One of the things I dislike the most about contemporary politics is the exaggerated importance it attaches to economics. This is true both of those who favour economic freedom and private property on the one hand and those who believe in a state-planned economy and/or collective ownership of property on the other.
This does not mean I attach no importance to these matters. I believe in private property and in laws protecting private property. I believe that economic decisions are best made by those who will be most affected by the outcome of those decisions. For most economic decisions this amounts to the free market position - that people are themselves the best judges of what to buy and what to sell, how much to spend or ask for in a market exchange. Some economic decisions, however, must be made by the leaders of communities or the governments of countries. These are decisions whose outcome affects the entire community or country.
Examples of the first kind of economic decision include decisions as to what kind of career to train for, whether to stay in a job or look for a new one, whether to open a new business or seek employment, whether to save, invest,or spend one's income, and, if one has this option, what other than essentials to buy with one's income.
Examples of the second kind of economic decision include decisions as to whether a country needs domestic production of a particular commodity or whether it is better to rely upon foreign imports and decisions as to how much and what kind of infrastructure to build and maintain out of the public purse.
These decisions cannot be made in isolation from each other, of course. The decision a government takes, to protect its domestic iron industry, because a consistent supply of foreign iron is threatened by war, will affect the choices of those buying and selling iron and deciding whether to go into an iron-related line of work. Likewise, economic decisions at the level of a community or country, cannot properly be made without taking people's personal economic choices into consideration.
In 2009 I wrote a series of economic essays, most of which
were arguments for economic liberty and against socialism. It ended with "The Free Trade Cult", which argues that history demonstrates that free trade doesn't work the way economic liberals say it does. I intend to post several of the essays from this series including "The Free Trade Cult". The first essay in the series, the one which follows, was "The Economic Age". This essay came first, because it contained the most important thing I wished to say about economics - that we, whether we be capitalists or socialists, place too much importance on economics.
The Economic Age
By Gerry T. Neal
June 2, 2009
“The age of chivalry is gone. -- That of sophisters, economists, and calculators, has succeeded; and the glory of Europe is extinguished forever.”
Those famous words were spoken by Edmund Burke in 1793, in response to the murder of Marie Antoinette by the revolutionaries in France. 2 years previously the 18th Century Whig statesman had written Reflections on the Revolution in France in which he rejected the abstract, rationalist, planning that led to the horrors of the French Revolution which had only just begun, and embraced the Tory view of traditional, organic society in which authority, rights, and liberty were firmly established by prescription. He had seen, even then, where the Revolution was headed.
Clearly, Burke did not think very highly of economists. What did he mean by the word “economist”? The context of Burke’s remarks would suggest that “economist” like “sophister” and “calculator” was being used to describe a class of people who rejected the noble sentiments of the age of chivalry – the gallantry and honor that, as Burke had just remarked, should have caused “ten thousand swords” to leap to Marie Antoinette’s defense. These people replaced these sentiments, with numbers, cold reason, and pragmatic materialistic calculations of their own self-interest.
Burke’s lament, was over seeing the day when such people would become dominant, when society would be rationally planned from the top down, and when people would be primarily guided by cold, rational, materialistic, pragmatic motivations in their everyday decisions rather than by noble sentiments and loyalties. He believed, that much of what made life worth living, which he summed up in the phrase “the unbought grace of life”, would fall by the wayside and perhaps be lost in such a society.
Burke was correct in his beliefs and his predictions. We see the evidence all around us. Far too many people identify “the good life” with obtaining material possessions and dismiss concepts like honor, loyalty, virtue, and character. The concept that true happiness is not related to how much you have compared to other people but to being satisfied with what you have and where you are, while familiar to the ancients and the great Christian ethicists, is alien to such people. This is true regardless of whether the rational materialist favors “capitalism” or socialism.
That does not mean that economic questions are unimportant or that “capitalism” and socialism should be regarded as equally good or equally bad.
Economics, a term derived from the Greek word for the management of a household, is today used to describe the discipline which studies the mechanics of the production, trade, and consumption of material goods and services. Thought on these subjects has been recorded for millennia, of course, but as a distinct formal discipline economics was only in its infancy stage in the 18th Century. While the nature of the discipline is such as to make it especially attractive to people with the rationalist, materialistic mindset Burke decried, it is by no means necessary for one to be a rationalist, materialist to form an educated opinion on these subjects.
