Interview with Warren Brookes

A successful businessman-turned-writer, syndicated columnist Warren Brookes observes today's economic scene and its problems and promises

When Warren Brookes began writing a column for the Boston Herald American in 1975, anyone could have told him that Boston—stomping grounds of the Kennedy family, the Kevin White machine, Paul Tsongas, John Kenneth Galbraith, and Lester Thurow—was the last city where a free-market columnist like him could ever survive.

But eight years later, Brookes is still writing his column. That in itself is a remarkable feat. Even more remarkable is that Brookes has enjoyed far more success than anyone could have predicted.

In a state with (in his words) "a tax burden soaring to choking heights and an economy that had fallen apart at the seams," Brookes in 1978 helped spark a massive tax revolt that reduced Massachusetts's tax burden by 18 percent in three years. In the wake of this tax cutting came the lowest unemployment rate in the nation and 100,000 new jobs created in the midst of a recession.

The spearhead of the tax revolt was Proposition 2½ a successful ballot referendum to cut property taxes to a maximum of 2½ percent. Brookes has been called the father of the proposition, and rightly so. He suggested the 2½ percent figure in a column; 14,000 pieces of favorable mail poured in; and a political turnaround in Massachusetts began.

Brookes is now syndicated in more than 40 newspapers and has a book, The Economy in Mind (Universe Books), to his credit. He has been described by George Gilder as "the nation's best columnist on economics and society largely because he is the best educated." Aside from a Harvard degree in economics, much of Brookes's education is of a kind rarely found among economists: a 20-year career in the corporate world.

Brookes was recently interviewed by REASON contributor Tom Hazlett, a journalist and economics professor, in Brookes's home near Boston.

REASON: Your career is somewhat interesting, because you didn't emerge bright-eyed and bushy-tailed as an eager boy-journalist. What was your past?

BROOKES: Well, sort of devious. When I was in college I did earn part of my living as a journalist covering Harvard's sports and news for, first, the Boston Globe (back when the Globe was a real, ordinary, true populist, Democratic newspaper—before it became the liberal, radical chic paper it is today). As a stringer at Harvard, I earned about a third of my way through school.

REASON: What were your politics then?

BROOKES: I was sort of what you might call a Rockefeller Republican—thoroughly liberal but brought up in the world protected. My family did not have money, but I went on a scholarship to a prep school and then on a scholarship to Harvard.

After I left college, I went into business. I went to work for Kimberly-Clark, the paper company in Wisconsin, where I began as sort of an experimental management trainee in the marketing area, which was then a new area.

REASON: What was your major in college?

BROOKES: Economics.

REASON: Did you ever take a class with Joseph Schumpeter?

BROOKES: Sure did! I audited it; I was not enrolled in it. I took his last course, in '48, '49,1 think it was. I took John Kenneth Galbraith, who I remember was one of the most boring. And he taught me everything I then had to "un-learn" in the corporate world.

REASON: So he was not influential on you in any sense?

BROOKES: No.

REASON: Did anybody leave a mark?

BROOKES: No. I don't really think so. What left a mark on me, frankly, was finding out what a difference there was between the real world of industry and the marketplace, and what I had been taught at Harvard. It was slowly dawning on me that I had been taught a totally different macroeconomic world than actually existed, and I had to "un-learn," basically, most of what I had learned at Harvard.

REASON: You say the macroeconomic world. You're saying that most of the training at that time was concentrating on Keynesian equilibrium?

BROOKES: Sure. What we got in our money and banking course was literally a course in a new approach to fiscal management of the economy. We got the whole Keynes treatment. This was back in '49, '50, I believe it was. It didn't dawn on me, at that point, of course. I was not very politically aware—our generation wasn't. And I think the American public was generally not aware of the trends in economic thought. If they had been, they would have been a little more worried.

I spent the next, well, up until 1963, working for Kimberly-Clark, W.R. Grace, and then for an advertising agency, primarily doing marketing and merchandising work. I was pretty darn good at it. I was heading for a very promising financial situation. At that point, about '63, the Christian Science Monitor, which is a love of mine because I happen to be a Christian Scientist, came after me and said they wanted to start to expand the Monitor because it's sort of quiet and a little backwater. They wanted somebody who understood direct-mail marketing and understood media and so forth. And I did something that everybody thought I was crazy to do, and maybe it was. I went to work at a fairly reduced pay as a labor of love, to try to put the Monitor on the map.

