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Risk, Relativism, and Resources
National Review Online ^ | DECEMBER 31, 2012 | Kevin D. Williamson

Posted on 12/31/2012 1:32:47 PM PST by neverdem

Three things conservatives must know about progressivism in order to defeat it

Conservatives understand the intellectual roots of conservatism better than progressives do, for obvious reasons, but we also understand the intellectual roots of progressivism better than progressives do. That is the case in no small part because progressives prefer to think of themselves as non-ideological pragmatists and empiricists, and they are immune to the irony that their just-the-facts pose is only an echo of vintage “scientific socialism” and related 20th-century ideologies with which our contemporary progressives claim to have no kinship. (I know a guy who wrote a book about that.) Progressives do not study Marx, Bismarck, Croly, or their other intellectual founding fathers, because they do not believe them to be their founding fathers — and also because many of them are kind of embarrassing.

But even though we study the Left’s thinkers, spend years in the universities they administer, and swim in the popular culture they dominate, conservatives still occasionally fail to appreciate critical aspects of the progressive tendency — especially the most attractive ones. Perhaps we should make a New Year’s resolution to better understand them, if not for reasons of charity and intellectual probity (we should always engage our opponents on their most meritorious arguments), then at least because doing so will help us to advance in the theater of ideas.

The political preferences that produced two terms for President Obama have been with us for a long time and will be with us long after the gentleman from Honolulu has completed the 82nd volume of his memoirs, and we would do well to better understand its attraction. The desire of one part of the population to live at the expense of another certainly is part of that, but conservatives are kidding ourselves if we think that the Democratic constituency consists entirely of freeloaders.

With that in mind, there are three ideas that should help guide conservatives’ thinking and policy prescriptions.

First: Progressives and those who sympathize with them are economically risk-averse compared with conservatives. As Charles C. W. Cooke recently pointed out, the terms “conservative” and “liberal” are sometimes confusing in the American context, and that is certainly true in the case of financial risk, about which conservatives are not conservative at all. As an academic study published in the American Journal of Business put it: “As the economic political orientation of the subjects in our study becomes increasingly conservative (meaning they lean more towards an economically libertarian position as opposed to an economically socialistic position), they assume significantly higher levels of risk in their investment decisions.” Other studies find similar results.

There are many ways to measure financial risk tolerance, but consider this: One of the riskiest things you can do with your money is start a business, and entrepreneurs and small-business owners skew heavily Republican. The 2011 survey (PDF) from the National Small Business Association found that 54 percent of the organization’s members identified as Republicans, while only 16 percent identified as Democrats; it is significant that more small-business owners identified themselves as independents in the survey than as Democrats.

The Democratic party is in fact a coalition of financially risk-averse groups: Women, blacks, and Hispanics all exhibit a high degree of financial risk-aversion when compared with whites and men. Even when controlling for income, white households are more likely to invest in stocks and other relatively risky assets compared with non-white households, and men are more likely to invest in stocks than are similarly situated women, though those differences are somewhat diminished when accounting for net worth and education. Black and Hispanic households, even when adjusted for income, are more likely to invest in low-risk, low-yield assets such as government bonds:

African-American households are particularly conservative in their investment style, preferring real-estate assets and insurance products to stock and bond investments. Even within these relatively more popular investment categories, however, the mean values for all categories of real-property investments across the African-American sample lie well below their corresponding values in white households. This trend persists across all income and education levels.

Likewise, women are more conservative, risk-averse investors than men are. They are also much less likely to be involved in starting a new business than men are — and not just in the United States, but around the world. Consider this from Werner Bönte and Monika Jarosch at the University of Wuppertal, Germany:

In this study we empirically investigate the contribution of personality traits to the gender gap in entrepreneurship. Our empirical analyses, which are based on data obtained from a large-scale survey of individuals in 36 countries, suggest that a group of personality traits which we call Individual Entrepreneurial Aptitude (IEA) has a positive effect on latent and nascent entrepreneurship among women and men. Moreover, women’s considerably lower level of IEA contributes significantly to the gender gap in entrepreneurship. The lower level of IEA is mainly due to women’s lower levels of competitiveness and risk tolerance. Furthermore, these results are confirmed by the results of a country-level analysis which show that the within-country variation of entrepreneurial activities of women and men is significantly related to within-country variation of IEA.

