New York Review of Books
December 17, 2009
To the editors,
This letter is in response to Tony Judt’s “What is Living and What is Dead in Social Democracy?” in the December 17, 2009 edition of your fine publication. Yes, Judt does a fair work of opposing of Hayek with Keynes and their differing views of a “good society”. However, Judt does miss the fact that Hayek too saw the concept of ‘uncertainty’ (of the limits to human knowledge) as inherent to the human condition. Whereas Keynes saw an increased role for the state to reduce the fear of the unknown, Hayek saw that people learn from our mistakes and therefore learn to adjust and improve ourselves given the opportunity and therefore Hayek was against the paternalistic state as a fetter on experientially-based human intellectual, spiritual and material growth. Keynes of course was of the opposite bent, he thought the state could ‘engineer’ society through economic interventionism. In fact in the introduction to the 1936 German language edition of the General Theory Keynes wrote that his policy recommendations “can be much easier adapted to the conditions of a totalitarian state”.
Judt states that Americans would “appreciate full medical coverage at lower cost, longer life expectancy, better public services, and less crime”. Of course, who would not? However, Judt misses the costs of these outcomes. Economic resources are by definition scarce. By calling on government to provide these goods, he is missing the costs of positive-rights. You cannot give everything to everyone, rationing must take place, and this is indeed socialism, where government planning decides who gets what and when. This is implicitly what Judt is calling for in his vision of Social Democracy when he asks that social-provisioning under the welfare state be a right rather than a hand-out. You simply cannot fight interventionalist wars, bailout financial institutions, insurance companies and automobile companies while at the same time expand the welfare state. There is a cost, and as we are seeing in real time, that cost is increasing debt to be passed to future generations, and a declining dollar and therefore a lower standard of living. In a Rawlsian “veil of ignorance” starting from Year One with no debt this may be possible (Hayek might differ) but to call for positive-rights now is simply irresponsible.
A better starting point might be the right to work, from which then a person would have the capacity to purchase those goods Judt states Americans would appreciate. In fact in 1945 the US Senate passed the Full Employment Act (passed by both House and Senate in a watered-down version in 1946) which states, “All Americans able to work and seeking work have the right to useful, regular and full-time employment….” The only well known economist who commented during these hearings was J.A. Schumpeter (also mentioned by Judt in his lecture), who said, yes, government-guaranteed employment was possible, but only with “coercion”.
Judt ends his piece with a quote from Orwell’s Homage to Catalonia,
There was much in it that I did not understand, in some ways I did not even like it, but I recognized it immediately as a state of affairs worth fighting for.
A world of plenty is a world worth dreaming of, and for Judt worth fighting for, but we should at least understand and be upfront about its costs, and realistic non-coercive alternatives, because we have been there before.