Guest: Gilder, George
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THE OPEN MIND
Host: Richard D. Heffner
Guest: George Gilder
Title: “A Theology for Capitalism”
I’m Richard Heffner, your host on THE OPEN MIND. Not long ago Newsweek magazine wrote that, “Anyone who wants additional insight into the thinking of Ronald Reagan’s economic planners doesn’t have to look far. Wealth and Poverty, the new book by social philosopher George Gilder is rapidly becoming a Washington bestseller, bought in bulk by the likes of chief economic strategist David Stockman and passed dog-eared among the White House rank and file. Its popularity is hardly surprising. In effect, Gilder’s book provides a moral underpinning for plans to slash federal spending, cut taxes, and get big government off America’s back. It is, in the author’s word, a “theology for capitalism”. And another reviewer, commenting on what seemed to be the expansive, ebullient and optimistic economics of Ronald Reagan and the zero sum or even seeming zero growth austerity of Jimmy Carter’s economics said it was “Sack cloth versus jelly beans”; that “jelly beans” had won in a landslide election in November of 1980, and that given the need for the articulation of an economic philosophy for the Reagan years, the invisible hand has conveniently provided it in George Gilder’s intrepid new supply-side volume entitled Wealth and Poverty. Of course, the last time George Gilder was here on THE OPEN MIND, it was to fend off Betty Freidan’s criticism of his strongly anti-feminist volume, Sexual Suicide. And so I suppose that in beginning our discussion today it isn’t inappropriate for me to ask George Gilder exactly what the connection is between Sexual Suicide and this extraordinary new book on Wealth and Poverty. What is the connection?
GILDER: To begin with, I still maintain that the family is the central institution of civilized society, and that the chief way people overcome poverty is through families. Men supporting their children, linked to the future through their children, save and work and overcome poverty in America. And this is really the central way any group does overcome poverty. It’s very hard for female-headed families to escape from poverty because they’re so preoccupied with just the day-to-day problems of caring for their children that it’s almost impossible for them at the same time to successfully pursue a career.
HEFFNER: What position does that put you in in terms of women working?
GILDER: I support women working, but in general women do not work as hard or as long or as devotedly as men do. Women have other options that men lack.
HEFFNER: And do you think that those are thoughts that are snared by Ronald Reagan as much as the rest of the supply-side economics?
GILDER: I think they’re shared by virtually everybody who observes the situation. There’s this empty and hypocritical pieties that everybody observes these days; but the fact is that it’s evident to anybody with eyes to see that women don’t pursue their careers with the same avidity and dedication in general that men show. Now, some women do, needless to say, and many women make vital contributions to the economy in direct jobs. But the idea that they are as much committed to work as men are is contradicted even by this recent Harris poll that allegedly showed a complete change in America’s attitudes toward working women. Women three to one preferred part-time work to full-time work. And the preference for part-time work over fulltime work increased as their educations and credentials improved. So that it’s clear that women have a different attitude toward their careers than men do. And there’s nothing wrong with this; they have other options that they can pursue that are fully affirmative to them as women. And the central ones are in domestic in the nurturing and raising of small children, which is the crucial role in society. They’re custodians of the very embodiment of the future of the society. And it’s only through women that men gain links to the future in children.
HEFFNER: You know, if you hadn’t been a guest here before and if it hadn’t been a discussion of Sexual Suicide and Betty Freidan hadn’t been here and I’d just begun this program with, “Mr. Gilder, tell me about the supply-side economics that you set forth”, would you have come as quickly to the question of the moral basis for wealth in this community, for the family basis of wealth?
GILDER: Well, I think I would have stressed at the beginning that supply-side economics is a system that regards citizens, you and me, everybody in this society essentially as producers rather than as consumers. The Keansian concept essentially is that the economy is governed and driven by dollars in people’s pockets; that it’s chiefly the, as consumers, the mass of the people have their economic contribution. I don’t believe that that’s true. I think you have to supply before you can demand. That you provide goods and services first and then you can consume. And this is how the system works. Supply creates demand. And that’s, and what’s really crucial is not the dollars in people’s pockets put there by the government or however, but the ideas in their heads, what they plan to do tomorrow to increase the flow of goods and services in the system.
HEFFNER: So your emphasis is upon attitudes and ideas.
GILDER: Attitudes and ideas, the metaphysical capital of the system rather than merely the machines and dollars, the sort of quantities on which most economists focus.
HEFFNER: What’s the nature of that metaphysical capital, as you call it?
GILDER: I think it’s ideas, ambitions, incentives, human creativity; the surprises of human creativity that have been crucial to overcoming every human problem through the centuries.