Single women are more financially risk-averse than married women, and likewise more likely to vote Democratic. While people who work for the government have an economic interest in voting for the party of big government, it also is probably the case that highly risk-averse people are attracted to government jobs, and that this same risk aversion attracts them to policies favoring a large, activist government for reasons other than narrow self-interest.

While we should be careful about over-generalizing the relationship between financial preferences and political preferences, some connections seem obvious. Social Security is a popular program across the board, but more popular among women than among men. Women are more likely to support benefit increases, less likely to object to Social Security taxes, and more likely to cite stability and security as a reason for supporting the program. Democrats have shrewdly attacked Social Security reform proposals as hostile to women’s interests, or to African-American women’s interests(PDF), as the context necessitates.

Social Security plays much the same role in the lives of these risk-averse Americans as do government bonds, CDs, or other low-risk, low-yield assets: They think of it as the ultimate money-in-the-bank investment. It is true that most people would be far better off if they spent their working lives investing the money they and their employers pay in Social Security taxes in a responsible, diversified portfolio of stocks and bonds, but conservatives are not going to get very far trying to explain the miracle of compounded returns to people who feel financially insecure. If our fellow Americans have different levels of risk tolerance than we do, that does not make them financially illiterate — it just makes them people with different levels of risk tolerance. And as conservatives, we should not discount the power and value of memory: Blacks and women were systematically excluded from full participation in the formal economy for a very long time, and it is understandable that their faith in the transformative and creative power of capitalism is not unqualified.

Where Democratic-leaning Americans go wrong is that they miscalculate the welfare state’s value as a tool of risk mitigation. Americans support the relatively low returns on Social Security for the same reason that Britons and Canadians broadly support their relatively low-quality government health-care systems: because of the mistaken belief that these programs will always be there for them. Better a low-return retirement “investment” in Social Security than no retirement income at all, that line of thinking holds, or one that is subject to the inherent risks of the market. Similarly, many Americans understand that a government-run health-care system will be less innovative than a market-driven one, that it will be inefficient, and that quality will suffer — and they prefer it still, on grounds that access to health care will be guaranteed.

Conservatives’ challenge is to make voters see that the risk-mitigation calculation behind support for the welfare state is erroneous and to propose reforms that do not threaten the guaranteed benefits that can be sustained. Unless our public finances are reformed, Social Security and Medicare most assuredly will not always be there for Americans. Paul Ryan is on the right track when he argues that his entitlement-reform plans are there not to abolish Social Security and Medicare but to ensure that the programs do not collapse. While some immediate changes are going to have to be made in Social Security and Medicare in the near future, relatively painless reforms such as changing the formula for indexing benefits and slowly raising the eligibility age will do a great deal to shore up the finances of these entitlements.

Conservatives looking to make radical reforms would do well to consider the risk aversion of a great many American voters and offer policy proposals that supplement Social Security and Medicare rather than radically restructure them or (my own preference) eliminate them entirely. For instance, we might create an opt-out (rather than opt-in) supplemental private account in which 5 percent of a worker’s income is put into a simple index fund on the Roth IRA model, in which gains could accrue tax-free and which would be heritable. That second provision is critical: Unlike Social Security benefits, real savings can be passed along to children or other survivors, contributing to intergenerational wealth-building, which has the potential to greatly enhance the stalled socioeconomic mobility of persistently poor communities. The use of those funds probably would need to be limited to retirement, education, and some health-care expenses (such as paying insurance premiums), a paternalistic aspect that will offend libertarians but make reform on this model more politically palatable.

