Communism and Statism: Is There a Third Way?
Notes on a Conservative Political Economy
by William F. Campbell and Andrew W. Foshee
The conservative victory in the 1984 election provides a timely opportunity to reconsider the conservatives’ approach to public policy. What is lacking is a conservative political economy, a set of economic policies and the body of unifying normative principles on which they are based. The construction of a truly conservative political economy is a tall order, but there is no lasting alternative to it. The inertia of election victory and economic expansion will eventually, perhaps very soon, be eroded and the battle will move once again into the realm of ideas.
Before that happens. Southerners would do well to realize that they are heirs to a conservative political economy which embraces private property, free markets, and a proper disdain for meddling bureaucrats but does not fall into any of the modern heresies. Consequently, it is open to the insights of various free market economists but does not draw on their anti-political political philosophies. It is the conservative political economy of Southern Agrarianism inherited from Jefferson, Taylor, Randolph, and Calhoun, and adapted to the new circumstances of the twentieth century by the Vanderbilt Agrarians and the American and English Distributists.
During the 1930s, the Vanderbilt Agrarians and their Northern and Midwestern counterparts, the Distributists, formed a loose alliance which provided an apologia for a decentralized society and the enduring freedoms which are nurtured by it. They argued that if the tree of liberty was to survive it had to be rooted firmly in the soil of small property, genuine federalism and piety — belief in God, respect for the family and a sense of duty to one’s home, one’s country. Unbeknownst to them, a concurrent development of decentralist thought was taking place at the hands of a German economist named Wilhelm Roepke (1899-1966). Roepke, along with a number of other European economists and sociologists, was laying the groundwork for a conservative political economy of the “Third Way” which was the logical culmination of principles shared by the Agrarians and Distributists. To borrow a phrase from Frank Owsley, “The Pillars of Agrarianism” and of Third Way political economy are virtually identical: small property, federalism, and what Roepke called “rootedness.”
1980 was not only the year which launched the conservative revolution; it was also the fiftieth anniversary of the publication of I’ll Take My Stand: The South and the Agrarian Tradition. The publication of that volume of essays marked the beginning of an attempt by the Vanderbilt Agrarians to provide a reasoned defense of the South’s traditional way of life. They had watched the rampant “industrial commercialism” of the North invade the South, and as Donald Davidson recounted in his history of the making of ITMS, “in no section were its activities more blatant than in the South, where old and historic communities were crawling on their bellies to persuade some petty manufacturers of pants or socks to take up his tax-exempt residence in their midst.” The Agrarians were no more opposed to the development of industry in the South than we are to the use of enterprise zones to increase employment in depressed areas. What they objected to was the manner in which this was being done. Throughout the postbellum decades the traditional political economy of the South had been giving way to the onslaught of materialism. By 1930 the process of home breaking, as Andrew Lytle called it, was very advanced and the traditional order could not be restored. However, a new order grounded in the same values could be created, one which was consistent with the preservation of Southern culture and the values to which Southerners adhered. What they sought was an industrialization along Southern lines. Thus, even before the Great Depression and before the efforts of both the political right and left to “save capitalism,” these men had begun to seek out and assert some Southern principles which would preside an alternative to both state-capitalism and collectivism. These principles were to be “relevant to the new circumstances” and so they asked themselves, “What were the right Southern principles in the late nineteen-twenties?” These were revealed in the introductory “Statement of Principles” of ITMS and in the many books and articles which followed.
In the “Statement of Principles”, the Twelve Southerners explained that by undermining that “sensibility in human affairs” which is grounded in “manners, conservation, hospitality, sympathy, family life, [and] romantic love,” the political economy of giantism had paved the way to a spiritual malaise which could not be remedied by any amount of education or by collectivist arrangements to increase and secure the proletariat’s material wellbeing. However, the foundation for a humane political economy could be found in the South as it existed before the old order gave way to the materialism and impieties of the “New South.” It should be emphasized that while the Agrarians described this as an “agrarian” social order, a term they would later regard as unfortunate since it placed an inordinate amount of attention on the particulars rather than the underlying principles, they gave explicit recognition to the valuable role which industries, professional vocations, scholars, artists, and city life would play in such a society. These Southerners shared a common belief in political and economic decentralization based on widely distributed property, the binding of communities through religion and education, and the modicum of permanence in social arrangements encouraged by both small and large family properties. Such views were also held by English and American Distributists as well as the European expositors of the Third Way.