While I was there I did some public research, for the church was beginning to wake up to its own sort of public. I spent the last two years I was there doing public-affairs research. And that's when I really started to focus on the trends in public thought, in economic thought, in social thought.

REASON: When was this?

BROOKES: This was the period from around 1970 to 1972. I wrote a whole flock of elaborate papers for the board of directors to get them to move beyond the narrow concerns of the church itself and to think in terms of forces that were shaping and changing the world in which we live. About the end of that second year, I kind of worked myself into a dither. I was working very hard at that time, a very intense time, and I had a real knock-down, drag-out physical breakdown. I was just physically exhausted. All the circuits quit on me! I had to quit completely—go home and lie around for a couple of years. It was very frightening.

In '74 I decided I could not let the church sustain me any more; I wanted to do my part. I did not want to go on disability and go through all that stuff. I don't believe in it. My friend, Bob Bergenheim, had been at the Monitor and was now the publisher of the [Boston] Herald. I had been watching a lot of television news, and I became more and more frustrated by the kind of slant—not just the slant, but the shallowness of the reporting. So, I wrote a series of columns on economic issues. I sort of just played around with it. I did a series of 10–12 columns and mailed them off to Bob, asking if his readers would be interested in this sort of thing. He called me back the next day and said, "Yeah, we'll run 'em!" So my column started running once a week in the fall of 1975, and the paper got a terrific response. So I began to write three columns a week, for pay, and I've been at it ever since.

REASON: Did you use a lot of that stuff in your book?

BROOKES: Well, yes, although it went through a process of sorting and sifting and paste-potting, and then I rewrote and wrote and wrote. And of course, my experience in Massachusetts was very useful, because this was the laboratory that we were playing around in. What to do? How to make this state come out of its doldrums?

REASON: What kind of personal involvement did you have in the Prop. 2½ campaign?

BROOKES: I had been writing a lot about the thesis that high and rising taxes have a negative impact on economic growth at the state level. I'd been following Art Laffer's position and the debates over it, and I was studying the apparent correlation between relatively rapid growth at the state level and relatively low tax burdens—or at least tax burdens that were not rising—and, conversely, between a relatively low rate of growth and tax burdens that were escalating. Massachusetts was a classic example. I first flung my hat in the ring on this—there was an article in January 1976, one of my first articles, called "A Tale of Two States," about New Hampshire and Massachusetts. Of course, it's been a magnificent example. Because, here you have two states, both of which are energy-deficient, both of which don't have any natural resources especially, and here's New Hampshire growing at two, three, four times the national rate, and we're growing at half the national rate and we're right next to each other. The obvious difference was that New Hampshire had the second- or third-lowest tax rates, and we had the fourth- or fifth-highest. I talked to industries that were moving back and forth. I did some additional, very simple, analyses of tax burdens and trend growth of employment and so forth, and then I got interested in the tax-limitation group.

In the spring of 1978 I was watching this whole California thing with the campaign for Proposition 13 to cut property taxes. I just didn't honestly believe that they were going to be that successful—the opposition was so intense. And I said, I wonder what would happen if we did that here? Would it pass? I asked in a column. It appeared the second day after Prop. 13 passed. In it, I repeated Governor Michael Dukakis's infamous miscalculation; he said our people in Massachusetts were too smart to fall for anything like that in this state. Of course, we had the highest property taxes, bar none, in the nation—the highest property taxes in the universe. And Dukakis is such an arrogant man. At that point I had a very sympathetic editorial department, and they were giving me play like mad. They put my column up on the front page: "What would it do for Massachusetts?"

I said I didn't think we could handle 1 percent, because we were already at 4½ or 4¼—we just couldn't handle that big an adjustment. But I felt, with the reevaluation impact, we could comfortably handle 2½ percent. I did some calculations. Well, immediately the figure 2½ got stuck in people's minds, and the next thing you know, a couple of committees had been formed, Proposition 2½. But the Herald put the figure in effect, because they ran a promotion on the front page saying, "What do you think of Warren Brookes's idea of 2½%?"