Conservatives are right to argue that a rising tide lifts all boats, but a bull market does not do a great deal of good to people who are not invested. Our economic policies should take that risk aversion into account if we want to bring in voters who share many of our values but lack our economic confidence. Which brings us to the second point.

Two: Progressives benefit enormously from the fact that economic inequality matters much more to Americans than conservatives like to admit. Without rehashing the entire Rawls–Nozick debate on justice and equality, we should appreciate the brute political fact that a great many people care very deeply about the issue of relative economic inequality. Given that there are signs that economic mobility is declining in the United States, those concerns grow more acute.

Conservatives have long focused on the problem of absolute economic status rather than relative status: We are not naturally interested in how much X has relative to Y, but whether we have created economic conditions in which X may thrive or, short of that, whether X has sufficient resources to avoid starving in the street. As conservatives see it, economic inequality is an inevitable and not necessarily undesirable feature of the same free economy that has given us the richest poor people in the history of the human race. Conservatives appreciate that capitalism has produced widely shared wealth undreamt of until quite recently, meaning that Americans living in what we now call “poverty” are materially much better off than were middle-class Americans in the 1950s. When we think about the richest and highest-earning among us, we tend to admire them; the idea of “trickle-down” has always been a caricature of conservative economic thinking, but we do not believe that the economy is a zero-sum endeavor, either, and believe that (give or take the occasional Hilton heir or Kardashian) profit is generally a sign that somebody has produced something of social value. We scratch our heads when somebody describes wealth on the Steve Jobs or Bill Gates level as “obscene,” especially if that somebody is paying 60 grand a year for college tuition.

But at a certain level of national affluence, relative status starts to matter to people. Think of the American economy in terms of the Mercedes-Benz lineup: If you are struggling to get by, your thinking about owning a car is going to be mostly utilitarian — you need something inexpensive and reliable to get you to work, to take the kids to school, etc. You’ll care a great deal about fuel economy, insurance expenses, and other factors in the total cost of ownership. But if you’re in the market for a new Mercedes, basic performance, quality, and reliability are going to be assumed, and the differences between models are not for the most part utilitarian: A $36,000 C-Class will get you to work just as effectively as a $90,000 S-Class, and it’s a great deal more utilitarian and convenient than a $200,000 SLS. But those gull-wing doors must speak to somebody’s soul, otherwise Mercedes would not be able to sell the SLS for $200,000. And if a C-Class driver feels a little pang of desire when he pulls up next to an S-Class, that is not a sign of a character defect on his part: Aspiration is not the same thing as envy. But from an absolute point of view, figuring out how to move from an entry-level Mercedes to a high-end Mercedes is a pretty high-class problem to have.

Likewise, figuring out how to move up in one of the richest countries in the world is a problem that most of the people walking the earth today would love to have. Our appreciation of that fact sometimes encourages conservatives to in effect tell voters to eat their vegetables, because don’t you know kids are starving in China. At the same time, our celebration of capitalist successes and our appreciation of the vital role played by what we now call “job creators” (unfortunate phrase) blinds us to some important facts. Bill Buckley was no practitioner of class warfare, but he detected that there was something distasteful going on in a great many corporate boardrooms, and that in many cases those gigantic executive paychecks were utterly unrelated to business performance: “What dismays is the utter lack of class in such businesses and businessmen here parading their skills in distortion,” he wrote. “What is going on is phony. It is shoddy, it is contemptible, and it is philosophically blasphemous.” Such facts sting all the more when the middle class and the poor are facing diminished prospects and net worths savaged by the housing collapse.

The poor aren’t poor because the rich are rich, and conservatives of course have to keep reiterating this fact. But neither is it universally the case that the poor are poor because they are lazy or lack ambition, and while the position of the American middle class is the envy of much of the world, that position is tenuous for many Americans, and their anxiety is not to be dismissed lightly. There is of course a very large dose of unhealthy envy in our national discussion about inequality, but nobody who has seriously examined the relationship between politics and the economy (or real-world corporate governance, for that matter) could believe that merit and merit alone accounts for the diverging prospects of the very well off and the rest.

