In Defense of Reason and a More Balanced Free Society

On what planet has the author of this month’s lead essay of Cato Unbound been living these past thirty years?[1] That is what any social democrat should first wonder after reading “Against Overlordship” by Daniel Klein. Klein would have us believe that Barack Obama is the latest incarnation of an ever-onward marching collectivism thrust on a naive American public by an all-powerful U.S. government controlled by liberal elitists. This sort of polemic is as ideological as it is misleading, which is ironic given that it is just such thinking to which Klein accuses social democrats of engaging.

A social democrat’s second wonderment would be rhetorical: did Ronald Reagan never exist? Reagan changed the terms of the political and economic debate in the early 1980s away from collectivism towards individualism, for good, one could argue. Klein, like most libertarians, casually overlooks the fact that it is his own dogmatic libertarian thinking — centered on lower taxes, deregulation, absolute private property rights, and smaller government — that has led to the biggest economic disaster since the Great Depression; the very financial mess we are in right now. In fact, in a testament to how non-collectivist the Obama administration is, the Administration itself largely seems to buy Klein’s own ‘straw-man’ argument that it is government that is a big part of the problem of the current crisis. Moreover, for the first time in the history of the United States, reasonable people are bypassing the libertarian versus social democrat debate and starting to question the virtues of free market capitalism itself.

If libertarians wanted any more proof that President Obama is not a social democrat, eager to transform the United States into a European socialist paradise, they need only look to this week’s twin economic policy decisions. Obama announced a pay freeze for federal government workers — a measure which will cut the $1.4 trillion federal deficit by a scant $5 billion over the next two years, as Paul Krugman noted in the New York Times.[2] The second anti-collectivist measure was Obama’s refusal to address the real issue on the table — whether or not to extend the Bush tax cuts for the 2 percent of wealthiest Americans – a measure which could actually bring in enough cash to save Social Security. Forty “patriotic” millionaires from around the country sent the president a letter urging him to let the Bush tax cuts expire, but to no avail. Obama is allowing all tax cuts to be extended, at a total price tag of $800 billion. If Obama actually were a social democrat, there is no way he would have lost this historic opportunity to correct the overt inequality which has developed as a result of a libertarian laissez-faire approach, an approach that was initially justified by a fast-growing economic system that has now run out of control and sowed the seeds for a complete collapse of social order in the long run. To anyone who lamented the lack of progressive policies in the 1990s, Obama over the past two years has managed to make Bill Clinton look like a tough and principled man of the left.

Leaving aside the factual inaccuracies of Klein’s polemical accusations lamenting the onward march of collectivism in the United States, on actual substance, libertarians — like Klein — are still off base. Libertarians and social democrats disagree on three fundamentals. The first is the relative efficiency of government. The second centers on the definition of freedom and whether it is an absolute; is it defined by the retreat of government from our lives? Or is there a distinction between negative and positive freedoms? The last is whether or not private property is a non-negotiable “natural” right, the answer to which determines one’s position on the rationale for government regulation of private property. On all three questions it is the social democrats that prefer reason and empirical facts to dogma. Let me explore these three disagreements in relation to the present day.

Firstly, with regard to government efficiency, it is simply not true that private sector performance is inherently superior to what the public sector can do in terms of service delivery. A case in point is healthcare. The U.S. government covers 45% of healthcare costs, while the governments of France and the United Kingdom pay 79% and 82%, respectively. The United States spends an average of $7,538 per person on healthcare (a whopping 16% of overall GDP). France and the UK spend much less per person: $3,696 (11.2% of GDP) and $3,129 (8.7% of GDP) respectively. However, American life expectancy at birth is 79.6, and the United States has an average of 2.4 physicians per thousand citizens. Life expectancy at birth is 81.6 in France and 79.8 in the UK, and they have 3.4 and 2.6 physicians per thousand citizens.[3] So while France ranks 10th and the UK 20th in the United Nations life expectancy ranking, the United States ranks at 38th, just below communist Cuba.[4] Yet, up until today, many Americans remain convinced that they have the best healthcare system in the world, far superior to the much reviled European system of socialized medicine. Libertarians seem to suffer here from the habitual social scientist’s disease, i.e. how can we get the data to fit our theory?

Secondly, libertarians hold that freedom is defined as the absence of restraint or any impediment to our actions; it is framed in a negative light. However, we are all born unequal — some to well-off families, but most are not — and by being unequal we have unequal opportunities: to healthcare, education, and wealth. Hence, social democrats perceive many people to be inherently – “naturally” if you want — constrained in their freedoms. It is for this reason that they view the state as an actual means to enhance the freedom of many, rather than an impediment as libertarians argue, whether through universal healthcare and education, or a basic social safety net that protects people against misfortune. It was Isaiah Berlin who first explicitly drew this distinction between positive and negative liberty in his inaugural lecture delivered before the University of Oxford in 1958.[5] In addition to the absence of constraint (negative freedom), genuine freedom must provide full opportunity beyond the mere non-interference of the state or of other people (positive freedom). In other words, social democrats believe that to be truly free one must have what is required for the satisfaction of worthwhile wants, including minimum wealth, physical health, talent and knowledge.[6] The more we can enable individuals to do the things they wish to pursue, the freer we will be, and the better and more complete a free society we will live in. Were libertarians to have their way, we would have a society where individuals — weak and strong, rich and poor — are left to fend for themselves, never mind the injustices of birth and the commensurate cycles we inherit.

