History Was Supposed To End. What Happened?

Authored by Jeffrey Tucker via The American Institute for Economic Research,

Anyone paying close attention at the turn of the 21st century could foresee the impending failure of the social-democratic consensus throughout the developed world. 

The exalted experts who rose to power in the postwar period built gigantic state-based systems of social management and control and took over vast swaths of private society, imposing planning schemes across many sectors of economic life. They imagined themselves to be permanent fixtures of the socio-economic system. After all, this approach won the war (so they said), so why couldn’t it win the peace? 

But there was a problem: over time nothing worked as it was supposed to. There were massive internal contradictions within the model, as Amity Shlaes shows in her new book on the Great Society. The new systems relied on bureaucratic command, not market signals. There was another problem: they were hugely imposing on people’s lives and property, and people don’t like that. Or rather: they will put up with it so long as they perceive that the benefits exceed or at least match the costs. 

Building that apparatus – the efforts really began about a century ago, extended through the New Deal, but became a full model of social control in the postwar period – depended fundamentally on its successful sales pitch: these were programs built by workers for the sake of social justice, for the poor, for the marginalized, against plutocratic elites. 

But as F.A. Hayek had long demonstrated about socialism, the movement was in fact nothing of the sort. It was originated by elites and largely served elites: intellectuals, the people who knew better than the masses, the people in power or wanting power, the winners in the game of political manipulation. 

These systems reached their breaking point by the late 1970s. For the following three decades we observed piecemeal reform efforts such as those that would re-incentivize investment and work, privatize labor relations, control rates of money printing, deregulate, bring back market forces, cut taxes, and re-empower society. 

By the time socialism in China, the Soviet Union, and Eastern Europe were abruptly swept off the map – a devastating blow to the whole model of top-down control – there arose an inconvenient problem. Many institutions constructed in developed capitalist societies were of the same mode: centralized, managed by elites, vastly more expensive than the benefit, ill-managed, and ultimately unworkable.

The dramatic events abroad further humbled the left in the developed world. In the 1990s, the socialist left mostly went into hiding, as even the Democrats in the U.S. and the Labour Party in the U.K. pursued real reforms to welfare systems. It seemed like everyone had made his or her peace with markets and free enterprise as the only system that truly provides the goods. 

As always with politics, the reform efforts were too little too late. Public anger at the status quo built until the end of the century even as private enterprise effectively constructed a completely new system based on information and decentralized control. Ten years later, we had the app economy, the ubiquitous cell phone, and globalized commerce to the point that more than 60% of the GNP of the world was attributable to imports and exports. It seemed like there was no going back. 

Looking at this sweep of events led liberals like me to conclude that history was on the right path. The state was failing in every area and less popular than ever. There were too many anomalies to be sustained. Social consensus was breaking down for a simple reason: the ethos of social democracy presumes that society should operate like a large clan, an impossibility in the context of a modernized globalized economy with mass migration. Politicians came to be loathed alongside the bureaucrats that managed the systems that political forces created. In the course of a half century, public confidence in government had slipped from two-thirds to one-tenth of the public. 

The experts we put in charge of the state apparatus to rule us through compulsion and coercion had proven to be an enormous flop. Their wars on everything from poverty to drugs to illiteracy to terrorism had made each of the targetted areas actually worse, while market forces themselves – mercifully neglected by the state – were creating vast new technologies in the newly dawned digital age and creating glorious new opportunities for everyone. It was markets, not welfare, that lifted billions out of poverty, opened up information economies, created dazzling new modes of communicating and living, and blasted open the possibilities for progress like we’ve never seen in human history. 

But we liberals proved naive in our belief that history would march along a linear path toward the light. We had presumed some or another version of the “end of history” thesis that the next stage of history was moving us toward human liberty and that the state would realize its obsolescence and die a merciful death. 

Looking back, we can see that the very same naive confidence in the capacity of human beings to learn from experience also afflicted the liberals of the late 19th century. Surrounded by the products of liberty, innovations that were dramatically changing the world and leading humanity to a new level of prosperity and peace – flight, internal combustion, the commercialization of steel – they rested on their laurels with a sense that their victory was somehow baked into the narrative story of human evolution. Then came World War I. They had clearly grown overconfident. 

The equivalent happened to us in the last half decade. My own opinions had previously trended in the direction of believing that everyone would see the obvious failures of the state as an institution and thus would the progress toward liberty continue in the right direction. Instead, something remarkable and unexpected happened (though it is all perfectly obvious in retrospect): the reaction to the failure of leftist-style social democracy was not to embrace liberty but rather to rally around the emergence of a new form of authoritarianism that sought to govern with rightist-style rhetoric. 

