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An Era of State Capacity?

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An Era of State Capacity?

Both conservatives and progressives embrace a politics of capable governance, but the project faces ideological squabbles and practical snags. September 20, 2022
Politics and law

One sign that a policy dispensation has taken hold in American politics is when both parties begin to invoke common assumptions. Declaring in his 1996 State of the Union Address that “the era of big government is over,” Bill Clinton acknowledged the deregulatory spirit that had existed since the late 1970s. Despite considerable conflict over how to deregulate, both Democrats and Republicans broadly supported removing regulatory limits on airlines, trucking, finance, and other areas. Many landmark legislative accomplishments of the 1980s and 1990s—from Ronald Reagan’s tax cuts to Clinton’s welfare reform—relied on bipartisan majorities that favored more market-oriented policies. After the end of the Cold War, the leadership of both major political parties supported expanded global trade, with Republican and Democratic leaders favoring the North American Free Trade Agreement, creating the World Trade Organization, and normalizing trade relations with the People’s Republic of China.

Is American politics pivoting to a new policy dispensation, oriented around state capacity? Donald Trump came down the golden escalator in the summer of 2015 calling for a big investment in infrastructure, limiting trade with China, and more assertive efforts to promote American manufacturing. This doesn’t sound that different from some of the bills that Joe Biden has signed as president. Bipartisan majorities passed a trillion-dollar infrastructure bill in 2021; the Chips and Science Act of 2022 (CHIPS) spends billions to support domestic semiconductor production (also with bipartisan support); and the Inflation Reduction Act smuggles in elements of a green industrial policy by targeting tax credits to electric vehicles assembled in North America that have critical components produced in the United States and a select set of trading partners (mostly in the Americas, along with a few other allies, such as Australia and Israel). Some critics of CHIPS opposed the bill for not doing enough to promote domestic manufacturing or counter technological threats from Beijing. State capacity has become a watchword for policy shops and commentators on both sides of the aisle.

Today’s state-capacity project has at least two elements. One involves ensuring that the institutions of government have the capability to address problems—for instance, giving the government power to regulate a commerce sector or appointing a police force. The other is the use of policy to support various capacities within the nation as a whole, such as industrial infrastructure.

American public life has long featured debates over state capacity. One of the great quarrels at the nation’s founding was whether the federal government should invest in sufficient military resources (such as navy ships) so that America’s sovereignty could be protected and its interests abroad promoted. The Constitution replaced the Articles of Confederation in part because the federal government under the Articles lacked sufficient state capacity.

In the nineteenth century, the transition from an agricultural to an industrial economy caused great social upheaval, while transforming the role of state and federal governments. The nuclear age and the Cold War further expanded the institutional resources of the federal government. One of the core tenets of movement conservatism in the twentieth century centered on state capacity: the investment in military and communication technologies to deter the Soviet Union. Though characterized by deregulation and integration into a global economy, the dispensation of the 1990s and early 2000s in many ways relied on the state capacity of the Cold War era. The groundwork for the modern commercial Internet was in part laid by the Pentagon’s DARPA research projects. Trade under the banner of the World Trade Organization presumes a global stability premised on American military preeminence.

Now, new issues have arisen, from the global ascent of non-democratic powers to the effects of digitization and globalization. It’s not surprising that new thinking about the role of the state might be involved in confronting these issues. For instance, it will be much harder to maintain American defense commitments if the U.S. relies on non-allies for the production of key strategic goods. Disruptions to semiconductor supply chains in the wake of the pandemic brought considerable economic turmoil. Those disruptions also suggest deeper geopolitical stakes for supply chains. As a June 2021 White House report warned, many American consumer goods, industrial products, and military supplies rely on computer chips produced in Asia, especially Taiwan, South Korea, and China.

Domestically, major technology firms have combined with financial conglomerates to create a vast mediating structure of communications, payment processing, and data surveillance. As with the arrival of the railroads and industrial behemoths in the nineteenth century, policies may be needed to address the challenges of the digital-finance economy. Social media and smartphones have created an engine of mimetic disruption, spurring a new appetite for regulation and interest in policies to check corporate concentration or restrict social media use among minors.

In response to digital and global disruption, the current pivot to state capacity could be described as a return to the physical and the national. Physical goods are in fact not completely fungible. The physical resources a nation can marshal have a profound effect on its ability to project power and manage its affairs. The bonds of national consensus, meantime, play a powerful role in maintaining democratic stability, and a crumbling civic infrastructure poses grave risks to liberty and democracy. This return to the concrete gives national borders new salience, though how to manage cross-border flows of money, people, and goods remains a subject of considerable dispute.

Every policy dispensation features common ground and differences. A state-capacity policy approach would provide an area of agreement that would also function as an axis for disagreements about the means and ends of that state capacity.

