Freeman

ARTICLE

Intellectuals, Moralists, And the Free Market

FEBRUARY 01, 1982 by JOHN K. WILLIAMS

The Reverend Doctor John K. Williams is chaplain and teacher of classics at St. Leonard’s College, Brighton, Victoria in Australia.

“Capitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the defense they may hear; the only success victorious defense can possibly produce is a change in the indictment.”

So wrote the noted economist and social scientist Joseph Schumpeter in 1942. The situation he depicts is worthy of Lewis Carroll; indeed, the bizarre principle of “justice” advocated by his “hanging judges”-“Verdict and sentence first; indictment afterwards”—is remarkably reminiscent of the slogan championed by Carroll’s Queen of Hearts at the trial of the tart-stealing Knave of Hearts: “Sentence first; verdict afterwards.”

The irrationality of the situation described by Schumpeter is not confined to a verdict and sentence desperately seeking for an indictment. In the work from which the above quotation is taken he argues that the chances of a free market economy surviving are remote: “Can capitalism survive? No, I do not think it can.” At the same time, however, he proffers a compelling case for holding that capitalism is a uniquely beneficent economic system enjoying an unsurpassed, and arguably unsurpassable, record for raising the standard of living of an entire community and thereby dramatically alleviating the penury and want of the worst-off. “The capitalistic process,” he asserts, “not by coincidence but by virtue of its mechanism, progressively raises the standards of life of the masses.” He wryly observes that “Queen Elizabeth (the First) owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens, but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”

Schumpeter Confirmed

An examination of the diverse and mutually contradictory charges levelled against the free market confirms Schumpeter’s judgment as to the desperation marking the critics’ search for a plausible indictment. In Schumpeter’s day the standard charge was that a free market economy had produced the Great Depression, creating economic stagnation and permanent mass unemployment. The data later presented by such scholars as Milton Friedman and Murray Rothbard documenting that the Great Depression was the creation of decades of governmental interference with the market, had been conveniently ignored (just as, in contemporary versions of a similar criticism, a plethora of studies documenting the consequences of minimum wage laws for those whose labor is of marginal value are ignored).

With the publication of John Kenneth Galbraith’s The Affluent Society, however, a stunning change in anti-capitalist criticism made its debut: the free market was too productive, tempting men and women to sell their souls for an obscene affluence measured in terms of burgeoning super-markets and automobile tail fins. Today’s fashionable charge is either that such institutions as private property, the free market, and material incentives to production, which once constituted a remarkably successful means for dealing with the problem of scarcity, are no longer necessary because we are living in a “post-scarcity” age, or that rapacious capitalism has greedily depleted the earth’s material resources and, by ushering in a new era of world-wide scarcity, has brought about its own demise. Quaintly, some critics parrot both charges, happily indifferent to their mutually exclusive nature.

Schumpeter’s case for the uniquely beneficent nature of the free market also stands scrutiny after four decades; indeed, his rebuttal of the boringly familiar claim that the productive success of capitalism, and hence its unintended lifting of the standard of living of the poorest, was the result of a chance combination of fortuitous circumstances and wise governmental constraints, has yet to be answered.

Further, those four decades have witnessed the demonstrable failure of a wide-ranging diversity of socialist experiments. Documenting the by now commonplace is tedious; suffice to suggest that the comparative beneficence of an economic system which, in the Soviet Union, results in the one-third of its working populace employed in agriculture being unable to produce the food required by a population of 265 million, and of an economic system which, in the United States of America, witnesses the four per cent of its working populace employed in agriculture vastly exceeding the food requirements of its 220 million people, is not hard to determine.

A Puzzling Attitude

Indeed it is simultaneously ironic and tragic that many Third World countries, in bold but fashionable defiance of observable empirical reality, should have opted for collectivist “agrarian reforms” and thereby have reduced nations once enjoying thriving agricultural bases to the unhappy situation of being obliged to import basic foodstuffs.

In passing, it is worth noting the moral astigmatism of such reports as the Brandt Commission’s North-South: A Program for Survival and numerous similar publications of the World Council of Churches: one might have thought that the infliction of chronic food shortages upon an entire population by ideologues might be perceived as a betrayal of “human rights” or as incompatible with “social justice”—or even, perhaps, as a new and particularly vicious form of “exploitation.” That such is not the case—indeed, that policies seemingly designed to produce equal destitution for all should be warmly commended—is a sad commentary upon the ideologi cal captivity of many Western intellectuals.