Three years after the publication of ITMS, Wilhelm Roepke, a student of law, political science, and economics and a founder of the Ordo liberal school of economics, lost his professorship at Marburg University. On the same day as the Reichstag fire, Roepke delivered a eulogy at his teacher’s graveside where he denounced the forces which were “on the verge of destroying the garden of culture and reconverting it to the primitive jungle.” Beginning before the war and extending to the end of his life, Roepke’s arguments concerning the foundations of a good society and the policies necessary for reconstruction and economic reform gained great influence with many European leaders, including Chancellors Adenauer and Erhard. Roepke associated with a loosely knit group of European statesmen and scholars who argued that a free society would not be preserved in the long run either by the laissez-faire policies of the “night-watchman state” or the state capitalism which it engenders. They had only to look at the histories of their own countries to see that. To replace the nineteenth century version of classical liberalism they offered up a “neo” or Ordo liberalism in which the state would play a positive though limited role in maintaining the social framework of the free market — those social, political, and economic arrangements which work in tandem with competition to preserve a “free, happy, prosperous, just, and well-ordered society.” Roepke, along with Alexander Ruestow and Lujgi Einaudi, is distinguished even within this group by his advocacy of a “Third Way” which stresses the importance of restoring small property ownership in the form of peasant agriculture (yeoman farmers and herdsmen in the Southern tradition), independent craftsmen, and local merchants. Thus the confluent streams of conservative political economy were re-established in this century not only in Britain and America but in Europe as well.
The common poetical thread for the disparate groups which make up the Third Way is agriculture. It is stamped on the face of Southern Agrarianism; it is no less obvious in Distributism and Ordo liberalism. Roepke fondly refers to the concept of the “aerated society” stressed by French philosopher and farmer Gustav Thibon, and argues that the centralization and concentration of power which took place under Bismark destroyed the roots of German culture. The result was a moral and intellectual vacuum which he called the “German dust bowl.” Roepke’s Third Way program was intended to promote social decongestion and deproletarization; anything to increase rootedness would be given a fair hearing by Roepke. Similarly, the use of the term “agrarian” by the authors of ITMS was a reflection not only of the particular circumstances of Southern culture but of the Agrarians’ opposition to the expansion of rootless cosmopolitanism. Although the Distributists thought that small scale agriculture established the proper poetical standards for a humane society, their formulation of a conservative political economy broadened the emphasis to small property in commerce and manufacturing. In so doing, they established a tie between Southern Agrarianism and a Northern commercial republicanism grounded in small property and genuine federalism. This synthesis of Northern and Southern traditions was embodied in the lesser known Agrarian-Distributist symposium published in 1939, Who Owns America? A New Declaration of Independence.
The Agrarians, Distributists, and Ordo Liberals developed their responses to state capitalism (mass scale economic and complementary political arrangements) and to collectivism during the 1920s and 1930s. Of particular interest is Wilhelm Roepke’s work which culminated in an explicit formulation of the Third Way in his Social Crisis of Our Time published in 1942. The foremost concern of all three groups was the preservation of human freedom, but they knew that the libertarian formula was not adequate to the purpose. Human freedom is too complex to be captured in the simple phrase “laissez-faire, laissez-passer.” On the other hand, human freedom is not what the collectivists thought either—full bellies regardless of what they are filled with and how they are filled—which is epitomized by Roosevelt’s dangerous and false aphorism “freedom from want.” Any good Southerner knows that that is a chimera since it would necessitate either an annihilation or a full gratification of the appetites, neither of which is possible in this world. In fact, it is the pursuit of such abstract notions of freedom that makes modern free-market political economy potentially as dangerous to human freedom as collectivism. True freedom comes only when man limits his appetites and that he must do for himself. No one else can do that for him or to him. Thus individuality — which necessitates a large range for expression of one’s beliefs in words and deeds — must be preserved. True freedom cannot come from the collectivist harnessing of big business to distribute mass produced goods and services more equally. It can come only from the inside of a man. The question is: are there ways of developing those qualities of self-restraint and personal responsibility which conduce to the preservation of freedom without sacrificing men to the deified abstraction of laissez-faire? A true conservative political economy must answer that question in the affirmative. Economic policy ought not to be based upon abstract postulates that take no account of historical circumstances or the realities of human nature and human experience. The Agrarians, Distributists, and Ordo liberals understood this and developed their arguments regarding economic arrangements, both private and public, with due regard for the nature of man and of the world in which he lives. One may argue that some of these writers were stronger on principles than policies. Both the Agrarians and Distributists proposed policies, some of which were not efficacious; sometimes these men were imprudent in the policy arena because they did not understand the workings of positive economic theory. But their occasional lapses in positive economics do not affect the value of their principles.
