Statecraft and Liberal Reform in Advanced Democracies by Nils Karlson

The study of politics in the United States now follows two paths. One apes economics, seeking to climb the ladder of higher math to theories of rational choice and scientific prestige. The other path—called American Political Development (APD)—looks to history to explain the growth of the American state. The devotees of APD seek to understand rather than evaluate the emerging American state, but their stories sometimes appear to justify administrative expertise and other aspects of their subject. Until recently APD scholars paid little attention to the liberalizing reforms enacted in the United States and other developed nations after 1980. Nils Karlson offers an admirable effort to understand the politics and outcomes of those reforms.

Karlson is suited to the job. He served as founding president and CEO of the Ratio Institute in Stockholm, Sweden. He was trained as an economist and political scientist at George Mason University and Uppsala University, respectively. Readers will be pleased to learn Karlson is also a board member of the Mont Pelerin Society. His interdisciplinary background should be (but is not) a starting point for studying state and political development. Academics laud interdisciplinary research, but academic careers prosper through specialization. To the benefit of his work, Karlson has done more than talk the interdisciplinary talk. He has also been involved in the practical matter of the politics of policy reform. Karlson has heard what Max Weber called the Beruf der Politik (the calling to politics/policy). Our author, in short, has an exemplary background for his task.

Karlson’s subject is the modern welfare state, that combination of market regulation and monetary redistribution that came to mark all developed nations. In 1965 most saw the welfare state as a remarkable success, a friend to both efficiency and equality and a teacher of improved tastes among the governed (according to Lyndon Johnson’s speech announcing the Great Society). By 1980, at the latest, the welfare state was troubled if not in crisis even in Sweden, the enduring model of market egalitarianism.

But reforms to the welfare state were hard. Karlson provides a lucid inventory of the barriers to reforming the welfare state, all of which will be familiar to public-choice economists. Public choice tends toward pessimism about reforms. Recall Mancur Olson’s view that rent-seeking favors small groups over the larger public. How in Olson’s world could diffuse benefits ever impose concentrated costs? Yet liberal reform did happen (and not just in Sweden and Australia, the two nations treated here). So perk up, liberals! Liberty may not be doomed after all.

Karlson is mainly interested in the “how and why of reform.” He proposes a reform cycle beginning with a change in social and economic conditions whose failings foster a need for new ideas that may be articulated by policy entrepreneurs. In turn, they engage interests and politics bringing about changes in policies and institutions that affect social and economic conditions. Karlson puts policy ideas and policy entrepreneurs at the center of his reform cycle. Put another way, he describes a road to reform paved by philosophy and policies though laid down by political engagement.

Here we come across Karlson’s first lesson for American liberals, a lesson learned long ago with the founding of the Cato Institute but perhaps now being lost by libertarians generally. Philosophy, especially anarchism, is not enough. The point indeed is not to interpret the world but to change it. And that requires policy entrepreneurs engaged in the dubious business of politics. Here again Max Weber could offer some guidance: Liberals need an ethic of responsibility (not an ethic of absolute ends) informed by Karlson’s studies of successful reform cycles.

Karlson seeks a theory of “liberal statecraft” to guide reforms. Statecraft is the “art of governing a country well.” Liberal statecraft would be the art of governing well by increasing liberty, in fact as well as in theory. Karlson sets out three strategies of reform: the Popperian, the Kuhnian, and the Machiavellian. The Popperian is “fact-based and involves the use of research, rational argumentation, and pragmatism.” The Kuhnian strategy is “idea-based and involves the use of paradigmatic shifts of perspectives, narratives, framing, new authorities, and agenda setting.” The Machiavellian, named after the putative “teacher of evil,” involves “shrewdness and … the use of obfuscating, blame avoidance, splitting, compensating, and scapegoating.” Good governance in general—and liberal reform in particular—require all three.

Liberals in Sweden (including Karlson himself) and Australia embraced all three strategies. What about American liberals? Perhaps we can say Ronald Reagan did so if libertarianism was indeed the heart of his conservatism. Rand Paul might fit the bill too. Perhaps American liberals foster so few successful reformers because the task is so daunting. That’s true, but not a wholly adequate explanation. Many American liberals hate politics precisely because of its Kuhnian and Machiavellian traits. They stay clear of its moral compromises, wishing instead to build a shining city on a hill that will eventually somehow inspire people to build a liberal world. But ideals, however important, are only part of the reform story, perhaps a small part. Politics, Kuhnian or Machiavellian, requires the practice and learning that arise from engagement rather than logic chopping. Karlson wanted to make something happen and he did. I wonder how many American liberals really do.

Karlson applies his theory to two nations who liberalized extensively in the last part of the 20th century: Sweden and Australia. Both case studies go into admirable and persuasive detail. Both cases hold surprises for readers. The success of liberalization in Sweden will be somewhat familiar; the transformation to private pension accounts has been discussed for some time in the United States. Yet the scope of the change was remarkable both in policy and institutions. The Sweden held up in my youth as a paragon for the American left of how to combine socialism and democracy jettisoned much of the former. Many will be surprised how collectivist the old Australia was and how quickly it changed. Karlson’s reform story in both nations ends about the time of the global financial crisis of 2008 (in Australia) or shortly thereafter (in Sweden).

Sweden and Australia might seem poor comparisons to the United States. But Karlson’s case studies need not be valid for all nations. He is seeking in this book to initially test his theory with two examples examined in depth. Does the theory work well with U.S. history? The United States began liberal reforms following an extended crises prompted by the failure of Keynesian economics and managerialism. Policy entrepreneurs and politicians played important parts in that drama including Bill Clinton, a politician who might have been expected to oppose liberalization. U.S. political institutions probably limited the scope of overall change by diffusing power thereby making it harder to enact reforms. Parliamentary democracies like Sweden and Australia can act resolutely if voters want liberalization.

Karlson has written a fine book, one that needed to be written. He has traveled far toward understanding how liberal reforms happen and thus how they might happen again. I am happy to learn that policy ideas and think tanks matter a lot to liberal reform, but I take from his book a larger and more challenging lesson. Politics should matter a lot to liberals. Making the world a better place requires more than argumentative engagement and moral probity. Young liberals must become dissatisfied with righteous failure. They must hear their own calling to politics and policy which holds out the prospect of both moral achievements and moral dangers. They might after all lose their souls. But doing nothing may mean losing liberalism itself. Will liberals be up to that task?

John Samples is a vice president at the Cato Institute. He founded and directs Cato’s Center for Representative Government, which studies the First Amendment, government institutional failure, and public opinion.