Edmund Burke’s own views on economics are known to us. He was a friend of Adam Smith who published his An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. Smith, who died in 1790, once remarked that Burke was the only man he had ever known who “thinks on economic subjects exactly as I do, without any previous communications having passed between us”. Burke, for his part, had heaped praise on Smith’s book. This suggests that Smith’s comment was no exaggeration.
Smith’s book marked the beginning of what is now called classical economics. It is both a history of the evolution of production and commerce and an argument for the free market. The specialization resulting from the division of labor results in greater production of any given product. The same principle applies on a larger scale to the specialization resulting from commerce. As everybody produces more and more of the product they specialize in to sell to others who in turn are producing other products, the general wealth of the nation increases, everybody is better off, and the best thing the government can do to facilitate the process is to keep out of the way.
Later, the term “capitalism” would be applied to Smith’s system. This was not Smith’s term. It was in fact coined by Karl Marx to refer to the period in his dialectic understanding of history, in which feudalism was supplanted by industrialism and commerce, and which Marx believed would be supplanted by revolutionary socialism leading to his communist utopia in its turn. The identification of Marx’s “capitalism” with Smith’s free market probably came about because Smith’s glorification of commerce could be seen as championing the activities and interests of the emerging bourgeoisie class. Marx, who saw everything in terms of class conflict, identified the bourgeoisie as the heroes of the capitalist revolution against feudalism and the villains in the coming revolution of the proletariat.
It is interesting that Marx regarded capitalism, not as a conservative or reactionary force in society, but a revolutionary one. As Marx was a champion of the revolutionary cause this observation on his part has to be regarded as praise of capitalism, which may seem odd, but actually makes sense when one considers his view of history as progressing towards a certain end.
Was Marx right? If he was right about capitalism being a revolutionary force what does that say about Smith’s arguments for the free market, which were endorsed, as we have seen by the leading 18th Century opponent of revolution?
The answer to the first question is yes. If we define capitalism as the historical transformation of rural societies with a predominantly agricultural economy into urban societies with a predominantly industrial economy, then capitalism was undoubtedly revolutionary. Capitalism weakened all sorts of ties that are fundamental to a functioning society. The ties between people and the land they live on were weakened as people moved en masse from the farms into the cities looking for work. The ties between people and previous generations were weakened as crafts and trades were removed from the home and concentrated in factories and stores. Institutions like the family were undoubtedly weakened and Thomas Carlyle was not unjustified in remarking that human interaction was being cheapened by being reduced to the “cash nexus”.
A few observations are necessary at this point. The first is that capitalism as described above was not the free market Adam Smith was advocating. The rise of modern, manufacturing-based economies, concentrated in large scale factories in urban centers, was accomplished with the active assistance of governments. This is a matter of the historical record.
The second is that those who condemn capitalism for its atomizing effects on society will not find an acceptable alternative in socialism or communism. Socialism’s objection is not to an urban economy centered on industrial manufacturing. Its objection is to that economy being in the hands of private owners instead of “the people”. The negative results of capitalism described above were regarded as positive and progressive by Marx. If capitalism was revolutionary, socialism is a thousand times more revolutionary.
A third observation is that manufacturing and increased production are not themselves the problem. It is not wrong for a society to desire a higher material standard of living for its people and this can only be achieved by increasing production. What is wrong is when people and society place make material prosperity their ultimate goal and make all other considerations subservient to that goal.
Adam Smith argued for a free market on the grounds that it was the best system for maximizing human industry and production and therefore increasing the nation’s material wealth and standard of living. He was right but his was not the best argument for the free market. The best argument for the free market is that freedom is itself a good. Moreover, freedom, the right and ability of people to make their own decisions for themselves (including economic decisions), is a superior good to any material goods that can be manufactured, bought, and sold. It is for this reason that a free economy should be defended against the advocates of a planned economy. The latter believe that they can somewhere find a group of experts competent enough to make everybody’s economic decisions for them.
That is the same arrogant mindset of rationalistic planning that Edmund Burke saw devastating France in the 1790s.
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