January 1, 2014

THE VIRTUOUS ECONOMIC CYCLE

Minding the Market : A history of the émigré intellectuals who helped undo the New Deal (CHRISTOPHER CALDWELL, Feb/Mar 2013, BookForum)

There is no natural alliance between moralistic conservatives and free marketers. Burgin is well aware of the observations of Joseph Schumpeter, Daniel Bell, and others about capitalism's tendency to embolden those who oppose it and enervate those who defend it. But this does not make Hayek's project incoherent, either. On the contrary. Hayek, following Hume's "Idea of a Perfect Commonwealth," approached the question from an epistemological angle. As Burgin puts it, Hayek "increasingly represented himself as a theorist of ignorance."

Hayek's argument, roughly, is that the more complex society gets, the less adequate individual reason is as an instrument for comprehending it. Markets and social traditions can remedy this problem somewhat. They give the individual working access to more wisdom than he can generate himself. Markets amass price information from buyers and sellers who will never meet. Social traditions (and, par excellence, religions) build ethical and metaphysical consensus across generations that don't inhabit the earth at the same time. If you accept this, a lot of conservative beliefs follow quite naturally. Socialist planning is antidemocratic. Hedonism is ignorance. And institutional change more often means vandalism than emancipation.

So one common hostile view of cultural conservatism--as something larded onto a basically plutocratic enterprise in order to make it more appealing to the plebs--is historically wrong, at least in the case of the Mont Pèlerin Society. Values were there at the beginning. Only later were they stripped away. It was by making common cause with consumerist hedonism, not by fighting it, that the society turned into a political force. Milton Friedman, who took over its leadership from an aging Hayek in the 1960s, is the symbol of this reorientation. He appears in Burgin's telling as the Lenin of postwar conservatism. His accession meant the triumph of dogmatism and politics. Friedman's political instincts were as good as his economic ones. He was almost alone among economists in predicting the stagflation of the 1970s. Although he supported Goldwater and Reagan, it would be too simple to say that he moved the society to the "right." Friedman was an intellectual forefather of income-tax withholding, open immigration, the earned-income tax credit, the all-volunteer army, and carbon taxes.

But where Hayek had been diffident and tragical, Friedman was ebullient and constructive. His rise marked an end to the Mont Pèlerin Society's--and to conservatism's--attempt to reconcile capitalism and traditional values. Friedman didn't solve the contradictions; he just failed to see them. As Bertrand de Jouvenel put it around this time, the society "had turned increasingly to a Manicheism according to which the State can do no good and private enterprise can do no wrong." It was now a much more efficient engine of battle and a much less interesting intellectual movement. People such as Aron, Polanyi, Rüstow, and Röpke, who had gladly called themselves conservatives when it meant liberating the human spirit from soulless and incompetent technocrats, ceased to call themselves conservatives when it meant cheerleading for tycoons.

Failing to see these contradictions, Friedman asserted that markets served ends that all people could agree on--only more efficiently. In Burgin's excellent formulation: "His was not a Spencerian or Sumnerian world in which free markets dealt crushing blows to some in order to contribute to the greater advancement of humanity. Rather, it was one in which incontrovertible benefits redounded, in a display of spectacular bounty, to people of all kinds and in all situations." About this Friedman was wrong--but for conservatives it was a vitalizing falsehood.

The realization that we've all arrived at is quite different and Mr. Friedman is closer than Mr. Caldwell.  As it turns out, the free marketeers were wuite right, capitalism does produce incontrovertible benefits in terms of wealh creation.  But they were wrong about those benefits extending to all in all situations.  That redistribution requires some level of social programming.

The compromise that the Anglosphere and Scandinavian Northern Europe have ioncreasingly settled on is to allow as much freedom as possible in the economic sphere to facilitate maximal wealth creation, but then to use the governmental sphere to redistribute that wealth more equitably.  And--importantly--to use the mechanics of capitalism to maximize those benefits even after they are distributed.

Thus, we are in transition from a system where businesses are required (whether by law, nationalization or social pressure) to maximize employment, pay for employee health and retirement, and myriad other ways in which we minimized productivity and profits, to one in which businesses are encouraged to shed jobs and social welfare spending in order to maximize productivity and profits which can then fund health and retirement programs premised on private but universal ownership of stock in these private businesses.  Meanwhile, we are moving from taxing income and profits--which we want--to taxing consumption--which favors savings.

Our current ideological awkwardness is a function of being midstream in this Third Way transformation, with the Right imagining they can still drag us back to the First Way--dumping social welfare altogether--and the Left imagining the Second Way can still be rescued--jettisoning capitalism and seeking state control of economics.  We of the great unwashed middle have already moved on from their two ways--as witness pretty much every national election in the English-Speaking and Lutheran worlds since the 90s--but are understandably nervous about the transformation we are forcing.  Indeed, this reformation will not be truly secured until the next generation starts inheritting the welfare accounts--401k, IRA, HSA, SS, etc.--that we're innovating. When genuine lucre starts being transferred down the generations it will cement the markets and social traditions--while, of course, alleviating the (initial) need for large wealth redistributions by the state.  








 

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Posted by at January 1, 2014 7:46 AM
  
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