Review 4: The Political Economy of the Minimal State, Edited by Charles K. Rowley (1996)

Tyler Cowen,
George Mason University,
Public Choice, Vol. 93, Nos. 1-2, pp.208-210 (1997)

"This edited collection, which brings together four essays by Anthony de Jasay, Norman Barry, Edwin G. West, and Richard E. Wagner, plus an introduction by Charles K. Rowley, will find great favor with fans of Virginia-style political economy. De Jasay, in his characteristic style, presents an insightful but scattered treatment of issues in the economics of politics. Norman Barry presents a very clear and useful introduction to the principles of classical liberalism, and Edwin West brings out the depth of Adam Smith's brand of liberalism. Wagner provides an excellent critique of standard welfare economics, and outlines an alternative classical liberal approach to economic policy. Rowley's introduction not only sets the stage for the other pieces, but also contains the discussion that interested me most in the volume. He focuses on the issue of intellectual migration and asks why Robert Nozick and John Gray have renounced their previous adherence to classical liberal and libertarian positions.

There is much in this volume of interest, but the link between democracy and free market policy caught my attention in particular. The decline of liberalism, typically dated from the mid- to late nineteenth century, is an embarrassment for free market advocates. Western polities, relatively wealthy and free at the time, appear to have turned their back on classical liberal principles and embraced state interventionism. Prior to the late nineteenth century most Western governments did not exceed ten or fifteen percent of national income; now most account for more than forty percent and sometimes over sixty percent of national income. However much market advocates crow about the revolutions of 1989, the trend one hundred years earlier was in the opposite direction. Classical liberals also appear to hold a skeleton in their closet, and this skeleton must be unearthed and analyzed if we are to discern the relevance of classical liberalism for the next century. The intellectual migration of Gray and Nozick, as discussed by Rowley, recreates the late nineteenth century crisis in miniature.

One strand in classical liberal thought blames the decline of liberalism on democracy itself. In this view, constitutional safeguards were too weak to constrain rampant majoritarianism, which led to an increase in state activity. While advocates of this position do not favor dictatorship, they do see democracy and liberty as antagonists rather than allies. Liberty will flourish only when democracy is constrained.

A second view, represented in contemporary times by the term limits movement, blames statism on the lack of true democracy. According to this perspective, governments have expanded against the wishes of their citizens, largely due to the pressures of special interest groups. A mix of economic education and political reform, however, will restore some version of a minimal state. A third view blames shifting ideological currents for the relative decline of the market. For whatever reason, socialist ideas rose in popularity at the same time that market ideas fell in popularity. Policy responded to this shift in worldviews, but if free market ideas were to outcompete their socialist counterparts, the policy shift might be reversed.

While no writer in this volume comes out and endorses any of these views in their entirety, each view pops up at numerous places throughout the volume. In particular, a suspicion towards democracy runs throughout each essay. We cannot help but notice that the Hong Kong economic miracle took place in a non-democratic society.

Each of the three views summarized above contains at least a grain of truth, maybe more, but none succeeds in pulling the skeleton out of the closet. Suspicion towards democracy, however well motivated, cannot succeed in turning back the clock. If democracy is at fault, classical liberalism must forever retreat. Modern market societies simply cannot sustain the degree of ideological fervor needed to enforce binding constitutional constraints across a wide range of government activities. I think of big government, however costly, as part of the price we pay for the benefits of modernity.

I see the second view, which blames interest groups, as faulty largely as a matter of fact. Most people like "big government", and the best educated people often like big government the most. The third view, which focuses on shifts in the climate of ideas, begs the question of why one set of ideas has pushed out another.

I subscribe to yet another perspective, one which sees the modern world as more of a triumph for classical liberalism than a failure. Classical liberals focus too much on the measured share of government in gross national product, and not enough on the relative influence of state and market spheres of activity. Over time the market share of national income has tended to become more effective and the government share has tended to become less effective. The relevant question for liberalism is the absolute size and efficacy of the market sphere, rather than the ratio or percentage of market to government. Most of the costs of government show up in the form of diminishing the absolute size of the market sector, compared to an alternative of less intervention, and I take the absolute size of the market sector as a good measure of the progress of freedom.

When viewed in these terms, classical liberalism clearly has triumphed. However much government has grown, the market has outraced it. On average, both economic growth and growth in non-pecuniary enjoyments are strongly positive in today's world, especially if we exclude Africa. Based on this reasoning, I wish to deny the existence of the skeleton in the closet. We still might be better off with less government than we have today, or with different governmental institutions, but I see the force of history as standing on the side of the market.

The authors in this volume each offer their own perspectives on liberalism, markets, and democracy. They pose the question of future classical liberalism in the next century, given the tension between our economy and our polity. I am largely sympathetic with their arguments, although I would like to see a stronger dose of historical optimism. Rather than the political economy of the minimal state, I prefer to think of the political economy of the maximal market; the two are not necessarily the same, given how costly it is to constrain government.

This collection of essays will attract readers with broad interests in political science, economics, and social philosophy. This publication comes from the Locke Institute, a scholarly think tank based in Fairfax, Virginia and run by Charles Rowley of George Mason University. The Locke Institute has been commissioning monographs on the issues of political economy, and publishing them through Edward Elgar Press; we can only hope for more works of a similar nature."