Republicans have for too long made holding down the top marginal tax rate their hill to die on, confirming in the minds of many voters the Democratic charge that the GOP is the party of the rich. Conservatives have an entire arsenal of good ideas for improving the lives of the middle class and the less well off, from encouraging savings and investing to reforming education, but none of those ideas brings out the fire in Republicans the way the top tax rate does. Do congressional Republicans sign a pledge to support school choice and tremble to break it?

Republicans are more libertarian in rhetoric than in practice; it would be better if it were the other way around. For a gifted orator such as Ronald Reagan, the language of freedom is uplifting and unifying; for a less gifted orator (say, one who decides to share eccentric theories about the biology of rape), the language of freedom can sound atomistic and Randian. In most conservative rhetoric, there is very little sense of solidarity, little sense that we are all in this together. (The subject of national security is an important exception.) To the extent that conservatives do invoke a spirit of solidarity in economic matters, it is too often in the form of yahooism regarding China, immigration, or trade. (Though Republican yahooism on the subject of the awfulness of foreigners who want to sell us things cannot hold a candle to recent Democratic yahooism on that subject.)

It is not entirely clear that there is a good policy option for encouraging the linkage of marriage and parenthood — the single most effective weapon we have against child poverty — but it would be beneficial (politically and substantively) if Republicans talked about that issue at least half as much as they do the 35 percent top tax rate. Indeed, it would be great if Republicans talked more about poverty in general than they do, given that conservatives have the better policy side of that argument. Instead, Republicans’ attitude toward the poor is too often something resembling contempt — witness the recent rhetoric regarding food stamps or unemployment benefits. The scandal is not that so many Americans use these benefits — the scandal is that they need them. Republicans not named Marco Rubio are not very good when it comes to talking about this sort of thing. Phil Gramm is one of the great American leaders, but “nation of whiners” is not a winning choice of words.

So, how do conservatives translate this into policy?

Three: Conservatives see people as assets, and progressives see people as liabilities. Marx and Engels may have hated Thomas Malthus and seen him as an apologist for the capitalist status quo, but the post-Marxist Left is thoroughly Malthusian. Conservatives see every individual as a potential butcher or baker, but progressives see him as a mouth to feed. Anybody who has spent much time arguing about abortion has seen the Left in full Malthusian mode, e.g.:

There’s no such thing as “taxpayer-funded abortion” because “taxpayer-funded abortion” saves the government money! . . .

How is that? Because whenever a child is born into poverty — guess who picks up the tab? Who do you think pays the costs of the delivery at the hospital? Who do you think pays the costs of the public schooling? Who do you think pays for the health care? Who do you think pays for any potential criminal justice costs? (Children born into poverty to parents who have no business having children are more likely to grow up to commit violent and non-white-collar crimes.) Furthermore, it increases our nation’s already exploding population, resulting in increased pollution and environmental costs and higher prices for food, land, and other natural resources.

In a similar vein, abortionist Ron Virmani, being hassled by some pro-life activists, was refreshingly candid in his response: “Don’t put it on the taxpayers, okay?” he said. “I don’t wish to pay for the baby with my money.” He then challenged the pro-lifers to “adopt one of those ugly black babies.” (Really.) More sophisticated Democrats make a very similar argument, as when Jennifer Granholm charged that Republicans do not sufficiently commit to financially looking after unwanted children. Progressive favorite Ruth Bader Ginsburg covered much of the same ground: “Frankly I had thought that at the time Roe was decided, there was concern about population growth and particularly growth in populations that we don’t want to have too many of.” Environmentalists, another key progressive constituency, are big on population control, too: Environmental groups ranging from the National Audubon Society to the Sierra Club either explicitly or tacitly endorse it; a former Sierra Club director describes the human race as “the AIDS of the Earth,” and, in case you are wondering where he stands, adds: “I make no apologies for that statement. Our viral like behavior can be terminal both to the present biosphere and ourselves. We are both the pathogen and the vector.” This is not fringe stuff from the Sixties, either: President Obama chose John Holdren, an acolyte of Population Bomb author Paul Ehrlich, to be his science adviser. From population control to peak oil, Malthus still looms large in the progressive imagination.

