But the principles of laissez-faire have had other allies besides economic textbooks. It must be admitted that they have been confirmed in the minds of sound thinkers and the reasonable public by the poor quality of the opponent proposals – protectionism on one hand, and Marxian socialism on the other. Yet these doctrines are both characterised, not only or chiefly by their infringing the general presumption in favour of laissez-faire, but by mere logical fallacy. Both are examples of poor thinking, of inability to analyse a process and follow it out to its conclusion. The arguments against them, though reinforced by the principle of laissez-faire, do not strictly require it. Of the two, protectionism is at least plausible, and the forces making for its popularity are nothing to wonder at. But Marxian socialism must always remain a portent to the historians of opinion – how a doctrine so illogical and so dull can have exercised so powerful and enduring an influence over the minds of men and, through them, the events of history. At any rate, the obvious scientific deficiencies of these two schools greatly contributed to the prestige and authority of nineteenth-century laissez-faire.
Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.
We cannot therefore settle on abstract grounds, but must handle on its merits in detail what Burke termed “one of the finest problems in legislation,” namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion.
John Maynard Keynes, The End of Laissez-Faire (1926)
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David Auerbach on literature, tech, film, etc.
Tag: economics (page 4 of 4)
Genealogically speaking, this book isn’t as captivating as Hirschman’s The Passions and the Interests, because it’s not a survey of past rationales, but an analysis of contemporary behaviors in response to this phenomenon:
Firms and other organizations are conceived to be permanently and randomly subject to decline and decay, that is, to a gradual loss of rationality, efficiency, and surplus-producing energy, no matter how well the institutional framework within which they function is designed.
Free of the meta-analysis, Hirschman doesn’t manage the ideological sweep of the other book, but there’s enough here that should interest even the most impractical humanities scholar. (Like the other book, this one is very short.) Hirschman’s structure is simple: when employees or consumers of an institution are faced with decline of how that institution serves and services them, they either vocalize their grievances (“voice”) or they vote with their feet (that would be “exit”). Various constraints make one option more attractive than the other, and sometimes exit isn’t available, or voice is minimized. There are two scenarios in particular, one conceptual and one historical.
The first is Hirschman’s free-market apostasy in saying that competition can work against voice, since the more vocal and less vocal can be separated into equally impotent factions. The easily dissatisfied ping-pong between equally bad options while the more inertial sorts stick around and don’t complain, giving no incentive for the institution to improve. (Think cell-phone companies.) This plays itself out in a more class-stratified way if there is a better but more expensive option for the privileged class to exit towards, leaving the less empowered stuck with a system that again has fewer incentives to change. (Think public and private schools.) Under orthodox conceptions, this is no prisoner’s dilemma, as the free-marketer would expect any exit to motivate the institution to improvement. In actuality, the institution will often be glad to be rid of these complainers. Sometimes it’s because they weren’t worth the trouble, but often it reinforces existing resistance to the troublesome process of reversing decline. One look at the sociologically fascinating Mini-Microsoft reveals a handful of salutary problems facing Microsoft in decline:
- Many of the most creative and most vocal leaders and employees have already left.
- Those remaining are miserable.
- Because of the first factor, the company has less incentive to address the second.
- The company’s attempts to stem the damage are perceived as cosmetic, and because of the above reasons, probably are.
- Remaining executives are perceived as not being accountable in the slightest and cashing in.
- If the increasingly livid tenor of the comments is any indication, things are getting worse, not better.
Mini-Microsoft is a particularly interesting case because even though the remaining employees are an extremely vocal and articulate bunch, the exit behavior appears to have caused a backlash demoralizing both executives and low-level employees. Hirschman’s optimistic suggestion that voice be recognized before things decay to this point seems unrealistic, however, since it requires a foresight that no institution can be expected to have: why listen to people gripe when everything is fine? I fear that only the absence of exit makes voice truly viable, and that is only because the possibility for organized, open revolt exists when those first exiters aren’t able to leave.