REASON: You got to pick the number.

BROOKES: I picked the number.

REASON: Yeah, well you're going to be coming under fire from a lot of people for not picking zero.

BROOKES: I'll grant you. I right away got fire for picking more than 1 percent. But it really forced this state to reduce spending. There was no "free lunch" in Prop. 2½ coming out of a big [state budget] surplus like you guys had in California.

REASON: Where have they cut?

BROOKES: Six thousand employees at the state level, which is about 10 percent. Local government employment was about 280,000, and it has gone down to about 255,000. So, the biggest cut came at the local level, about 25,000. A lot of it was attrition. A lot of it was plain old lay-offs. They laid off 7,000 teachers, for one thing.

REASON: Now, what's happened to your economy here?

BROOKES: Well, in the last recession, in '75, Massachusetts had the highest unemployment rate of any industrial state. This year we have the lowest—around 7½ percent, which is only about one point higher than when Reagan took office in 1981. I think that's evidence of sprightly survival, if you will.

And there are other things. Part of the measure was to cut the sales tax on automobiles. We cut it from $66 to $25 per $1,000. Massachusetts used to have the lowest automobile sales in the nation. Last year we had the best. Laffer predicted that. Art Laffer said, "You are going to have a hell of a sales program for automobiles." I said, "Really?" He said, "You bet." That is exactly what has happened.

REASON: So why won't Ronald Reagan cut taxes? Last year he helped get a tax increase.

BROOKES: Well, I think Reagan has been basically homogenized, but I'm not prepared to write him off yet. I think that Reagan, to the degree that the economic recovery manifests itself, will reassert some of his old values. I think he has been "Rockefellerized" over the last year by the likes of Jimmy Baker and that crowd.

REASON: But how do supply-siders explain that during this time of actual tax increases, the economy has turned around?

BROOKES: Supply-siders have to be careful. You can't be dogmatic. I try to define it, at least in my book, as an attitude of thought rather than as a strict set of principles—an attitude of thought that tends to trust the market more than it trusts government, that tends to view the tax burden as a negative for economic activity, that tends to view microeconomics as more important than so-called macroeconomics, that tends to be committed to an expansion of the rate of private-sector growth as opposed to a restricted private-sector growth. That, to me, is what supply-side economics really is. I'm fairly impartial. I pick and choose from what seems to work.

REASON: Are you in favor of unilateral free trade?

BROOKES: In the theoretical sense, yes. Ultimately the money our consumers spend on foreign goods comes back to us, so why should we worry about whether foreign governments are subsidizing the goods? Fine. If they want to give us their exports cheaper, that's their business.

But I do think that a time comes when you ought to be using some leverage. The Japanese have, in fact, constructed very, very interesting ways to make it difficult to get into their markets, and I think we ought to be banging away at that politically. But, I don't believe we should simply threaten to cut off their goods in the market.

REASON: What are you going to "bang away" with if not with trade barriers?

BROOKES: I think in the case of Japan we have moral suasion in the sense that we provide so much of their defense budget.

REASON: Why don't we just move away from moral suasion by cutting out our subsidies to their defense? You have some interesting numbers in the book about the size of that subsidy.

BROOKES: Well, Japanese cars carry a "defense burden" of about $60–$70 per car. American cars carry a defense burden of about $350–$400 per car. So, that is one very tangible way in which Japan is riding on our marketplace. I would like to see Japan forced to take care of more and more of their own defense. I would say, look, you guys want free trade routes and you want all the advantages of sea ways open for your oil and what-have-you, and we're giving you all this. How about taking over a portion of this defense yourself, or we'll just have a little "defense tax." Call it what you will—a tariff—but we'd like to see you pay for more of our defense budget.

REASON: Why do trade barriers have to figure in there? Doesn't that actually lessen our bargaining position? Because what we are saying is that we are going to make ourselves less prosperous as a nation just to punish the Japanese…

BROOKES: Oh, I agree.

REASON: …when we could simply withdraw our defense commitment to them on a gradual, announced basis.

