A reader (anonymity requested, and respected) who works close to the ground in the world of high finance, has offered to me the following thoughts. They are so cogently and persuasively rendered, that I requested to circulate his thoughts more widely. In the note, the reader is responding to specific points in last Friday’s column by David Brooks about Phillip Blond. I think he helps us – here at FPR and elsewhere – to articulate a path that takes seriously Blond’s diagnosis but remains wary about his enthusiasm for government’s capacity to effect a cure. I am perhaps more sympathetic than many here at FPR toward the argument that government at various levels must play a role in restoring a sensible subsidiarity in the nation, but I share the wariness of my colleagues that this can be done easily and without great danger of simply accruing more power at the center at the expense of the periphery.
For those who have the chance to listen and eventually see the audio/video of the Blond event at Georgetown, I think this reader anticipates a constructive response to the serious and respectful criticisms of Blond’s position that were articulated during the morning panel by Ross Douthat and Dan McCarthy, of the New York Times and American Conservative, respectively. In the main, their forceful and articulate concerns highlighted the ways that the contemporary American political arrangement tends to co-opt and incorporate what would be dissident efforts to use the engines of government to devolve power. Blond, I think, was especially impressed by McCarthy’s careful review of the various iterations of “Red Toryism” in the American context – citing such authors as Nisbet and Vierek – and showing that mainstream American conservatism is where these arguments have gone to die.
I invite our readers to read and assess the arguments of the discerning reader that I quote, below. And I invite our readers to respond with their own thoughts.
Since we’ve met, I have been struggling with the distinction between Libertarian ideas and Communitarian (or Distributist) ideas. Brooks reflects a view that I have heard from others that seems to put the two worldviews at odds. I certainly agree that their philosophical roots are distinct. However, I think Blond’s analysis has helped put my finger on what’s been troubling me. In a nutshell, we should use libertarian tools to achieve communitarian goals. I think this contrasts with Blond, who seems to want to use statist tools to achieve communitarian goals. I may be wrong, but I think it is much easeir to protect against out-of-control libertarianism than it is to protect against out-of-control central government power.
A large part of the reason I believe this stems from my understanding of how important the federal government has been to the growth of giant corporations. Every time I hear some lament about the “market” fueling corporate power, I see the hand of the government pushing down small business and promoting big business. By what I have read, it has been going on since the early 1900’s and from what I have seen personally, it is central to the “too-big-to-fail” financial system we struggle with today. Perhaps the result would have been worse without the heavy hand of the federal government, but I am doubtful.
I think there is room for a thorough analysis of the forces that impair small business and farming in the US. Blond is right to link the economic and the social. I believe the governmental actions that have destroyed the small, distributed business structure in the country are often considered seperately from the government actions that have eroded the social structure. But I have been frustrated by my inability to find any high quality economic and business analysis that systematically links the ample anecdotal, historical evidence.
[Editor’s Note: Can anyone help point to such analyses?]
Brooks says Blond wants the following (I have enumerated his points):
To create a civil state, Blond would
1. Reduce the power of senior government officials and widen the discretion of front-line civil servants, the people actually working in neighborhoods.
2. He would decentralize power, giving more budget authority to the smallest units of government.
3. He would funnel more services through charities.
4. He would increase investments in infrastructure, so that more places could be vibrant economic hubs.
5. He would rebuild the “village college” so that universities would be more intertwined with the towns around them.
Who is the “He” that would do all of this? I am afraid it is simply the omnipotent, omniscient central government with a new “social engineering” ethic. I think this is a dead end. The government will simply use this as a pretext to expand its role even further. Drawing on Robert Nisbet, the destruction to community is the result of the expansion of the central government at the expense of intermediating institutions. The individual gets a small portion of the “liberated” power, but the central government keeps the rest.
