Politics Foreign Affairs Culture Fellows Program

The Nationalist Delusion

They're wrong: government is still the biggest threat to our freedom and way of life.
Tucker Carlson

Whatever his faults, I love President Donald Trump. He’s forced conservative and libertarian intellectuals to rethink their long-held assumptions, something mere reasoning could not accomplish.

Take Tucker Carlson, who was ahead of the curve, as he often is:

If you’re a kind of conventional conservative, like I have been for most of my life, you’ve been—I’m 49, so I grew up in the Reagan era and I was trained to believe that the singular threat to our liberty was government. That’s what Reagan said. He was probably right at the time. And it takes a while, if you’ve grown up believing that, to readjust to the new reality, which is now the singular threat to your freedoms, to your freedom of association, certainly to your freedom of speech, to your ability to think, is technology. It’s the big tech companies. It’s Google primarily, but it’s also Facebook and Twitter and the rest. Simple question: who knows more about you, Google or the Social Security Administration? There’s no contest.

A more scholarly nationalist critique of libertarian-conservative assumptions was presented by Modern Age editor Daniel McCarthy:

I consider libertarianism to be every bit as much a suicidal ideology as left-liberalism. In some ways it is even more so, as libertarians are more oblivious than left-liberals to the consequences for themselves of hewing to their ideology. It seems to me that a healthy polity needs a middle class, and a country that is going to remain economically viable for as long as possible needs to have a commanding advantage in high-end manufacturing and producing goods that the rest of the world wants to buy. We still have some of these advantages right now, but we’re forsaking them. Our country went from being underdeveloped at its founding to being a techno-industrial powerhouse in the 19th and 20th centuries while employing a great many economic policies that libertarians don’t like.

McCarthy’s problem today is that “Libertarians take for granted the conditions of the 20th Century and don’t imagine anything could ever really change.” The 80-year-old New Deal is assumed to be the only challenge they’re worried about: “If we just cut taxes and de-regulate hair-braiding, the market will take care of the rest.” Rather, the market actually depends upon a civilization, a way of life, one that can survive even bankruptcy “but it can’t survive the global transformation that’s coming if we do nothing.” He argues that “the timeline for political crisis is shorter than the timeline for economic crisis.” Amid that crisis, “there will be a hard left or hard right political turn,” where the “urban administrative overclass will continue to grow in power and wealth, the urban and suburban lower class will become increasingly servile (or else restive), and the old middle class and heartland will be economically sidelined and in many places depopulated.”

In an earlier piece, McCarthy specified the nationalist indicators for the crisis: Americans “increasingly working as contractors rather than salaried employees, with fewer benefits and less security,” their “industrial” jobs vanishing, with no family wages, no lifelong work, no retirement guarantees, no prospects for children and grandchildren, and “economic growth concentrated in cities and college towns, leaving everyplace else to wither.” He argued that the American economy has changed in ways that now require “a new choice about the kind of country we are.” The nationalist choice is “the program that follows through on the themes of Trump’s 2016 campaign with greater clarity and focus than the administration itself has so far done.”

This economic nationalism “is less about ‘economic’ than it is about ‘nationalism’—that is, it takes account of the different needs of different walks of life and regions of the country.” To prevent such a crisis, the goal should be to balance “farmers, urban capital and labor” with the “post-industrial classes” by strengthening “the productive economy against the largely fictional economy of administrators and clerks.” This balance requires building the manufacturing sector against the service one, especially against the challenge from China, which “will determine the strategic and economic environment in which we live” unless we change.

Libertarians respond to the crisis, according to McCarthy, by saying that “no nationalist program for strengthening manufacturing for the sake of the middle class is workable because the social philosophers Friedrich Hayek and Ludwig von Mises demonstrated that all economic interventions by government involve insufficient knowledge of consumer preferences and specific market circumstances.” But technology has changed so radically, McCarthy rejoins, that it has undermined classic assumptions about the market. This follows a similar argument that’s been made by thinkers from Thomas Malthus to J.S. Mill to J.M. Keynes to Thomas Friedman today.