The primacy of Wilhelm Roepke is a consequence of his adhesion to the same principles with no sacrifice of economic theory; he kept his head and heart together. Ignorant moralizing and abstract rationalizing were equally foreign to his vision of an intelligent political economy. Roepke, as well as the Agrarians and Distributists, recognized that man is both body and soul, and that we must have political economic arrangements which encourage the good health of both. Men cannot be reduced to one or the other. Positivism and scientism, which are the groundwork for modern abstract economics, reduce man to matter while the idealism and romanticism of the fascist reaction make man spirit only. In Third-Way political economy the ultimate criterion for judging economic and political arrangements is the character of the citizenry: the control of the appetites through reason and the honor-loving part of the soul is necessary if freedom is to endure. Thus a decentralized society and small property are not cherished for the principally libertarian reasons of self-sufficiency or autonomy, freedom in the sense of the absence of coercion, but because they encourage the development of those qualities in men which in the long run are the only assurance that freedom will be maintained. Small property and the family are the nursery of those qualities of mutual responsibility, devotion, charity, and hospitality. The pursuit of self-interest within the bounds which men set for themselves through the development of these qualities is wholly desirable. Without these bounds, self-interest soon degenerates into greed and thereby provides fertile ground for the seeds of collectivism.
In a conservative political economy, policy questions must be approached with the understanding that the maintenance of a humane social order is essentially a moral rather than a material problem. The creation of such an order requires no increase in GNP. Such increases are important and desirable, and they are more likely to come from Reagan supply-side policies than Keynesian demand-side/central planning. But they do not address the fundamental problem. It does not require economic leveling of the kind brought about by a massive redistribution of the “pie,” a consumerist/materialist metaphor for a man’s work in the creation. Instead, as Richard Weaver explained,
“the moral solution is the distributive ownership of small properties. These take the form of independent farms, of local business, of homes owned by the occupants, where individual responsibility gives ‘significance of prerogative over property. Such ownership provides a range of volition through which one can be a complete person, and it is the abridgement of this volition, for which monopoly capitalism must be condemned along with communism.”
Roepke and the Agrarians were in perfect agreement on this point. As Roepke said, “We must decentralize, put down roots again, extract men out of the mass and allow them to live in forms of life and work appropriate to them.”
The policy lesson is this: there is much good in a freedom defined as the absence of coercion, but it does not sustain itself. The void which is left will be Tilled with appetite — the tyranny which parades as modern liberalism or the selfish heroics of libertarianism. Conservatives must therefore avoid the mistake of assuming that all intervention is inherently bad. Such an attitude comes from a devotion to an abstract conception of freedom which ignores historical realities and all that we have learned about man through religion, philosophy, and experience. Instead, they must learn to distinguish between forms of intervention which are consistent with the preservation of a free and humane society and those which are not. To the doctrinaire laissez-faire critics of all forms of intervention, Roepke would write in his Humane Economy, published in 1960, these reserves which must then be replenished. Roepke again says
“The market remains morally and socially dangerous and can be defended only up to a point and with qualifications and modifications of all kinds…Extreme commercialization, restlessness, and rivalry are an infallible way of destroying the free economy by morally blind exaggeration of its principle…The curse of commercialization is that it results in the standards of the market spreading into regions which should remain beyond supply and demand. This vitiates the true purposes, dignity, and savor of life and thereby makes it unbearably ugly, undignified, and dull.
