Viewpoint: Cooperation and Coercion


Within the next few months we'll be hearing a good deal about various Democratic alternatives to "Reaganomics." Since Reagan's main idea is to return more economic decisionmaking to the people, it is easy to see that an "alternative" to Reaganomics is likely to be antimarket, embodying quasi-socialist proposals—not so labeled, but rather camouflaged in the friendly rhetoric of "cooperation."

Some of this material has already begun to seep out of the various outposts of latter-day liberalism: a cover-story in Esquire, for example, regaling us with the thoughts of Sens. Bill Bradley and Gary Hart—"cooperative regionalism" being a sample. Sen. Paul Tsongas's book, The Road from Here, gives us further clues. In addition, Felix Rohatyn, the chairman of New York's Municipal Assistance Corporation, has published endless articles in the New York Review of Books. They are worth a glance, if only because it is rumored that Rohatyn would like to be secretary of the Treasury in a Democratic administration.

Rohatyn is here to tell us that we must adopt "an industrial policy committed to restructuring basic U.S. industries." He has in mind steel, autos, rubber, glass, and such. Such restructuring, of course, is already taking place as a result of market forces. His use of the word "policy" tells us that he would replace market forces with political force. (Remember how we didn't have an "energy policy" until the Department of Energy was in place?)

Rohatyn reassures us that he is not in favor of "lemon socialism." Nevertheless, he believes that the Chrysler bailout was wrong in detail, not in principle. What we really need, apparently, is a new Reconstruction Finance Corporation (RFC), which will "provide capital for industries that have a sound case for it." Taxpayers' money would be invested "where the RFC deems this in the public interest."

Which supplicant firms would be favored? "The RFC staff would have to analyze [a firm's] chances to survive on a realistic basis." Equity capital would be provided, and "in exchange" unions "would be asked" to make concessions, and some management decisionmaking would be transferred to the RFC. Rohatyn does not explain how RFC staffers will achieve such far-sightedness, nor does he explain why lenders in the marketplace are incapable of similar wisdom. His is really a proposal to transfer power and decisionmaking to an intelligentsia. (One is reminded that socialist President François Mitterrand of France said in a recent interview: "The nation must entrust its future to the most intelligent in order for society to succeed." Remember when socialism was legitimized by "the proletariat"?)

This RFC should be run "outside of politics," Rohatyn adds ominously. That is, the people should be prevented from influencing its decisions. Freedom, admittedly, "would be abridged," and "a temporary austerity will have to be accepted." In fact, a great many things will "have to be" in the-world-according-to-Rohatyn. Jobs "will have to be" brought to the people. Some employment "will have to be" subsidized. A new tax "has to be" imposed, and a "tough incomes policy" is promised, too. Protest is likely to be inaudible "outside of politics," of course. The Kremlin is also run outside of politics.

Similar themes of alleged "cooperation" between business and government have been sounded by other Democrats. "We must make certain that business, labor and government cooperate and agree on specific goals," said Walter Mondale in a New York Times Magazine article. Who is "we" here, and who decides the "goals" exactly? "Government and industry must be in harness," Tsongas wrote in his book. Yes, but who cracks the whip?

The new Democratic motif of "cooperation" seems intended to disguise the reality that business will in fact be ruled by government. Governments, after all, have coercive powers. Businesses must use persuasion to sell their products.

Of course, many businesses are happy to surrender to the will of government, Chrysler being an example. And government is only too willing to bow to some private-sector interests in order to enlarge its constituencies. For these reasons the "cooperation" of business and government will inevitably degenerate into an extension of the welfare state into the corporate world. Nothing could be more destructive of entrepreneurship and dynamism.

Furthermore, grandiose partnerships-in-enterprise never work out, because by the time the information needed to draft and implement the plan is accumulated by the planners, the people across the land want something else and are probably already making it. The world moves on and won't await the cogitations of corporate and government leaders.

The great delusion of leadership elites is that it is possible to accumulate all useful information about an economy into one great shining nugget of data and then pass it around a boardroom table, refining it and polishing it up in the process. It can't be done. Rohatyn himself has admitted that he learned as MAC chairman that "when we know all the facts, it is often too late to act."

"Industrial policy" really amounts to central planning in disguise. And central planning doesn't work because the central plan must inevitably run afoul of all the myriad small plans of individuals. So if the central plan is to be implemented, individuals "have to be" prevented from carrying out their plans—whether they like it or not. That is why planned economies always turn into police states. Beware, then, when you hear the word cooperation out of the mouths of politicians. What they mean is coercion.

Tom Bethell holds the DeWitt Wallace Chair in Communications at the American Enterprise Institute. He is a Washington editor of the American Spectator.