So what is the libertarian response to this nationalist challenge? From Adam Smith to F.A. Hayek, it has been that increasingly complex technology actually makes the market even more necessary to sort out and adjust to the new complicating forces in a way the lumbering centralized bureaucratic and politicalized nation-state alternatives cannot. The nationalist program to “balance” the whole economy is the epitome of failed industrial planning. Its preference for a “productive” manufacturing sector that alone can generate a self-sufficient middle-class society as opposed to a “fictional” service sector basically rests on the single datum that U.S. manufacturing employment has declined drastically, from 35 percent of jobs in 1910 to merely 10 percent today.

In fact, as early as 1840, service jobs (and output) were already dominant over industrial employment, while both trailed agriculture. Services today constitute an overwhelming 80 percent of U.S. employment; they represent about 70 percent measured by the economic value of its output, or, most critically, by national economic value-added. Moreover, contrary to the nationalist charge, U.S. manufacturing today is very competitive as measured by the value of its products. China does have higher manufacturing total value-added at $3.25 trillion to America’s $2.1 trillion, or $2 trillion for China and $1.8 trillion for the U.S. measured by output, so the difference is actually quite small. And the U.S. is much richer per capita than China, which has forced the latter to spread its wealth among three times as many people who are much poorer and more restive. Worldwide, China has about 20 percent of manufacturing value and the U.S. 18 percent, with the EU at 16 percent, Japan 10 percent, and South Korea 4 percent. That gives the four two thirds of world industrial output.

The other three must thus be the targets for U.S. nationalists “driving bargains” to advantage U.S. manufacturing. But both economies have much larger service sectors than manufacturing sectors. Even China has had a majority service sector since 2015, a response to undeveloped countries taking manufacturing trade from them. Contrary to the critics’ claims, a services-dominated U.S. economy is hardly unable to find opportunities for foreign trade. In fact, some recent data showed that U.S. manufacturing exports amount to $1.4 trillion, actually a bit higher than China’s at $1.3 trillion. If the U.S. shut the door on foreign manufacturing, who would buy those manufacturing exports, second only to the EU? The U.S. is also first in service sector exports, at 14 percent of world exports (and 7 percent of imports). What country would not swap declining manufacturing for the U.S. giving up services? Is that the nationalist “balance” plan?

It is simply impossible to substantially move away from a service-sector economy in modern times without some global catastrophe. The nationalist emphasis on manufacturing actually serves more of a political than an economic function, as indicated by its demeaning the service sector as “preparing food for” and “tending the children of” the elites. Actually, U.S. service-sector value added is usually divided into a financial sub-sector with a value of $4 trillion, government with $2.4 trillion, professional/business with $2.3 trillion, education/health with $1.6 trillion, wholesale with $1.1 trillion, retail with $1.1 trillion, information with $.9 trillion, construction with $.9 trillion, and arts/food with $.7 trillion. The disparaging caricature refers to the smallest part of the service sector. The largest “financial” sub-subcategory is real estate, which normally does not even require higher education. Why shouldn’t the working class find decent and non-degrading livings in any of these service sectors?

The fundamental moral charge that nationalists make against libertarian-conservatism is that it is insensitive to the plight of the left behind industrial and rural working class. Well-off libertarians may indeed show insensitivity to those affected by illegal immigrants (although many libertarians have supported merit-based upper-middle-class immigration competition for years). But the real problem for the working class is that state welfare saps its initiative to get jobs. Once on unemployment insurance, and then Medicaid, food stamps, disability, and welfare, the value of the benefits can exceed that of a minimum wage. Libertarians like Milton Friedman have suggested a negative income tax or the earned income tax credit pioneered by Ronald Reagan (although there are practical considerations) as a means to restore the pride of having a job even at low wages—which is the real plight of those left behind.

The fundamental libertarian disagreement with the nationalists is their insistence that Hayek’s and Mises’ works on the complexity problem are not “the relevant texts for understanding any of this.” Contra this not being a knowledge problem, where is the genius who will devise a plan to make a sector with 10 percent employment balance one with 80 percent? Admittedly, a tariff approach is less complex than managing an economy or welfare system (50 levels of bureaucracy and more from top to bottom) but it is complicated too. Even with very high tariffs, how will U.S. manufacturing grow that much? And to what percentage are we aiming? Back to 35 percent? A tariff by itself will not stop more manufacturing jobs from being transferred to robots, so how do we prevent that? And then what happens when we are using foot power while the rest of the world is automated? The critics blame libertarians for pining for the 1950s, but the nationalist solution seems to look back to 1910. 

