Are You Better off Than You Were 40 Years Ago?
Government has grown, but freedom has grown faster.
In the November 1968 Mechanix Illustrated, James Berry gave an eerily prescient glimpse of life in the typical American household today: "The single most important item in 2008 households is the computer. These electronic brains govern everything from meal preparation and waking up the household to assembling shopping lists and keeping track of the bank balance…handle travel reservations, relay telephone messages, keep track of birthdays and anniversaries, compute taxes and even figure the monthly bills for electricity, water, telephone and other utilities."
Though Berry was spot-on in predicting the technological advancements of the last 40 years, he didn't say much about whether such progress would explicitly enhance the cause of freedom. Many libertarians, eyeing the relentless expansion of the state, worry that freedom is marching backward. But are we really worse off than we were 40 years ago?
This is a complicated question to measure. Wealth expands people's choices, and Americans are fabulously more prosperous than they were in 1968. According to the Census Bureau, income per capita adjusted for inflation has doubled in the four decades since 1968, from $13,374 to $26,804. Non-wage compensation, in the form of employee benefits, has also increased greatly during that time.
There's a better measure of living standards than raw wealth: consumption. By this measure, the United States is also doing very well. Luxury goods that few could afford in 1968 are now standard in most households, including poor ones. Writing in the July/August 2008 American, Michael Cox and Richard Alm, the senior vice president and chief economist and the senior economics writer at the Federal Reserve Bank of Dallas, reported that in 2005 a full 85 percent of households that are classified as poor by the Census Bureau have air conditioning (compared to only 36 percent in 1971); 97 percent have a color television (compared to 40 percent in 1971); 40 percent have an automatic dishwasher (as opposed to 20 percent in 1971); and almost 100 percent own a refrigerator (a 25 percent increase over 1970).
As Milton Friedman showed in Capitalism and Freedom, such wealth both feeds and is a byproduct of freedom. On one hand, freedom in economic arrangements produces wealth. This, in turn, produces a demand for more liberty, which then produces more prosperity. Thus, increasing wealth is usually correlated with increasing economic freedom. The deregulations of the airline, telecom, and trucking industries in the 1970s, and the marginal tax rate cuts and control of inflation in the '80s, contributed to the widespread prosperity of the '90s.
Yet, the wealth accumulation of the last 40 years has also made the government bigger. Real federal spending increased from $774 billion in 1968 to $2.5 trillion in 2008—a 225 percent increase—and federal spending per household grew from $11,800 to roughly $21,000 over that period, in constant dollars. This forms a libertarian paradox: economic freedom and wealth breed not just more political freedom, wealth, and choice but also more government.
While the nominal size of the federal government has exploded, spending and receipts relative to the size of the overall economy have not. So perhaps as the economy grows, the government is mainly tagging along. Figure 1 shows both as a percentage of GDP, one that has remained remarkably constant. Interestingly, marginal tax rates have also fallen drastically over time, raising an interesting question about the impact (if any) of marginal tax rates on the size of government.
This doesn't mean we shouldn't worry. The looming entitlement crisis when baby boomers start retiring will result in a massive expansion of federal spending that could shatter the balance between government and freedom. But we may not even have to wait that long for the state to catch up with the economy. The $700 billion bailout of Wall Street threatens to be the most sweeping government intervention into the nation's financial markets since the Great Depression. And other economic policies being discussed are unlikely to be much better.
It's not hard to point to other areas where government has grown and liberty yielded. Look no further than your morning routine. The federal government has put its imprimatur on the mattress on your bed (through the Consumer Product Safety Commission). The Federal Communications Commission regulates the transmission and content of your favorite morning show. The Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA), as well as the Commodity Futures Trading Commission, regulate the coffee you drink and the sugar you add to it. The USDA regulates the milk you pour in the coffee, as well as cheese, butter, and other dairy products you might eat for breakfast. And the FDA has its say about the shampoo, soap, and toothpaste you use with water that's regulated by the Environmental Protection Agency.
Then there is the explosion in security measures. Airline travel regulations, increased surveillance, and growing databases are a few examples of government's expansion in our lives. Add in state and local regulations—on smoking, eating transfats, or labeling menus—and you can get the feeling that we've lost our freedom.
That's especially true if you're behind bars, which a lot more people are these days. A recent Pew Research Center study shows that one out of 100 adults in the U.S. are imprisoned, an exponential increase since the 1960s. Trends in violent crime don't explain this trend, but the war on drugs might. In a 2004 paper, the Princeton economist Ilyana Kuziemko and the University of Chicago economist Steven Levitt detailed how drug offenders now make up over 30 percent of all inmates in state and federal prisons, compared to less than 8 percent in 1980. The number of inmates with drug crimes as their most serious offense has risen from 24,000 in 1980 to near 400,000 today, a 15-fold increase.
But these vignettes don't tell the whole story. Looking at the whole social picture, it's hard to tell blacks, Jews, gays, and women that they are less free today than they were in 1968. As a woman, I can enter and leave the work world freely, whether I have kids or not. I can get an abortion, file for divorce, enter into a lesbian relationship, marry a black guy, or have several lovers, all without worrying about legal consequences (or being drummed out of polite society). While some restrictions persist, the breakdown of social barriers, many of them formerly enforced by government edict, has done much to increase my freedom and that of other once-restricted groups.
So is everyone freer today than in 1968 except for white men? Not exactly. White males—and men in general—are freer in an important way too. Just as it is today, in 1968 the U.S. was engaged in a war. But back then, the country had a partially drafted army, not the all-volunteer force that fights today. Draftees accounted for 30.4 percent (17,725) of combat deaths in Vietnam. The number of draftee deaths in Iraq: 0.
So I think we are freer today than we were 40 years ago. Now if only James R. Berry's other prediction would come true: "Sensors in kitchen appliances, climatizing units, communicators, power supply and other household utilities warn the computer when the item is likely to fail. A repairman will show up even before any obvious breakdown occurs." Then life would really be sweet.
Contributing Editor Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.