Today’s Hub Dialogue episode features a conversation with Samuel Hammond, the Niskanen Center’s Director of Poverty and Welfare Policy, on industrial and trade policy and his search for a new Left-Right synthesis in favour of higher rates of economic growth and increased social welfare spending.
You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, Spotify, Stitcher, or YouTube. A transcript of the episode is available below.
Transcripts of our podcast episodes are not fully edited for grammar or spelling.
SEAN SPEER: Welcome to Hub Dialogues. I’m your host Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Samuel Hammond, a Canadian-born, Washington-based policy scholar who writes about a diverse set of topics, including income support programs, family benefits, innovation and technology, and even supersonic flight. He’s the Director of Poverty and Welfare Policy at the Niskanen Center and previously served as an economist in the Government of Canada. I’m grateful to be joined by Sam to talk a bit about some of his policy research, and how it fits in a broader debate about the future of conservative politics and policy.
Sam, let’s start with your career trajectory. You’ve recently celebrated your 30th birthday, and yet you’ve already been published in The New York Times, in The Atlantic, and been cited by David Brooks as a leading thinker involved in shaping the future of conservative politics and policy. How does a Canadian arrive in Washington and come to have such prominence in American public policy debates? Why do you think your thinking and writing are resonating in the current moment? Is your Canadianness a virtue?
SAMUEL HAMMOND: Oh, those are great questions. You know, sometimes I wonder how it happened too [LAUGHS]. I think that for better or worse, DC is very elite-driven and elite-network driven, and on any given issue, there’s maybe 1000 people, max, that you have to have lunch with, if that. You really just need a fraction of that because they’re all mutuals with each other.
My entry into DC was through George Mason. I did a graduate program at Carleton University, their MA program, and then I did another graduate degree at George Mason University because I was always fascinated with that sort of ecosystem of libertarian thinkers in Arlington. And it was within the Mercatus program, and Mercatus is sort of a university research centre that is very policy-oriented.
They did a great job of trying to bridge that gap from academic economist to how to get a think tank job; how to work in public policy for folks who were citizens, placing them in federal agencies potentially. So, in my case, I got really lucky because I got hired straight out of that program, actually while still in that program, into the Niskanen Center.
I think the only reason that happened so quickly is because I had a rich portfolio of writing on sort of the intersection of libertarian, classical liberal, philosophy, and politics. And Niskanen, as a young sort of heterodox libertarian organization, had Will Wilkinson there at the time, and I was a big Wilkinson fan as a kid. So, I was sort of in the right place at the right time, and with a very unique set of intellectual interests that aligned with the stars.
To the question that whether it was a virtue, I think it’s a huge virtue. One because, in American politics, there’s a lot of parochialism. Now, this is a Canadian cliche or stereotype of America that turns out to be totally true. And being from another country, especially an adjacent country—it would be one thing if I was from Bulgaria or something that’s totally different, but being from a place that is broadly similar, we like to exaggerate our differences, but it is broadly similar—gives you a comparative perspective which is really useful in public policy, and which is sorely lacking in a lot of the DC policy world. Because America has this conceit of being at the frontier and so they don’t need to learn from other countries, and/or, we’re going to just use the laboratories of the 50 states and learn from that. And I sometimes joke that if there wasn’t a pilot program in Wisconsin in 1996 it never happened.
So bringing that outside but adjacent perspective has been really useful. And I also find that there are lots of Canadian—either Canadian-sleeper cells or Canadian enviers, you know, people who have a weird fascination and, are interested in my perspective, maybe more than they should be, with no evidence to back up my credibility. But like anything credibility is something you build over time and it doesn’t happen overnight.
SEAN SPEER: Let’s talk a bit about your intellectual influences. I’ve read that Joseph Heath and Andrew Potter’s 2004 book, The Rebel Sell, had a formative influence on you and your worldview. What aspects of the book affected your thinking about the economy, culture, and politics?