HEFFNER: And how does one foster that?
GILDER: One, first of all, recognizes that men and women are not chiefly consumers; they’re not chiefly burdens on the society; they’re producers. The human beings are the fundamental resource of the society. And this resource will be best used if people are emancipated to make their own individual contributions rather than subjected to government planning and coercion which necessarily excludes the surprises of human ingenuity and innovation which are always central to overcoming human problems.
HEFFNER: Frequently I give my students a little essay to read written by Andrew Carnegie on wealth. What you’ve said sounds very much like what Carnegie had written. It sounds also, very much like the basis for the social Darwinism of the late nineteenth century. Is that a fair…
GILDER: No. It’s the opposite of social Darwinism.
GILDER: Because we don’t believe in a zero-sum game. I don’t believe that capitalism is founded on dog-eat-dog competition. I think it’s founded on the effort to serve others. You know, capitalist businessmen succeed to the extent that they respond to the needs of others. That’s the foundation of capitalist success. Businessmen are successful; they earn profits to the extent that other people succeed. In other words, the golden rule of capitalism is “the good fortune of others is also one’s own”, because it provides markets for your own products. Capitalists have to be oriented toward the needs of others in order to triumph. And I think that the concept that capitalism is somehow based chiefly on greed is a profound misunderstanding. As I put it in my book, “Narrow self-interest leads as by an invisible hand to an ever-growing welfare state”. Because people concerned chiefly with themselves, the “me” generation seeks comfort and security first. That’s what they desire. And they petition government for it. That’s the safest way to secure support. While the entrepreneur, the businessman who is really taking risks to launch new products is governed by something beyond a mere narrow view of self-interest. As a matter of fact, the crucial thing he does is keep reinvesting his earnings. And as he reinvests it, the knowledge, the real metaphysical capital of the system which is human knowledge, which is gained through providing goods and services, is exploited further so that we have a continual increase in knowledge. The decisions are increasingly successful because they’re based on this, on previous experiments. That is, investments which, in the production of new goods and services…Those are experimental because before you make the investment you never know how it’s going to turn out. And as the investing process proceeds, knowledge accumulates and guides new investment. Naturally the secret of capitalism is continually giving back to the system.
HEFFNER: I gather you’re talking about something that one might characterize as mechanical, that it is a mechanical procedure rather than referring to the social obligations of a corporate leader to provide funds through corporate foundations, etcetera, to this cause and that cause.
GILDER: No, it’s not. I wouldn’t say it’s mechanical, but it is something that happens in a successful capitalist system. People are trying to figure out the needs of others. That’s what capitalists have to do. They have to figure out what people need. And when they figure it out, then they try to provide it.
HEFFNER: Need or want?
GILDER: Need, want, whatever. They have to create products which will create demand. In other words, there’s no preordained demand for new products. People don’t, didn’t know that they wanted a television set until somebody created one. And by taking risks to create new products, the capitalist performs experiments. And as it turned out, there was a tremendous demand for television sets so that, although many companies failed in attempts to launch the television industry, finally it was successfully sustained and it created thousands of jobs, or really hundreds of thousands of jobs for people across the system.
HEFFNER: Mr. Gilder, it’s a question I frequently ask guests on the program. I don’t think it’s unfair. As a proponent of supply-side economics and as a most articulate statesman, statesperson for the point of view that you just made…
GILDER: What’s a statesperson?
HEFFNER: Well, you are now…Betty Freidan. I was thinking of the time that Betty Freidan was here. If I said “statesman”, she’d say, “statesperson”. Okay?
HEFFNER: I will go with the times, too.
GILDER: All right.
HEFFNER: Now, spokesman…
HEFFNER: Now what’s the downside of supply-side economics?
GILDER: I don’t think there’s a downside, particularly. It’s the only kind of economics that really works. All major economic progress in recent centuries has been accompanied by the emancipation of individual energy and creativity. That’s how it happens. And that’s the central message of supply-side.
HEFFNER: Well, I raised the question because I was interested that at the beginning of your book you, and through it, you refer frequently to Irving Crystal and pay your respects to him. And here, in the symposium on George Gilder’s Wealth and Poverty, Mr. Crystal said, “There is one important point, however, on which I have to register a strong disagreement with Mr. Gilder”. And I wondered about your comments on this. “That his pseudo-anthropological analysis of economic activity as inherently and ineluctably giving birth to a viable morality”…And I think you know the rest.