The market economy is not everything. It must find its place in a higher order of things which is not ruled by supply and demand, free prices, and competition. It must be firmly contained in an all-embracing order of society in which the imperfections and harshness of economic freedom are corrected by law and in which man is not denied conditions of life appropriate to his nature.”
As a conservative, Roepke understood the essential role of competition in stimulating human effort and in generating a harmonious ordering of economic activity. He also knew that private property rights were essential to the competitive process. Yet to Roepke the egregiously neglected “moral and sociological significance” of private property was of even greater importance. Citizens rightly act in their own interest in the marketplace, but there is a continual danger that the competition which is essential to restraining and channeling that self-interest will degenerate. In order to minimize the need for a governmental imposition of the discipline which will preserve competition, and thereby limit the opportunities for citizens to use government to escape competition, action must be taken to develop and maintain in men those ethical reserves, or good character, which conduce to self-restraint and personal responsibility. As Roepke explains,
“The market, competition, and the play “-of supply and demand do not create these ethical reserves; they presuppose them and consume them…SeIf-discipline, a sense of justice, honesty, fairness, chivalry, moderation, public spirit, respect for human dignity, firm ethical norms–all of these–are things which people must possess before they go to market and compete with each other. These are the indispensable supports which preserve both market and competition from degeneration. Family, church, genuine communities, and tradition are their sources”
The extreme laissez-faire position does not recognize the necessity of these ethical reserves or at least fails to recognize that competition and market activity consume
This is precisely what the Agrarians and Distributists believed to be happening in the United States and especially in the South.
Like Roepke, the Agrarians and Distributists sought to identify the proper limits of markets and competition as means of ordering the lives of men in a free society. They knew that their ancestors had hedged in the pursuit of wealth with piety, a love of honor, and with the cultivation of the habits of hospitality, charity, and civility. With the passing of the traditional way of life in the South, new means of hedging in or limiting the spread of market standards had to be devised. New traditions would have to be funned and cultivated.
In defining the Third Way, Roepke had to address the popular misconception that laissez-faire is antipodal to collectivism. He explained in the Social Crisis of Our Time that laissez-faire policies would indeed reduce the number of monopolies. Roepke understood just as we do that most private monopoly power is acquired with the help of government. Yet the road to collectivism and the destruction of human freedom is not paved exclusively with the displacement of competition by the growth of monopoly power, by whatever means. The concept of inter-industry competition which is used to explain the absence of significant long term monopoly power on the part of “big business” is persuasive, but it still does not go to the heart of the matter. There are also the problems of “increasing mechanization and proletarization, the agglomeration and centralization, the growing dominance of the bureaucratic machinery over men, monopolization, the destruction of independent livelihoods, of modes of living and working which satisfy men, disruption of the community by ruthless group interests of all kinds, and the dissolution of natural ties (the family, the neighborhood, professional solidarity, and others).” Roepke, the Agrarians, and the Distributists objected to the destruction of these institutional arrangements and ways of living which developed and maintained the ethical reserves essential to the long term preservation of competition, private property, and ultimately, human freedom. It is for these reasons that they argued that the maintenance of a free and humane society necessitated public policies which would preserve both markets, competition, and private property, and the social framework which sustains them. To that end, Roepke formulated a three-pan program which constitutes the conservative political economy of the Third Way. It is not only consistent with Agrarian — Distributist principles but has the advantage of coming from a person with Roepke’s knowledge and experience as an economist and government advisor. Thus it provides an advantageous point of departure for the construction of a contemporary conservative political economy which is solidly grounded in the Southern principles of I’ll Take My Stand.
Roepke outlined his program in numerous books, articles, and pamphlets. Prominent among these were his volumes The Social Crisis of Our Time and Civitas Humana: A Humane Social Order. The three components of the Third Way program were Anti-Monopoly Policy, Positive Economic Policy (anti-Laissez-faire), and Structural Policy (decentralization, balance, and “economic humanism”). These components constitute a unifying normative framework for the consideration of public policies ranging from antitrust law to the regulation of public morality and the creation of a “new” federalism. It reveals the essential connectedness of conservative ideas concerning the preservation of a free society, ideas which at present are not being viewed (and some say should not be viewed) as integral parts of a conservative policy agenda. Indeed, some conservative policies are being viewed as contradictory (e.g., free markets vs. restricting the sale of narcotics and pornography) which should be seen as part of one fabric.