SAMUEL HAMMOND: Rebel Sell is an amazing book. There are other books like it like Bobo’s in Paradise by David Brooks or Thomas Frank’s Conquest of Cool. They’re all on similar things and topics. I loved Rebel Sell, in particular, because it was sort of an exploration of what went wrong with the counterculture and the new left, and sort of a critique from the left of the politics of subversion, of trying to undermine, to jam the culture, drop out of society, that kind of orientation. Purely reactive.
A) It didn’t lead to actual policy, progressive policy change, right? In fact, it was kind of disenfranchising to leftist politics because it presaged the Reagan Revolution, and everything else. And B) was sort of a misdiagnosis of the problems that ail society. Take an issue like climate change: it’s not that there’s like some deep ecological cultural factor that explains climate change, it’s that there’s a kind of shallow collective action problem; it’s our individual incentives that don’t align with what is collectively socially beneficial. And that seems to be true across most domains, I’d say.
Any intractable problem, in the U.S. context in particular, like race relations or rising crime rates or pandemic preparedness, you could attribute any of those big issues to some deep, systemic problem, but more often than not, it’s because individual actors in each one of those spaces have incentives which are misaligned with the common good. And part of politics, and institution building and policymaking, is trying to realign those incentives in ways that align with the common good, that facilitate collective action.
So, I really liked that analysis. It also was simpatico with my other reading on evolutionary psychology and social science and sort of rationalists’ libertarian literature that put a lot of emphasis on status games, that, in the case of Rebel Sell, the title refers to the fact that being a rebel, being countercultural, actually sells products. You know, the current images of like Starbucks Coffee with a Che Guevara image, but that actually doesn’t resist consumerism so much as feeds into it. Because consumerism isn’t really about the mainstream; the mainstream is only like the end stage of the consumer cycle. The consumerism is driven by people, early adopters taking on new, edgy ideas, and only later when they become popular, and by dint of their popularity, lose their coolness, come to be a sign of mainstreamness.
So, for me, that was also a kind of a wake-up call that you have to sort of step outside status games and try to understand the world social-scientifically, and not just be chasing whatever the fad is, or misattributing what the actual like causation is in a sort of system.
SEAN SPEER: You previously mentioned that you came of age as a member of the libertarian movement. But there’s also a high degree of futurism and interest in technology in your thinking and writing. Are there any thinkers in Silicon Valley who have influenced your work? You’ve written for instance about Peter Thiel and his heterodox worldview, and I’ve sometimes wondered if you view him as something of an intellectual influence.
SAMUEL HAMMOND: Not directly, I would say indirectly via Tyler Cowen. You know, a lot of people in the Thiel world will point to René Girard, right? This anthropologist-philosopher who talked about mimesis, the human propensity to mimic. The Girardian theory is that human desires are created by our deeper desire to mimic each other.
That’s not my point of view, but my point is very similar and actually comes via Rebel Sell because a lot of the intellectual precursors to Rebel Sell were folks like Thorstein Veblen who talked about the leisure class and why do rich people have gigantic front lawns that they have to mow every week? It’s sort of a signal that you have a bunch of excess wealth that you can waste on a huge lawn.
And there are all kinds of goods and services that are kind of like that, and a lot of consumerism is a kind of mimicry game. This is something I was highly self-conscious of even in high school and younger, so maybe I was sort of predisposed to seeing these status games.
But the futurist part comes more through, I think, just a deeper interest in what is the point of economics? If The Wealth of Nations is the foundational book in economics, it suggests that development economics is sort of the original purpose of economics. It’s about raising standards of living; achieving new technological frontiers. Obviously, the industrial revolution is an example of a huge phase shift in industry and economy.
I worked at the Government of Canada, where I was at the Atlantic Canadian Opportunities Agency, which was a regional development agency, and so I’ve always had this interest in development policy. I do think of myself as a little bit of a futurist, but I’m not pining about the sci-fi world. I think in a very developmentalist way, where we have to pass through certain stages, there are certain things that have to fall in place, and you start thinking of the economy more as like a garden that you cultivate rather than a chessboard that you essentially planned, but also not just a purely laissez-faire thing. It’s something that has a kind of organic quality to it.
