Jude Wanniski, R.I.P.

By Scott D. Gillette
web posted January 2, 2006

Jude Wanniski passed away on the 29th of August. 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

Enter Stage Right -- http://www.enterstageright.com