Some of these debates would be about efficiency—about whether a given set of policies actually achieves certain ends. For instance, to what extent will CHIPS actually support manufacturing in the U.S.? Other arguments would focus on the ends themselves. Consider, for example, controversies over wokeness, which suggest that the state-capacity dispensation could become embroiled in cultural disputes. Public education has become a battleground between efforts to impose a form of hard-edged identity politics and resistance to that divisive vision.

Energy is another area of potential dispute over the ends and interests of state capacity. Conservatives and progressives might advocate government efforts to promote energy, while disagreeing about specifics and ultimate goals. The turn toward an electricity-driven economy provides many opportunities for investment in infrastructure. Public spending would likely be required to transition from an energy system based on the extraction of fossil fuels to one based on renewables and the extraction of rare-earth metals (for batteries and other critical infrastructure). As recent power outages in California indicate, vast sums would have to be spent to create a more robust electric grid to handle demand for electricity, which would only grow in response to progressive restrictions on gas-powered automobiles, natural gas for homes and businesses, and fossil-fuel extraction. So far, the production and installation of new solar panels and wind turbines have garnered massive new government subsidies and generated fortunes for private individuals. Recent efforts in green energy policy have entailed an alliance between state investment and corporate interests, increasingly the patrons of Democratic interests.

The Right could pursue a different approach. Throughout much of the twentieth century, conservatives found allies in the fossil-fuel industry. Conservatives might instead push for a basket approach to energy, combining fossil fuels, electrification, and non-fossil sources of energy (including wind, solar, and nuclear). Supporters of an “all of the above” energy framework might argue that a diversity of energy sources adds to the resilience of the nation’s energy grid and reduces prices for consumers. A policy of cheap energy would also benefit many consumers in rural and exurban areas, key members of the Republican political coalition.

Coalition interests, then, represent an inevitable source of conflict and political drama in an era of state-capacity politics. As the Republican Party gains working-class voters, Democrats increasingly speak to the social preferences of elite college graduates, affluent urbanites, and managerial strivers. But many Republican voters and politicians remain skeptical of empowering government, while Democratic entanglement with public-sector workers complicates plans they might have to make the state more efficient. Both parties might face considerable coalitional tensions in a new era of state-capacity politics.

Yet ensuring sufficient state capacity is a perennial concern, including for a political project of limited government and democratic liberty. Protections for various personal liberties depend upon a government strong enough to protect them. Past American statesmen sought to nurture the broader social conditions that allowed for secured sovereignty, democratic stability, and overall flourishing. Alexander Hamilton’s “Report on Manufactures” stressed the political imperative of developing a manufacturing base. Abraham Lincoln’s trade, frontier, and educational policies were guided by a vision of expanding opportunities for independent householders. The social-insurance programs and market regulations of the New Deal were intended to avoid feast-or-famine economic cycles and stabilize the country. National security—one of the preeminent elements of state capacity—is an essential component of democratic self-rule.

Today, continued frustrations and policy disappointments have worsened political instability. Indeed, it’s arguable that the many spectacular failures of state capacity—chaos at the border, botched nation-building efforts, and deficient pandemic responses—have radically inflamed domestic sentiment. On this view, state capacity could be a unifying cause. Promoting economic resilience could help ameliorate public dissatisfaction. Reinforcing democratic oversight over the engines of the digital economy could reassure Americans. Ensuring that the American economy does not depend on the good graces of autocracies abroad could help renew political sovereignty.

Government can play an important role in ensuring the integrity and energy of the market, such as through funding basic research or investing in public education. And building domestic capacity can ultimately lessen demands for state intervention over the long term. For instance, efforts to help family formation can strengthen the broader civic fabric of the nation and forge the conditions for limited government.

Nevertheless, new interest in state capacity does not circumvent the real limits of central planning. An increasingly creaky New Deal and Great Society infrastructure opened the way for deregulatory efforts in the 1970s. Efforts at revising state capacity in the U.S. would have to account for the limits of centralized knowledge and the contours of American life, which often encourage creative decentralization. A turn toward limitation and the concrete might also see the wisdom of subsidiarity and strengthening the capacity of local self-rule.

The coronavirus pandemic is instructive here. Supply-chain crunches since 2020 and the success of Operation Warp Speed show the importance of productive capacity for an economy, and how government can support it. However, the many failures of pandemic policy (from confused messages from high-level bureaucrats to mitigation efforts that degraded the core of civil society) also illustrate the benefits of checks on centralized authority. The sheer diversity and heterogeneity of the American system at once posed obstacles to the most draconian pandemic responses and provided a powerful bulwark for the protection of communities and individual liberty.

State power can often be an enemy of liberty, but history demonstrates that the institutions of government play a key role in preserving many modern liberties. Statecraft can be the crafting of a renewed infrastructure for liberty.

Photo: Bet_Noire/iStock

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