Back in 1977 the Communists controlled a third of the world, Democrats controlled the federal government, the big three networks had 91 percent of television viewers, textbooks said the Soviet Union would soon have a larger GNP than the United States, and the federal government's most recent accomplishments were Vietnam, Watergate, and stagflation.
And in that unpromising environment Ed Crane and Charles Koch decided to create a libertarian think tank. It could have been, as Otter said about that time, "a really futile and stupid gesture." But some surprisingly positive things began happening right about then.
It's hard to recall the depression, the malaise that Americans felt in the 1970s. Henry Kissinger was quoted as saying that he thought of the United States as Athens and the Soviet Union as Sparta. "The day of the U.S. is past and today is the day of the Soviet Union. My job as secretary of state is to negotiate the most acceptable second-best position available," he is supposed to have said. Kissinger denied the quotation, but another leading intellectual-statesman, Senator Daniel Patrick Moynihan, stated a similar view openly in 1976, at the time of the American bicentennial: "Liberal democracy on the American model increasingly tends to the condition of monarchy in the 19th century; a holdover form of government, one which persists in isolated or particular places here and there, and may even serve well enough for special circumstance, but which has simply no relevance to the future. It is where the world was, not where it is going. Increasingly democracy is seen as an arrangement peculiar to a handful of North Atlantic countries."
But under the surface things were changing. Some of the very weaknesses that led Kissinger and Moynihan to their pessimism had eroded the confidence in government built up by the New Deal, World War II, and the prosperous 1950s. The ideas that Ayn Rand, Milton Friedman, F. A. Hayek, and others had been propounding for a generation were taking root with more people. Politicians such as Margaret Thatcher and Ronald Reagan, who had read some of those dissident authors, were planning their challenges to the failing welfare-state consensus.
Even less obviously, the Soviet leaders had lost confidence in the Marxist ideology that justified their rule, a fact that would have profound consequences in the coming decade. And in China, Mao had just died, and his old comrade Deng Xiao-ping was maneuvering for power. His victory would have consequences that no one could see in 1977.
Politics isn't everything, of course. In 1976 Steve Jobs and Steve Wozniak incorporated the Apple Computer Company, on April Fool's Day. Two other young men, Bill Gates and Paul Allen, had created a company to develop software for the new personal computers, and in 1978 the Microsoft Corporation's sales topped $1 million. Around 1978 an Atlanta businessman came up with the idea of an all-news cable channel; Ted Turner launched the Cable News Network on June 1, 1980.
Forty years on, the world has changed so much that we may have forgotten what a different era 1977 was. Reagan and Thatcher moved public policy in the direction of lower taxes, less regulation, and privatization. They had an even bigger impact on the political culture in their countries and around the world. They both symbolized and galvanized a new appreciation for markets and entrepreneurship. Reagan's optimism—along with the mountains of facts painstakingly accumulated by Julian Simon and other scholars—helped to dispel the doom and gloom of the 1970s.
Reagan and Thatcher did little to challenge the welfare state legislatively. But by strengthening the economy and helping more people appreciate the benefits of entrepreneurship and investment, they contributed to a growing demand for reform:
- Economic deregulation (begun under President Carter) made the airline, trucking, railroad, oil, natural gas, telecommunications, and financial-services industries more efficient.
- Tax-rate reductions set off economic booms in both countries, and more people became homeowners and investors.
- Later, after Reagan and Thatcher had passed from the political scene, other advances for liberty took place — from NAFTA and other trade expansions to constitutional protections for Second Amendment rights and equal marriage rights to, slowly, a turn away from marijuana prohibition and the spread of school choice.
- Finally, Americans came to realize that welfare was trapping millions of Americans in dependency. What Jonathan Rauch called a "demosclerotic" political system did not change easily, but in 1996 a welfare reform bill was finally passed.
Abroad, the changes have been even more dramatic. The only thing more certain than death and taxes was that the world was divided into communist and non-communist parts. And yet the changes that began with Deng's rise to power in 1977-78 and the first stirrings of Solidarity in Poland in 1980 would change the face of the world in little more than a decade.
