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Pessimism and Prospect

Mises Daily: Friday, January 28, 2011 by


[Excerpted from Politically Impossible (1971)]

A deplorable pragmatic tradition has developed under which economists have tended to inhibit careful exposition of "politically impossible" solutions. And that very inhibition has contributed to the "impossibility." Alternatively, economists have come to believe themselves not to be concerned with "political" issues, yet have in practice allowed a subconscious self-censorship to condition their thought and teachings — a censorship based on their tacit judgment of what electorates will welcome, stomach, or reject.

When they do declare categorically that a proposal is ''politically impossible," they are usually indirectly praising it, even if their real purpose is to destroy what is suggested. They are implying that it has to be renounced solely because politicians will not believe they will be able to persuade electorates (or those who finance their campaigns) to accept such a proposition; or else that — for other, less disinterested reasons — the politicians themselves will be unwilling to make the proposal an issue for public debate or discussion. But the harm wrought occurs chiefly when objections due to the supposed vote-acquisition defects of recommendations remain unexpressed.

The attitudes so created have been inclined to engender an unwarranted pessimism about the prospects of fundamental reform. We must never regard the opinions of voters on any issue important to their wellbeing as in any sense unalterable. That is why the explicit statement of proposals that are not pressed, or which are even categorically dismissed on account of evident current unacceptability, may be able to play so fruitful a role.

A long educative period may have to precede many fundamental reforms under democracy or even under other forms of government. Thus it would be possible for a Hindu statesman to condemn the caste system as an obstacle to a much-needed modernization without advocating its immediate eradication. He could state his case in nonemotive, dispassionate terms and commit himself to take no action without the widest general approval for any reform. In that way he could avoid provoking consternation and revolt.

The "Impossible" Does Happen

Nevertheless, the relative difficulty of getting changes accepted by the people prompts the question, expressed in Professor Philbrook's (rhetorical) words,

Should we not … distinguish among conceivable changes according to whether we stand some reasonable chance of actually effecting the necessary shift of attitude? Why waste effort by making suggestions which we cannot hope will be accepted?[1]

"The danger looming before the Western world is a gradual drift of free-enterprise countries toward a totalitarian concentration of economic power."

My answer to this question is weighted differently but is essentially the same as Professor Philbrook's. He points to the truth that proposals which most often seem to be least likely to be accepted by the people may be the most desirable. This is certainly a consideration that magnifies the importance of refusing to accept public opinion in any form as inevitable and unalterable.

But my own answer is empirically inspired. Changes in public opinion of a kind that nearly all experienced observers would have regarded earlier as "inconceivable" do occur in practice.

Schumpeter's almost-terrifying pessimism (in spite of his courageous realism) cannot be accepted. He gave no consideration whatsoever to the possibility that eventual discernment of the very perils to which he was pointing might lead, given the inspired political leadership necessary, to a sufficiently widespread democratic majority supporting reforms in the spirit of the "Tocqueville principle" and acceptance of the rule that all forms of scarcity contrivance (affecting skill acquisition as well as outputs) should be impartially suppressed because they cause recession, as well as for the regressive incidence. If the economists spoke out, such a solution could not be ruled out as "political impossibility."

Again and again in history the "unbelievable" has occurred when disaster has threatened. This generation has witnessed the formerly totalitarian-minded German people, confronted with the dismal prospects of 1946–1947, accepting the Erhard philosophy of "prosperity through competition," and enjoying the consequential "miracle recovery" of the following decade.

One illustration that threatened disaster may force a government to retreat from a policy long thought of as politically lucrative was the British Labour government's 1969 attempt to curb the abuses of strike-threat power. It proposed legislation then which would have been regarded ten years previously as "politically suicidal." Although its attempt failed, the volte-face had important consequences on opinion. Public attitudes now make it appear possible that the Conservative government will be able to win votes, rather than risk the near-certainty of losing them, by departing from what had been widely accepted as irreversible policy for generations.