GILDER: Yeah. I really don’t know where Irving got that. I mean, I think Irving’s utterly marvelous, but that particular critique is amazing to me. I don’t think that capitalism creates morality. I think there is a fundamental religious foundation for all human life. And capitalism reflects this religious foundation and partakes of this higher moral order; but it doesn’t create it. That would be a silly thing to say. And I don’t see really, how Irving can maintain this. Capitalism obviously reflects all wide range of human characteristics, that greed and avarice and viciousness can be manifested within the capitalist system. But to the extent that these sentiments prevail in it, I think this system cannot produce wealth. I think it will destroy the trust and faith on which long-term investments and new businesses necessarily depends.
HEFFNER: Excuse me. Let me go back a step. As long as what sentiments prevail?
GILDER: Greed and all these negative sentiments. In other words, I don’t think all capitalists are benevolent and philanthropic. That would be a ridiculous idea. I’m saying that capitalism works best when people are oriented toward the needs of others and when the rules against stealing and lying and cheating and all the fundamental principles of moral life are upheld.
HEFFNER: Yes, but…
GILDER: And that if these, that the kind of predatory capitalists of the, who exploit people can destroy the system.
HEFFNER: Yes, but I don’t think that it was a question of predators quite as much as it was a matter of whether the mechanics of the economic system you set forth provide also for a deep concern for social justice, let’s say, for the needs of others, not in terms of creating wealth and creating more wealth; in terms of the needs of others who today are hungry, today who need what they don’t have.
GILDER: Well, I think that capitalists have to be concerned with the largest number of people. They can’t focus on supplying the needs of elites, so they probably won’t do very well. The mass of…
HEFFNER: You say “elites”…
HEFFNER: You mean the poverty groups?
GILDER: No, no. Rich people.
HEFFNER: Rich people.
GILDER: No. I said capitalists.
HEFFNER: I understand.
GILDER: …if they’re preoccupied with supplying luxury goods for elite sections of the population they’ll fail, or at least they won’t do as well as they will by trying to satisfy the needs of the mass of people. But in general, one of the misconceptions of critics of both my theory and critics of capitalism is that giving is easy, that helping others is easy. All you do is go out on the street corner or into a welfare office and distribute money, and you’re somehow helping others. And I think this is one of the great illusions of liberalism, that it’s easy to give things to people in ways that help them. And I think capitalism is uniquely a system that allows people to give back to the system productively, that makes investments and induces development that provides jobs and goods and services that help the mass of other people. In other words, it’s uniquely the system that depends on serving others for its successes and depends also on the successes of others for its own profits.
HEFFNER: It’s now, as we tape this program, June 1981. When you wrote Wealth and Poverty, and I believe you signed off on it, what, in July 1980? Very little mention here of a man by the name of Ronald Reagan. Since that time, given the election, given what the President has done and has not accomplished, what would your write in a postscript about him?
GILDER: Well, I think he’s been a splendid president, and his program is excellent. I couldn’t much improve on it. I mean, you have to move step by step in all these matters. And Reagan’s moving step by step in a very intelligent and I think tactically sensible way. And I think particularly, his stress on cuts in individual income tax rates is vitally important toward revitalizing the economy.
HEFFNER: If the administration can continue down the path that you would suggest, what would happen to much of the social and welfare legislation of the past half century?
GILDER: It’ll be improved.
HEFFNER: Improved in what way?
GILDER: Well, the big problem is that we’ve got all these programs to sustain the poor as dependents, but there is a lack of opportunity in many of these areas. And I think that as the economy expands it will create new opportunities for the poor. However, the crucial problem of the poor today is not a lack of income; it’s a lack of incentives. The welfare system as it’s currently constituted has the major effect of destroying families. And since families are the central institution of civilized society, the crucial vessel of upward mobility, any so-called anti-poverty program that increases people’s incomes at the cost of subverting their families will not overcome poverty but intensify and perpetuate it. And that’s the great problem today with combination of welfare programs and subsidies that collectively were worth twice as much as a year of work at the minimum wage. And that means that the average man in the welfare culture can’t possibly compete with the government in supporting his family.
HEFFNER: Can the economic machine in this country pick up fast enough to make up the slack if our welfare programs are cut back?
GILDER: Well, I don’t…the welfare programs are not being cut back.
HEFFNER: And you don’t believe they should be.
GILDER: Not significantly. What I think is crucial is that the rest of the economy be expanded and that the welfare programs not be increased. Because in other words, I want to make the system of work and family and production more attractive than the welfare system. And as it grows increasingly attractive people will tend to move out of the welfare system into the real economy. And that’s the process I want to foster. I do not think that benefits that are twice as valuable as a year’s work at the minimum wage can be increased without devastating impacts on work incentives and on family integrity.
HEFFNER: Do you think they should be decreased?
