The Canadian Red Ensign

The Canadian Red Ensign

Tuesday, December 14, 2010

The Age of Economism and its Errors

In October of 1793, following the murder of Queen Marie Antoinette at the hands of the filthy riff-raff that had taken over France and in the name of “human rights” established a terrorist state, Edmund Burke gave a speech in which he lamented the death of the era of Christian chivalry. In this speech Burke famously declared:

But the age of chivalry is gone; that of sophisters, economists, and calculators has succeeded, and the glory of Europe is extinguished forever.

Burke’s friend Adam Smith would probably not have appreciated this remark had he lived to hear about it. The author of An Inquiry into the Nature and Causes of the Wealth of Nations and the father of modern economics had in fact died three years previously and so was spared the indignity of hearing his profession slighted by the man of whom he had once said that he was “the only man I ever knew who thinks on economic subjects exactly as I do, without any previous communications having passed between us.”

What exactly did Burke mean when he made this remark?

Burke was mourning, not just the murdered Queen of France, but of the civilized way of life she represented. The world of faith and tradition, honour and chivalry, manners and civility, rank and order, with all that it entailed good and bad, was dying before his eyes, personified in the person of the daughter of Holy Roman Empress Maria Theresa and wife of Louis XVI of France. In its place, he saw a new world arising, where society would be a laboratory for ivory tower intellectuals to test their abstract theories with men and women as their experimental guinea pigs.

That is what is Burke had in mind with those three words “sophisters”, “economists” and “calculators”. People, detached from the realities of human life, who believe that through cold, hard, reason and logic they can draw up a blue print for a society which will be better for all of its members than one which has slowly evolved through history and which naturally arises out of the relationships and interactions of people bound together by ties of kinship, culture, religion and history.

Some might object that the description above applies to economists who are socialists but not to classical or liberal economists who believe in capitalism. It is the former who believe in a planned economy and social engineering. The latter believe in freedom and letting people make their own decisions for themselves.

There is some truth to this distinction. Socialism originally referred, in the 19th Century, to various movements that sought to replace the private ownership of property with the collective ownership of property on the part of either the community or those who worked the property. The theory behind socialism is the idea that injustices occur in society because of inequality in status and wealth and that this inequality arises out of the private ownership of property. From this premise, the socialist logically proceeds to the notion that if we were to eliminate the distinction between “mine” and “thine” and replace it with an all-inclusive “ours”, an ideal peaceful society would arise, where all men are equals and brothers, sharing all things in common, where each “contributes according to his ability” and receives “according to his need”.

Socialism clearly belongs to the age “of sophisters, economists, and calculators”. It is completely out of touch with reality. It treats the evils and injustices which are an unavoidable aspect of the human condition because they arise out of human nature as a disease that can be successfully treated with a political and economic cure. It is therefore unsurprising that every society which has seriously tried to put it into practice has only exponentially magnified the misery of its people.

It does not follow from this that capitalism is categorically any different.

The “capitalism vs. socialism” debate which dominates academic discussion of political matters today reminds me in many ways of the “Calvinism vs. Arminianism” debate which keeps cropping up in discussions of Christian theology. The latter debate, as to whether the view of predestination and free will expressed in the Five Articles of Remonstrance of 1610 is more true and Scriptural than the view expressed in the Canons of the 1618-19 Synod of Dort, is treated by both sides as a debate between the only two logical positions on these matters, despite the fact that it is an in-house debate among the Reformed branch, of the Protestant wing, of the Christian faith.

Likewise, “capitalism” and “socialism” are subcategories of a particular kind of economy – the modern industrial economy. The modern industrial economy is an economy where the primary economic activity is the production and distribution of factory manufactured goods. It differs from the Western economy which immediately preceded the Industrial Revolution, in which the primary economic activity was agriculture and where items that are mass-produced in factories today were produced by skilled craftsmen. This economy was neither “capitalist” nor “socialist”, categories which are meaningless when applied to it.

