Joy and Sorrow for the Libertarians - 17 May 2002

In Washington the other night there was a joyful, sad, moving scene, impossible to imagine 25 years ago.

It was on a May evening in 1977 that a small society was founded, so small, so oddly named, committed to so obscure, not to say ridiculous an ideal, that I doubt it carried more than a tucked-away-paragraph in any newspaper.

It was called the Cato Institute, a political society not for Democrats, Republicans, socialists, conservatives, liberals, but for some odd bodies called libertarians.

Three dictionaries define a libertarian as one who believes in free will, which doesn't get us very far does it?

But politically libertarians may be found in all parties, except the Communist, shining here and there, about as conspicuous as needles in a haystack.

Every four years they appear on the ballots of many states as the Libertarian Party and they run a presidential candidate.

Ever hear of Harry Grahame? Well last time he seemed, to many people - not too many - to be no demagogue but a sensible, reasonable, very thoughtful man talking not to the mob but as if to a friend - a fatal gift.

In more brutal words: not an impressive politician. In a total presidential vote of 90 millions he got just over a hundred thousand. I expect he'll be there next time.

But the party the other evening to celebrate the 25th anniversary of the founding of the Cato Institute was struck a sad blow by the absence of the man in whose honour the dinner had been arranged.

If the patron saint of the Cato Institute is Adam Smith, the founding father of the libertarian charter creed was a Londoner, Peter Bauer.

All was set for his transatlantic flight, his weekend as the honoured guest. On the 2nd of May he died. He was 86.

But it would be unfair, not to say maudlin, to pretend that the party was blighted or stayed depressed.

Lord Bauer was to have been the first recipient of a new annual prize - the Milton Friedman Prize - for advancing liberty.

Mr Friedman was also being celebrated, or hailed, for reaching the age of 90, though why anyone would want to celebrate that melancholy milestone I can't imagine.

Mr Friedman, however, like the lucky nonagenarians was frail but sprightly and set the tone of the evening by recalling how unfashionable, how scorned, 25 years ago were the disciples of Adam Smith and the free market.

Since then, said Mr Friedman, we have moved from an era of galloping socialism to an era of creeping socialism, what we need now is an era of declining socialism.

I don't think that Peter Bauer would have put it quite that way.

He did not emerge under any opposition banner, he had his own cause, his own positive recipe for liberty and the pursuit of happiness.

And as somebody said, when he started to preach or plead for the free market 50 years ago, he was hugely unpopular, ignored by many, derided by many.

And then in the rosy dawn of the welfare state, the benign spread of socialism all over Europe, the birth of such wise and benevolent institutions as the World Bank and the International Monetary Fund, when in fact we summed up the economic future of Europe as the final triumph of Keynesism, there piped up the voice of a youngish man warning that the general adoption of stateism was bound to fail, that idealists had allowed the rosy view of the Soviet experiment to blind them to the actual universal and continuing poverty of the Soviet peoples, let alone the murderous means by which that utopia was imposed.

Bauer said that subsidies and huge money loans to the poor - what we now call third countries - would in the end do little more than provide seed money for bigger loans.

He advocated the preposterous doctrine that state planning was no way to cure massive poverty.

But, as he later went on to demonstrate in Asia, it was better for a poverty-ridden country to encourage private investment to help the poor choose their projects, make the most of their own resources and labour.

It was called free market Asian target economies.

He predicted a quarter century ago that what would doom the Soviet Union and its satellites was the core system of central planning itself.

Peter Bauer never claimed that the free market was a quick fix. There was no magic anywhere outside the magic of human energies freed to act in a free society.

If he had a passionate belief it was that the fatal, false way to help the poorest countries was with regular, measured handouts of monies and loans by well-meaning international bodies to governments that would supervise the planning, the distribution of the monies, the assignment of the loans and the projects.

At the dinner there were, among other distinguished and now acceptable guests, three Nobel Prize winners, all for economics, all disciples or at least admirers of the lone, lorn, once-ridiculed Peter Bauer.