Naturally, the proposals have had to be described to the electorate in terms that do not appear to threaten the careers of the union hierarchy or the status of the unions. The objective of the Industrial Relations Bill, in the prime minister's (Edward Heath's) words, is "not shackled trade unions, but free, strong and responsible trade unions." But it is now beginning to appear almost as though it will be "politically impossible" not to persevere with a bill that will effectively curb strike-threat power.

For the last election was won on the promise to end inflation, while the subsequent continuance of strikes has caused reluctant perseverance with the old policy of inflationary validation of duress-enforced labor costs, with prices generally still tending to rise (written in March 1971). The prime minister's opponents are already making political capital out of his having "failed to deliver," having themselves done everything in their power to obstruct delivery.[2]

That shrewd politician, Mr. William F. Buckley Jr. of New York, recently commented on the extraordinary fact that official encouragement of and official provision of facilities for birth control are now widely accepted in the United States, although for many years practically all politicians skated clear of the issue because they felt that any stand in defiance of religious opinion generally would be politically suicidal. Today not only is "family planning" officially promoted, but in several states abortions have been legalized.

Has the "Impossible" Become Imperative?

At other times, politicians seem to have had a sufficient sense of responsibility or a sufficient concern for their careers to stop short of precipitating disaster through capital consumption or runaway inflation. Thus, the Labour government in Britain was forced a few years ago to forego the rapid expansion of welfare services that electors had been promised because it feared that higher tax rates would reduce prospective tax revenues.

Labour politicians began to advocate the imposition of charges for services hitherto "free." And discussion of the government's predicament seems to have helped to create the climate of opinion that permitted the Conservative Party to win an election while pledged to halt inflation, to cut down on welfare expenditures, to impose welfare charges, and to reduce taxes.

The new policy in 1971 has again reversed a trend. Recipients of medical and dental services are now to be called upon to contribute more toward the cost — a reform that, significantly, has permitted more generous aid to the genuinely needy. What is important, however, is that the reversal of direction appears to have occurred just in time to have prevented disaster.

Making the "Impossible" Possible

In referring above to the "miracle recovery" of Germany, I suggested that the prospect of disaster was the main factor in permitting acceptance of the Erhard reforms. Now it seems to me that economic collapse will increasingly threaten the Western democracies if they try to persevere with their attempts to restore employment via inflation when everyone has come to expect inflation to occur.

As we have seen, this is what has been happening. The developing situation may well force an early choice between democracy, political and economic, on the one side and totalitarianism described as "democracy" on the other. If "stagflation" — recession in spite of inflation — eventually causes countries like Britain and the United States to be stampeded by the pressures of shortsighted thinkers and commentators, the intelligentsia would be most hurt in the beginning.

The danger looming before the Western world is a possible outcome of the gradual drift of traditionally free-enterprise countries toward a totalitarian concentration of economic power due to reactions to "stagflation." The drift originates in the almost self-perpetuating political weaknesses of which reluctant inflation is the consequence. Because governments have shrunk from the task of exposing the responsibility of the unions for chronic incipient recession, and have been able to hold off rapidly worsening unemployment only through inflation, society strives to protect the real value of its capital in the remaining sectors of the economy in which the price mechanism still operates with relative freedom.

Governments then feel compelled eventually to suppress such efforts. That is basically why "income policies" and other kinds of totalitarian control have to be resorted to. When the leaders of opinion realize the dangers, will fundamental reforms remain "politically impossible"?


[1] C. Philbrook, "'Realism' in Policy Espousal," American Economic Review (1953), p. 851.

[2] "He is in the process of pushing up prices," wrote Mr. John Grant MP in January 1971. "It is not too early to predict that the promise that won him the last election will lose him the next one." This assertion is a perfect example of the "polemical asseveration of 'political impossibility'." The Spectator, January 2, 1971.