Any comprehensive reorienting of the economy from service to manufacturing would make the original New Deal or War on Poverty or even Green New Deal look like child’s play. Nationalists have already expressed fear of Federal Reserve power, more over its evil intent than its lack of knowledge, but the latter is the real danger. As economic columnist Robert Samuelson reported in the middle of the Great Recession, the Fed and Treasury were changing the rules every day and had no idea what they were doing. This was conceded even by Alan Greenspan about much of his own tenure.

The objectionable bailouts and bank rescues, of course, were done by the same presidents, Treasury bureaucracy, and Congress that nationalists need to rely upon for their own solutions. Nationalists have criticized the influence of Big Pharma’s lobbyists—but just wait until they begin their program. The Washington bureaucracy, pretending knowledge, will run circles around them, just as it’s done with social conservatives, economic conservatives, and even the far left. A nationalist government will have no more idea how to control the bureaucracy than other administrations have. Rather than big business obtaining everything it wants from government, they tend to be pushed around by GS-12s who can send them to jail or ruin their companies any day they want.

Contra Carlson and the rest, the major threat to freedom is still from big government, including to the institutions that nationalists deplore. Google and Facebook are intrusive but have probably plateaued and cannot send anyone to jail. And where would they be without the state? Social media have special liability privileges. Governments fund the universities’ law, education, and culture colleges (even the Ivies were mostly state supported at the outset), and mandatory attendance laws produced today’s semi-monopolistic elementary and secondary education. The high arts, too, are mostly supported by government, as they move the popular standards below them. Media are mostly private but the legacies were likewise granted oligarchical access to the federal radio wave spectrum at the crucial beginning.

The critics raise valid concerns about the fate of many in rural areas who were once dependent on manufacturing. But they don’t face what to me is the basic reality that we throw simple things like centralized bureaucracy, “scientific” administration, and goodwill at highly complex social problems. To Hayek, that was the fundamental progressive error, and I see nothing different in the nationalist critique. Yes, they are correct that the political crisis will come before the debt one; indeed it is now. We libertarians are alarmed too. But the issue is what to do about it. Yes, the weak will suffer in any crisis, but how can nationalism keep the smart from taking advantage when its very program relies on them? How can we have nationalism without force and centralization when the country is at best divided 50/50?

More fundamentally, how do “we” build a “self-reliant middle class,” the major task set by the nationalist critics? Almost by definition, this cannot be done by government. Only free, pluralist, local institutions can work from the bottom to counter the nation-state monolith at the top. And only those same private institutions can produce an independent middle class rather than one manipulated by national elites. Many critics find the long-term conservative-libertarian goals of freedom, decentralization, and privatization to be unlikely and insufficient. Yes, even a decentralized heartland will still be outwitted by elites. But some redress is better than giving those same elites new power over the working class’s livelihoods.

Timothy Carney is on the right path here with his recent data demonstrating what is needed to build a middle class: doubling down on Alexis de Tocqueville and Robert Putnam that voluntary group membership and especially church participation is the precondition for social engagement. Did “we” build America as a “techno-industrial powerhouse”? Or did those groups provide the material from which it could grow with very few laws to help other than against coercion?

As libertarian Russ Roberts reminds us, it was Adam Smith who wrote, “The chief part of human happiness arises from the consciousness of being loved,” which comes from free social interaction with other human beings, which Roberts even connects to how the minimum wage keeps the less skilled from forming such important attachments at work.

Means and facts are as important as ends. It is not simple caring; the question is how. Indeed, much of President Trump’s most effective actions have been libertarian, eliminating burdensome regulations and cutting taxes. Even his tariff policy has arguably corrected past over-regulatory custom excises. Of course, the market won’t save us, but neither will a grandiose centralized state plan, nationalistic or not. The most important lesson libertarians should learn from the nationalist critique is that we have to do much more to strengthen the free private institutions that formed not only our markets but our civilization.

Donald Devine is senior scholar at the Fund for American Studies. He is the author of America’s Way Back: Reclaiming Freedom, Tradition, and Constitution and Reagan’s Terrible Swift Sword: Reforming and Controlling the Federal Bureaucracy. He served as President Reagan’s director of the U.S. Office of Personnel Management. He can be followed on Twitter @donalddevineco1.