Why Can’t Conservatives Remember What They Know About Liberty?

Because they have not read Life After Capitalism

Why is it that American conservatives, so committed to liberty as a source of prosperity are so easily intimidated into abandoning it. To understand the power of liberty is to seize the Gnosis in its secret lair. Why ever let it go?

And yet they do, almost at a drop of a hat.

In our time the great and most dangerous example is China.

Something of world-shaking, astonishing importance happened in China in the last quarter of the 20^th century. This miserably poor nation, mired for decades in the most brutal tyranny, under which 10s of millions starved to death, became not poor almost overnight, and in many places grew rich, sprouting an amazingly dynamic economy, becoming a technological and entrepreneurial powerhouse.

Anyone who understands the power of liberty, as American conservatives claim to, will thereby know it was socialism that kept China poor, socialism that murdered millions and that only a drastic reduction in state power could explain the sudden and glorious improvement in China’s condition.

Understanding liberty, one did not need have access to a single historical fact to deduce this, though we do know a great many facts that confirm it. Two telegrams would allow the rewrite guys at the home office to tell the whole story.

First Telegram:

China poor. STOP. Millions starving STOP. Crops fail STOP. Famine reported interior STOP.

The rewrite boys could have done 10,000 words on Communism comes to China.

Second Telegram:

Bumper crops China STOP. Chinese migrate cities STOP. Chinese allow bankruptcy STOP

Good enough for dozens of news stories on Chinese socialism in retreat.

We could even leap forward to a third telegram from within the past few months.

Third Telegram:

Chinese economy worse than feared STOP

That’s all we needed to know, to know the socialists are striking back.

And yet American conservatives will buy almost any explanation for China’s rise other than a relative rise in liberty.

Newt Gingrich sums up the repulsive GOP China hawks’ views on how China did it: It was all a pretense. The commies never blinked. It’s one big con and they got us.

“The Chinese Communist Party has intelligently mounted a 40-year-long propaganda campaign (going back to Deng Xiaoping’s first visit to the United States) to create … a false front for the real China.” It is “China’s totalitarian system, extraordinary organization, and immense population [that] make this communist nation incredibly formidable.”

As for China’s current difficulties, conservatives can’t wait to glom on to the most conventional macroeconomic nonsense they would mock from a Harvard man— “overheated” housing markets, slowed government spending, monetary manipulation—as an explanation for China’s current difficulties.

How about this as an explanation: the Chinese let an avowed Maoist slip back into power, dump trillions in capital back into state owned enterprises that had been happily headed for extinction, shut down the country’s vast private supplementary education system, crush private credit markets competing with state banks, and ritually humiliate world leading entrepreneurial geniuses who had spent decades making up for Commie Criminal Madness.

It is a huge advantage grasp the causes of phenomena without needing vast details about those phenomena. (Comparable even to the miracle of knowing that men are not women, without having to look it up.)

And no, that is not ideology. That is diagnosis, a product of rationally explored experience.

So why don’t conservatives know what they know?

I offer an excuse on their behalf. We have until very recently lacked a coherent theory linking liberty and prosperity. Lots of examples, lots of common-sense intuitions, but no coherent theory.

That changed about two years ago, thanks to nearly two decades of effort from my friend and now indisputably one of the greatest economists in all history, George Gilder.

I watched and occasionally assisted in this massive multi-decade effort to explain the link. George is now 85 (and still winning running races). There were times I feared he might not get there. Several books got written in this race, but, as we both knew, though he had the target in his sights he had not quite got it.

Finally, in his latest book, somewhat ironically titled Life After Capitalism, George nailed it. What’s beautiful is that with George’s intel inside I can explain it—why liberty makes us rich--in four propositions. Liberty shows up in number three.

1. Wealth is knowledge. George means this quite literally and gives more than ample demonstration. Note that he does not say “knowledge is wealth” which is almost trivially true. No, he says wealth is knowledge to make clear that all wealth is knowledge, and knowledge is wealth’s only source. Even the most pro-free market entrepreneurial economists have traditionally assigned some importance to accumulated physical capital. George gives it a zero.

2. Growth is learning. This stands to reason if we are serious that wealth is knowledge. The accretion of knowledge is called learning. This can be subjective for an individual—I learn how to flip burgers or design a microchip. Or it can be “objective” in Peter Thiel’s zero to one sense: Bell Labs invents the transistor.

Learning implies adding information, but…

3. Only surprise counts as information. This is the crucial step where liberty comes in. Imported from information theory, this was the great insight that enabled Claude Shannon to define the most efficient communications networks. To pack in the most message and the least noise, eliminate any unsurprising signal. F u cn rd ts u cn gt gd jb. 16 of 28 letters eliminated, no information lost.

Liberty does not guarantee surprise, but surprise is impossible without it. All regulation, all government restrictions, must be based on prior knowledge, at best, or prior ignorance all too often. Regulators must depend on what they know of what is already known, which is how we get the ineffably ignorant Mr. Navarro in charge of the American microelectronics industry.

And that’s it right there. That’s why liberty is necessary to prosperity. It’s why we can know that wherever there has been a marked increase in prosperity there has been a marked increase in liberty. We can know what caused the change in China from 1976 through the first decade of this century, and we can know what is happening now. We have a method of diagnosis.

Notably, Deng Xiaoping was on to the whole surprise thing. He proclaimed repeatedly that the reform could not be planned; that only by being open to surprise could the reformers succeed. How China Became Capitalist by Nobel Laureate Ronald Coase gives the best account of this.

George’s fourth proposition is a check-sum. To know whether we are increasing wealth we must be able to measure it. Thus, George proposes “Money is time” though not ‘time is money.’ Time is absolute. We cannot make any more of it, for ourselves or the world. We say we have ‘run out of money’, but we only ever run out of time. To know whether we are getting wealthier, we need only to know whether we can get more of what we need and want in exchange for less time.

A man wandering in the desert between oases may seem to be short on water. Give him a camel, so he can get to the next oasis before he expires, and you reveal that he was short only on time, which the camel has provided.

George is my camel. Just keeps on going! Hey George, giddy-up, I’m thirsty!