The Washington Times

The question of whether [or perhaps now, how much] the administration of George W. Bush and Republicans in general will be tainted by the ongoing corporate scandals and the slump in the stock market, and accordingly punished by the electorate, is certainly an interesting one. But may I suggest that there is something rather more important here than that, namely, the future of global economic liberalization?

For the past 20-plus years, the United States has been at the forefront of a massive shift in thinking about how economies work at home and across national borders. To be sure, the entire postwar era has been characterized by a U.S. effort to open international markets and lower tariff barriers. But even this commendable initiative, which did much to promote U.S. and global economic growth, was nevertheless accompanied at home and in other participating countries by a general government commitment to play a fairly active role in the economy.

Margaret Thatcher led the way, and certainly the name of Ronald Reagan will always come first to mind in the United States as the leading proponent of re-limiting the role of government in the economy. Yet in the United States, liberalization actually started bearing fruit in the Carter administration, chiefly the handiwork of the estimable Alfred Kahn.

Getting the chronology right is a matter of some importance, because otherwise you miss the essential element of the drama. Free [or rather freer] markets may be a Republican touchstone, and heaven knows there were and are many Democratic enthusiasts for more government regulation, broader social welfare programs, higher tax rates, etc. But it is unlikely in the extreme that liberalization could ever have proceeded at the pace it did without significant Democratic support. The emergence in this period of the “New Democrat” and the centrist Democratic Leadership Council was a reflection of the new pro-market orientation of a significant segment of the party elite.

From home to abroad: First, the period saw the demise of the planned economies of communist countries, clearing the air of a fog of ideological hubris. I have long thought that without the full-scale command-and-control model in operation, the more moderate but nevertheless still avowedly socialist variants of political intrusion into the economy lacked the support they needed on the left to survive intact and to travel under their own colors. At a minimum, socialists over time tended to change their rhetoric. More significantly, they embarked on genuine liberalizing reform.

The current Pasok government in Greece, for example, bears absolutely no resemblance in economic policy terms to the Pasok of the early 1980s; then, the Greek economy was a socialist train wreck. More recently, technocrats have been advancing liberalization across a broad front, using whatever leverage they can find to maintain political support. For example, because Greece wanted to join the euro, which it did in January 2001, it had to reduce its budget deficit in order to meet the criterion for member countries. This in turn provided a powerful weapon in saying no to domestic constituencies.

I think these trends, which collectively go by the name of globalization, have been enormously beneficial, not only in terms of improving people’s material lot but also in securing them more liberty [although it is hardly fair to say that economic liberty always leads to political liberty]. Nevertheless, globalization has numerous detractors. There are essentially two ways of looking at things: Either the problem of economics is scarcity, and the solution is the market as the most efficient means of allocation of goods and services; or the problem of economics is excess production, in which people are deprived of the surplus value produced by their labor and are thereby oppressed, in which case massive political intervention is justified.

What looked to have been a settled question in the 1990s now looks to be on the table once again. The egregious, if not always illegal, behavior of a part of corporate America has provided an extraordinary opening to critics of the market. When it was just Enron, they didn’t have much to go on and were more interested in the prospect of inflicting political damage on Mr. Bush. Now, with Enron just one of the mighty now fallen and with the stock market in the dumps, the field is more open.

As interventionism in the economy required, at the limit, a bulwark of communist-style command-and-control in order to legitimate it, so, I think, does liberalization require an exemplar of market economics pushed to the current practical limit and continuing to liberalize still. That’s the role the United States has played for a generation now.

And just as it took Democrats to make liberalization work, so I think, it would require Republicans defecting to a new gospel of re-regulation and intervention, born of their electoral worries, to usher in a new era of economic de-liberalization. And that, friends, is the really interesting question about the Bush administration and the GOP in Congress.