opinion with respect to government continues to change, we may soon be on the lookout for someone who can solve the greatest puzzle of representative democracy: how to reverse the ratchet of government.”

But that can only be done, not by compromising, demagogic conservatives, or by liberals beating a retreat, but by a new political force with a new political vision. Newsweek has insisted that “what is needed, clearly, is a new definition of what government should do and what it can do, given current economic limits.”

In economic affairs, in civil liberties, and in foreign policy, libertarians stand for individual rights and for radical opposition to government power. We oppose what government does not because it is “too expensive,” but because it is unjust We alone have the wisdom and honesty to acknowledge and declare that the only way to reduce the size of government is to cut back on its functions.

To do that, we must have the political courage to speak clearly, and to act