But that line of thinking is not always obvious. It is the Malthusian tendency that explains, among other things, Democrats’ remarkable enthusiasm for the General Motors bailout. In the progressive view, people are liabilities, mouths to feed — problems, in a word, and a job is one possible solution to that problem. It does not matter whether that job is in fact productive or the enterprise is economically viable: If there’s a paycheck coming every two weeks, then that liability is dealt with, at least for now. Thus the eternal progressive love affair with the WPA and other make-work programs. (They do not even get that the make-work fallacy is a fallacy.)

Conservatives, on the other hand, see every individual as a potential contributor to economic productivity. (In the coldest version of this, conservatives see people as indistinguishable from capital.) So we’re mystified by the desire to prop up GM when those workers could be put to use doing something more productive, and by the popularity of using protectionist measures to sustain otherwise moribund enterprises that lock up a great deal of potentially fruitful human capital. The capitalist cannot understand why anybody would want to waste good human resources on nonproductive activity; the Malthusian cannot understand why you wouldn’t.

Conservatives are not immune to the Malthusian temptation — it is behind much of my friend Mark Krikorian’s arguments against immigration. But it is in regarding people as assets rather than as liabilities that conservatives really have an opportunity to claim a great deal of what has long been progressive territory. Democrats are forever going on about making “investments” in education, infrastructure, health care, and the like, but of course they never propose any real investments, only transfers and spending. Conservatives who believe that people are assets also understand that these assets require investment to maximize their value, and, like our progressive rivals, we know that many of the most important investments to make are in education and health care. The difference is that we want to make investments in performing assets — assets that offer a real return. The doubling of national spending on education in recent decades has not produced any appreciable improvement in educational outcomes, but choice and market-driven reforms promise to drive scarce resources into the most productive uses. Simply directing more money into the market to chase the same supply of medical resources is not going to improve anybody’s health care, but creating an environment that encourages real investment (especially research-and-development funds) in health-care resources such as hospitals, pharmaceuticals, and medical devices will. Sensible tort reform greatly improves the value of investing one’s resources in a medical degree, as Texas and other forward-looking states have discovered.

It is a subtle but critical difference: The point of education is not to help students get a job and therefore take them off of our Malthusian liability rolls, but to give students the resources to produce something valuable, making them a national asset. Maximizing the return on human capital is probably more important than maximizing the return on financial capital — do the former and the latter will largely take care of itself. That should be conservatives’ guiding principle when it comes to education, health care, immigration, welfare, taxes, and a host of other issues.

Conservatives are rightly feeling a little glum after the 2012 election, but Americans are not fools, we do not want to be poor and vulnerable, and we have the resources to address even our most pressing economic concerns. In the end, good policies will win out. Consider:

Over the past 15 years a coalition of liberals and conservatives has brought in for-profit free schools in education, has sliced welfare to pay off the deficit, and has privatized large parts of the health service.

[The country’s] economy continues to grow and its pro-business coalition has remained in power since 2006.

Where? Sweden. Sweden’s reform-oriented conservatives have been able to achieve a great deal not because they are moderate — they are quite radical by Swedish standards — but in part because they took the time to really understand their rivals’ motives and, unlike unsuccessful conservatives before them, did not treat their opponents’ concerns as illegitimate. Conservative reformers took into account Sweden’s egalitarian culture and its consensus-oriented politics rather than wage a Newt Gingrich–style armored assault. Consider:

Before winning the general election in 2006, Frederik Reinfeldt had learned lessons from the way the party was perceived at the previous election. The “Moderaterna” party had been previously seen as a party of right-wingers intent on threatening public welfare — a model recognized globally for its generosity and success in the post-war era. Bo Lundgren, the former Moderate leader, had proposed radical tax cuts and lost to the Social Democrat, Göran Persson. The stigma attached to the Moderaterna brand was an issue that Reinfeldt knew he must address. . . .

