The Power of Fusionism

Libertarians and conservatives can curb the state, if they work together

By: Donald Devine

Pity the next generation—especially if it is yours! Your country is in a profound economic crisis that will be followed in a few years by a virtual explosion of elderly entitlement spending that will overwhelm government resources already strained to the breaking point by an almost trillion-dollar stimulus, budgets forecasting trillions more, unprecedentedly excessive monetary liquidity, and not enough young workers being born to pay for it all. The solution of both the George W. Bush and Barack Obama administrations has been more easy money, more spending, and more restrictions on the economy and people’s lives.

Is there no other solution? The stock market has only lost more than 20 percent of its value in a two-day period three times: 1929, 1987, and 2008. In 1929 and 2008 the government responded with all of its tools—which for President Herbert Hoover included the Federal Reserve, jawboning businesses on wages and state governments on welfare, massive federal building and reclamation projects, a forced repatriation of 500,000 Mexicans to open jobs for Americans, and a huge tariff to encourage purchase of U.S. products, as well as directly prefiguring Franklin Roosevelt with a Reconstruction Finance Corporation. Roosevelt merely ratcheted up Hoover’s program, spending and regulating more. In spite of all this, the economy remained stagnant for an entire decade. Following the 2008 crash, President Bush went further, committing an incredible $2 trillion to open the Federal Reserve and Treasury to almost unlimited credit, nationalizing banks and other financial institutions, providing stimulus checks to citizens and states, and bailing out the mortgage, insurance, and auto industries. That did not produce recovery either.

What happened after the other major crash? Following 1987’s so-called Black Monday, which actually saw a somewhat sharper decline in stocks than 1929, President Ronald Reagan did nothing—and the economy quickly healed. He did “nothing”—as his son Michael described it—under the economic logic that markets cannot go up until potential buyers think prices have hit bottom. The market must find its own level on the basis of decisions made by the public, which creates all the wealth that government financial, regulatory, or spending bureaucrats merely redistribute. If government credit or bailouts or regulations keep prices up, by definition prices cannot hit bottom and people will not buy discretionary items until they think the market will not drive prices lower still tomorrow. Reagan understood the value “doing nothing”—that is, letting prices seek their natural level—in 1987, and the same “leave it alone” strategy, together with tax and spending cuts, worked to cure Reagan’s first recession in 1981, too.

How did Reagan get it right twice when Hoover, Roosevelt, Bush, and Obama—to say nothing about Japan, old Europe, and much of the rest of the world—kept getting it wrong? These all bought into the welfare-state philosophy of economic planning, which they believed had ended the 1930s Depression and had made the business cycle obsolete. All that was needed was to give the government planning experts the power and funds and they could tame markets. The only problem is that it took years to recover after 1929, and recessions have taken place every decade or so ever since. Nothing the central banks or treasuries or regulators did could stop them. Minor recessions could be ignored, but 20 percent declines could not, especially by 2009—after 21 months, this was the longest recession since World War II. After six months of President Barack Obama, a Gallup poll found that 60 percent of Americans believed the old New Deal approaches would not work any longer.

Reagan succeeded because he rejected the New Deal dream that the market could be manipulated into prosperity. Rather, he accepted that what Adam Smith called the “invisible hand” of individuals, families, groups, and businesses making free trades with others equally free was the only way to produce an efficient economy for all. Government had to provide broad rules for property regulation—no stealing, violence, or fraud—but within those rules the market could work efficiently even as all followed their own self-interests. Indeed, as Smith noted, “By pursuing his own interests [the individual] frequently promotes [the interest] of the society more effectively than when he really intends to promote it.” By leaving decisions in the hands of individuals, the government is discharged from “a duty it cannot perform” for which “no human wisdom or knowledge could ever be sufficient, the supervision of the industry of private people and of directing it toward the employments most suitable to the interests of society.”

