Are we “all socialists now”? That phrase has been endlessly reprised and repurposed since it was first uttered by a British minister (a centrist liberal) in 1887. Newsweek used it as the headline when President Barack Obama splurged billions of dollars in response to the banking crisis in 2009 — though in retrospect, maybe we need to redefine “splurge.” Governments are now decreeing stimulus packages that make the Troubled Asset Relief Program look like loose change.
Actual socialists are delighted, obviously. As they see it, the rest of us have finally caught up with their central premise that governments are better than individuals at doing the big stuff. Eye-watering sums of money are being commandeered, price controls imposed, free movement ended. Forms of conscription, at least for healthcare workers, are starting.
Do such measures make President Trump a socialist? Or Boris Johnson or Emmanuel Macron? Of course not. There is a difference between a one-off response to a planetary emergency and a belief that people are better off, in principle, if the government runs the economy.
Free-marketeers are not anarchists. Following John Locke, the first prophet of free markets, they want limited government, not zero government. There are certain things that almost everyone agrees are state responsibilities — maintaining a uniform justice system, for example, or defending the national territory. Even convinced libertarians allow that it would be impractical to let competing groups of property owners raise rival militias.
In this case, the state function is to curb an epidemic. Infecting others is as clear an example as you could ask for of what economists call an externality — a burden imposed on someone else that cannot be priced. No one, capitalist or socialist, seriously questions the right of a government to restrict some liberties in order to contain a plague. And since those restrictions impose a cost on citizens who are impeded in pursuing lawful occupations (restaurateurs or travel agents, to give two obvious examples), the state has a moral responsibility to compensate its own victims.
The real test will come afterward. Governments usually seize powers on an emergency basis only to hang on to them. In 1794, James Madison, in a letter to Thomas Jefferson, warned of “the old trick of turning every contingency into a resource for accumulating force in the Government.”
Wars are the usual drivers of state expansion. Direct federal taxation wasn’t really a thing in Australia until 1915 or in Canada until 1916. In the United States, a federal income tax was first imposed in 1861 and in Britain in 1799 as “a temporary measure” necessary for “the prosecution of the war” against Napoleon. All these countries still have national income taxes today.
What we are witnessing resembles full mobilization more than anything seen peacetime. Johnson talks of leading a “wartime government.” As Winston Churchill’s biographer, he knows how single-mindedly the earlier Tory leader pursued victory and at how high a cost. Britain’s deficit stayed above 20% of GDP through the war years. Paying off that colossal debt brought three decades of inflation and a commensurate blow to national productivity. The final installment of the American wartime loan was not paid until 2006.
This time, it’s not just Britain undertaking an economic general mobilization. Many countries will emerge from the pandemic with World War II levels of borrowing and, indeed, World War II levels of state intervention. And then what?
“Nothing,” as Milton Friedman used to say, “is as permanent as a temporary government program.” Let’s assume a pessimistic but plausible scenario. Suppose that restrictions are in place for months rather than weeks. Imagine that large numbers of companies become dependent on state aid during that time. Why assume that it would all be swiftly dismantled afterward?
In Britain, the structures put in place during World War II lasted until the 1980s. A few of them (notably, the healthcare system) are still in place today.
I take comfort in the idea that if any leader has a visceral dislike of state control, it is Johnson. Once, when asked who his hero was, he cited the mayor from Jaws, who had defied the health and safety fanatics to keep the beaches open. True, he conceded, it turned out to be a bad call, but the mayor had been right in principle.
Is there a similar distaste for government action in Washington? Listen to the way both parties cheer extensions and abuses of executive power when they emanate from their own side. Recall how relaxed they were about a $1 trillion deficit before any of this started.
There seems to be no appetite to return to what we used to think of as normality. Socialists or not, we are all big spenders now.