The end of communism did not usher in nirvana, of course. Russia had a brief spring and then slipped into autocracy and corruption. The other former Soviet republics are in most cases even worse off. The European countries that were once under the thumb of the USSR are doing somewhat better. East Germany is once again simply eastern Germany, part of a prosperous and democratic nation and the home of Europe's preeminent leader. Poland, Hungary, the Czech Republic, and the Baltic nations made fairly rapid transitions to liberal capitalism, while the southeastern European nations—which had little national experience of democracy or capitalism—have lagged behind.
As for China, its economic development has been astounding. After Mao's death in 1976, first spontaneously and then with the encouragement of Deng Xiaoping and the leadership, farmers began dismantling the agricultural communes, transitioning to a "responsibility system" with incentives. Agricultural production soared. The resulting surplus in food production allowed workers to move into other lines of work. State-owned enterprises were given more independence, and Chinese citizens were allowed to set up village and even private enterprises. Economic reform accelerated. When I attended the Cato Institute's first conference in Shanghai in 1988, the huge city had almost no tall buildings. From the 16th floor of the Shanghai Hilton, you looked across miles of hovels to the Sheraton in the distance. There were few stores and restaurants in 1988, and they had little to sell. In 1997, when I arrived at 10 p.m. one night for Cato's second conference in China, again at the Shanghai Hilton, I took a stroll around the neighborhood. Even at that late hour, I encountered an enterprising people—there were stores, restaurants, fruit stands, bars, nightclubs, farmers selling produce from their trucks. And the city's skyline, if not yet Manhattan, had certainly blossomed to the scale of Houston. The differences were obvious and dramatic.
But there was another difference as well. At our 1988 conference students and professors wanted to talk about market reforms and democracy; they followed Milton Friedman around like a guru. In 1997 the participants were more subdued; they wanted to talk about business models and market institutions, but they clammed up when the Americans turned the discussion to free speech and political reform. It seemed as if the leaders of China had made a bargain with the people: stop talking about democracy, and we'll let you get rich. Not the worst bargain in history, but not what we hope for. Today, even as Xi Jinping cracks down on free thought and political criticism, China is far freer than in Mao's time. As Howard W. French of the New York Times reported in 2008, "Political change, however gradual and inconsistent, has made China a significantly more open place for average people than it was a generation ago."
As Cato's Human Freedom Index shows, the extent of freedom varies widely around the world. Markets, trade, access to information, democratic governance, and an end to legal discrimination based on race, religion, sex, and sexual orientation have made much progress. Yet there's a growing trend toward autocracy and what Fareed Zakaria called illiberal democracy in countries such as Russia, Turkey, Hungary, and Venezuela.
So what are the challenges to liberty as we enter the Cato Institute's next 40 years? Many, as always. Let me identify just a few:
- Socialism and social democracy. Libertarians and conservatives have worried since the days of Franklin Roosevelt about "creeping socialism" — whether by actual nationalizations in Great Britain and other countries, or by taxpayer-funded "social insurance" programs in Europe, the United States, and elsewhere. Those programs account for an increasing share of GDP in most developed countries, and they seem very difficult to trim or eliminate once recipients come to expect benefits. After the elections of Reagan and Thatcher and the collapse of communism, it seemed that socialism was a relic of the past and that even social democracy was listless. But now with the election of Jeremy Corbyn as leader of the British Labour Party and the unexpectedly strong challenge of Bernie Sanders in Democratic primaries, it seems that avowed socialism is making a comeback, perhaps because a generation of voters has come of age without any experience of the failure of state socialism.
- Along with the revival of socialism, the left in the United States and Great Britain has been energized by an accelerating demand that all institutions accept and conform to a particular version of "diversity." From employment to housing to corporate boards to Hollywood, divergence from proportional representation is under attack. The extension of freedom to gay people in the Supreme Court's Lawrence and Obergefell decisions and a series of state votes has been followed by a campaign to find and punish every traditionalist baker and florist. Freedom of association is threatened. Although this is a real problem, we should be careful not to exaggerate it, considering how badly freedom of association was harmed in the recent past by Jim Crow and sodomy laws, and by continuing questions about race and criminal justice.