In other words, market freedom works. But what about the rules within which individual freedom can operate so successfully? Reagan told an early meeting of his supporters in Washington soon after being sworn in as president that while individual economic freedom was central,

It was Frank Meyer who reminded us that the robust individualism of the American experience was part of the deeper current of Western learning and culture. He pointed out that a respect for law, an appreciation for tradition, and regard for the social consensus that gives stability to our public and private institutions, these civilized ideas must still motivate us even as we seek a new economic prosperity based on reducing government interference in the marketplace.

The modern philosopher Frank Meyer “in his writing fashioned a vigorous new synthesis of traditional and libertarian thought—a synthesis that is today recognized by many as modern conservatism,” Reagan explained.

To both Meyer and Reagan that synthesis was rooted deep within the American experience. As Reagan put it,

Our Founding Fathers began the most exciting adventure in the history of nations. In their debates with the principles of human dignity, individual rights, and representative democracy, their arguments were based on common law, separation of powers, and limited government. Their victory was to find a home for liberty.

Madison knew and we should always remember that no government is perfect, not even a democracy. Rights given to government were taken from the people, and so he believed that government’s touch in our lives should be light, that powers entrusted to it be administered by temporary guardians. He wrote that ‘government was the greatest of all reflections on human nature.’ He wrote that ‘if men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government,’ he said, ‘which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed, and next oblige it to control itself.’

Led by Madison and Jefferson and others, the authors of the Constitution established a fragile balance between the branches and levels of government. That concept was their genius and the secret of our success—that idea of federalism. The balance of power intended in the Constitution is the guarantor of the greatest measure of individual freedom any people have ever known. Our task today, this year, this decade, must be to reaffirm those ideas. Our Founding Fathers designed a system of government that was unique in all the world—a federation of sovereign states with as much law and decision-making authority as possible kept at the local level. They knew that man’s very need for government meant no government should function unchecked.

We the people—and that is still the most powerful phrase—created government for our own convenience. It can have no power except that voluntarily granted to it by the people. We founded our society on the belief that the rights of men were ours by grace of God. That vision of our Founding Fathers revolutionized the world. Those principles must be reaffirmed by every generation of Americans, for freedom is never more than one generation away from extinction.

That synthesis—or “tension” as Meyer called it—between an individual freedom granted by a Creator beyond the power of government to legitimately take away and the need for order based in tradition and law was the essence of Western political thought. It was based on both libertarian economic means and traditional value ends. Reagan, again, explained it as it related to his own program of reform:

Our goals complement each other. We’re not cutting the budget simply for the sake of sounder financial management. This is only a first step toward returning power to the States and communities, only a first step toward reordering the relationship between citizen and government. We can make government again responsive to the people by cutting its size and scope and thereby ensuring that its legitimate functions are performed efficiently and justly. Because ours is a consistent philosophy of government, we can be very clear: We do not have a social agenda, separate economic agenda, and a separate foreign agenda. We have one agenda. Just as surely as we seek to put our financial house in order and rebuild our nation’s defenses, so too we seek to protect the unborn, to end the manipulation of schoolchildren by utopian planners, and permit the acknowledgement of a Supreme Being in our classrooms just as we allow such acknowledgements in other public institutions.

That philosophy of government guided the early American republic but frayed over time as new beliefs challenged it. Nineteenth-century progressivism especially disputed the basic theme of freedom and limited government, arguing that modern life required a centralized national government not limited but with all the power needed for “experts” to assure the people’s welfare. Begun by Woodrow Wilson, the new statism defeated the constitutional separation under FDR and achieved its zenith of authority with the Great Society programs of Lyndon Johnson. But the end result of this concentrated power was the “stagflation”— both stagnation and inflation—under Jimmy Carter that led to the election of Reagan as president. In office, President Reagan reoriented government by cutting discretionary domestic national government spending by 9.7 percent and even reducing all nondefense spending, including entitlements, from 17.9 to 16.4 percent of Gross Domestic Product. By achieving this and reducing the top marginal tax rate from 70 to 33 percent, he unleashed the private sector in a surge of free growth that lasted until the current crisis, increasing the relative role of state and local government in the process, especially in advancing new programs.