Capitalism like socialism, is an abstract blueprint for society, drawn up by rationalist theorists who are out of touch with reality. It is more properly called economic liberalism because it is the extrapolation of the liberal worldview into economics. The liberal worldview is as out of touch with reality as the socialist worldviews. Liberalism is based upon the idea that people are by nature good and so like socialists liberals look for a source of evil that is outside human nature and which can be altered through political means. Hence the long history of liberal projects to eliminate evil through “universal suffrage”, “universal education”, and the like, each designed to eliminate a new “source of poverty, crime, and suffering” after the last project proved to be a dud. They all prove to be duds because poverty, crime, and suffering are born out of the human nature that is present in the breast of every human being and which cannot be eliminated by political solutions.

More immediately relevant to economic liberalism is the liberal view of society. Central to liberal theory is the idea that the “individual” is prior to society. An “individual” in liberal theory, is a generic person apart from society, whose identifying traits are not those which distinguish him from other people, but characteristics which liberal theory claims he possesses equally with all other “individuals” – personal sovereignty and natural rights. In reality, no such creature exists. Particular persons exist, but they exist within societies, societies which are both older than them and logically prior to them. People enter the world as members of pre-existing families, and by extension as members of the pre-existing communities and societies to which their pre-existing families belong, which are defined and bound together, by ties of language, culture, history, etc. Liberal theory blatantly contradicts observable reality.

Economic liberalism is directly derived from the liberal view of the “individual” and society. Economic liberalism or capitalism is the idea that a society’s collective economic interests are best served by its individual members entering into unrestrained voluntary transactions in which their motivation is entirely their own self-interest. When individuals enter into such transactions the impersonal forces of supply and demand which drive the market ensure that the outcome will produce the greatest amount of happiness for the largest number of people.

This theory contains both truth and error.

It is true that under ordinary circumstances, each of us is better qualified to make the decisions that affect our personal economic interests, than the government is to make them for us. As Dr. Thomas Fleming put it:

The one essential insight of free-market economics is that human beings are more efficient at providing for their own needs than any set of other people could possibly be, no matter how enlightened. (The Morality of Everyday Life, University of Missouri Press, 2004, pp. 18-19)

The problem is, that because liberalism sees the individual as being prior to society, and society as existing for the individual, liberalism concludes that a society’s economic interests lies solely in the personal economic interests of its individual members. Society cannot have any collective economic interests, to the liberal, because to the liberal society is an abstract concept created by individuals to serve their own self-interests. To treat collective society as having interests of its own is to commit the fallacy of reification (treating an abstract concept as if it were a concrete reality) to a liberal.

As we have seen, however, liberalism is wrong. Society is the reality. It is liberalism’s concept of the “individual” that is the abstraction. Therefore it is reasonable to expect that a society will have a collective stake in its own economy. Would a society not, for example, have a collective interest in making sure that has sufficient domestic production of all essential goods that would be needed in an emergency wartime situation in which dependence upon foreign suppliers might result in critical shortages if the enemy were to block the supply lines?

In light of the above, we would expect economic liberalism to depart from reality precisely where it denies society a collective stake in the economy, and this is exactly where we find it in economic liberalism’s devotion to the idea of free trade.

Free trade is the idea that a country should eliminate duties and tariffs altogether or lower them to the point where they do not result in a significant difference in price between foreign and domestic goods. The result is supposed to be that all goods will be produced where it is most efficient to produce them, productivity will rise across the board, prices will drop, and all countries will be better off. A country that puts free trade into practice will generally expect reciprocity on the part of its trading partners, but a true economic liberal insists that even a policy of unilateral free trade will be to the benefit of the country that practices it.

What does history tell us about the effects free trade has on a country’s economy?