SEAN SPEER: We’ll come back to the question of development near the end. But let’s move to some of your policy scholarship. In a 2020 report, entitled “Faster Growth, Fairer Growth”, you and your colleague Brink Lindsey set out a new left-right policy synthesis that you described as the free-market welfare state. What is the basic idea behind your proposed policy framework and what are some examples of how it would change Washington’s policies and priorities?
SAMUEL HAMMOND: The main purpose of the paper was to try to—I think the opening chapter is called a new policy synthesis, and really what we’re trying to do is synthesize concerns on the left and the right into a coherent agenda. If there are any meta projects behind my work or in the Niskanen Center’s broader work, it’s that we are in need of deep structural reforms in many different areas in the United States. But achieving those reforms will require a degree of, a very relatively high degree actually, of political consensus. Not necessarily social consensus, but at least in Congress there needs to be some degree of consensus. And it’s not so much that we want the Washington Consensus, just a Washington consensus.
I’m predisposed to believe that achieving that consensus will look more like taking common elements of concern on both the left and the right and finding ways to reconcile them, rather than treating them as irreconcilable. You hear these days discussions of national divorce and stuff like that, and divorce is something that happens when you have irreconcilable differences. So my deeper belief is that all these concerns can be hopefully reconciled.
So the core agenda we outline first it begins with a diagnosis of what went wrong and how we got here. It talks about rising labour polarization and declining state capacity, the ability of the U.S. government to actually execute on its plans, and those things leading to a deeper decline in trust in government, exacerbated by polarization, and outlines a really comprehensive agenda, from decarbonization, immigration reform, to how to reform our health care system to get more bang for its buck. But I think because we take that more synthetic approach, we come up with ideas that are more original, but also closer to the actual causes of the problem.
If you read a left-winger on health care reform, it’s going to be either Medicare for All, or coverage coverage coverage and we just need to get more people insured, or maybe the root cause of the problem is high drug prices and insurance company profits. Then you read the libertarian economist or free-market economist on health care reform and it’s just about how we need to get government out of the way and we don’t have a real free market in health care. And we just are talking past each other, and it may be that high drug prices are an issue, they’re clearly an issue in the U.S., but they’re not the issue. It’s not why health care is twice, as a percent of GDP, as it is in other countries.
So, we’re really trying to cut through the BS and identify what are actual policy mechanisms that are driving outcomes, and how can we reverse engineer the coalitions needed to achieve those outcomes.
SEAN SPEER: How would you say the free-market welfare state concept converges or diverges from Tyler Cowen’s state-capacity libertarianism?
SAMUEL HAMMOND: Well, the free-market welfare state was really my attempt to explain why someone with my libertarian background supports a large social insurance system. And part of that was to point out that empirically, when we think about economic freedom as measured by protection of property rights, business and labour market flexibility, so on and so forth, it turns out that the European welfare states actually do pretty well. And this is not to say that the United States can become Denmark or Sweden, but it’s to try to understand how do we reconcile that apparent contradiction? And the way I did it was to say, “You know, size of government, in terms of fiscal footprint is not the best barometer of economic or personal freedom, as a classical liberal would understand it.” To me, in a more Hayekian vein, freedom means being able to plan your life free from domination of another, or regulations and other interventions that try to mold your life plan. And in many ways, social insurance programs actually facilitate the ability of an individual to plan their life.
In the U.S., you’re not going to change your job if you’re not sure you’re going to have life insurance, or I mean health insurance. The instability in the U.S. social insurance system really constrains freedom, in a certain way. It constrains people’s autonomy and ability to plan their life.
So the purpose of that paper was to A) defend a larger welfare state that is consistent with liberty and economic freedom, but then to also say that, in many ways, we need a reform agenda that transcends just austerity and cutting down social programs, to understanding how they can complement the market, and even complete the market. And then thinking through what would that look like if it was designed intentionally with that end in mind. How do we make unemployment insurance programs, for example, enable a more dynamic labour market, rather than see it as simply a kind of bleeding heart program for people who’ve lost a job?
Something like one in five Danes switches their jobs every year, and they’re able to do that, because of really robust unemployment insurance systems which protect their income in-between jobs but still give them the push and the training and the resources they need to re-enter the labour force really quickly.