In order to restore these intermediating institutions, three things must be in place. First, they must have a function. Second, they must be free from direct central government control. Third, they must be allowed to create an independent source of funding. Government must give up performing the functions of the intermediating institutions (charity, social service, business, collective bargaining, etc.). Government must curtail its endless desire to regulate the performance/behavior of these institutions (absent of compelling need and then subject to subsidiarity). Government must allow money to be raised/earned and kept, free from excessive taxation directed at the institutions and/or the donors/consumers.
Let me at least try to lay out some of my ideas how I think it would be better to proceed.
Accepting Blond’s goals, but challenging his method, I would offer the following approach for each point above instead:
1. Substantially reduce Federal involvement in social services, leaving this activity to state, local and community efforts. The practice of federal involvement in directing social services through state “block grants” should be ended. Ideally, privatize Social Security and Medicare over time.
2. Substantially cut federal taxes, allowing state and local governments to tax citizens for the social services they want to pay for and thereby give them budgetary control over both revenues and expenses.
3. Do not “funnel” government money to charities, but do allow charitable donations to be fully deducted from taxable income. Allow charities to provide the social services they see fit, in the manner they desired.
4. If infrastructure is narrowly defined, this makes sense. Broadly defined, this is a recipe for government creating a huge bureaucracy that crowds out private initiative.
5. Stop funneling enormous federal money to universities. Let them fund and be funded by their communities – state, local and charitable.
On the economic front, there is a more promising tone, to Blond/Brooks ideas. Brooks summarizes as follows:
Economically, Blond lays out three big areas of reform: remoralize the market, relocalize the economy and recapitalize the poor. This would mean
1. passing zoning legislation to give small shopkeepers a shot against the retail giants,
2. reducing barriers to entry for new businesses,
3. revitalizing local banks,
4. encouraging employee share ownership,
5. setting up local capital funds so community associations could invest in local enterprises,
6. rewarding savings,
7. cutting regulations that socialize risk and privatize profit,
8. and reducing the subsidies that flow from big government and big business.
Again, accepting Blond’s goals but challenging his approach, I would offer the following:
1. As for Zoning, this is currently a local regulation. It would be a mistake to federalize this activity. Why not start by taking away power from the federal government rather than expanding its role in the zoning power? For example, it was the Supreme Court which set in motion the giant discount “box” stores in the 1911 ruling that banned manufacturers setting minimum prices. Without this ruling, it was possible for a manufacturer to design a product distribution strategy that rewarded small distributors (by maintaining minimum prices). There are undoubtedly other areas where federal interference has had a similar impact.
2. What are the barriers to entry for new business in America? Is it the overwhelming burden presented by federal regulations? Is it the tax code, that makes it easier for big corporations to deduct research and investment compared to the hassles faced by small enterprise?
3. Local banks have been squeezed out by the end of interstate banking rules. Why not restore these rules in some fashion? Also, why not make capital charges lower for small banks (not “too big to fail”) and higher for bigger banks. The same for FDIC insurance.
4. Employee share ownership is best encouraged by keeping capital gains taxes low. Even more importantly, ending the death tax on small business owners and farmers will encourage them to pass their business on to their children rather than sell them to conglomerates.
5. Who runs the funds? Who provides the capital? At the state level, these have been mostly failures.
6. Rewarding savings through lower taxes on interest and capital gains for some threshold. At the moment, the threshold is much too small.
7. Socialize risk and privatize profit? The last two years have told the story, and the villain is “too big to fail”. This is not only banks but any of the big businesses tht have been bailed out (auto companies, etc). Big firms need to go bankrupt. Big unions need to see their employees lose their jobs when big firms fail. That restores the balance to encourage both labor and capital to work for small enterprise.
Reduce government subsidy to ALL business. But start with the biggest first. How about corporate farming as well?
I hope this can be a continuation of a conversation about “what is to be done”? I think many of us at FPR are emboldened with a confidence that our analysis of our situation is on the mark. Where we go remains a challenge. Let’s create a brain trust of Other Ways.