It is that “ideological captivity” highlighted by Schumpeter’s grotesque but perceptive image of capitalism’s critics as “hanging judges” blindly determined to sentence capitalism to death, that merits careful thought and discussion: Why do so many intellectuals and moralists attack so readily and so unremittingly an economic system the worst about which even the most dogmatic of socialists can say is that it is the best yet, save for the particular untried version of socialism the socialist in question advocates?

There is nothing irrational about judging an economic system, as many moralists do, on the basis of how it serves the worst-off; what is irrational is that those committed to this criterion of judgment should display an almost instinctive abhorrence of a system which, at least to date, has demonstrably done best what they value most. It is this puzzlingly irrational abhorrence of the free market—an abhorrence not explicable in terms of some simple, factual disagreement as to the productive capacity or social consequences of an economic system—that the defender of the free market must seek to understand and to address.

Who Are the “Intellectuals”?

Attempts to define the notoriously vague term “intellectual” are legion, and none of them is entirely satisfactory. Perhaps the best that can be said was said some years ago by Friedrich A. Hayek in his justly famous paper, “The Intellectuals and Socialism.” The intellectual trades in ideas: “What qualifies him for his job is the wide range of subjects on which he can readily talk and write, and a position or habits through which he becomes acquainted with new ideas sooner than those to whom he addresses himself.”

Hayek goes on to note the truly astonishing number of contemporary professions and activities which belong to this class: “The class does not consist only of journalists, teachers, ministers, lecturers, publicists, radio commentators, writers of fiction, cartoonists, and artists—all of whom may be masters of the technique of conveying ideas but are usually amateurs so far as the sub stance of what they convey is concerned. The class also includes many professional men and technicians . . . who through their habitual intercourse with the printed word become carriers of new ideas outside their own fields and who, because of their expert knowledge on their own subjects, are listened to with respect by most others.”

This description of the “intellectual” is substantially the same as the description usually provided of what such economists, and social scientists as Fritz Machlup, Peter Drucker, Daniel Bell, Peter Berger, and Irving Kristol have called the “New Class.” Irving Kristol has argued persuasively that, since the early 1970s, the most significant “class struggle” in Western nations is the struggle between the old “business class” and the “New Class,” the ascendant elite based on the knowledge industry. Peter Berger, commenting on the power of this new elite, notes its “capacity to influence public opinion through the communications media and through the educational system.” “This influence,” he continues, “. . . even extends into the old business class itself: Corporation executives go to churches where they are preached at by New Class clergy, their wives read magazines written by New Class authors and editors, and their children go to colleges staffed by New Class professors.”

Reasons for Irrationality

Perhaps the first feature to note about the “intellectual” is his essentially prescriptive stance. The journalist, the teacher, the minister, and the writer are more concerned to prescribe what “ought to be” rather than to describe “what is.” To the extent that “what is” is described, it is described in terms of its departure from some norm defining what “ought to be.” Put more simply, the intellectual is committed to the espousal and advocacy of values.

Ayn Rand to the contrary, the free market is supremely indifferent as to values. It prescribes no overall vision of moral or aesthetic or intellectual excellence; it aims toward no all-embracing end or purpose. It simply coordinates the activities and skills of diverse individuals seeking radically different goals and espousing widely varying values.

It does, however, reveal popular tastes and preferences. Commodities valued by the masses can, for the most part, be mass produced and sold cheaply; commodities valued by a few can, of course, still be produced but only if the few are prepared to foot the bill. And the tastes of the masses are deplorable. They prefer Agatha Christie to Dostoevsky; they rank the performances of “Abba” ahead of those of Pablo Casals; they value the compositions of Johann Sebastian Here- today-and-gone-to-morrow more than they value those of Bach.

That the intellectual finds such a state of affairs profoundly disturbing is not surprising. It is disturbing. And it is quite proper for the intellectual and the moralist to denounce vulgarity of taste and to attempt to transform the masses’ tastes. To blame the free market for what it reveals is, however, supremely irrational—as irrational as indicting wet roads for rainy weather or thermometer readings for fevered temperatures.