In the early 19th Century the leading economic country in the world was the United Kingdom. Liberals and radicals were demanding free trade, and in 1846, Conservative Prime Minister Robert Peel, formed an alliance with Liberals and Radicals against the policies of his own party and abolished the Corn Laws (laws protecting British agriculture). This led to the defeat of Peel’s government but it also put the UK on the road to free trade. A couple of decades later the UK had implemented free trade and eliminated its import duties and tariffs. Around the same time Britain was doing this the Republican Party was erecting a tariff wall around the United States. The Republican Party had been founded upon Alexander Hamilton’s economic system, which involved protecting domestic producers with tariffs and using the revenue to fund the government and pay for internal improvement projects like roads, canals, and railroads that would benefit internal commerce.

The UK practiced free trade for approximately the same period of time that the USA followed the Hamiltonian protectionist system of the Republicans – from the late 1860’s till the period between the World Wars. During this period the USA replaced the UK as the world’s leading economic country.

During this same period of time the new Germany which had united under the Prussian monarchy implemented economic nationalism similar to that of the Republicans in the United States. Chancellor Otto von Bismarck applied the economic principles of Friedrich List whose primary influence was Alexander Hamilton. Following this economic policy, Germany became an industrial power in the same decades when those Western European countries that were implementing free trade began to decline.

Liberal Democrats introduced free trade into the American Republic in the 20th Century. Franklin Delano Roosevelt, the author of America’s welfare state moved America towards international free trade in the 1930’s and 40’s, and JFK, LBJ, and Bill Clinton moved America further in that direction. By that time the Republican Party had abandoned its founding platform and adopted free trade as well. During the post-WWII period in which America became a free trade country, Japan adopted America’s old protectionist policies. These decades were the decades of America’s decline as a manufacturing power and Japan’s rise to prominence in the new post-WWII high-tech economy.

None of this seems to faze true believers in free trade. A. E. Housman described free trade as being a fetish to the liberal, which seems accurate enough. In their ongoing devotion to policies that have proven disastrous whenever they have been implemented, economic liberals and socialists are alike.

This is not the only similarity between capitalism and socialism. For two systems which are so widely believed to be polar opposites of one another, they share a surprisingly large number of common goals and values. Both have a materialistic view which equates human happiness with having one’s material needs met. Both envision a classless society – capitalism the society of meritocracy, socialism the society of egalitarianism. Both have a utopian vision of a world where global peace has been established through the breaking down of traditional nations and societies into a one-world order.

Both are antagonistic to traditional, organic society, made up of families rooted in local communities with strong social and religious institutions, inevitably falling in a hierarchical arrangement of some sort.

What alternative to capitalism and socialism is there? Is there anything salvageable from the wreck of pre-modern, civilized, chivalrous Christendom that can guide us through the murky darkness of modernity?

The following principles are a start:

A) Private property is not the source of evil. The ills we face and must live with as human beings come from human nature, which is the nature of each of us. The law can contain human evil, by prohibiting us from hurting each other, and punishing us if we do. It cannot change our nature, however, and the only solution to the problem of human evil is a spiritual rather than a political one. Private property is a traditional social institution that has worked better than most if not all communal property arrangements.

B) Society is prior to the individual person within it. A society has collective needs and interests which must be balanced with the personal needs and interests of its members.


C) Society should not collectively decide for its members things which are best left up to their own personal judgment. This includes personal economic decisions. Socialism treats the personal economic well-being of a society’s members as a collective matter to be handled by the government. Capitalism treats the collective economic well-being of the country as a personal matter to be handled by private individuals. Both are errors.

The principle of subsidiarity applies here. Subsidiarity is the principle that decisions should be made by the lowest level of authority that is capable of making them. A decision that affects your family should be made by the authority within your family. A decision concerning your local neighborhood, should be made by the neighborhood authorities. It is only when a decision affects the entire country that it should be made and must be made by the federal government. This applies in economics as in everything else. In practice it means that most economic decisions and transactions will resemble those in a liberal economy. It is not laissez-faire, however, because the government still has the right and responsibility to make laws and decisions which affect the collective economic good of the society which is distinct from the personal economic good of its members.

These principles are not a blueprint for an ideal society. No such thing can be created by the mind of man. They are however, pretty basic economic common sense, which is sorely needed in the ideological debate between capitalism and socialism.

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