Third Way political economy is precisely what Allen Tate had in mind when he said “we have been mere economists, and now we have got to be political economists as well. Economics is a study of wealth. But political economy is the study of human welfare.” Most of the Agrarian-Distributist “program” — both principles and policies — coincides with Roepke’s. Most importantly, however, an examination of Agrarian-Distributist policy proposals and some current policy concerns reveals the applicability of the Third Way framework not only to our past but to present circumstances.
Roepke’s Anti-Monopoly policy encompasses laws dealing with cartels, holding companies, and interlocking directorates, and a concern to avoid policies which create monopoly power for private interests. Roepke wrote extensively about the monopoly effects of tariffs and protectionism, a problem with which the Southern Agrarians were all too familiar. While it is true that the Agrarians and Distributists failed to foresee the abuses of “captive” regulatory agencies such as the Interstate Commerce Commission, they clearly understood and opposed the creation of government-run cartels under Roosevelt’s first administration. Roepke also considered technological innovation to be a boon to competition. Even in the 1940s he argues that new technology was promoting competition rather than concentration (fewer and larger firms with greater market shares) and monopoly.
Under the heading of “Positive Economic Policy (anti-Laissez-faire),” Roepke combined “Framework Policy” and “Market Policy.” The former contained positive steps to be taken by government to preserve the moral and legal framework of the free market. The essential “rules of the game” included in the legal framework were a federalist political order to limit the abuse of government powers; the embodiment of policies in law rather than administrative decree; the maintenance of a stable money supply; and an overriding respect for private property. Certainly the Agrarian and Distributist opposition to New Deal legislation such as the NIRA (National Industrial Recovery Act), the Agricultural Adjustment Act, and the National Labor Relations Act stemmed from a similar concern over the concentration of power in the central government and an expansion of the discretionary powers of its agencies. Such problems were exacerbated during the I960’s and 1970’s and have resulted in calls for regulatory reform and a “New Federalism.”
While regulatory reform and the re-establishment of genuine federalism are essential aspects of a Third Way program for the 1980’s, it should not be forgotten that Roepke considered the moral framework to be equally important. The issues addressed here have traditionally been the object of the state police powers: health, education, and public morals. Factory legislation, care for the indigent, sick, aged, and unemployed, and public or subsidized private education are the proper concern of a conservative political economy. Rejecting both social Darwinism and cradle-to-grave security, Roepke, the Agrarians, and the Distributists argued that a limited role for government in such matters was consistent with the canons of justice and humanity in a society of free men.
Thus policies concerned with occupational health and safety, toxic waste, and an educational voucher system are as important to the long term preservation of the free market as antitrust policy and monetary policy.
So, too, are policies concerning public morality and character formation. Roepke argued in Humane Economy that because private market gains were likely to overwhelm the moral and aesthetic reasons for resisting some activities, the market “loses its authority in the ultimately most important decisions.” Advertisers’ indiscriminate destruction of the beauty and harmony of the cities, and the extreme foolishness of those who wish to separate from politics the issue of trade between communist and non-communist countries demonstrate the necessity of moral framework policy. There are, of course, many other sources of market gain (e.g., prostitution, pornography, abortion, and drug abuse) which are the proper concern of such policy. No less important is the instruction of the young in the basic moral principles of personal and civic responsibility, honesty, courtesy, and respect for the “rule of law.” Such are the social presuppositions of the free market without which the market will simply devour itself.
Roepke’s Market Policy allows for some discretion in the use of interventionist policies since even framework policy would not always be enough. Distinguishing between “adjusting” and “preserving” intervention, Roepke argues that there are some limited actions which government should take to aid individuals, industries, and communities that face the kind of drastic changes in market conditions (demand, technology, resource availability) which inflict serious and lasting harm. Limited government assistance to communities seeking to adapt to new circumstances and to individuals seeking re-training would prevent the kind of destruction which induces men to resort to preserving intervention — permanent subsidies and tariffs, import quotas, plant closing regulations, and domestic content legislation. Such forms of intervention are intended to eliminate the need to adjust to new conditions and lead inexorably toward greater inefficiency and still more intrusive government policies. Adjustment policies should originate at the lowest level of government possible and rely heavily on private sector initiative. Certainly “enterprise zones” and temporary subsidization of private sector re-training for certain groups of workers fall within this category of intervention. The phoenix “industrial policy” does not. The latter erroneously attributes to central planning bureaucrats a knowledge of profits and community interests which is superior to that of entrepreneurs and members of local communities.
