Contra Libertarianism

Picture yourself as Lee Kwan Yew in 1965, the Prime Minister of Singapore the year it gained independence. You are in control of a third-world, multi-ethnic nation on a small island off the coast of southeast Asia. Communism is at its high-tide; the red fever has already swept over many of your neighboring countries. In your own country, communist parties are growing in popularity and calling for more social welfare policies. What do you do?

This is a situation where libertarianism fails to be a synonym with good governance. Would you recommend that Yew stubbornly cling to a low-tax, laissez-fare social policy? It is not hard for me to imagine what would happen in that case. It is a familiar pattern in history, populist pressure building until it bursts forth in a communist revolution. Yew is eaten by a hungry mob, his wife and children are slow roasted, glazed with cinnamon, and eaten for dessert. American fighter planes douse the island in napalm.

That is not what actually happened. We know that Yew served as Prime Minister in Singapore for thirty years, and his political party has stayed in power for five decades. So, what did he do?

Yew's key insight is that while democracy might elect government by the will of the people, government policy also influences the peoples' will. He knew that he had to address communist agitation for welfare policies or lose popular support. At the same time he was worried that welfare recipients would provide a permanent constituency for the left-wing parties who always supported more welfare.

It is remarkable how closely this mirrors the current concerns of the American right-wing about Universal Health Care. They fear that once a majority of the population depends on government welfare programs, it will grow harder and harder to forge a majority that opposes them. Also, for the same reason Social Security is considered the "third-rail" of American politics. Both political parties don't dare oppose it unless they anger the legions of voters dependent on SS payments. Any mainstream criticism of SS is carefully framed solely about concerns for its long-term solvency.

The policy that Yew's decided on used the same logic in reverse. It has another close parallel in recent American politics, President Bush's ill-fated "ownership society" program, which was a part of his attempt to build a permanent right-wing majority. He believed that increasing the average American's asset balance through home ownership, private retirement accounts, and private medical spending accounts would increase support for property-friendly, libertarianish, right-wing economic policies. I think his plan would have worked, had its implementation not suffered from the usual level of Bush-regime competency.

I would not be surprised if Bush's advisors drew inspiration from Singapore's experience. Yew's government instituted a forced savings program with enough government and employer subsidies to satisfy the left-wing. Part of the forced savings program was for medical expenses. However, the other part was Yew's masterstroke - the retirement account. Money in the individual retirement accounts could be used to make investments in housing and securities, but it could not be withdrawn for ordinary consumption uses until retirement. Over time, the average Singaporean's asset balance waxed, and the support for communism waned. Just as welfare recipients would be natural constituencies for left-wing parties, home owners with substantial investment portfolios were natural constituents for Yew's center-right party. However, Yew was careful to call his party "socialists" on his diplomatic trips to Europe, while it remained fashionable.

It is interesting to briefly compare Yew's electoral strategy with modern libertarians', which mostly consists of handing out pamphlets. We are a movement that believes that people respond to incentives, and yet we trust that the eloquence of our rational arguments will move people to vote against free education, free health insurance, and the other goodies that Barack Obama promises like Santa Claus.

What should libertarians think of Singapore's experience? Given the results, it is hard to argue with Yew's decisions. I am no fan of a forced savings regime, but it is better than the transfer programs we have in the United States, and it is certainly better than a communist revolt. Today, Singapore has a free market economy with strong property rights, it is richer than the United States, and three times richer than Malaysia, its closest neighbor.

Perhaps a libertarian would say that Singapore should have followed libertarian policies all along and developed a free and prosperous economy, but that option simply wasn't on the table. It was either meet the communists half-way, or perish. In the same light, maybe a pacifist would say that Finland should not have fought the Soviet invasion in World War II and remained independent. It's wishful thinking. The advocated cause does not lead to the desired effect.

Practical libertarianism is my new area of interest. My political goals are different from Yew's, but like Yew, I recognize that the incentives facing a political system determine its destiny. In order to accomplish his goals, Yew had to restructure the incentives present in his society. He kept the legal framework of democracy in tact, but he changed the lifestyle of the voting populace.

As a libertarian, I am a bit more squeamish about reengineering peoples' lives. However, I recognize that our constitutional democracy is not an impartial arbiter between competing political philosophies. It is not an idealized marketplace of ideas. Rather, it has built-in biases. If we ignore reality, then we will never change it to our liking.