So, I would say that’s different than Tyler Cowen’s State Capacity, it’s not mutually exclusive with it. But to me, the state capacity issue comes more from questions of bureaucracy, and do we have a government that is on rails that fetishizes this procedure? Or do we have a government that pursues outcomes rather than processes and has highly competent people to actually achieve those outcomes?
SEAN SPEER: You just talked, Sam, about the complementarity between strong, dynamic markets on one hand and a social insurance system on the other hand. Let’s talk about the potential tensions present in some of the ideas outlined in your 2020 paper. You’ve written about the need to advance pro-efficiency policies including more immigration and greater investments in science. But you’ve also written about the need to address growing geographic inequality. Are these two priorities in tension? How can policymakers prioritize higher rates of economic growth overall without exacerbating regional disparities?
SAMUEL HAMMOND: I think they can be in tension, depending on where you define the scope of you know, quote-unquote, efficiency. Another really formative book for me growing up was Joseph Heath’s The Efficient Society, the subtitle of which is Why Canada is as Close to Utopia as it Gets. And part of the upshot of that book was to say efficiency is a deeply misunderstood term in public life. Most people when they hear the word efficiency, in the economic context, think of it in purely technical terms of how to get from A to B in a shorter amount of time. When really, efficiency in economics refers to a Pareto improvement: a policy change you can make that makes someone better off without making anyone else worse off.
In the efficient society, Heath says to understand that this isn’t just purely technical, but it actually has a deeply normative core to it. Try flipping Pareto improvement on its head, and the opposite of a Pareto improvement is when you make some worse off without making anyone else better off. In other words, it’s gratuitous suffering.
So one of the main theses of The Efficient Society was to say one of the reasons Canada works relatively better than the United States on a policy level is because we have a more efficiency-oriented political norm rather than the pure liberty norm. And that shows up in the form of positive-sum games of our commitment to pluralism, of trying to work together, and being agnostic about what your comprehensive moral commitments are but trying to find areas of common concern.
So, I think of efficiency as a deeply normative thing, and not just a matter of minimizing costs. So that’s the first point. The second point is there’s the relevant scope of efficiency. If efficiency is this commitment to positive-sum games, it’s positive-sum games with who, right? Mass industrial farming is not a positive-sum game for chickens because they’re not in the social contract, for better or worse. There are animal rights people who would like them to be in the social contract. But nation-states define the relevant social contract because that’s the setup we have. That’s the Westphalian setup that we inherited, and morality and ethics have to be embedded in a set of institutions, and a polity, the government, is like the reflection of the culture and the people in a set of objective institutions.
And therefore, when we talk about efficiency in the context of a country, do we adopt any old trade agreement just because it’s, quote-unquote, efficient? You have to ask it in the context of that country. And one of the reasons I do think a social welfare state is not just positive, but in some ways inevitable in a modern industrial economy, is because without it you can’t guarantee genuine positive-sum outcomes.
Creative destruction will create winners and losers, and part of having an efficient society is having the institutions in place to ensure that the gains from trade, so to speak, are actually equitably and efficiently distributed in a way that leaves everyone better off, or at least, not worse off. To minimize gratuitous suffering.
So, coming back to the heart of the question, take something like airline deregulation in the United States. On net, clearly a huge boom for efficiency in the technical sense. Because after airlines were deregulated in the 60s, there was just a steady decline in airline travel costs. Flying has never been cheaper, and although you don’t have a lot of legroom, it’s much more efficient in the technical sense. But this also created winners and losers. Part of the by-product of airline deregulation was these smaller regional airports going out of business because they only existed due to a degree of cross-subsidization that disappeared. So that led to a degree of regional polarization that created permanently worse-off places.
In some ways, a more fulsome commitment to efficiency should cause you to actually pump the brakes a little bit. Deregulatory reforms that on their surface look like they check all the boxes of economic efficiency because we don’t have complementary institutions in place, they can actually undermine efficiency. In the case of trade, if you pick up a Paul Krugman textbook on trade, it will say that in a modern, globalized economy, trade between a rich, high-productivity economy and a low-wage economy can lead to education polarization that leaves a segment of the rich country’s population permanently worse-off. Not temporarily, but permanently worse off.
