“Only de Gaulle could free Algeria; only Nixon could open up China.” Behind these slogans rests an notable principle: self-interest often causes political parties to radically depart from, even to abandon, their traditional ideologies. This insight is particularly useful in Europe, and increasingly around the globe, when examining the actions of supposedly left- wing and socialist governments.
In the late 1950s France came near to civil war over Algeria. Out of power since 1946, Charles de Gaulle was summoned back to the ElysОe to lead France out of this quagmire. Because of his patriotism, de Gaulle seemed the only man able to set Algeria free.
Starting in the late 1960’s rapprochement between Mao’s China and America became possible because China was involved in political and military conflicts with the Soviet Union. America’s Democrats knew this as well as the Republicans, but President Johnson was afraid to approach China because his party was supposedly soft on communism. Only a dedicated anti-Communist like Nixon had sufficient political support from the right to visit China and urge cooperation between the US and China against their common enemy in the Kremlin.
Economics is not immune from this dynamic. Ronald Reagan and Margaret Thatcher successfully promoted lower income taxes, privatization of government enterprises, weaker unions, and a generally smaller role for government. The popularity and success of their programs induced liberal, labor, and social democratic governments in many nations to also promote free market policies in direct conflict with their traditional ideologies. Often, only these parties have sufficient political support on the Left to succeed in introducing needed reforms in labor and other markets.
The market reforms initiated by the Left started in 1984 with a New Zealand Labor government which enacted legislation that transformed a small formerly isolated nation into one of the most “liberal” economies in the world. New Zealand’s Laborites privatized the postal system and many other public enterprises and changed the country’s employment system from highly centralized collective bargaining to one that gave employers considerable discretion to hire and fire and to pay market-determined wages.
The Democratic Party of the US has in the past strongly supported big government, but under President Bill Clinton it took heed of the popularity of the Republican Party’s stance advocating less paternalism and smaller government. It was President Clinton, not Bush or Reagan, who declared that “the era of big government was over” as his administration radically reversed traditional Democratic positions on welfare, balanced budgets, public debt reduction, and the encouragement of business.
A telling example of this trend is found in Mexico’ economic policies of the 1980’s and 1990’s. The Party of the Institutionalized Revolution (PRI) that governed Mexico uninterrupted for seven decades (until its recent loss of the presidency to Vincente Fox) had been a strong advocate of government ownership of heavy industry, prohibitive duties on imports to protect domestic companies, and detailed regulation of labor and financial markets. Starting with President Miguel de la Madrid in the early 1980’s, however, the PRI responded to free market critics of Mexico’s weak economic performance by selling many government-owned enterprises, partially privatizing the Mexican social security system, and becoming a strong advocate of a free trade agreement with its large “enemy” to the north, the US. So President Fox needs only to continue this revolution, not start his own.
Argentina’s Senate recently reacted to very high unemployment by passing a labor market reform bill that cuts union power and gives employers flexibility in hiring and firing. This reform is being promoted by the new Center-Left government of Fernando de la Rua after the failure of attempts to reform the labor market by the previous conservative government of Carlos Menem.
But it is recent policy changes in Germany and France that provide, perhaps, the most impressive examples of the “de Gaulle/Algeria” and “Nixon/China” theory of political reform. Both nations suffered high unemployment and slow growth during the 1990’s, in good measure due to heavy-handed regulation of labor and other markets. Conservative governments in these nations accomplished little in the way of serious market reform, despite considerable rhetoric. The Jospin and Schroeder governments were elected on manifestos that promised to cut unemployment and raise growth by expanding government regulation.
Each regime did in fact start out by introducing more government controls including a law to implement a 35 hour week in France. Both governments, however, soon — and quite stealthily — reversed course. Gerhard Schroeder in Germany has now slashed corporate taxes, is encouraging startup companies, and promises to provide tax breaks for private pension plans. French Premier Jospin quietly liberalized the French labor market by allowing for more part-time work, increased privatization, and promoted a more globally competitive financial system with reduced governmental control.
If Nixon could seek agreement with Communist China, and de Gaulle surrender Algeria, it is a relatively small step for Socialists to embrace the free market and support much lower taxes on business. In politics as in life, ideology is usually overwhelmed by self-interest.
August 2000
Gary S. Becker is a Nobel laureate in economics, professor of economics and sociology at the University of Chicago, and senior research fellow at the Hoover Institution, Stanford University.
