A Humane Economy, capitalism, Cato's Letters, centralization, economic power, economic tyranny, economism, F.A. Hayek, Gunnar Myrdal, Hannah Arendt, John Trenchard, Joseph A. Schumpeter, liberty, monied corporations, On Revolution, political tyranny, regulatory action, Socialism and Democracy, The Political Element in the Development of Economic Theory, The Road to Serfdom, Thomas Jefferson, wage labor, Wilhelm Ropke
In picking up on our discussion of economic tyranny from yesterday, the argument contended that to blindly submit to market forces creates an atmosphere for economic tyranny to arise, every bit as dangerous as political tyranny. This singular belief in markets, to the exclusion of all other considerations, is folly. Both the economic and the political institutions that arise in a society were given space by America’s founders for the betterment of the individual, not the converse.
Economist Wilhelm Röpke noted in The Humane Economy that to focus merely on the economic is to place blinders over our eyes, that
“we have narrowed our angle of vision and do not forget that the market economy is the economic order proper to a definite social structure and to a definite spiritual and moral setting. If we were to neglect the market economy’s characteristic of being merely a part of a spiritual and social total order, we would become guilty of an aberration…” (emphasis added – ed.).
Röpke squarely embeds the economy within the social, within society.
The conservative historian Dermot Quinn, of Seton Hall, in his introduction to the third edition of Röpke’s work, frames the discussion thus,
“Free markets are preferable to tyranny not because they enrich us but because they moralize us. They connect us to authentic human communities, allowing us to be self-reliant yet also honorably dependent on the efforts of others. And precisely for that reason, to make a cult of the market is to detach it from its own moral imperatives. Markets do not generate moral norms: they presume them. Moreover, they offer the freedom of self discipline, not unanchored greed.”
At the individual level, economic power in the hands of private individuals can indeed exert its force over the whole life of a person. Witness a simple layoff, particularly during a time of scarce employment: the struggle to find new employment as a wage laborer, the loss of private property secured by credit, the financial woes that beset the person and family, the stress on one’s person and relationships. This is economism in its worst manifestation.
Economist F.A. Hayek, however, remained intransigent in The Road to Serfdom:
“The refusal to yield to forces which we neither understand nor can recognize as the conscious decisions of an intelligent being, is the product of an incomplete and therefore erroneous rationalism.”
Those “conscious decisions,” I would beg to differ, can also be the “product of an incomplete and therefore erroneous rationalism,” or as Röpke framed this aberration, “social rationalism.” How can we be so certain those “impersonal forces” are “helping to build something that is greater”? Such blind confidence is reckless. Yet, Hayek, perhaps unwittingly, brings his argument to a logical conclusion:
“The only alternative to submission to the impersonal and seemingly irrational forces of the market is submission to an equally uncontrollable and therefore arbitrary power of other men.”
So there it is: We trade our chances for the devil we don’t understand for the devil we do understand. In either event, we are left dealing with the devil.
The free marketers seems to pick and choose the conservative voices to which they listen. And the free marketers hew close to Austrian economist Joseph A. Schumpeter. Schumpeter was boldly supportive of economic tyranny, arriving at a Spencerian survival-of-the-fittest mentality about it all in Capitalism, Socialism and Democracy (1942):
“(M)onopolization may increase the sphere of influence of the better, and decrease the sphere of influence of the inferior, brains” (Chp. 8).
Once again, Röpke presses against this:
“It is economism to dismiss, as Schumpeter does, the problem of giant industrial concerns and monopoly with the highly questionable argument that mass production, the promotion of research, and the investment of monopoly profits raises the supply of goods, and to neglect to include in the calculation of these potential gains in the supply of material goods the possible losses of a non-material kind, in the form of impairment of the higher purposes of life and society” (Chp. III).
Hayek felt it was either submit to impersonal economic forces, or submit to tyrannical political forces. If that is indeed the choice, then neither is an acceptable alternative. If individuals – as Hayek reasoned throughout The Road to Serfdom – are fully capable of self governing the political and legal actions in their lives, then by all means those same individuals should be able to self govern in the economic actions in their lives. The aggregate of this type of economic activity by self-governing individuals is the “invisible hand” of Adam Smith’s argument, not impersonal forces pressing deterministically upon individuals.
Liberty is liberty from all arbitrary power… even that of economic power. As John Trenchard expressed it in Cato’s Letters, № 91 (1722):
“In fine, monopolies are equally dangerous in trade, in politics, in religion: A free trade, a free government, and a free liberty of conscience, are the rights and the blessings of mankind.”