Point two: the United States was founded on exit, grew through exit, and exit is ingrained in its psyche. Founded by those who voted with their feet, grown on cheap immigrant labor, expanded through pioneer expeditions, and granted the luxury of isolationism through geographical position, the country has been notably reticent to address complainers, and the massive backlash against civil rights and entitlement programs is only one of the more distasteful examples. Complaint is frowned upon precisely because of the “If you don’t like it, go to Russia” ethos:
Why raise your voice in contradiction and get yourself into trouble as long as you can always remove yourself entirely from any given environment should it become too unpleasant?
Ironically, this book was written in 1970, so Hirschman cites the black power movement as a notable exception to this trend. Forty years later, a singular, failed exception it remains.
I have not spent enough time with other cultures to have a sense of how distinctively American this trait is, but people from Tocqueville to Veblen to Richard Hofstadter have remarked on it, so I’ll assume it’s at least more extreme here. It makes me wonder if the comparative absence of politically-engaged novels and works of philosophy in U.S. history (note that I am talking about political engagement rather than agitation and muckraking, so I don’t count Dreiser, Upton Sinclair, and Sinclair Lewis, nor the disenfranchised voices of Baldwin, Ellison et al.; Dewey is a notable exception, however) can be traced not only to individualism, but also to the disparagement of voice in our culture. Do we teach our writers to stay the hell out of politics? Is that why our supposed politically-engaged writers (Mailer, DeLillo, Franzen) are such a joke?
In the aftermath of the Southeast Asia tsunamis, the Bush administration pathetically found itself spending more money on its second inauguration than it initially committed to disaster relief. Even now, its contributions are not especially impressive. I donated to relief organizations, and then, left to my own thoughts, I went through three responses: anger, despair, and detachment.
I was infuriated when I read Slavoj Zizek’s The Liberal Waterloo. Zizek proposes that it is for the better that Bush won the 2004 election, since it will
dispel the illusions about the solidarity of interests among the developed Western countries. It will give a new impetus to the painful but necessary process of strengthening new alliances like the European Union or Mercosur in Latin America. … Within these coordinates, every progressive who thinks should be glad for Bush’s victory. It is good for the entire world because the contours of the confrontations to come will now be drawn in a much starker way. A Kerry victory would have been a kind of historical anomaly, blurring the true lines of division. After all, Kerry did not have a global vision that would present a feasible alternative to Bush’s politics.
Zizek spends a good deal of space lambasting liberals for their faulty faith in Kerry and his empty vision, instead proclaiming the ascent of a new counterweight that will not seek unity with the United States. I disagree (except on the empty vision part), but it is not this that bothers me. Nor is it throwaway lines like this, which make me fear that his grasp of economics is quite weak:
Further, Bush’s victory is paradoxically better for both the European and Latin American economies: In order to get trade union backing, Kerry promised to support protectionist measures.
No, it was the words “painful but necessary” that were maddening. I pictured Zizek sitting in his safe European home, gently telling his dialectic-minded followers that it is all for the best, that the nightmares that await are part of a cleansing clarity of darkness through which the new sun will rise. I thought it displays a faith not so different than that which informs the Left Behind books that he mentions. I exaggerate, but I was upset.
From Edmund Burke, a philosopher I despised for a long time before coming to a tenuous rapprochement, I learned not that revolution was wrong, but that it is absurd to believe that a ideology, revolutionary or otherwise, can be faithfully transmuted into a working polity. Zizek does not offer statecraft, but inflated theory with which he cheers the coming crash. I have no doubt that life will get far more unpleasant, but I will not allow myself to believe that the decreased education, increased poverty, and burgeoning intolerance will yield a better world or revivified political debate through anything except pure accident. I will not applaud the clarity gained when the U.S. refuses to ante up more than a pittance for the damage wrought by tsunamis in Southeast Asia.
Nor do I believe that the “lessons” learned from these horrible experiences by the vast majority of Americans (or others) will be anything other than instinctive reactions towards some new random vector. Even the ultimately optimistic economist Joseph Schumpeter was sober and cautious when considering the failure of capitalism and the successful rise of socialism, offering only an equivocal endorsement of what he believed would come to pass.