BROOKES: I agree. I think we ought to tell NATO the same thing. I'm not an isolationist, but I'm all for those guys taking care of their own problems. I think that the defense budget can and should be reduced. I don't think we have to spend 9 percent of our GNP, or 8 percent, on defense. Okay, so the Russians are spending 12 percent—but that's a lousy GNP. Their GNP is less than half as good as ours on a per capita basis.

REASON: Well what—and this is really getting toward the meat of your book—what creates value?

BROOKES: Well, of course, our values are a result of our culture to a certain degree. What is valuable in one culture is not valuable in another, obviously. The creation of value, in my judgment, is the adding of qualities and characteristics to otherwise useless raw materials that make them useful to us, and we perceive them as having value.

But I am very concerned about the degree to which we have a tendency to think this is totally a mechanical and physical expression. That's one of the reasons I devote a large part of my book to a discussion of the influence of values on our economy—the influence of spiritual and moral values. Not moral in the narrow, sexual sense. That's not what I'm talking about. I'm talking about the values of commitment to work, commitment to quality, commitment to performance, commitment to doing things as well as we know how to do them, commitment to excellence. I think the greatest attack has taken place in the last decade, a broad-scale attack, on the whole issue of performance or excellence. We have just lost our commitment to the notion that excellence and merit should be rewarded.

Economists tend to look only at the balance sheet and say we are creating value and so forth, without looking at what's happening to the cultural values. The Japanese have proved to us that their cultural values have a financial translation; their commitment to work, to excellence, to performance, to certain basic loyalties to the group, and so forth—those all have an effect on their economy, their productivity, their willingness to make sacrifices, their willingness to save.

REASON: But interesting how we say that it's gained value through the market. Japan's culture wasn't in and of itself valuable because it was a good culture. They had the same culture a hundred years ago, and nobody gave two hoots about it.

BROOKES: Sure.

REASON: But now, it's proven within the context of the marketplace to be competitively successful…

BROOKES: But, let's face it, I mean, freedom is the essential element of the free market.

REASON: Okay, I wanted to get to that.

BROOKES: Sure. My basic commitment is to libertarian values. I believe that freedom is the essential value. I don't believe, however, it is the only value. I think it is important to recognize that we can destroy ourselves as hedonists and we can destroy ourselves if we abuse our freedom. The junkie is not a free man.

REASON: Well, let's see, I think it's pretty clear that if you go around maiming and pillaging your fellow coworkers on the assembly-line floor, for example, then it's not going to be a real productive society.

BROOKES: Exactly.

REASON: On the other hand, how does hedonism translate into the abuse of freedom?

BROOKES: It affects, for example, our attitudes about saving. We profess to be a great capitalist economy, but we don't save very well. Very broadly, my feeling is that we have gone from a society that had a profound commitment to long-term satisfaction to a profound commitment to immediate gratification. I think the whole trend in our culture regarding sexual matters is to put great emphasis on what Midge Decter calls a certain preoccupation with narcissistic attitudes—with the immediate gratification of personal desires, personal tastes, and so forth. This puts great strain on an economy that has to be, by necessity, prospective, forward-looking, willing to save and plan for the future.

REASON: But isn't it a great strength of the capitalist system that people can enjoy themselves and celebrate the prosperity that they have created?

BROOKES: Sure.

REASON: But you seem to be saying that you really don't trust people who enjoy the fruits of capitalism.

BROOKES: No. As a matter of fact, I don't anywhere propose that we should legislate these things. I am simply saying, however, that if half the society was sitting watching erotic movies all day long, we'd have a different kind of society. We would have an altogether different kind of culture, and I don't think it would be as productive.

What we need is an understanding of what real values are, what substance really is. And that, I think, is the job of the philosophers, the preachers, the ministers—to keep spurring us to seek, seek, seek a substance that lasts, that works, that makes us really happy, genuinely happy. This is a place for leadership rather than legislation. I think there has to be strong moral leadership in our society and that this is crucial to our economic productivity and therefore to our well-being. And I'm talking about the ethics of the way we treat ourselves, the way we treat our neighbors, the way we treat our children or our old people. I see a decline in those values.

REASON: I'm sensing that that decline, in your mind, is because of too much freedom.

