The Legend of the Nurturing State

There are two kinds of people: the happy and the unhappy. Political leaders act as lightning rods for the cheerful and vexed souls who make up the voting public. Which of these psychological classes has the upper hand varies over time. Happy moods favour conservative politics. Discontented, sulky electorates look to more intemperate options. Periodically the social mood changes. As psychological atmospheres shift, so do political fortunes. Australia’s second-longest-serving prime minister, John Howard, was a classic case of a conservative leader who personified a happy society. In 2007, after four terms in office he was abruptly turfed out by voters. There was no compelling institutional reason—to the end he led a successful government. But the zeitgeist had changed. The prevailing mood of happiness had given way to mounting dissatisfaction.

This shift wasn’t peculiar to Australia. Since 2007 national disgruntlement has been on the rise internationally. This hasn’t occurred everywhere. Some nations have got happier. Others have got unhappier. And some that were already unhappy have continued to stew in gloom and dejection. The degree of happiness varies from country to country. Australia is essentially a happy country even when its cheerfulness declines. In the OECD’s life satisfaction survey Australians grade their satisfaction with life 7.3 out 10. Only the Finns, Israelis, Norwegians, Swiss, Icelanders and Danes are happier—and then only marginally so. Nevertheless while Australia’s happiness is deep-set it did decline after 2007. It didn’t shrink as much as that of Greece, Italy, Spain or the United States. On a scale of 0 to 10, Australia’s subjective happiness fell 0.125 between 2007 and 2012, while Japan fell 0.2, New Zealand 0.4, the United States 0.5, Spain 0.7, Italy 0.8 and Greece 1.5.

The moderate decline in Australia’s national happiness had an equally moderate though notice­able political effect. Between 2010 and 2015 Australia had four prime ministers, five if we include the re-treaded Kevin Rudd. The way Australians currently express their discontent is through precipitous polls. They act like the national cat tormenting the elected mice. Compare the net satisfaction rating of Australian prime ministers since 2001. John Howard was in positive satisfaction territory from September 2001 to February 2007, around 1900 days. It took Rudd (2007) 850 days to fall into negative territory, Gillard 250 days, Rudd (2013) twenty days, Abbott thirty-six days and Turnbull 189 days.

For all of this though, Australian voters today are more irritable than angry. Their appetite for “sudden death by political polling” is mild compared to the recent actions of US Republican primary voters. The plurality that chose Donald Trump as their 2016 presidential nominee opted for a P.T. Barnum Republican. They selected an incoherent, egotistical showman, conspiracy monger and habitual liar to represent their party. Exhibitionism and grandiosity are a mirror of insecurity. A bombastic candidate is a natural screen on which voters can project deep insecurities. Republicans who voted in the 2016 primaries for John Kasich tended to rate their family’s economic situation as “moving ahead”. The typical Ted Cruz voter was “holding steady”. The average Trump voter meanwhile was “falling behind”. These falling-behind voters were found at all income and education levels. This reflects an underlying social reality. The proportion of adults living in middle-income households in the US dropped from 61 per cent in 1971 to 54 per cent in 2001 to 50 per cent in 2015. The American social structure has been gradually polarising. The number of adults in lower-income households went from 25 per cent in 1971 to 27 per cent in 2001 to 29 per cent in 2015. Not everyone is falling behind. Over the same period the percentage of American adults in higher-income households grew from 14 to 18 to 21 per cent. The prevailing trend, though, was households losing their place.

Is angry politics the corollary of this falling behind? Do lagging classes wrap themselves in conspiracy theories, swaggering spitefulness and betrayal-and-vengeance fantasies? Do left-behind nations opt for protectionist bravado, strongman exhibitionism, distrustful autarchy and trade wars? The 2010s has experienced an economic winter. Parallels can be drawn with the 1930s, 1910s, and the 1880s to early 1890s. America’s GDP growth rate is sluggish. Its long-run median income level is stagnant. Eighty-five per cent of Americans today think their government is heading in the wrong direction. So voters find solace in Donald Trump’s conspiratorial bluster? The EU’s percentage of world trade has shrunk. The Eurozone’s common currency is unworkable. In Hungary and Poland the national spirit is morose. So voters choose “anti-communist anti-capitalist” governing parties advocating anti-market patriotism and suspicion-fuelled cross-and-flag nationalism? The leader of Poland’s Law and Justice Party, Jaroslaw Kaczynski, is a conspiracy theorist who baits opponents as Stalinists and gangsters. Are we then to conclude that despondent times produce strutting leaders and mistrustful voters?