Zizek portrays an America of uniquely extreme religious fanatics. But the United States’ problem is that through an unlucky confluence of events, a group of crazies have taken over, people who do not act, in general, in line with the beliefs of those who voted for them. This is not because Americans are particularly close-minded or bloodthirsty, but because most people everywhere are irrational and ignorant.
After the election, I felt an alienation from huge chunks of my country far greater than anything I’d previously experienced. I could not find words for it, but Steven Shaviro sharply articulated the paralyzing despair: Nothing.
I think, rather, that 59 million people voted for Bush in full consciousness of what they were doing. They were aware of the harms that they would suffer from this action, but they were willing to put personal advantage aside in order to serve a higher duty. In other words, the reelection of George W. Bush was an ethical decision, a moral choice.
I believed this too in darker moments, but then I asked myself: what duty? I remind myself that this President hardly articulates policy, especially given how often it reverses. His steady, agonizingly simple personality is the foundation for any policy; (I don’t think Tom DeLay could have gotten elected with the same rhetoric, and so far, he agrees with me.) With any luck, this version of politics too will fall away after Bush leaves public office (whenever that may be), and there is no longer a cowboy hat on which to hang the current policies.
Looking to the future, I think that India has it right. The Road to Surfdom has a piece on India’s attitude towards America that gives probably the best-case long-term scenario. Dunlop paraphrases the Indian government’s attitudes as such:
[The Congressional delegation] spoke to a lot of Indian government people and the message from them was very clear, and in a nutshell it was this: We don’t much care about America. He said they were very polite but almost indifferent. Maybe matter-of-fact is a better description. The conversation went something like this:
We consider ourselves as in competition with China for leadership in the new century. That’s our focus and frankly, you have made it very difficult for us to deal with you. We find your approach to international affairs ridiculous. The invasion of Iraq was insane. You’ve encouraged the very things you say you were trying to fix – terrorism and instability. Your attitude to Iran is ridiculous. You need to engage with Iran. We are. We are bemused by your hypocrisy. You lecture the world about dealing with dictators and you deal with Pakistan. We are very sorry for your losses from the 9/11 terror attacks. Welcome to our world. You threaten us with sanctions for not signing the non-proliferation treaty, but you continue to be nuclear armed and to investigate new weapons. You expect us to neglect our own security because you want us to. We don’t care about sanctions.
That seems about right. The resistance of so many people to embrace a non-Western-centric view of the next half-century years (and I include Zizek here) is as much a product of parochialism as it is of short-sightedness. The view of a battle between European progressivism and American fundamentalism (Zizek calls it fundamentalism; I, who can’t see a competent hand at the wheel, would just term it insanity) seems obsolete, an artifact of half a millennium of Eurocentrism.
Given the damage wrought to it by the tsunamis, India certainly regrets the United States’ lack of assistance, but is probably not surprised by it. The United States’ total inability to lead in aiding South Asia, or even to feign appropriate sympathy (pace Burke), is ironically appropriate. I still wish that the richest country in the world would shell out a few billion, and I do believe Kerry would have wrangled a bit more, though not as much as I would like. But either way, change is coming through economic realignment, not through Zizek’s advocacy of the repoliticization of the economy (which itself seems to be synonymous with a re-Europeanization of the world).
Likewise, the damaging acts of the United States, assuming they don’t wipe us all out, will be self-marginalizing, rendering the decline of liberalism and the increased polarization of Europeans and Americans irrelevant. So when I am set upon by the black mood of despair that Steven Shaviro described, I regretfully welcome the decline of the United States’ influence, so as to minimize the impact and scope of what Zizek ominously describes as “the confrontations to come.”
Ominous to me, at least.