Those are facts that you have to deeply internalize if you truly care about classically liberal outcomes and trade policy. It’s not just a matter of being a dogmatic free trader, and it’s not a matter of having trade support programs just pasted on as an afterthought. You actually have to think through how we structure these outcomes so that policy changes leave, not in a literal sense because this isn’t possible, but find genuine positive outcomes for the members of the society.
One of the ways I think Canada has actually done better than the United States on this front is—I don’t know if this has always been the case, but at least when I was observing Stephen Harper’s administration—you know Harper signed many trade deals, there were constant public consultations across the country; talking with officials in different countries, but also ordinary people. And I think, above and beyond just the pure economics of it, it’s important to get genuine public buy-in. Because even if some people recognize that they may be worse off, or lose their job or the industry move, it makes a world of difference if they feel like they’ve been part of the process and were heard.
And you don’t see that at all in the U.S. context. You might have some stakeholder meeting with the head of AFL-CIO. But you know, they’ll cut trade deals, they’ll pass permanent normal trade relations with China and wipe out two million manufacturing jobs, and it will just be on page 26 of The New York Times.
SEAN SPEER: That’s a great segue, Samuel, to my final question. Maybe before I ask it, let me just say one thing that I hear in your immediate answer and through a lot of your work is a call for a restoration of political economy. It seems to me that particularly in the United States it was diminished in the 1990s and early 2000s and you and others are contributing, I think, to a renewed emphasis on this question of political economy.
In a 2019 essay for National Affairs, you wrote about how the so-called “China Shock” didn’t just lead to labour displacement in the United States, but it also caused forms of process knowledge to be lost for good including of course in the manufacturing sector. Do you think the growing great power competition between the U.S. and China and the supply chain issues present in the pandemic will lead to a meaningful reshoring of industrial capacity back to America? And what if anything should public policy be doing to support that agenda?
SAMUEL HAMMOND: Just to answer your question directly, I don’t know. If there will be a reshoring, it will be less due to great power competition, per se, and more because China has alienated itself from its neighbours and its potential allies. I believe Samsung is investing in a large semiconductor plant in Texas at the moment. Many countries that have the potential to be sources of foreign direct investment in the United States have to make a choice, and the choice is, do you put a plant in North Carolina, and maybe have to invest more in skills and education than you would if you put the same plant in Shenzhen, or do you put it in Shenzhen, but then risk having your CEO kidnapped and put him on some mystery island. And yeah, maybe you’ll have all your intellectual property expropriated or something like that. So I think countries are waking up to the deeper risks of China that the liberalization that had been taking place was beginning to reverse.
And so I think that can lead to some degree of reshoring. But I also think reshoring isn’t the right goal, because specifically the “re” part of it. I think the most common mistake in all these industrial policy and development policy discussions is in fighting the last war and having a nostalgia-driven focus to bring back the jobs that were lost rather than to understand what systems you need in place to cultivate better jobs here and now and get a foothold into the industries of the future. That can be overstated, because sometimes when people talk with industries of the future, they have in mind everyone learning to code, or something like that. Whereas what I have in mind is more something like the German Fraunhofer Institutes, the public academic manufacturing institutes that provides direct technical assistance to small-medium manufacturers; shows them how to upgrade their processes, to solve information and coordination problems.
The U.S. has programs like that, but they are a fraction of the size of what Germany has for a country that is four or five times as big, and not just is much bigger but also more geographically and economically diverse. So that’s more what I have in mind as a policy response. It’s not to be reactive, but to actually be proactive, and in that more developmentalist tradition take a system-level approach rather than pick and choose winners or fight the last war in some industry-specific countries.
SEAN SPEER: Well, Samuel, this has been a fascinating conversation. Thank you for joining us at Hub Dialogues and sharing insights on a wide number of issues. I know our listeners will be glad to know that we have a man in Washington influencing the big public policy questions there. Thanks so much.