Which is to say: the state reinvented itself to live another day, forestalling the hoped-for push to emancipate humanity from the constructed oppressions of the last one hundred years. 

The new movements came to power under a global surge of populist agitation. Trump in the US is the most obvious case but a deeper look shows that he was only one player among many in countries all over the world. Rightist movements that were against the old order but for a new form of state-imposed order rose up in Europe, Russia, and Latin America too. 

I’ve called this new form of populism (which is a method of rhetoric and a means of retaining power) “right-wing collectivism.” It feeds off public resentment of the previous type of elite management of the social order. It rejects the universalism (globalism) of the social-democratic way and embraces instead a new form of nationalism that bleeds into every application of reactionary statism: racism, religious bigotry, misogyny, intolerance. It is invariably restrictionist on immigration and protectionist on trade. It celebrates all the things the left puts down such as faith and family but demands that these institutions serve the common national project under a Carlyle-style great leader. It brings back the leadership principle and executive rule. It is as ill-liberal as that which it replaces but not obviously so since this style of governance is more tolerant toward finance capital and nominally capitalistic production, though also celebratory of industrial planning. 

Its champions called the model the “politics of human nature” without noting that there are both lower and higher angels of nature: the rightist brand of collectivism was all about tapping into the lowest instincts. 

The problem was not only the right. What happens on the right somehow always finds its mirror image on the left. The rise of this new form of rightist extremism further fed the resurgence of the same on the left, which similarly tried an experiment with the populist style. Down with the rich. Pillage the millionaires and billionaires. Impose new global plans of economic management. A green new deal. Punitive taxation. The return of socialism itself! 

The whole thing has been incredible to watch, but this is what happens: one form of extremist paradigm shift creates an appetite for another form, which is precisely why several astute observers have noted the strange overlap in the proposed policies of Trump/Warren/Sanders: statism becomes a kind of echo chamber of voices that seeks control by seizing the machinery of power for their own purposes. 

In the end, every form of state planning uses the same methods with the same collectivist goal even if the details change depending on the constituency being served. 

The question that has been on my mind constantly for these last five years has been: when does this all end? At what point does the populist model die the death too?

I must give credit to David Brooks for drawing my attention to a trend this year that I had missed. His column came and went in the flurry of minute-by-minute information flows but, to my mind, this is one of the most important writings I’ve seen on politics in years. His prescience here could define the look of the next half decade. 

Have you noticed that the world is on fire?…

The populist/authoritarian regimes are losing legitimacy. The members of the urban middle class in places like Hong Kong and Indonesia are rising up to protect the political and social freedoms.

These days, it doesn’t take much to set off a giant wave of anger. In Lebanon it was a proposed tax on WhatsApp. In Saudi Arabia the government raised taxes on hookah restaurants. In France, Zimbabwe, Ecuador and Iran it was rising fuel prices. In Chile it was a proposed 4 percent rise in subway fares.

The world is unsteady and ready to blow. The overall message is that the flaws of liberal globalization are real, but the populist alternative is not working.

Bingo! Here’s the problem. The populist must rely on exactly the same means of control as their managerial elite predecessors from the social-democratic project. The state is the state and there is no other kind. Control is control and force is force, and they breed as much popular resentment as the other managerial type from which populism emerged as a reaction. 

State control does not work. It never has. It can’t because, as it turns out, the people who manage state programs are no smarter than the people they manage; in fact, it is worse because the managers lack access to reliable signals of market forces. Also, a revolution on this scale is bigger than another person who purports to lead it. Rise to power in a revolt and prepare to be the next scapegoat. 

That is precisely what is happening right now. The new movements of protest are only nominally about left and right, despite the media attempt to make them fit those categories. As Brooks says, “the protests in all these places are leaderless, so it’s unrealistic to expect them to have policy agendas. But the big question is, what’s next? What comes after the failure of populism?”

He doesn’t dare point to the actual answer because he can’t come around to facing it, because doing so would amount to admitting that a century-long intellectual project is an enormous failure. There is an answer to the question of which paradigm best suits the needs of a modern, progressing, global, diverse world order powered by technological innovation that enshrines human choice as a first principle. The answer is now what it has always been: a free society protected from the wiles of political machines through extreme restraints on the state, any state of any flavor, whether managerial or populist. 

The next paradigm of history – once we stop experimenting with mad ideologies, populist reactions, fake paths to manufactured progress, and top-down means of enforcement – needs to be human liberty itself.