I keep waiting for Immanuel Wallerstein to pop up in the debate on the current troubles, but so far I haven’t seen him around. Wallerstein is the man who has claimed for some time that the United States’s global influence and hegemony has been in inevitable decline for thirty years and its leaders are simply deluding themselves that it will be king of the hill for much longer. Since it’s not the most obvious of theses, his papers appear from time to time with seeming bemusement from people
It’s not my main area of interest or study, but Wallerstein’s argument sure seems to have some problems. He overplays past dominance:
The history books record that World War I broke out in 1914 and ended in 1918 and that World War II lasted from 1939 to 1945. However, it makes more sense to consider the two as a single, continuous “30 years’ war” between the United States and Germany, with truces and local conflicts scattered in between. The competition for hegemonic succession took an ideological turn in 1933, when the Nazis came to power in Germany and began their quest to transcend the global system altogether, seeking not hegemony within the current system but rather a form of global empire.
The second part sounds all right; the first part doesn’t. Wallerstein argues that the U.S. was already a major economic power by 1914–fair enough–but it’s hard to see how the U.S.’s claim to global dominance even became an issue before the 20’s and 30’s. Working with the same evidence and a similar conceptual framework, Karl Polanyi still painted the first war as concertedly Eurocentric. At the time, states didn’t have enough truck with the U.S., and vice versa.
Wallerstein also underplays the U.S.’s current influence. When he says:
In the Balkans and the Middle East alike, the United States has failed to exert its hegemonic clout effectively, not for want of will or effort but for want of real power.
he downplays the ability of the U.S. to help put Israeli ultra-nationalists Effi Eitam and Avigdor Lieberman exactly where they want to be, or at least way closer than prudence would dictate.
But I’m not inclined to get in a debate on the matter, other than to say I think he’s offbase. It’s a slightly more conservative argument than Paul Kennedy’s because Wallerstein seems to invoke qualities of national prestige and posture that are not directly related to economic power. But after a few diplomatic disasters in the last year or so, Wallerstein is starting to look pretty good; in fact, I’d say he looks better than Kennedy, because it hasn’t been economics so much as pure posture that has turned everyone against the U.S. (Marshall has been working overtime discussing this, and there’s still so much more to be said.) In the last section of the article, Wallerstein is able to nicely retrofit his theory without much trouble on the “never thought that would happen” neocon dominance. His analysis of U.S. strongarming in the middle of last year looks extremely prescient:
Yet the U.S. response amounts to little more than arrogant arm-twisting. Arrogance has its own negatives. Calling in chips means leaving fewer chips for next time, and surly acquiescence breeds increasing resentment. Over the last 200 years, the United States acquired a considerable amount of ideological credit. But these days, the United States is running through this credit even faster than it ran through its gold surplus in the 1960s.
But Wallerstein’s position is that the strongarming inevitably used up credit and it failed (in Turkey, Angola, Cameroon, Chile, etc.) because the U.S. simply isn’t as powerful as it thinks it is, and other countries disobeyed because they could. I’m inclined to think that the administration just bungled it; those we strongarmed resisted in spite of fairly notable consequences (or, maybe, resisted because the promises of rewards were totally unreliable, in light of how the administration had already repeatedly screwed Mexico). Wallerstein’s argument, as he says, becomes one of bungling just hastening the inevitable, not wrecking a working piece of machinery.
The neocons actually look worse under Wallerstein’s version for overestimating their country’s position, but it takes some of the blame off of them, since it implies that there probably wasn’t much of a way to get multilateral support for an Iraq war in the first place. Wallerstein does not claim this (well, he didn’t in 2002; I wonder what he is saying now), but he does say that there is far less prestige for the U.S. to squander than is commonly thought. But in general, he seems too pessimistic on the amount of presige right now, and I expect he would claim his estimation as one factor in the inept U.N. wrangling of the last six months. (As much as, say, presenting garbage evidence.) I think he attributes too little power, and thus too little responsibility, to the administration. It still looks like a contingent screw-up, not even a vaguely necessary one. In the short-term, his essential pessimism still looks misplaced. But the diplomatic damage that everyone is talking about and the economic damage that everyone will be talking about look to vindicate him, and we can only hope that his theory isn’t at all useful in removing responsibility for decisions that I suspect are far more decisive than Wallerstein thinks.
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