This essay appears in the July-August edition of Quadrant.
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If you think that a kind of dark causality of dejection is at work here, then consider the contrary case of the Bourbon Democrat Grover Cleveland. He was twice elected US President during the long downturn that stretched from the mid-1870s to mid-1890s. Cleveland battled tariffs and pork-barrelling. He vetoed an astonishing number of rent-seeking Congressional bills. He wasn’t alone. The periods in office of the great conservative British Prime Minister Lord Salisbury (three times between 1885 and 1902) were distinguished by a deep scepticism about government utopias and an equally deep stoical confidence in the providential workings of markets and industries.

Modern economies are cyclical. They oscillate through long waves of economic upswing and downswing. When markets and industries contract, which they do periodically, there are two possible responses. One is for societies to hold their nerve while the economic cycle moves from winter to summer. The second is for government to try to reverse the effects of downturns by expanding the state. The nineteenth century relied largely on strategy one, the twentieth century on strategy two. In 1932 when Grover Cleveland’s spiritual successor, Al Smith, ran against Franklin Roosevelt in the Democratic Party primary, Smith lost overwhelmingly. He became a rallying point for conservative Democrats opposed to the New Deal.

Don’t expand the state

In the twentieth century conservatives were those who said: Do not expand the state. It is already large enough. There are sufficient staff to carry out its key functions without adding more in real terms. The classic liberals of the nineteenth century argued for small government in an age when small government was commonplace. In the twentieth century liberals on the whole converted to social liberalism and identified with big government. Only a handful of conservative governments resisted this. In the US, the UK and Australia total government spending as a percentage of GDP fell in a concerted way six times only in a century. This occurred during the presidencies of Calvin Coolidge in the 1920s and Ronald Reagan in the 1980s; Winston Churchill’s years as Chancellor of Exchequer in the 1920s and Prime Minister in the 1950s; Margaret Thatcher’s prime ministership in the 1980s; the Menzies government in the 1950s and the second half of the Howard era in the early 2000s.

The conservative argument for limited government in part is economic and classically liberal. Reduced government spending increases economic growth. Yet this does not work in practice unless it is underpinned by a conservative culture. Think of it this way: modern industrial economies are not progressive, but cyclical. They oscillate up and down. Industries grow and decline, appear and disappear. Character allows individuals to adapt to the cyclical ups and downs. Perseverance is necessary for the down cycles and initiative is necessary for the up cycles. Independence and self-reliance are the concomitant of limited government. The character traits of patience, forbearance, nerve, prudence and endurance are very handy for dealing with the inherent waxing and waning of modern economies.

The American Founders included “the pursuit of happiness” as one of the three ends of government. They did so because the phrase signified all that was unbroken, sturdy, firm, stable, fixed, reliable, dependable and durable in human desire. It was John Locke who originally coined the phrase. In An Essay Concerning Human Understanding, he observed that the pursuit of happiness was the foundation of liberty. By happiness he meant the careful and constant pursuit of true and solid happiness. If we engage in that, he argued, we liberate ourselves from the tyranny of inconstant desires and random cravings. True and solid happiness makes us free. Conservative constancy, persistence, endurance and continuity are the key to liberty. Winston Churchill agreed. His motto was “never, never, never give in”.