Thirdly, libertarians think of property rights as a “natural right” which needs to be protected by the government at all costs. They usually cite Locke and Smith in their defense. However, it was the same Adam Smith who, in his celebrated Wealth of Nations in 1776, had the following to say on this issue: “Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.”[7] As Karl Polanyi pointed out in 1944, there is nothing “natural” either about laissez-faire capitalism or private property rights; they were both enforced by the state in the first place. For Polanyi, “laissez-faire was planned; planning was not.”[8] At a basic level, property rights originate from power and the capacity to compel; there is nothing “natural” or “god-given” about them. So, if private property rights can only exist if the state guarantees those rights, then they fall within the scope of state regulation, a role which is carried out in contract with the powerful people who live within that state. There is circularity in the libertarian argument that is problematic: they want the state to protect what they call natural — that which is not natural — but why would the state need to protect something that — as natural — is completely outside the jurisdiction of the state in the first place?

It is useful to remind libertarians that the choice is not always between good and evil, but between what is preferable and what is detestable, as the anti-Marxist French liberal Raymond Aron once observed about politics.[9] The late historian and social democrat Tony Judt pointed out that the detestable “is always characterized by its attraction to one big theory, one big view of how things are, how they work and how they should work, and is always very sure of itself.” Over that, social democrats will usually choose what is preferable, and try to forge a compromise between the lessons of history and the distractions of prosperity.[10] And like all compromises, there will be flaws and inherent contradictions in social democrats’ teachings. But given what we know history has taught us, it offers a better chance for a world that is truly free.


[1] I want to thank Mark Blyth, Sheri Berman, Bruce Parrott, Gabriel Goodliffe, Greg Fuller, and Alysson Oakley for their help and inspiration in writing this response piece. The main argument and all mistakes or inconsistencies are, and remain, solely my own.

[2] Paul Krugman, “Freezing Out Hope,” New York Times, 2 December 2010.

[3] Data are taken from OECD, Health Data 2010: Statistics and Indicators (Paris, 2010).

[4] United Nations Development Program, Human Development Report 2010 – 20th Anniversary (New York, 2010).

[5] See Henry Hardy (ed.), Isaiah Berlin: Liberty (New York: Oxford University Press, 2002), 2nd edition.

[6] See the Routledge Encyclopedia of Philosophy, entry on “Freedom and Liberty” (London: Routledge, 2010).

[7] Adam Smith, Wealth of Nations, Book V, chapter I, Part II.

[8] Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston: Beacon Press, reprinted 2001), p. 147.

[9] J. Jennings, “Introduction: Raymond Aron and the Fate of French Liberalism,” European Journal of Political Theory 2 (4), 2003, p. 369.

[10] As quoted in Matthias Matthijs, Ideas and Economic Crises in Britain from Attlee to Blair (1945-2005) (London: Routledge), p. 198.

Also from this issue

Lead Essay

  • In his lead essay, Daniel B. Klein introduces us to the idea of overlordship – the premise, implicit in modern social democracy, that the state is the ultimate owner of all property rights in society. Under this theory, the state provisionally delegates any rights that individuals may have, and it is free to revoke them as well. The social contract, to which we have all allegedly subscribed, gives warrant for these acts, or so we are told.

    Though his formulation may seem quite harsh – “overlordship” is a term we more often associate with feudalism – Klein traces its development in the late nineteenth century, citing authors who were quite explicit about their intentions. He also cites recent figures, up to and including President Barack Obama, who subscribe to substantially the same views. Klein calls for a return to individualist modes of ownership, as championed by David Hume and Adam Smith, both of whom were also skeptical of the social contract in general, owing in part to the dangerous consequences implicit in that mode of thinking.

Response Essays

  • Matthias Matthijs charges that libertarian thinking caused the biggest economic disaster since the Great Depression, and that our current political climate is nonetheless still dominated by an ideology highly congruent to Daniel Klein’s. Reasonable people, however, now doubt even market capitalism itself. Libertarians and social democrats disagree on three fundamentals: the empirical evaluation of government efficacy, the positive/negative liberty distinction, and the absolutism of private property rights. On each disagreement, Matthijs argues, the social democrats have the upper hand. In particular, property rights would not exist without the state to regulate them, and these rights are in no sense “natural.” A natural right, Matthijs argues, would never have any need of defense by the state.

  • David Friedman suggests a threefold classification of rights. In his scheme, normative rights are moral claims whose violation results in a moral judgment: I may think, with reason, that you are a bad person. A legal right is one that has been duly written into the law. Finally, a positive right is one for which violators face meaningful consequences, such that they will be substantially deterred. These definitions differ somewhat from those found in traditional legal theory, but Friedman defends the analytical power of his schema. In practice the three types overlap, but we may still analyze rights according to their normative, legal, and positive dimensions. Friedman offers historical and contemporary examples of the three types of rights and speculates on their origins using game theory.

  • Ilya Somin examines three arguments for government control over property rights: the claims that property rights are created by the government, that residence and/or citizenship imply consent, and that government control can produce superior outcomes to private control, regardless of theoretical justification. He dismisses the former two and concedes that the latter, consequentialist argument for government control is the strongest of the three. Still, he argues that this approach has serious weaknesses, in that people across the political spectrum tend to overestimate the good that governments can do.