Reinfeldt had made very important changes behind the scenes. Every promise that the Social Democrats had made on social-welfare spending, he promised to accept and improve. He switched focus on taxation from the rich to the low-waged in an effort to stimulate economic growth. He attacked unemployment benefits with increased incentives on making work pay more. He even increased the retirement age to 67 (sound familiar?).

What becomes even more remarkable about Reinfeldt’s success is that he managed it with the 2008 banking crisis. In the first quarter of 2011, [the] Swedish [economy] grew at 6.4 percent. It has falling unemployment and a budget surplus, alongside a public debt heading southwards of 40 percent GDP. Put this together with the fact that Sweden is the second most competitively ranked country alongside Singapore, and you wouldn’t be far off thinking that Sweden might belong with the Tiger economies of Southeast Asia.

None of this success has happened by accident or overnight. Sweden for too long had a bloated public sector and welfare benefits, which stagnated ambition. But Sweden has reinforced its economy with a huge growth in recent years in the private sector and manufacturing. Sweden today is famous not just for ABBA and Ikea, but also for high-quality design, defense, fashion, technology, and a high-skilled workforce.

All of which sounds good. (I have my doubts about that 6.4 percent growth number, which in any case is not where Sweden is now.) Awfully good, in fact. The Malthusians see a race to the bottom when it comes to global wages and manufacturing, but somebody forgot to tell Sweden (and Germany — and Boeing, Cummins, etc.).

Conservatives have a great deal to offer the American electorate, but some of our policies (and a good deal of our rhetoric) worry them. Yet we can take into account varying appetite for risk, address concerns about relative economic status, and make real investments in human capital while staying true to our principles. We will never win over the hardcore Left, but the hardcore Left is not what decides U.S. elections. Republicans who are concerned about winning the loyalty of the middle class should try to understand the many legitimate reasons many middle-class voters may have had for backing Obama again, as hard as that is to understand. The despair caucus holds that everybody who voted for the Democrats in 2012 did so for a bad reason, and that the resentment-and-redistribution vote now commands a permanent majority. If I thought that were the case, I’d be learning Swedish. But I do not think that is the case.

— Kevin D. Williamson is a roving correspondent for National Review.

TOPICS: Constitution/Conservatism; Culture/Society; Editorial; Politics/Elections

1 posted on 12/31/2012 1:32:54 PM PST by neverdem
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To: neverdem

Excellent article, thanks for posting.

The main thing I think he missed here is the fact of shifts in the economy whereby there is declining long-term real economic demand for low skill, low IQ workers. People are literally falling out of the bottom of the job market.

This is likely not a shift from agriculture to industry jobs, or from industry to service jobs. It’s a shift from jobs to no jobs.

And nobody is talking about it. Liberals are interested only in talking about it insofar as they can blame “the evil rich,” and conservatives generally only insofar as they can blame the parasitical whiners and takers.

The evil rich and the parasitical takers both exist, but they are symptoms of the problem, not its cause.

2 posted on 12/31/2012 3:30:26 PM PST by Sherman Logan
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To: neverdem
r/K Theory is the fundamental issue. Without that, everything else is just pondering the fluff around the margins.

3 posted on 12/31/2012 4:41:06 PM PST by AnonymousConservative (Why did Liberals evolve within our species?
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To: aflaak


4 posted on 01/01/2013 8:14:22 AM PST by r-q-tek86 ("It doesn't matter how smart you are if you don't stop and think" - Dr. Sowell)
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