Market Policy also includes a crucial distinction between compatible and incompatible forms of intervention, i.e. between those which interfere with the functioning of the price mechanism and those which do not. When adjustment intervention is warranted, care should be taken to minimize the government’s direct control of the market. Demand and supply forces and the actions of entrepreneurs should be left as free as possible to guide production and exchange within the legal and moral framework of the market. Tariffs might be used temporarily to ease the shrinkage and restructuring of a large domestic industry faced by a crisis, but quotas and exchange controls would not. They are counterproductive (preserving) because they paralyze the price mechanism and render inefficient and unresponsive domestic producers absolute freedom from foreign competition.
The third component of Roepke’s Third Way program entails policies to encourage “rootedness,” or political, economic, and social decentralization. This “Structural Policy” includes maintaining a healthy balance between town and country life; encouraging the accumulation of small and medium-sized property in the form of owner-occupied homes, small businesses, and small farms; decentralizing industrial areas; and maintaining a genuine federalism. Of course the Agrarians and Distributists advocated policies to encourage decentralization and to preserve farm life (e.g., low interest loans to help tenant-farmers become farm owners, rural electrification, and tax breaks for small property owners), but it would seem that the ultimate purpose of these policies was to strengthen the family and preserve small property. They knew that the ultimate safeguard of freedom and lasting happiness is the formation of good character in the citizenry through healthy family life in a self-governing community. It is there that one learns mutual responsibility, charity, and hospitality, as well as honesty, thrift, and a sense of workmanship. Welfare policies which undercut family life destroy the roots of a civilization and leave its people fit subjects for the rule of tyrants. Thus welfare reform is an essential part of a conservative political economy of the Third Way. The list may be extended to include tax policy to encourage the accumulation of small property (deductions for interest payments on one’s first home should be retained in any simplified tax plan), relief from excessive inheritance taxes which destroy family enterprises, and avoidance of licensing procedures and health and safety regulations which inordinately inhibit the formation of small businesses.
It cannot be claimed that a conservative political economy provides a shortcut to public policy. The gathering and assessing of empirical evidence will have to proceed in the time-honored ways. But it can be claimed that it provides a framework for an integrated approach which is true to the complex nature of human beings.
The conservative political economy of Southern Agrarianism and the Third Way are the traditions on which conservatives should draw to develop public policies which treat men not simply as selfish “atoms” but as persons who live in communities and require a culture to sustain them.
That is the purpose of Roepke’s Positive Economic Policy and Structural Policy. Granted. Third Way political economy does borrow heavily from the positive aspects of classical liberal economics. The market does promote mutual gains from trade, private property is desirable, competition ought to be promoted. Also, there are the many negative criticisms of collectivism which classical liberalism provides: the welfare state and government intervention often do not accomplish any reasonable end and are counterproductive.
Yet the choice is not simply between an abstract individualism and a bloated collectivism. The argument for federalism and “decentralization,” if based on the individual, has no logical stopping point except anarchy. But American federalism was based on the idea of self-governing communities. The United States government was to be one of severely limited powers at the same time that the state and local governments maintained the traditional police powers. The mere invocation of police powers does not imply that these powers always have been or always will be used wisely. Policies on this level may be counterproductive for the result intended as well as on the national level. But it is here that the conservative ought to begin looking for evidence. The evidence must not only be the immediately measurable, or opinion polls, but considered judgements of the effects of institutions and public policies on the tone of the society and the character of people. The conservative political economy of the Third Way is capable of integrating the use of such evidence with the traditional approaches to public policy. Thus it provides a framework for unifying the conservatives’ fragmented assault against the forces of our own time which are destroying the garden of culture.
William F. Campbell
Professor of Economics, Louisiana State University.
Andrew W. Foshee
Assoc.Professor of Economics, McA’eese State Univ.