Blaming the System

Yet the temptation to such irrationality is irresistible. To attribute deficiencies of tastes to the masses is to invite the charge of elitism, and that is a charge intellectuals will go to any lengths to escape. It is much easier, and much safer, to blame the “system,” and the irrationality of the exercise can be disguised by extraordinary arguments to the effect that advertising skillfully depraves the admirable tastes and noble desires of ordinary people. The self-evident fact that advertising must, if it is to succeed, address itself to existing tastes, and the prima facie implausibility of any advertisement, however skillful, being able to sell and continue to sell food that is inedible, clothes that are unwearable, and gadgets that are unworkable, can conveniently be ignored—as can a multiplicity of studies documenting the conspicuous failure of advertising to sell goods not satisfying the fickle tastes of consumers. For such a strategy enables the intellectual to hold to values which in truth are elitist, yet simultaneously to sustain the false belief that “really” his values are those of the “ordinary people.”

In the second place the intellectual and the moralist are attracted to systems which are the conscious creation of trained intellects and work to the advantage of those deemed “morally worthy.” The free market is neither. To be sure the free market is characterized by order—it efficiently coordinates countless diverse skills, it automatically draws upon a totality of information embodied in innumerable individuals who for the most part never meet, it accurately indicates the tastes and desires of consumers and the most economic way of satisfying those tastes and desires, and it unfailingly indicates when random patterns of behavior “chance” upon new ways of more efficiently satisfying human needs—but this order is a spontaneous order, not a consciously contrived order. Its subtle rationality is akin to the subtle rationality of language: a subtle rationality which no person or group of persons deliberately and consciously designed and which trained linguists still strive to comprehend. Indeed, the market coordinates skills no intellectuals could list and draws upon an ever-changing totality of information no intellectuals could synthesize.

That the random and uncoerced activities of the many could give rise to a system defying conscious imitation by the gifted few is intrinsically threatening to the intellectual. And when that system “rewards” neither the best nor the brightest but those who actually satisfy the tastes and preferences of the masses—however depraved or unenlightened or tawdry those tastes and preferences might be—the threatening becomes abhorrent.

Conditions Change

Connected to this almost unconscious dislike of spontaneous as against contrived order, is the intellectual’s preference for the abstract as against the concrete. This is, perhaps, nowhere more pronounced than in the enthusiasm of many economists for the abstract concept of “equilibrium.”

Such a concept presupposes a static world devoid of ordinary human fallibilities, where neither past nor future human expectations matter. The concrete reality of purposive individuals seeking to improve their situation in a world characterized by imperfect knowledge and a consequent lack of coordination, but a world in which learning is possible, new opportunities for improvement can be perceived, and increasing coordination can be realized, is effectively ignored. Rather, the real world of purposive behavior in an environment of flux and change is supplanted by an eerie world of aggregates the adjustment of which to their controlled and perfectly known environment is the entire story.

That any theory couched in terms of “equilibrium” cannot be tested by measurements taken in a world of continuous disequilibrium, a world of changing tastes, changing expectations, changing technologies, changing information, changing opportunities, and changing material resources, was the great insight of such free market economists as Ludwig von Mises and Friedrich A. Hayek. Yet an enthusiasm for the abstract (and an addiction to what the philosopher A. N. Whitehead once called the “fallacy of misplaced concreteness”) has led to a widespread disregard—albeit no rebuttal—of the arguments leading to this conclusion.

Galbraith’s Outlook

The predilection of the intellectual for the abstract finds a less technical expression in a recent, and quite charming, volume from the prolific pen of the much lauded opponent of the free market, John Kenneth Galbraith. In Annals of an Abiding Liberal Galbraith writes patronizingly of those who, as an alternative to the system of wage and price controls advocated by himself, argue for a return to a self-regulating market economy. “Conservative economists,” he notes, “if sufficiently archaic, have some justification for this theology; the full employment equilibrium is basic to the conservative creed, and inaction is the way to realize that equilibrium. Liberal economists must believe that they are of the chosen—that, as I’ve said often, God is a Keynesian Democrat.”

Now it would be churlish to disallow Galbraith his much tried and frequently tested rhetorical device of describing views he dislikes in religious terms. Yet when such rhetorical flak is dropped his utterance reduces to the fascinating proposition that a fully employed economy would be marked by “inaction.” What has happened is clear: in boldly heretical defiance of The Shorter Oxford English Dictionary Professor Galbraith has redefined the verb “to act” and the nouns “action” and “activity.”