The next Democratic president, Bill Clinton, was forced rhetorically to say the “era of big government is over,” and even when the Democrats regained control of Congress in 2006, their first act was to require that all new spending be supported by new sources of revenue, inhibiting their ability to create new programs. Still, domestic national government spending soared as early as President George H.W. Bush and continued under Clinton. Finally, federal government spending exploded to a half-century high under George W. Bush. National economic regulation increased; education, farm, and transportation programs metastasized; foreign policy became increasingly interventionist and threatening to civil liberties; and social issues like the family, marriage, and research became politicized.

As even Republicans have abandoned the Reagan formula of libertarian means for traditionalist ends, there has been a splitting back into the separate traditionalist and libertarian tribes of the pre-1950’s era that Meyer and Reagan tried to unite. Society is split naturally into different political groupings. Political scientist Aaron Wildavsky identified four very broad cultural types: individualists, traditionalists (or deferentials as he called them), egalitarians, and fatalists. One estimate was that individualists (libertarians) represented 34 percent of the population, social conservatives (or traditionalists) equaled 22 percent, egalitarians (progressive liberals) were 27 percent, and fatalists (predominantly alienated non-voters) represented 17 percent. On the basis of this division, Wildavsky concluded that all politics must be coalition politics, with no single group able to build a reliable majority.

Interestingly, Wildavsky claimed that the normal ruling coalition is the individualist/traditionalist one. The two groups could cohere because they both held a positive enough view of humanity that a strong central government was not required to control an irretrievably nasty human nature. Individualists consider nature as actually benign, encouraging freedom, experimentation, and entrepreneurship, believing that the invisible hand will make everything turn out right. Traditionalists are not so optimistic, but they do think nature can be at least tolerable for human social life if institutions like the family, church, and community are vibrant and active. Both of these views limit government in favor of private institutions. Both differ from egalitarians, who view nature as ephemeral, and fatalists, who view it as actually capricious—these perspectives require the strong hand of government to control harmful nature.

Some libertarians have tried to unify the individualists and secular egalitarians as a coherent political force. It has not worked because of their conflicting views of human nature and the fact that polls show that American individualists tend to hold traditional values on family, religion, and morality—indeed they are almost as socially conservative as the traditionalists on many traditionalist issues. It is significant that voting in Congress shows a very high correlation or correspondence between votes on economic and social issues. It is noteworthy that the supposedly pure libertarian Rep. Ron Paul also tends to vote socially conservative on the major issues.

President Reagan, Frank Meyer, and most of the others who have tried to revive the Founders’ synthesis did not see the fusion as merely tactical or political. As Reagan put it, libertarian means and traditionalist ends “complement each other.” Fusionism represents “a consistent philosophy of government.” Even the nontheistic economist F.A. Hayek taught that both freedom and tradition are necessary: liberty and markets cannot exist without a traditional, even religious, social order to sustain them. As social conservative Russell Kirk proclaimed, the state is often the greatest threat to traditional values and institutions. A serious review of the major philosophers of tradition and liberty will find that the best in each school believed both were necessary.

It has been noted that Kirk did not consider himself to be a fusionist. But neither did Meyer by that name. The name fusionism is not essential. Kirk and Meyer both believed in a synthesis between tradition and freedom. Indeed, as Meyer taught, Western civilization itself was and is a harmony of both. Not a uniform tune but a harmonic masterpiece—not simple libertarianism nor univocal traditionalism, but both. As Reagan said, this “was part of the deeper current of Western learning and culture” that created Europe and its offspring around the world, very much including the United States. This fusionist vision has lost much of its inspirational force in Europe and is weakened even in the U.S. today. But as the results under President Reagan suggest, it may be the answer to our current problems and America’s future.

Donald Devine, director of the U.S. Office of Personnel Management during Ronald Reagan’s first term, is a professor of political science at Bellevue University and editor of the American Conservative Union Foundation’s