Markets can't do everything.

There are moments in history on which we look back and say, "What were those people thinking?" Year in and year out during World War 1, generals ordered their troops to scramble up from their trenches and run across no-man's land toward enemy machine-gun nests, only to be mowed down. What could they have been thinking? During the first year of the Reagan administration, many politicians and commentators acted as if there were a reasonable chance that cutting federal taxes, while increasing federal spending, might balance the federal budget. What were they thinking?

A generation from now, people will look back on us, especially at today's Democrats, and wonder what we were thinking on one fundamental issue. The issue is the role and purpose of government. Following the example of President Clinton, Democrats have done very little to challenge the modem Republican proposition that government is simply evil, that it is wasteful, oppressive, misguided, and inefficient. Therefore the contest between the parties boils down to who can hack the most out of this evil presence in the shortest possible time. What can the Democrats be thinking? Not only are they doomed to lose any government-hating contest against the Republicans, they are also ignoring the history of their growth--and the country's.

When this magazine was founded more than 25 years ago, part of its purpose was to explain all the ways in which government could and did fail. Bureaucrats became wrapped up in self-protection. Administrators spent more time attending meetings and currying favor with the press than finding out whether their programs were doing what they should. Politicians were rewarded for striking poses rather than solving problems. The whole system often sang to the tune of special-interest money. Big organizations suffered from a "culture of bureaucracy" that got in the way of what citizens and taxpayers wanted done.

These problems were serious 25 years ago, and they are at least as serious now. But the logical response to them is not to say, "Therefore, let's get rid of the government," any more than the logical response to complaints about lawyers' or doctors' greed is to say, "Let's abolish the court system, and while we're at it get rid of hospitals." A court system is part of civilized life; so are hospitals; and so even is the hated federal government.

The real history of this country is of the intimate connection between government and private activity. Individuals settled the frontier. The government provided an army to map routes and (for better or worse) fight off the Indians. Farmers tilled the Midwestern soil. Federal, state, and local governments surveyed the land, set rules for homesteading and title-registry, created great centers of agricultural research. Industrialists and laborers built America's great 20th century industries. The government set rules that kept monopolists from squelching new competitors. Through the hand of government, child labor was outlawed, and unions were empowered to bargain for a share of the nation's wealth that in turn helped create a middle-class society. Does anyone believe that Central Park would exist if the market had been left to determine the most efficient use of land in Manhattan? Or that Yellowstone or Yosemite would have come into being except for the federal government's "interference"? Or that men would have landed on the moon? Or that we can more-or-less assume that the food we buy and pharmaceuticals we use meet basic safety standards? Air-quality has improved across the country over the last two decades; water pollution has been reduced. Theoretically you could argue that the right market incentives would have produced the same result, faster. The reality is that around the world, pollution has been reduced when governments have set environmental-quality standards.

Perhaps the most dramatic change wrought by the federal government in the last generation is breaking the connection between being old and being poor. hi the early 1960s, before Medicare, retirement-aged Americans were much poorer on average than other Americans. Now they are, on average, richer. This change perfectly illustrates the way we should think and talk about the imperfect achievements of the federal government. Medicare and Social Security have been effective--but now they have become too effective. Too much of the nation's income goes to non-needy retirees, with too little left for children and working parents. The solution to that problem, of course, is not to abolish either Social Security or Medicare; instead it is to reform and moderate them, so as to have more of their positive effect with less excess.

In the real world, Social Security and Medicare illustrate how cynically and crudely we think about government now. Both parties have made the realistic calculation that they cannot discuss reductions in Social Security. When the Republicans discussed making cuts in Medicare, the Democrats pounced on them for this demonstration of "heartlessness." Both parties, that is, are willing to badmouth the government and act as if they wish it would disappear--except for its role as a giant check-writer to groups whose votes the politicians think they need.

What the politicians should instead be talking about--and in the real world, this means the Democrats--is the difference between jobs the government can do well and jobs the market can do well. The market can do most jobs better, but not all. It can't provide goods or services that benefit broad groups of people but are too risky or expensive for any single private investor. Private investors could never have built a national highway system. Private firms could never have provided nearly-universal telephone, electrical, water, and sewer services across the nation unless they enjoyed government-sheltered, regulated-monopoly status. The market has no way of preserving values that are clearly important to real human beings but have no easily-measurable price tag, from the existence of national parks to the benefits of living in a society in which few people are desperately poor. Any of today's academic economists knows what Adam Smith pointed out in The Wealth of Nations: The invisible hand does certain chores exceedingly well, such as matching buyers and sellers on a stock exchange, but "market imperfections" make it the wrong tool for many other activities. Our politicians seem to have forgotten this for the moment. The likes of Dick Armey and Phil Gramm may never have known any better. Bill Clinton and Al Gore should.

These were, after all, the leaders who gave us the "reinventing government" initiative. Behind it lay the idea that the government should be no bigger than necessary--but it should be that big. They launched that campaign only two years ago, but to judge from their rhetoric it seems like a relic from another geological era. To avoid the head-scratching puzzlement of their children's generation, the Democrats should stop aping the Republicans in pretending that the government is simply burdensome. They should talk about how it can better perform the tasks that only it can do.