The words no longer refer to such concrete, flesh-and-blood realities as the labors of the carpenter, the toils of the garbage collector, or the exertions of the transport driver. They refer rather to the abstract ruminations of those who determine what people “ought” to value, decree what men and women “deserve” to earn, and decide how much money “should” be extracted from football fans and movie buffs to subsidize the extravagant tastes of ballet and opera en thusiasts.

A Vested Interest

The “most active” people of all are, of course, members of the veritable army of Keynesian economists who, perceiving the economy as a potentially workable, but always troublesome and recalcitrant patient, with a continual tendency to hive off into greater inflation or unemployment, function as Court Physicians, ever watchful of and ever tinkering with the economic patient. (That the disease from which the patient is alleged to suffer is iatrogenic—that is, caused by the procedures purportedly fighting the disease—is the thesis of so-called “Austrian” economists; not surprisingly, perhaps, such economists tend to be ignored in Court Economic cir cles.)

That the tidy mathematical abstractions so amenable to intellectual manipulation give rise to conclusions serving their creators’ class interests is, perhaps, the decisive cause for intellectuals’ dislike of the market. The majority of intellectuals derive their livelihood from public-sector employment; they ipso facto have a singularly tangible interest in expanding such employment.

The enthusiasm of the New Class for such fashionable contemporary causes as consumer protection, the environment, and—of course—the “war on poverty” makes perfect sense when related to the intellectuals’ class interests. If business interests are served by the proposition that open access of producers to the market and ordinary laws prohibiting fraud are sufficient to protect the interests of consumers, those employed by State-funded consumer protection agencies are no less served by a denial of that proposition. If industry and consumers have an interest in holding back environmental protection measures that increase costs, the New Class has an equal interest in creating environmental protection agencies that provide its members with jobs and political power. If the participator in private enterprise has a vested interest in asserting that increased productivity proffers the only meaningful, long-term solution to the problem of poverty, those administering complex welfare systems have every reason to claim that such proffers no solution.

Part of the Problem

Interestingly enough, some of the most vocal critics of the “New Class” are to be found among those concerned to improve the economic lot of the poorest and most vulnerable of the community. Such black, ghetto-born U.S. economists as Professor Thomas Sowell and Professor Walter Williams have argued, and argued convincingly, that it is much more difficult for a disadvantaged minority in a “transfer society” to gain the political “clout” necessary to wrest substantial wealth from politically sensitive redistributors than it is for such a minority to gain economic power in a free market economy. Sowell has, in fact, gone much further, brutally stating that “The poor are a gold-mine. By the time they are studied, advised, experimented with, and administered, the poor have helped many a middle-class liberal to achieve affluence with government money.” To suggest that the interests of the New Class, professional “poverty fighter” might not parallel those of his unhappy clients may be unkind; it is not, unfortunately, self-evidently untrue.

Enforced Equality: Reform the Tastes of the Masses

Anti-capitalist clergy constitute merely a special sub-set of”intellectuals”; the values they seek coercively to impose upon a society are, perhaps, more explicit than those of their fellow opponents of the free market, but no substantial difference obtains. They too are anxious coercively to reform the tawdry tastes of the masses; they too find the notion of “spontaneous” as against “consciously directed” order threatening; they too prefer the static abstractions of an idealized world to the dynamic change of the real world; they too have a vested interest in a society proffering positions of power to moralists decreeing who “deserves” to earn and own what.

They are, however, subject to two particular temptations. Firstly, the doctrine that all people are valued equally by God can easily lead to the notion that an economic system producing some “equality of distribution” is preferable to a system producing substantial inequities. Apart from obvious difficulties attending the very notion of “equality,” the enthusiast for “equal distribution” simply cannot admit any liberty to dispose of initially equally distributed goods in his utopia.