What changed between Grover Cleveland’s election in 1892 and Franklin Roosevelt’s in 1932? Simply put, there was a general societal loss of nerve. In his 1911 book Political Parties, the German sociologist Robert Michels noted how in the era just before the First World War the eudemonic spirit of the nineteenth century had started to recede in favour of those who made “a profession of discontent”. Some of these personality types are familiar from history: the demagogues, humbugs and charlatans. More interestingly though, Michels also observed the growth in the number of “neurasthenics” and “mauvais coucheurs”. The former lacked the ability to cope with anything but trivial tasks. The latter were inclined to protest at the slightest hitch. Neurasthenia was a catch-all nineteenth-century psychological term for anxiety, irritability and depression. It was too vague to serve as an effective clinical classification. Nonetheless it rang true as a figurative description of those who did not cope well with the stresses of modern life. By the time Michels wrote his book the coping mechanisms typical of eudemonic personalities were in decline. This trend accelerated over the next century. The personality traits of perseverance, persistence, tenacity, determination, tirelessness and the courage to continue atrophied. Insecurity, anxiety and nervousness grew, and with them came political movements trading in grandiosity and megalomania, the flip-side of insecurity.

Neurasthenic behaviour is common in the culture today. On American college campuses a small army of phobic students agitates for “safe spaces” and “trigger warnings” to protect them from the slightest upset. Older self-help moral cultures have now virtually disappeared. The threads of Augustinian, Thomist, Stoical, Epicurean or Aristotelian character, once integral to Anglosphere culture, have been shredded. Instead of patiently adapting to the inherent ups-and-downs of modern life, people get angry. Anger turned inwards (depression) leads to drug addiction: ice in regional Australia, OxyContin in the US. Anger turned outwards is an expression of powerlessness. As anxiety spirals, the elites, the political class, globalisation, bankers, Jews, Mexicans, Chinese, George W. Bush—all the latest fashionable scapegoats—are wheeled out for ritual blame.

The legend of the state

As neurasthenic social psychologies in the late nineteenth century started to replace eudemonic ones, states were asked to “do more”. Already in 1911 Michels had noticed a sharp increase in the demand for official positions. He attributed this to the “ever-increasing precariousness in the position of the middle classes”. The 1910s, like the 1970s or the 2010s, was an era of economic sluggishness. This placed pressure on, among others, “smaller manufacturers and traders, independent artisans, farmers”. The precariousness of their situation, though, was as much psychological as material. In response to increasingly nervous societies, states began to offer an expanding pool of secure positions. Governments started to proffer salves and balms for ever more edgy, panicky national sensibilities.

From earliest times governments have had a supply of positions which have always been sought after. Patronage of “placemen” was a ritual of pre-modern states. Nineteenth-century liberal governments over time replaced the patronage system with bureaucracies. Michels was a socialist. But he was also a trenchant critic of bureaucracy. He observed things about the bureaucratic state that others overlooked. He noted that by creating a new class, “the intellectuals”, the recently minted procedural bureaucracies found a means of (seeming) perpetual expansion. He noted how in the early twentieth century the state began to hire staff to help in its own “self-defence”. It recruited employees to work on “the legend of the state”. The word intellectuals only came into wide usage in English after 1900.

What turn-of-the-century governments did in effect was to create an unprecedented apparatus to publicise, market, defend, promote, analyse, report on, certify and document the state. Eventually the legend-makers migrated to the state-funded post-industrial health-and-education sector which by mid-century began to proliferate alongside government. By the late twentieth century the legend-makers made up a sprawling class devoted to policy, management, consulting, advocacy, strategy and analysis in a range of government, quasi-non-government, public sector, corporate, industry, association, arts and think-tank bodies. They also worked for pollsters, electoral offices, political campaigns and lobbyists, touting ideas, peddling influence, and seeking to leverage the state and shape public opinion. The members of this class were not classic philosophes. Yet neither were they just white-collar workers. They were something in between.

The legend of the state has many authors. Even so, the demand for these jobs always exceeds the supply. As a consequence, Michels observed, we actually end up with two classes of intellectuals. There are those who succeed in securing public employment and undertake to defend the state. Then there are those on the outside who became by default “sworn enemies” of the state. Today you find many of these outsiders with blogs or on opinion sites or doing PhDs. This class is restless. Its members habitually criticise and carp. They are skilled exponents of outrage, anger, affront, annoyance and indignation—at least until they get lucky and finally receive a good public post or a comfortable slot in the pressure-and-influence industry. Michels pointed out the paradox that this implies. The state continually increases. Yet it can never expand as rapidly as the discontented elements of the middle class want. The larger the public sector gets, the less compatible it is with the general welfare. Yet it alone can promise secure positions for educated members of the insecure middle class.

