Government's Expanded Role

GOVERNMENT'S EXPANDED ROLE .An eJitorial THE EXPANDED ROLE of government has brought about significant changes in our economic system. Old-style, individual-enterprise capitalism has given way to what Professor Calvin Hoover of Duke University describes in his recent book, The Economy, Liberty and the State, (The Twentieth Century Fund, N. Y.) as "Welfare Capi talism, Progressive Capitalism, or simply the Organiza tional Economy." Picking up the last descriptive phrase, it would seem that organization headquarters are gravitating more and more toward Washington-as President Eisenhower warned at the 1957 Governors' Conference. The federal government, in ways large and small, per vades our lives. Measuring its size and scope, to get some indication of its vast and growing influence, can take many approaches. Perhaps the simplest is to cite a few statistics, single out a few programs that point rtP the wide range of government economic-financial activities and responsibilities today.

From the Monthly Letter of the First National City Bank of New York, August 1959. 197 198 FIRST NATIONAL CITY BANK For example, some 25 million Americans (veterans, federal workers, ~r~ed forces" farmers,. social security recipients )-one adult in every five-get regular checks from the government. Countless others receive occa sional payments. At the end of 1958, federal warehou~es were giving out food to more than five million "needy persons." The food got in the warehouses in the first place be cause of federal farm programs which, while regiment ing the farmer with acreage controls arid marketing quotas, have priced commodities out of markets and piled up mountainous surpluses. Some two million persons live in government-subsi dized' public housing. Taxes at all levels of government take more than one quarter of our national production and are levied most heavily on work, enterprise, and capital accumulation.

The federal government directly competes with pri vate business by operating thousands of commercial industrial facilities (a 1956 tally placed the total at nearly 20,000 with capital assets of some $12 billion). In the financial field there are over 100 federal insur ing, lending, and guaranteeing agencies covering agri culture, housing, foreign trade and investment, local government organizations, commerce, and industry. It is estimated that by June 1960 existing lending programs will reach a total outstanding of $105 billion ($23 bil lion direct loans and $82 billion guaranteed or insured loans.) In June 1945 the total was $11 billion. Federal aid to states, localities, and individuals, at GOVERNMENT'S EXPANDED ROLE 199 $147 million in 1930, climbed to $7.2 billion· by 1958. Government-ownedelectric utilities accounted for one kilowatt in 18 generated, in .this country in' 1920; last year public power facilities generated one kilowatt in every four.

One in every six employed· Americans is on a govern ment payroll. Since 1900 nongovernmental employment has increased about lOOper cent while government em ployment-federal, state, and local-has' increased about 650 per cent. The Great Reaction There is a chorus of pleas these days for an even big ger role for government-more central planning, goal setting, decision making. They are invariably put forth in the name of "progress." Last month, for example, a panel of seven economists, including Professor John K. Galbraith of Harvard, stated: "We reject the notion that government governs best which governsleast. The federal government is our only instrument for gllidiIig the economic destiny of the country." "Liberals" urge greater spheres of government to "beat the Russians" and "advance social welfare." Criticism is heaped on "reactionaries'" who are obsessed with the "fetish of a balanced budget and stable prices" and who harbor "exaggerated fears about growth of government."

"Liberalism" is a good word; "reactionary" is a bad word. Yet the real reactionaries are those who urge stat200 FIRST NATIONAL CITY BANK ism in the name of liberalism. The true liberal op poses encroachment by centralized power; he respects the individual, his cherished freedoms, his sense of re sponsibility. The "neo-liberals," on the other hand, have little faith in the capacity of free men to take care of them selves, to overcome hardships, to exercise wise judg ments. Supporters of the superstate aspire to decide for people what they shall have and to keep power by mak ing voters beholden to them for handouts. This is openly expressed in the cynical observation, widely at tributed to Harry Hopkins: "We will spend and spend, and tax and tax, and elect and elect." It was Alexis de Tocqueville, that discerning French observer, who in the 1830's warned of the ultimate fate of men who are tempted by a "benevolent" Welfare State: It provides for their security, foresees and supplies their necessities, manages their principal concerns, directs their industry, regulates the descento£ property, and subdivides their inheritances - what remains, but to spare them all the care of thinking and all the trouble of living .. '.?

The will of men is not shattered, but softened, bent, and guided. Men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence. It does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, until each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd. John Stuart Mill, the English philosopher and econo mist, pointed out more than a century ago: The. worth of the State, in the long run, is the worth of the GOVERNMENT'S EXPANDED ROLE 201 individuals composing it; and ... a State which dwarfs its men, in order that they may be more docile instruments in its hands even for beneficial purposes - will find that with small men no great things can be accomplished. A democracy, while preserving the outward forms, can destroy itself if the majority of the voters find them selves bound, out of selfish interests in benefit programs, to perpetuate in power a benevolent dictatorship. Soon er or later, however, people revolt when bureaucrats be come too greedy for power and money.

As far back as 1949, the Australian people turned out of office a ruling Labor Party in favor of a Liberal Country Party which reformed taxes to open opportu nity for enterprise. In Canada a Liberal Government launched a similar tax policy beginning in 1952. A year earlier, in 1951 in the United Kingdom, the Labor Government went down to defeat before a Conservative Party pledged to halt nationalization, end controls, reform taxes. As R. A. Butler, Chancellor of the Exchequer in the Conservative Government, put it in 1954: In the past three years we have burned our identity cards, torn up our ration books, halved the number of snoopers, decimated the number of forms, and said good riddance to nearly two-thirds of the remaining wartime regulations. Now we have red meat - instead of red tape. These illustrations of retreats from socialism show that, while people like to get Christmas presents, they are not so keen about the restraints, controls, and losses of opportunity that go with the fully developed socialist society.