Consider, for example, a society of one thousand persons, each of whom possesses exactly one thousand dollars. One member of this society happens to be Joan Sutherland. Suppose Joan Sutherland were to state that she was going to stage a concert and that any person wishing to forgo fifty dollars and hence other goods for which that fifty dollars could be exchanged might attend that concert. Suppose further that all the remaining members of the society prefer to forgo that sum of money (and alternative goods) and hear Joan Sutherland sing than to retain that money or procure such goods and not hear her sing. The exchange, in other words, is purely voluntary: each person surrenders what he values less for what he values more. At the conclusion of the concert massive inequity obtains: Joan Sutherland possesses $50,950 whereas each other member of the society possesses only $950. Yet if the initial state of affairs is deemed “just,” and if the voluntary exchange of goods is also deemed proper (and if people are not at liberty to exchange what they value less for what they value more, the point of owning anything is obscure), it would seem to follow that the final distribution must be “just.” As noted, however, “equality of distribution” is no more.

The Good Samaritan

In the second place it is extremely easy for clergy to glide from the claim that the carrying out of some action is “good” to the quite distinct claim that coercing others to carry out that action is good. It is instructive, however, to observe what such a glide does to a story familiar to all clergy. The wicked priest and Levite (interestingly a clergyman and an intellectual!) pass by a beaten victim of society, leaving him for dead. A Samaritan traveller (again, interestingly, a businessman prudent enough to have accumulated some capital) assists the stranger and funds his care and accommodation at an inn. The welfarist clergyman would, however, have to posit a “Better Samaritan.” On espying the beaten stranger this Samaritan would rapidly return to Jerusalem, call out the Roman armies, ‘coercively extract money from other wealthy businessmen, and establish an aid-to-wounded-travellers’ benefit. The moral excellence of this strategy is, surely, obscure; so, for that matter, is the coerced “charity” of those whose money is forcibly redirected.

Can the Accused Get a Hearing?

Schumpeter was right to observe that capitalism is standing its trial, and standing it before judges with the “sentence of death in their pockets.” He said, however, nothing about a jury; yet there is a jury. It is true that that jury is more familiar with the caricature of capitalism created by its accusers than the actual defendant, but while not warmly disposed towards that caricature the jury is not unambiguously enthusiastic about “intellectuals” either.

The jury, in other words, may well be ready to listen to a case for capitalism—especially if that case can stress that they, the ordinary consumers, are the ultimate beneficiaries and controllers of the free market. There is good evidence that ordinary men and women are becoming impatient with the only alternative to “profit management” in a free market: bureaucratic management. There is good evidence that the level of taxation demanded in a “transfer society” has led to the rediscovery of the core free-market principle of mutually benefiting voluntary exchange—whether that involves barter or undisclosed cash payments. There is good evidence that the almost inevitable consequence of a currency unrelated to the reality of the market and at the mercy of a State enjoying unrestricted, monopolistic control of the money supply is inflation—and inflation is not popular with the masses.

The time is ripe—indeed is overdue—for the practitioners of the free market to enter the world of ideas and to promote the free market. Corporations simply must start supporting thinkers who challenge the dogmas of Statists. And such thinkers are not unknown. The collapse of the socialist ideal is a reality. The “new philosophers” of France (in particular Jean-Francois Revel and Bernard-Henri Lévy) have mounted a devastating critique of Marxian thought. Faculties of economics, torn by disputes between Keynesians, neo-Keynesians, “neo-Classical Keynesian synthesists,” Monetar-ists, and Marxists are more prepared than was, until recently, the case to give some voice to pro-market economists. Dissenting intellectuals, such as George Gilder (author of the widely discussed volume Wealth and Poverty), are making out new and interesting cases for a free market economy.

That such materials are “translated” into terms accessible to ordinary men and women is vital. That corporations should, both individually and collectively, aid the dissemination of such translations is imperative. Michael Novak has put it well: “[The free market] is now engaged in a war of ideas. The methods and means for conducting such a war successfully can be clearly discerned—they are well known, even if seldom set forth in systematic form—and the resources for employing them wisely . . . and in an atmosphere of freedom and diversity are plainly available. The next step is to make them operational.”

The time for that “next step” is now, while democratic institutions still exist. “Hanging judges” tend to dislike such institutions, particularly juries, for ordinary men and women are, so it is claimed, the unhappy victims of a “false consciousness” which prevents their seeing the free market for what it is. Only the enlightened few, the fortunate possessors of an “authentic consciousness,” are able to see the truth. It is not sufficient that such “true believers” simply be judges. They wish also to be jurors. And executioners.

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February 1982

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