This implies a vicious circle. More so for the fact that the state in the main also educates the children of the middle class. In doing so it tacitly pledges that education will end in a good job. But periodically this is doomed to fail. It is in essence a state-run Ponzi scheme. Whenever the scheme falters the intellectual proletariat gets in a rage. This happened in 1968 with the international student revolt. It repeated itself in 2011 with the Occupy movement, which was populated by individuals with large student debts and poor middle-class career prospects. In 2016 the same group flocked to Bernie Sanders’s Democratic primary campaign rallies in the US. Their anger was soothed by Sanders’s Scandinavian-style socialism-lite. His advocacy of nationalised health care and gratis college tuition entailed an implicit promise of endless jobs in an ever-larger, never-costed, infinitely benign public health-and-education industry. Utopia was not dead.

Economic and moral independence, personal industry and self-mastery are keys to enduring the wave-like character of modern economies. That was a commonplace view in the nineteenth century. A new attitude formed in the early twentieth century. This held that the key to social well-being was not independence, but intelligence. This vision propelled the growth of government. The state hired or subsidised knowledge, expertise, qualified staff, graduates and brains trusts. It employed symbol-wielding functionaries. Their job was to produce justifications, defences, evaluations, strategies and rationalisations of state action and public sector organisation. They crafted programs that then employed burgeoning numbers of white-collar and pink-collar workers.

Along with this grew conceit. The knowledge class convinced itself that it knew the kinds of things that would save the world. It was notable for its sense of self-importance, which readily translated into smugness, intellectual snobbery and narcissism. It was perhaps the most conceited class ever in human history. Society paid a price for this conceit. For the knowledge class knew less than it pretended. The depression years of the 1930s illustrate this. Between Calvin Coolidge’s last full year in office (1928) and Franklin Roosevelt’s first year in office (1933), government in America doubled in size. The more conservative British expanded their government by 10 per cent in the same period. Double-digit unemployment lasted in America till 1940; in the UK till 1936. Peak-to-trough output declined in the US by a precipitous 46 per cent; in the UK by 16 per cent.

In truth the legend of the state is only a legend. Expanding government does not erase economic cycles. Periodic prolonged big down-turns like those of the 1910s, 1930s, 1970s and 2010s do not respond well to government intervention. As Joseph Schumpeter long ago pointed out, these cycles are neither caused nor cured by policy but by technology. New technologies like the motor car caused the 1920s to boom. In the 1930s the same technologies eliminated jobs. When cars replaced horses, the farmers who produced horse-feed went out of business. Industrial mechanisation eliminated many other farm occupations. There are periodical waves of technological unemployment. Farm labour shrank in the 1930s; expansion of manufacturing replaced these jobs in the 1940s, 1950s and 1960s. Then manufacturing’s share of employment declined sharply beginning in the 1970s; post-industrial office-and-service, education-and-health jobs took their place. Now white-collar and pink-collar jobs are declining as they are being automated.

We live in a cyclical world. Modern economies oscillate. That is their natural rhythm. Governments don’t control this rhythm and they can’t vary it except in incidental ways. They can’t bring back the lost worlds of rural employment or manufacturing industries. Nor can they inflate the health-and-education industry indefinitely or stop the natural shrinkage of employment as auto-industrialism (the potent combination of computing, networks, cheap digital sensors and robotics) replaces office-and-service staff. The natural law of industrial society applies to all economic sectors. Eventually machines replace labour. And in due course new paradigms of work are invented—we see this happening today as capital work is growing incrementally in place of salaried work. Small businesses, micro-businesses, self-employment, partnerships, contract work and household-based occupations are expanding as wage-and-salary office and factory work declines. The DIY sector grows as the service sector reaches its natural ceiling and the bureaucratic incubus of the education-and-health industry echoes in low productivity, high price inflation and declining real outcomes.

Self-reliance versus nostalgia

Casting a glance back over the past century, the major conservative leaders in the Anglosphere—Coolidge, Churchill, Menzies, Thatcher, Reagan and Howard—voiced a common theme: self-reliance. Citizens in liberal democracies have to be able to stand on their own feet. Independence is an essential characteristic of a eudemonic world. We are happy when we can take charge of our own affairs. Contemporary electoral politics in the Anglosphere is torn between the happy desire for self-reliance and the anxious reliance on the state to “fix things”.