BROOKES: No. No, I don't think so. I don't think you can have too much freedom in that sense of the word. I think freedom is an absolute value, and I'm committed to freedom. But I also am committed to helping people use their freedom, to maximize their freedom as opposed to minimize it. I think an awful lot of people today who say they're free are essentially not free at all. They have become real slaves to illusory enjoyments, as opposed to free in the sense of being able to really have dominion over their lives.

REASON: I want to ask you about your contention that business has to do more than try to maximize profits. In your book you say, "When the single-minded pursuit of profit dominates corporate thinking it can tend to exclude vision, hinder true creativity and productivity, debilitate the dynamism of enterprise and ultimately reduce wealth itself." Are you saying that when people really try to pursue profit, they're not going to make a profit? Isn't that contradictory?

BROOKES: No, it's not. I don't think it is contradictory. I use the example of Bradley Dewey, who came back from France in 1936 with this idea of Cryovac. He had this vision of this process that would make it possible to do all kinds of things, to basically revolutionize the distribution of perishable foods, particularly meats and poultry. He was almost single-minded in pursuing this vision, and he was a colossal economic and financial failure for a long time—in fact, until 1953, to be exact—during which time his accountants, his controllers, as Harvard Business School types, were saying, you've got to stop this thing. Ultimately, of course, Cryovac turned into an enormous profit-maker and confounded his accountants and his maximizers in the short-term sense of the word. Now, maybe they weren't in your sense of the word…

REASON: Well, they certainly didn't maximize profit in that case, did they?

BROOKES: No, they didn't.

REASON: So, what you're saying is that American business should look to the longer term.

BROOKES: Yes. And I personally feel that business schools such as Harvard's have created this quest for the short-term solution, this focus on the short-term approach.

REASON: Well, Lester Thurow has this theme, too, that the Japanese tend to be long-term in their thinking, and he keeps pounding on this and blaming American management. But if I were an American manager, I would be damn short-sighted too when I know that the Alcoa Corporation builds a tremendously efficient company and has the government's antitrust people come in and operate a divestiture proceeding, and when I see the tax rates, and giant deficits bouncing up and down…

BROOKES: Sure. I do blame the corporate tax system for a lot of the myopia that exists in corporate boardrooms today. But I spent most of my life in the business world, and I was continually struck by the difference between those who did have vision and those who did not. Where there is no vision, people perish. And I think part of what the business schools have failed to do is to put that heroic view, that heroic sense of vision, forward hard enough—to say, look, yes we must maximize profits, and we must deal with the short-term situation, but let's understand that it's the vision, ultimately, that brings the long-term consequences.

And what excites me about the economy today is that you look at these little pieces of plastic, paper, they're worth about a nickel or a dime…

REASON: You're holding a floppy disk.

BROOKES: Yeah. And on this thing is a piece of software that I paid $400 or $500 for. Now somebody is getting $400 or $500 not for a piece of plastic or a piece of cardboard. You are paying the $400 or $500 for his ideas. This, to me, is the exciting part about the economy we are moving into. It's an economy where people are being paid more and more for what they know rather than what they can physically move around and produce. I think that's exciting. I think that the whole revolution that is going on in high technology is the possible unleashing of a level of value that we don't even have accounting systems to add up now. We don't even know how to account for this kind of value. The values are shifting so constantly. What is it worth to you? Well, it's worth whatever you're willing to pay, obviously. A whole realm of things is coming out of people's heads, out of people's minds—that's what wealth is. That's what I call the economy in mind. Obviously, we are going to pay more and more for people to be thinkers, to be productive mentally. That's where we are headed. I see that as the ultimate extension of my Adam Smith tie, because once we reach the point where everything of value is coming out of consciousness, we have the basis for the perfectly free economy. I regard this as the ultimate. I mean, here I am sitting, I sit here in this little office, and I turn out a column that pays me a pretty good income now. I turn it all out of my head, and yet it's all being manufactured in my home.

REASON: The great liberator.

BROOKES: Sure, and decentralization. I mean, God, that's the greatest thing that's ever happened, you know, in terms of decentralizing the economy. This is the break-up of the corporate state.

REASON: And you're pointing to your personal computer.

BROOKES: Sure.