Hayek and Kristol

The best riposte to Bill Kristol comes from Hayek. He pointed out years ago–sorry, don’t have time to track down the citation–that the idea of small government was vital even if there was no prospect of its ever being achieved. So powerful and varied was the pressure in and on government for every kind of new spending that an automatic barrier was necessary to prevent the fiscal river sweeping all before it. A general prejudice against higher spending and taxes served as such a barrier. It might not prevent all or even most spending, but it would stop some. It would compel the government to think through its spending priorities and to confine them all within or nearly within taxable capacity. And though the government would probably grow anyway, it might grow less because of the prejudice that it should not grow at all.

If we were lucky, a barrier might even gain a quasi-religious status over time, as the Gold Standard did in England until the First World War, and instill in voters the fear that tampering with it would be an impious act or even simply impossible. This worked for quite a while. When the Tories floated the pound in 1931, a former Labour minister, Lord Passfield (aka Sidney of Sidney and Beatrice Webb) said: “They never told us we could do that.”

Well, they know now and since 1931 the rate of inflation has perked up remarkably. And if Bill’s political realism gets his way, the state might grow far faster than otherwise.

It’s nice to think, though, that Sidney Webb who was always telling the capitalists how much more rationally socialists could run the economy, was in practice hostage to an unconscious monetary conservatism–like almost the entire Labour party and intelligentsia. Those were the days, my friend.


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