GILDER: I think they, in many states they could be decreased without damage to the people who depend on them. But I’m not an advocate of decreasing welfare benefits now. I think what we got to do is get the system in some sort of rational order, and not add to the chaos that it’s creating. I mean, I don’t, I think that the idea, I did…while I was in Albany my wife and I just as an experiment lived on a welfare budget for several months. I was writing a book about the welfare culture, and I thought it would be interesting for us to live on that budget. And much to our surprise it was easy to do. And I can see why the social worker going into a welfare community feels that the benefits are too small, because it’s chaos. But the reason for the chaos is the lack of a family structure and the lack of fathers in the home. It’s not inadequate incomes. The incomes that welfare recipients receive are triple and quadruple what all the immigrants in American history received in real terms as they rose up out of poverty. It’s not incomes that, low incomes that chiefly hurt the poor today; it’s broken families. And so we have welfare systems that don’t destroy the family. That’s a crucial beginning.
HEFFNER: If you were making a bet – and indeed, I guess, when you commit yourself to a book like Wealth and Poverty you are making a bet – if you were to look into the future, do we have enough time, enough energy, enough will, enough resources to make the seed change that you really are calling for?
GILDER: Oh yeah. I mean, the fact is that we’re on the verge of a very positive era in our economy. I mean, it just so happens that Reagan is very lucky and he’s got…in every industry in America there are new technologies being launched and being applied that will greatly enhance the productivity of the system. And the productivity crisis is about to be overcome. The energy crisis, provided that there’s not some catastrophe in the Middle East, is well on the way to being overcome by the application of more efficient equipment and discovery of new resources of natural gas in immense quantities. So we’re really at a very promising period if we don’t allow the burden of taxes to choke off economic growth.
HEFFNER: You know, it’s interesting, in one of the many, many reviews and comments on your book, this was in The New Leader…And in return it is said, “If Gilder can be called anything, it is a Nietzschean romantic”. And I wonder why. What about you…
GILDER: I never read Nietzsche. Can’t tell you. (Laughter)
HEFFNER: No, but you know what a Nietzschean romantic is. And what he’s really saying is that there is a kind of belief, a force of belief and a feeling tone that characterizes you perhaps more than classical economics. Is that a fair…
GILDER: Right, yeah. I think, I don’t believe that you can, tat the economy is separate from the rest of human life. You know, a lot of economists want to build a sort of science of economics that is entirely divorced from religion, sociology, anthropology, all the other, history, all the other ways that people study human life. And I think that that’s, that that results in a sterile economics. So I really do have a broader focus than really on the principles of the money supply and aggregate demand and all the jargon of the economic profession today.
HEFFNER: Somewhere, someone, going back to this matter of Sexual Suicide and your emphasis upon the family, someone said that this was a, created a sort of sense of kinship between you and the Moral Majority of our times. Is that a fair statement?
GILDER: That’s fair. I think, you know, there’s some members of the Moral Majority who do silly things and they get trumpeted broadly in the press. But I think in general the Moral Majority is a positive movement.
HEFFNER: Where do you see this surfacing, not the silly part of it, but the important part? Is it opposition to ERA? Is it…
GILDER: Yeah, but…and our revival of the values of home and family and morality. I think that a society is ultimately dependent on trust and faith and moral values. And to the extent that these moral values are eroded, the society becomes increasingly sterile and unhappy, even if it is devoted to a hedonistic principle of pleasure seeking. So I think that the need for moral revival is real and that it has profound economic implications, because ultimately the economy consists of families. And men and women supporting their families and preparing for the future.
HEFFNER: I guess this indicates to me that you really believe in life after death. You wrote Sexual Suicide. We killed ourselves along these lines once, and you still feel there is life and there’s hope.
GILDER: Well, oh, I certainly do.
HEFFNER: Coming from what? This corpse that’s committed suicide sexually?
GILDER: Well, I don‘t think Sexual Suicide was describing a phenomenon. Certain women, for example, who said they couldn’t bring children into this terrible world, as if the conditions today are worse than the conditions in 1939 when I was brought into the world, you know, in the Great Depression with the Second World War coming up. Past generations faced much more difficult problems than the ones that we confront. And I just thought that this wasn’t an objective appraisal of the world, saying it’s impossible to bring up kids in this terrible world; that it was a collapse of faith on the part of many of our most intelligent women.
HEFFNER: I just had to ask you that question at the end.
HEFFNER: But it really is the end.
HEFFNER: Thank you for joining me today, Mr. Gilder.
GILDER: Thank you.
HEFFNER: And thanks, too, to you in the audience. I hope that you will join us again here on THE OPEN MIND. Meanwhile, as an old friend used to say, “Good night, and good luck”.