The most miserable of today’s Anglosphere nations is the United States. While it continues to experiment at a state level with DIY initiatives like charter schools and home schooling, at the national level the prevailing mood is one of nostalgia for retro social models. A good chunk of today’s Republican voters long for the lost world of 1950s-style manufacturing. They think it can be resurrected by a mercantilist American state that imposes high tariffs, aggressively renegotiates trade deals and extracts tribute from other nations. The Democratic Party in contrast offers 1970s-style neo-socialism or 1990s-style knowledge-class liberalism. Nationalisation of health insurance and free college tuition figure prominently in Bernie Sanders’s campaign to be the party’s presidential nominee. His key supporters are vocal young neurasthenics. Hillary Clinton’s answer to voter anxiety is colossal presumptuousness. Her style is the quintessence of knowledge-class insolence. It mixes shamelessness, pushiness and arrogance with a banal liturgy of post-industrial pabulum that promises economic salvation wrought from government investment in research agencies, college education and pre-schools.

The door to self-reliance is open a little wider in the United Kingdom. In spite of David Cameron’s emollient political style, Michael Gove made significant headway as Education Secretary with self-governing academies. George Osborne has pursued admirable budget restraint, reducing total government spending from 45 per cent to 40 per cent of GDP. Yet spending remains significantly above the Thatcher and Churchill-era lows of 34 per cent of GDP. The assuaging response of Centre-Right parties to the leviathan state is no better illustrated than in the hostility of Cameron and Osborne to the idea of the UK exiting the EU super-state. The European Union’s mix of costly regulatory bureaucracy, uncontrolled population flows and a mercantilist common tariff is the antithesis of a self-reliant politics. Self-reliance assumes simple rules, clear limits and no rent-seeking. Opaque rules, blurred boundaries and political prices confound self-determination, whether individual or national. The Cameron–Osborne argument against Britain leaving the European Union is fear. In sharp contrast self-reliant politics appeals neither to the Hobbesian fear of death nor to utopian hopes for a painless world.

Contemporary arguments for bureaucracy resolutely mix hope and fear. The legend of the state today is routinely encapsulated in the sanctimonious rhetoric of safety. This brand of rhetoric has become pervasive. In an anxious world, political parties, trade unions, universities, states and super-states all offer the pursuit of rules in place of the pursuit of happiness. A century ago nervous electorates began to seek exemption from the economic cycles of industrial capitalism by pushing the state to grow. First came bigger government and then the voluminous taxpayer-subsidised health and education industries. Now electorates are torn. Rules, it turns out, are costly. Ever larger portions of the GDPs of advanced nations are invested in rule compliance, which cripples human autonomy and economic productivity. Yet the rules have become addictive. Junior doctors and the UK Health Secretary Jeremy Hunt agree in their different ways that Britain’s National Health Service is “drowning in bureaucracy”. Doctors complain of having to do vacuous paperwork rather than treat patients. Yet the same doctors turn instantly into militant defenders of bureaucratic employment schedules when they are asked by the Health Secretary to work on weekends.

The same perverse ambivalence is reflected in the behaviour of governments. In Australia the Coalition government wants to control spending to reduce the country’s budget deficit. Yet the government’s forward projections of its expenditure on health and education continue to leap well ahead of inflation. Centre-Right political parties find it difficult to confront knowledge-class ideologies. They have been seduced by the legend of the state and disarmed by the notion that intelligence is more important than independence. They retain a sense of fiscal rectitude but it is constantly eaten away by the legend of the state. The Liberal leader Malcolm Turnbull personifies this ambivalence. The siren song of the legend echoes loudly in his ears. Its pull seems ineluctable. Only the grinding white noise of budget deficits dims its sound.

