From Big State and Small Society, to Small State and Big Society: Reflections on Richard Cornuelle’s Healing America

[S]ociety performs for itself almost everything which is ascribed to government. . . .

So far is it from being true, as has been pretended, that the abolition of any formal government is the dissolution of society, that it acts by a contrary impulse, and brings the latter the closer together. All that part of its organisation which it had committed to its government, devolves again upon itself, and acts through its medium. When men, as well from natural instinct as from reciprocal benefits, have habituated themselves to social and civilised life, there is always enough of its principles in practice to carry them through any changes they may find necessary or convenient to make in their government. In short, man is so naturally a creature of society that it is almost impossible to put him out of it. . . .

The more perfect civilisation is, the less occasion has it for government, because the more does it regulate its own affairs, and govern itself; but so contrary is the practice of old governments to the reason of the case, that the expenses of them increase in the proportion they ought to diminish. It is but few general laws that civilised life requires, and those of such common usefulness, that whether they are enforced by the forms of government or not, the effect will be nearly the same. If we consider what the principles are that first condense men into society, and what are the motives that regulate their mutual intercourse afterwards, we shall find, by the time we arrive at what is called government, that nearly the whole of the business is performed by the natural operation of the parts upon each other.

 —Thomas Paine, The Rights of Man (1984 [1792], 193-195)


Government is a legitimized monopoly on the use of force in a given territorial region, whereas the state is the institutionalization of such a monopoly in society. The twentieth century has witnessed a tremendous growth of government in the United States. In 1870, total federal, state, and local government spending as a percentage of GDP was 7.3 percent, in 1960 it was 27 percent, in 1980 it was 31.4 percent, and in 2009 it was 42.2 percent. As seen in Figure 1, among Western democracies, those numbers are slightly higher, with average government spending in 2009 being 47.7 percent of GDP, but the overall trend has been increasing government spending as a percent of GDP over time.

When Richard Cornuelle sat down in the early 1980s to write Healing America, there was a growing recognition that the Keynesian consensus in public policy was breaking down and that the public sector had become bloated and ineffective. But the policy steps that followed in subsequent decades did not take up the challenge as Cornuelle put it, and focused instead on ineffective efforts to constrain government spending. Cornuelle liked to borrow from Keynes the observation that you cannot become thinner by wearing a tighter belt. You have to trim the fat.

Trimming the fat, Cornuelle argued, will result not from starving the state of resources but from starving the state of responsibility. To accomplish that we must demonstrate that the non-state sector is able to address the social problems which modern industrialization presents: mass unemployment, extreme poverty, provision of educational opportunity, and health and retirement services among others. A good society is one whose system of governance enables individuals to realize the gains from social cooperation and exchange under the division of labor, and thus experiences the benefits of material progress, individual freedom, and peace. A good society allows for free and responsible individuals who participate and have the opportunity to prosper in a market economy according to profit and loss signals, and who live in, and are actively engaged in, caring communities. As we will argue, a system of governance that allows such a society to emerge requires limits on the scope of government and reliance on the non-state sector to address many, if not all, of the actions we now assume only the state can accomplish.

Throughout the twentieth century and into the twenty-first the great expansion of trade and technology has produced a level of material wealth such that the costs of government intervention could be offset and remain largely hidden. This is not a new phenomenon—Adam Smith pointed out long ago how self-interest exercised through the market economy is so powerful in aiding the creation of wealth that it can overcome a “hundred impertinent obstructions with which the folly of human laws too often incumbers its operations” (1981 [1776], 540). It is important to stress that the great material progress realized over the past 100 years was not caused by the expansion of state intervention into the economy but despite it, precisely as Adam Smith laid out. It is equally important, however, to stress that there is a tipping point where the costs of “impertinent obstructions” can simply no longer be offset nor hidden by the market economy.

The folly of human laws that intervene in the market economy is a consequence of ideas and interests. Government’s growth in terms of both scale (expenditures as a percentage of GDP) and scope (responsibilities) in the twentieth century has been astronomical. It has particularly accelerated in the twenty-first century as Western democratic states have had to deal with perceived tensions due to globalization and the widening income gap between the “West and the rest,” as well as the perceived terrorist threat from fundamentalist extremists who supposedly despise Western culture. But, as the fiscal situation in Europe and the United States has demonstrated so clearly over the past few years, the current scale and scope of government is unsustainable.

As already noted, government spending as a percentage of GDP has grown among Western democracies from an average of 12.7 percent on the eve of World War I to 47.7 percent in 2009 (Micklethwait 2011, Tanzi 2011). Spending has increased even more rapidly since 2009 in an effort to boost aggregate demand in the wake of the global financial crisis. Government spends because the economy is weak, and the economy continues to perform poorly because government spending crowds out productive private investment. It is a vicious cycle that has to be broken by a reevaluation of the role of government in a society of free and responsible individuals. This implies that the problem of the scale of government will only be addressed when we rethink the issue of scope of government. The important political/intellectual activity of our age is not to agitate to starve the state of resources, but to build the intellectual case that we can in fact starve the state of responsibility, as Cornuelle suggested in Healing America that we can and ought to.

Reevaluating the scope of government entails demonstrating that society can provide the necessary system of governance and acts of compassion to render state action needless. The belief in society’s ability to solve social problems without recourse to the apparatus of compulsion that is the state was a defining characteristic of democracy in America and the meaning behind a population of self-governing citizens. But modernity ushered in a new age—an age of great material progress along with the introduction of new social problems that challenged the quaint memory of caring communities. The belief in the self-governing capacity of individuals and communities to deal with social problems was lost, due intellectually to the transformation of public administration, which followed Progressive ideology, and empirically to the experience of mass unemployment during the Great Depression. Since then, not only have economics and politics been transformed to conform to the changed mindset, but American society itself reshaped into the image of a corporatist state ruled by trained experts who deal with social problems through the tools of state power rather than cooperation within communities.

Cornuelle argued that our intellectual culture since the Great Depression has “heard only the case for expanding the scope and size of government,” and that if “rationality is to be restored, the independent sector must compete for social responsibility consciously and aggressively” (1983, 174; 175). Success will require a radical rethinking of “public business” as the role of government in a free society is critically examined. In other words, it is necessary to engage in the negative task of demonstrating that the justificatory arguments for the state are not as airtight as imagined, and thus that the supply and demand for state action actually have their sources elsewhere. This demonstration is what we take as our task in this paper.

In sequence, we discuss the claims for state intervention that derive from our moral sense of justice, the arguments for state intervention based on prisoners’ dilemmas and the need for collective action, and the case for state intervention that follows from the broad claims of market failure. We then argue that even if we have good reasons to reject (or at least seriously question) the justificatory arguments for state intervention based on justice, collective action, or market failure, a high probability of state intervention will persist as suggested by public choice arguments regarding the logic of democratic governance. We thus turn to a discussion of what may be necessary to realize a society of free and responsible individuals who participate and can prosper in a market economy based on profit and loss, and who can live and be actively engaged in caring communities. We conclude by returning to Cornuelle’s Healing America and its implications for twenty-first-century political economy.

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