Freeman

ARTICLE

The Failure of the Middle Way

AUGUST 01, 1986 by JOS STELLE

José Stelle is a freelance writer, editor, and translator, residing in Verona, New Jersey. This article is abridged from an essay titled “Are Liberal Principles Still Relevant?”

The “middle way” between socialism and the free market is put forward as a “third system” that retains the virtues of both, but discards the disadvantages of each. It promises to replace “outmoded” liberal freedom by a new freedom under planning: freedom from want, poverty, and insecurity. In this “third system,” civil and political freedom will be respected, but economic action will be subjected to intervention and control by government in order to “discipline” the prodigious forces of capitalism and to promote “social justice” by what is termed “a better distribution of income.”

“Planning” in the strict sense of total control of society by the government has lost much of its appeal and has been rejected even by many of its former supporters. But in the second sense of a “middle way” between the free market and socialism it rules all contemporary democracies. Depending for much of its success on the remaining faith in “outmoded” liberal values such as even-handedness and fair play, its insidious plausibility and seeming avoidance of extremes has transformed it into an unassailable creed. Yet this creed, which rejects traditional liberal principles and proclaims its “scientific” pragmatism which would fashion a new and just society by a judicious combination of the best elements of the two opposing systems, has failed to deliver on its promise of political freedom, increased productivity and wealth, and greater peace and justice, and today poses a threat to the very survival of freedom and democracy.

The weakness of the “middle way” lies in the fact that regardless of the intentions of its advocates, principles have a way of making themselves felt. The “middle way” has been unable to combine freedom with planning because planning undermines the chief safeguard of liberty—the rule of law. Planning aims at particular results and must therefore reject general and permanent rules of law in favor of particular and ever-changing commands enforced by a bureaucracy with wide discretionary powers. It is unreasonable to suppose that such powers can be controlled when the success of the plan depends on their full exercise.

The hope that excesses Of authority could be checked by the electoral process has proved futile. Planning requires detailed and expert knowledge of particular questions, a knowledge that politicians do not and cannot have. The result has been that in the “middle way” countries planning has passed into the hands of experts and that political power has shifted from elected Assemblies to unelected bureaucracies. “Middle way” planning has thus acquired the essential characteristics of the totalitarian planning, precisely what the advocates of “freedom under planning” wished to avoid.

In a free market, economic decisions are largely based on prices which reflect the underlying forces of supply and demand. Prices function as signals informing both producers and consumers where best to employ their industry and capital. Price competition becomes a vital element of economic efficiency, adaptation to changed events is quick, the relationship of effort to reward is close, and economic order is insured.

Planning, however, does away with free prices, imposes wage and price controls, and determines production. Economic decisions are made without reference to efficiency or to consumer demand. This results in misallocation of resources, falling production, reduced wages and revenues, unemployment, and a lower standard of living.

The most serious failure of “the middle way” has been its inability to promote peace and justice. For the sake of “social justice,” central planning must also determine the “just” relationship of effort to reward, that is, incomes in general. Individuals no longer control their standard of living. Worse, with a less productive economy and incomes that are increasingly determined by political power, energies previously devoted to economic pursuits become progressively employed in political action aiming at control of public resources.

This is both unjust and less conducive to peace. Special interest groups and lobbies will seek an unjust structure of privilege, ruling at the expense of society. Such a situation produces dissatisfaction and social conflict, as the belief in the possibility of justice perishes. Where no principles exist, force will eventually appear as the only road to order and justice.

In all democracies the attempt to tread a pragmatic way between liberalism and socialism has given rise, on the one hand, to calls for tougher socialist measures and, on the other (at least in most Latin American countries, but apparently also in France and the United States), to a reviling of both liberalism and socialism and an extolling of a “new” spiritual socialism, a “new” mystic order. The re-emergence of totalitarian or authoritarian regimes cannot be brushed aside.

The Guiding Function of Principles

As many historians remind us, freedom has endured only when liberal principles have governed public opinion. The guiding force of principles and free institutions allows for both freedom and order—that is, for infinite variability within a legal structure, making it possible for people to pursue their disparate goals with a minimum of friction.

The liberal principles of “law, liberty, and property” are not old-fashioned remnants of an earlier era. They are vital elements by which the nations that have practiced them, however imperfectly, achieved their present wealth and relative freedom.

Casting aside liberal principles in favor of a “middle way” can only lead to a gradual dissolution of the rule of law—the first step toward despotism.

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August 1986

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