The Centre-Left on the other hand thinks that the legend is the answer to fiscal short-falls. The Labor leader, Bill Shorten, has no doubt about what to do. “The way we will grow the economy is we’ll make sure that we have highly skilled workers in the future—that’s our kids, making sure they get the best education. You grow the economy by making sure that when people are sick, they can get to a doctor without having to pay a big co-payment fee up the front.” This is absurd. Industrial economies do not grow by people going to the doctor. They grow by increasing productivity. The long period of global economic slowdown since 2005 is closely connected to declining rates of productivity growth. Australia’s multi-factor productivity has recorded negative growth in most years since 2004-05. This is consistent with the ever-greater reliance in advanced economies on the service, health and education industries. These are low-productivity sectors. They are resistant to technology-driven output growth. Typical of this resistance was the horror that gripped the international university sector when massive open online courses were first widely mooted in 2012.

Anxiety versus calm

Since the 1970s the post-industrial economy has evolved into a classic labour-dominated wage-and-salary sector. Yet the long-term trend in major economies is away from labour as a source of income, towards capital, often small-scale capital. There is an incremental but major historical shift occurring. To its credit the Liberal Party has recognised something of this imminent social turn. It went to the polls in the 2016 federal election campaigning on tax reduction for small business. Today small business is the key generator of jobs. The party also campaigned on not changing the favourable tax treatment of negatively-geared buy-to-rent properties. This type of property-ownership has become a significant source of supplementary income for a large number of middle-tier Australian households. Reflecting social evolution in policy terms is a key for political parties. Yet ethos is even more important. The case for popular capitalism is not only institutional. It is also ethical. It pivots on the question: What is a good society? The answer to that question for much of the last half-century was a salaried “smart” society. In the last decade, though, that answer has become less persuasive. The “smart” metaphor is dying. The desire for DIY-style autonomy and independent proprietorship is quietly growing, and the virtues of self-reliance are its implicit ethical scaffolding. This is something, though, that the political class, preoccupied with policy, often misses.

The context is significant. The age of the large organisation is in decline. This does not mean that big companies are disappearing, but they are employing fewer workers. Stock or other capital rewards are becoming increasingly important as a supplement or alternative to salaries. The next step in this social shift will be the automation of the service, health and education industries. The natural law of industrial society is implacable: machines replace labour. In the nineteenth century most people worked in a rural occupation. Today almost no one does. In the mid-twentieth century manufacturing was the big employer. But no more. Manufacturing jobs were replaced by office and service jobs. Now these are being automated. By 2030 an owner-driver in the transport industry today will be an owner-manager of driverless vehicles. Compare this with the government health-and-education sector. It continues to steadfastly resist productivity gains of almost any kind. It is the last bastion of the labour unions. But automation is coming even to that sector. We are just now beginning to glimpse the era of automated essay marking, robotics for minor surgical procedures, algorithmic application processing, auto-industrialised warfare, and much more. Why, for example, should municipal councils hire more staff when they can employ big-data analytics to allocate existing staff resources more efficiently?

Voter choices have a complex relationship with social realities. A successful transition to a “small capital” future depends on voter confidence. Fear favours the legend of the state. Anxious voters are inclined to opt for the mirage of low-productivity jobs. They prefer short-term gain even if this realistically means long-run loss. Low-productivity worlds are dismal. But the neurasthenic mix of fear and hope seduces vexed electorates in times of prolonged downturn. It is anxiety’s sleeping draught. Despite this, social reality rolls on implacably. Under the surface it patiently chips away at all social fantasies. Governments and voters can piously resist unpleasant reality all they wish, but they pay a steep price eventually.

The alternative is calm and composed adaptation to reality’s swings. This is not a matter so much of policy as of ethos. An unruffled demeanour is needed to deal with the oscillations of modern life. The pendulum swings unceasingly for all of us. What helps is not the pathos of fear and hope but rather the happy delights of fortitude and determination. Neurasthenic voters want to be coddled. Being cosseted and cocooned was the great demotic twentieth-century dream. Yet all of the bubble-like shelters, big-spending protections, deficit defences, exhibitionist shields and mercantilist postures end in ill. In spite of the legend of the state, modern life is not built for anxious foot-stampers but rather for calm stoics and happy fatalists. For those souls, the dispiriting vacillations of febrile economies matter less than do the irrepressible joys of resolute hard work, strong-minded enterprise, staunch economy, dogged initiative and spirited self-reliance.