- Threats to freedom of speech. Throughout the past century protections for free speech under the First Amendment have been gradually expanded. For many decades Americans have affirmed to pollsters that they support the First Amendment and freedom of speech. Yet they often find exceptions to the general rule. In the middle of the 20th century majorities thought that atheists and communists should not be allowed to speak. Laws against pornography are often popular. More recently, 40 percent of millennials, far more than older groups, told the Pew Research Center that people should not be allowed to make statements that are offensive to minority groups. Perhaps most disturbingly, some activists at elite universities today reject the very idea of free speech as a standard. Meanwhile, threats of violence are a very direct way of chilling some kinds of speech.
- Autocratic nationalism. It isn't just Russia and Turkey where liberal principles are in retreat. As Freedom House writes, "The system pioneered by Hungarian prime minister Viktor Orbán stands as an appealing model for elected political leaders with authoritarian leanings." And not all those leaders are in currently non-democratic countries. For the first time in two generations Europe is seeing an upsurge of support for right-wing authoritarian movements. Although some of these groups appeal to "freedom," their definition seems to amount to national sovereignty or even autarky. Political leaders such as Marine Le Pen in France, Geert Wilders in the Netherlands, and Frauke Petry in Germany are not advocates of free markets and fiscal conservatism. Their program tends to involve identity politics, anti-elite populism, economic nationalism, opposition to liberal trade and immigration, welfare statism, and a promise of strongman rule that will triumph over the deliberative nature of electoral and parliamentary institutions and "get things done." Some supporters of President Trump display similar characteristics.
- The underlying theme in all these problems, of course, is a declining commitment to liberal values. For some 300 years liberalism, the philosophy of liberty, has spread from northwestern Europe to more and more of the world and has been applied more fully. The values of individual rights, markets, private property, the rule of law and equality under the law, freedom of religion, tolerance, pluralism, and limited government have become more deeply rooted. It was the American creed that these truths were self-evident and would eventually be embraced by the whole world. Thomas Jefferson wrote two days before his death, "All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride legitimately, by the grace of God." A half-century later the Statue of Liberty, a gift from one liberal country to another, was formally titled "Liberty Enlightening the World." Despite the existence of yet-unenlightened parts of the world and horrors such as communism and national socialism, liberals have maintained an optimistic view that all people do want the rights to life, liberty, and the pursuit of happiness.
Is that still true? That's the question we face today. Will the liberal era come to an end, like the Roman Empire or the Dark Ages? Or will we look back a generation or two from now and see nannyism and campus speech restrictions as a passing fad like Prohibition, and right-wing nationalism as a rear-guard response to the real story of the past half century, globalization and its liberalizing influence?
I'm an optimist. Despite all these challenges, it's still true that around the world, more people in more countries than ever before in history enjoy religious freedom, personal freedom, democratic governance, the freedom to own and trade property, the chance to start a business, equal rights, civility, respect, a higher standard of living, and a longer life expectancy. War, disease, violence, slavery, and inhumanity have been dramatically reduced. Immigration flows are always from less free to more free countries, creating some challenges but also demonstrating a broad preference for liberal societies.
I also think of something Murray Rothbard wrote in 1965:
The liberal Revolution implanted indelibly in the minds of [all people a desire] for the mobility and rising standards of living that can only be brought to them by an industrial civilization….And given these demands that have been awakened by liberalism and the Industrial Revolution, long-run victory for liberty is inevitable. For only liberty, only a free market, can organize and maintain an industrial system, and the more that population expands and explodes, the more necessary is the unfettered working of such an industrial economy.
Socialism doesn't deliver the goods. Cronyism and tax-and-spend policies reduce economic growth. When people get a taste of growth, they want it to continue. And the economic freedom that leads to growth also gives people a taste for making their own decisions, which tends to spill over into a demand for political, cultural, and lifestyle choices.
But I'm not an economic determinist. I believe that ideas have consequences. Free societies depend on an intellectual foundation — both a constitution that constrains power and a consensus both elite and popular around liberty, markets, pluralism, and tolerance. That foundation has to be nurtured, debated, and sustained. Which is why I work at the Cato Institute.
In honor of the fortieth anniversary of our founding, the Cato Institute has organized a special online forum on the future of the free society. Join the conversation on Twitter with #Cato40, and follow the hashtag for updates.