Memo to McLaughlin Jude Wanniski February 24, 1997

Memo To: John McLaughlin
From: Jude Wanniski
Re: Civic Renewal

Your NBC "McLaughlin Group" segment on Sunday relating to Bill Bennett and Sam Nunn and their Civil Renewal movement, or whatever they call it, extends a debate that has been going on for a few thousand years, at least. It's a chicken and egg argument over economic determinism and cultural determinism. Your call that it is a "fad" makes perfect sense when you relate this particular effort as a counterweight to "capitalism," by which Bennett/Nunn really mean "materialism." Bill Bennett really doesn't know anything about capitalism, except that when you write a book which millions of people buy, you get rich on the royalties. Sam Nunn is in another part of the same boat, a fellow who has spent an illustrious political career thinking about how to save capitalism, without having thought much about the mechanisms that make capitalism superior to other economic mechanisms. It is for this reason that neither of them appreciate the fact that there are a great many varieties of capitalism, each different according to its political configuration. It is in this sense that "capitalists" are amoral — in the same way that water is amoral in seeking equilibrium along a path of least resistance. We can't say Sam Walton was amoral in creating WalMart, for goodness sake, only that the configuration of the U.S. political economy cried out for something like WalMart. He was smart enough to see the opportunities to make his mark by serving a national population that has had its real wages squeezed during the past 30 years of inflation. If in the next 30 years, living wages climb as I believe they will, the newly affluent Americans will find less attraction in relentless discount shopping.

In a way, Bill Bennett and Sam Nunn are the cultural equivalents of Sam Walton, in that they see a private hunger for traditional values, and are capitalizing on it by questioning capitalism. I was glad to see you first call on Mort Zuckerman as the quintessential capitalist and have him fume about the Bennett assertion that people have too much real stuff and not enough spiritual stuff. Mort's defense of capitalism was stirring, in a black-and-white kind of way, but he clearly doesn't see any more than Bennett does that the deficiencies in our capitalist system are political, not economic. Bennett is saying the market doesn't work and Zuckerman is saying it does too. Did you see the letter to the editor I had a week ago in the New York Times Sunday Book Review! It was really on the same topic, prompted by Bob Kuttner's new book on how markets are fallible. I append it here in the event that you didn't see it. In any case, keep up the good work. 

* * * * *

Letters Editor
The New York Times Book Review (published 2/16/97)
229 West 43 Street
New York, NY 10036

Dear Editor:

The central argument in Robert Kuttner's book Everything for Sale, that free markets often fail, is correct only if one asks "at what?" The purest free market in economics, that which existed prior to civilization, had no economic imperfections, but myriad political imperfections. It operated with optimum efficiency according to the law of the jungle. The political market came into existence as a mechanism to improve upon the law of the jungle. The history of civilization has been a history of the intersection of political markets and economic markets.

Government should be at a minimum when there is minimum need for government, usually in periods of extended peace and prosperity. Government should be at a maximum when there is maximum need for government, in periods of war and depression. Because wars and economic contractions cannot be predicted with very high degrees of certainty, government cannot be downsized below certain minimum levels of national security and social security, via a safety net.

Mr. Kuttner's work is useful in reminding us of the many successes of government. It would be more useful if he would simply recognize there is a law of diminishing returns on tax policy, on spending policy and on regulatory policy. The political marketplace should produce leaders who are able to tell when we are taxing too much, when we are spending too much on national or social security, and when regulation creates more problems than it solves. It is when that marketplace fails us that the economy most often gets into trouble.

Sincerely,

Jude Wanniski