Jude Wanniski, R.I.P.
By Scott D. Gillette
Jude Wanniski passed away on the 29th of August last year. There are only dozens of individuals who have had a greater influence of the history of our country, so it is a legacy worth recalling.
His death did not draw national attention in part because individuals who carry and promote ideas are obscure relative to figures of our popular culture. But time always changes that. Ideas move the world, and those who dedicate themselves to ideas only shine more brightly in the passage of time.
Jude coined the term "supply-side economics", which he promoted as a fighting force as an editorial writer on the Wall Street Journal. Originally, Jude was a political columnist, and when he talked to Arthur Laffer one day after Nixon went off the gold standard, Art Laffer said, "It won't be as much fun to be an American anymore." Jude was surprised by this sober assessment, especially after every economist was applauding Nixon's decision to float the dollar.
Then came the inflation, oil shocks, and the stagflation in the 1970s. Prominent economists in the 1970s were flummoxed. But Laffer and Robert Mundell predicted all of these events before they occurred, when other economists couldn't explain what had happened in the first place.
Jude immersed himself with the worldview and theories first expressed by Mundell and Laffer with increasing intensity as the 1970s progressed. These were not really new ideas, as much as they were the way that economists used to look at problems in the 19th century. The problem is that so few economists used that model in the 20th century.
Demand-side economics flourished along with statist ideas in the 20th century, and that was no coincidence. Represented most prominently by liberal Keynesians, demand-siders emphasized ways to get people in society to "demand", or consume more goods and services. Keynesians, for their part, believed that it was the role of government to "cool" the economy when growth was strong and inflation was rampant, and to "heat" the economy when growth was tame and unemployment was high. In this way, the government can regulate the economy for the benefit of all.
Demand-siders view economics as the science where the government twists and turns various knobs to fine-tune the economy. Modern supply-siders turned that pretense upside down. Government can only create the conditions where the economy – the sum of all the people with goods to supply – can exchange those goods with minimal friction.
Supply-siders focused on what people did, instead of what governments did. By emphasizing how people produce, or supply, to the economy, supply-siders came up with a 3-pronged approach to maximize growth and welfare: lower marginal tax rates that increased incentives, a stable money supply to reduce the cost of all transactions and preserve long-term contracts and wealth, and to reduce barriers between people by promoting free trade and deregulation.
Jude once said, "Bad socialism is better than bad capitalism. But good capitalism is better than the best socialism out there." He meant that under a socialist system, people would not be well-off, but they would not experience the grinding poverty that comes without any government assistance, or the concern of ruling elite. But if individuals had the ability to take advantage of a growing marketplace, they can increase their standards of living in a way impossible under any planned economy. The ultimate determinant of the quality of an economic prescription is how it can provide an opportunity for regular people to improve their lives.
The supply-side manifesto was expressed most prominently in The Way the World Works. Its portentous title should not obscure the fact that every prediction that Jude made 25 years ago has come to pass. But Jude's goals were far more ambitious. Jude wanted a political devotee to these innovative ideas to reawaken the American economy out of its doldrums.
Along came an ambitious and erudite quarterback turned Congressman from Buffalo named Jack Kemp. Kemp promoted these ideas in the House of Representatives, and then considered a bid for the Republican nomination. Another candidate adopted Kemp's platform, and sought out the advice of Jude. His name was Ronald Reagan.
After his inauguration, Reagan's tax plan was controversial looked like it was doomed to defeat. But then Reagan suffered through the assassination attempt that nearly took his life. His bravery gave Reagan a second boost of political capital, and Reagan used that capital to insure the large tax cuts. And the rest, as they say, is history.
During the 1980s alone, America's economy grew by a third, and added the entire GDP of Germany to its own. Since 1981, America has experienced nothing but mild recessions, and periods of sustained and sometimes significant growth. Many supply-siders believed that Reagan's tax cuts were the most decisive reason why.
Moreover, the American boom in the 1980s did much to alleviate and ultimately end the Cold War. The Soviet leadership, accustomed to viewing the Cold War in the long-term, witnessed America amassing larger budget deficits….and with ever-lowering interest rates! The fact that the United States had greater resources at its disposal forced the Soviets under Gorbachev to achieve compromise, and a world peace far more secure than the détente of the 1970s. This culminated with the collapse of communism around the world.
What would have happened if Jude was not around? Would Mundell and Laffer's worldview been given the chance to thrive? Would America's economy have recovered in the 1980s? Would the Soviet Union still be around, hanging on by its last threads, still intent on winning the Cold War, instead of throwing in the towel as they did? Would the grand struggle between capitalism and socialism, still be waged to this day?
These are very open questions, but the fact the need to be asked reveals just how important Jude's contributions were. But Jude's accomplishments and interests were not merely limited to supply-side economics alone. He was a practical person, and saw the supply-side model as a vision of a planet where people could provide for themselves, unhampered by fallacious economic doctrine that forces people to go without throughout the entire planet.
The original critique of supply-side economics – that it was just a way to favor the wealthiest segment of our society, completely breaks down when critiquing its biggest advocate. Jude was never a man who fawned over the powerful, or supported the comfortable. Instead, Jude never kept his eye off the prize. Politicians constantly talk about peace and prosperity. Jude was about promoting these things for his entire lifetime.
This is especially the case when it comes to the developing world. The Way the World Works devoted an entire chapter to how developing nations were told to heavily tax their citizens in order to promote development. These prescriptions were unsuccessful, because they never provided the means for the vast majority of citizens in the developing world to utilize their potential. That primarily because
I firmly believe that the only way the world will get out of poverty is by enacting supply side policies. Jude once pointed out that, "You can't tell me that the limits of the vast majority of people on this planet have been exhausted." When one considers that half of the people on the planet have never made a phone call. That is why Jude's mission was so important, not merely for America, but the whole world.
Jude was a universalist. His vision wasn't limited to the Republican Party, which he certainly improved by championing growth and inclusiveness. Nor was it even limited to America. Jude saw the world so broadly and so fully, that he could gain the ear of figures as different as Louis Farrakhan and Dan Quayle.
On one level, Jude's friendship with Louis Farrakhan is extremely complicated. But Jude's befriending of Farrakhan was very simple: Jude saw good in him. Jude understood that his influence derived from his unswerving devotion to Black America and its promise, while mainstream society is either indifferent or hostile to black progress. (The events that occurred in post-Katrina New Orleans validate this assessment.) Jude believed that if Farrakhan could join the political mainstream, blacks would increase their political representation, and race relations could be improved.
Regardless of whether one supports Jude's connection to Farrakhan, it should be pointed out that Jude lost dozens of clients at Polyconomics for associating with the Nation of Islam. Jude never abandoned his sense of mission, even when it cost him millions of dollars.
Such ecumenicalism stands in stark contrast to what constitutes political discussion today. Many commentators are happy to score political points for their team. For Jude, nothing mattered except the genuine improvement of the world around him. Such iconoclasm will be deeply missed by me, and many others as well.
It would be Jude's deep hope that the ideas and path he articulated would spread in the generations to come. That hope would sustain Jude for his entire career. I believe Jude would still be comforted by the fact that the world, in fits and starts, continues to move turn his way. Rest in peace, Jude.
This is Scott D. Gillette's first contribution to Enter Stage Right. © 2006
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