"All of us," said one of them, "no longer sit in the back of the bus."

During the week that the Cato Institute was getting ready to toast and honour Peter Bauer, Milton Friedman and the free market, in Beijing the President of China, Mr Jiang, made a speech inviting the capitalists of the world to come and make themselves welcome in the world's largest communist party.

He was eager to explode a common fallacy which is that the communism and capitalism are necessarily in competition or not reconcilable.

Nonsense - our understanding of this issue, he said, has in the past been superficial and simplistic.

I ought to say at once that these thoughts were not plucked out by Western reporters as tiny but rare nuggets in a speech on some grand theme.

The grand theme was entirely about the excellent and necessary uses of capitalism on the way to world communism.

And it took Mr Jiang two hours to trace and impress the new line, which I imagine all good communists from now on will be required to take.

Well, old Chinese present, who have been lucky enough to follow every new line and yet stay out of prison or labour camps, must be feeling very wary about taking the new new line because, according to Mr Jiang, it makes clear for the first time in, what, 85 years, that the present success of free market capitalism is a necessary stage along the inevitable move toward world communism.

Now who is the authority for this blinding new insight? None other than the author of the bible himself, Karl Marx.

In the passage that sanctions the new party line Marx says that in the past communist revolutions may have come too soon. They ought to wait for capitalism to mature, flourish and burn itself out before an educated proletariat can then overturn it.

And this doesn't have to happen, he says, through violence. The inevitable forces of communism can be at work in the seeming progress of capitalism itself.

For example, did you know Mr Jiang now says that the United States is farther along the road to communism than anybody?

In that country the means of production are more and more owned by the workers. Look, he says, at half the American population that invests in the stock market or mutual funds.

A notable Chinese economist giving a gloss to Mr Jiang's exposition said, With its social security system and Medicare - I don't know why he didn't mention Medicaid, the full medical care of the very poor - the United States is far more socialised than China.

And China, at its present stage, would do well to realise that what he calls "advanced forces of production" - that means capitalists - should be welcomed.

The word capitalist itself is still frowned on. Mr Jiang calls "private entrepreneurs", they're the people who are needed and their moving in on state enterprises should be welcomed.

Has been welcomed - where? - it's news to many of us. In some state-run industries in China private enterprise holds the majority stock.

In the end Mr Jiang urged his people to rejoice, once it understands that the United States is not only not the enemy of Communism but is moving nicely along the road to the Communist utopia.

I think, I'm sure, this speech was given well before the national report which came in this week with all the sweetness and light of a tornado that 43 of the 50 American states have totted up their annual accounts and find they are plunged into massive debt.

Only two years ago both the federal government and the separate states were sketching out how they would most usefully spend the great surpluses that were stretching out into the far future.

Today 43 states and still counting are desperately figuring how many vital social programmes will have to be trimmed or abandoned because of the endless vista ahead of deficits, deficits, deficits.

Worse off than anywhere is California - the state glorified, only 18 months ago, as having an economy larger and more prosperous than the national economies of only seven other nations in the world.

Today California is reeling under a $26bn deficit.

The effect on American economic life, social life - on work and play, eating and housing and sleeping - is at the moment impossible to imagine.

Much of the news you see on television these nights about plans for new housing, new baseball stadiums, new arts centres, new schools, et cetera, et cetera, seems like an accidental replay of programmes made in 1999.

Only one thing you can bet on: by this winter there'll be an awful lot of Americans singing, or moaning, "There's a hot time in the old town tonight".

THIS TRANSCRIPT WAS TYPED FROM A RECORDING OF THE ORIGINAL BBC BROADCAST (© BBC) AND NOT COPIED FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING, THE BBC CANNOT VOUCH FOR ITS COMPLETE ACCURACY.

Letter from America audio recordings of broadcasts ©BBC. Letter from America scripts © Cooke Americas, RLLP. All rights reserved.