Classic Liberalism amidst Globalization

The Break­down of the Clas­si­cal Lib­eral Par­a­digm in the Age of Globalization

…nice title eh?

Back in the 1950s and 60s, it was com­monly said that “what was good for Gen­eral Motors was good for Amer­ica”. The claim was rel­a­tively sim­ple to grasp: When Gen­eral Motors did well, it employed hun­dreds of thou­sands of work­ers and cre­ated prod­ucts that ben­e­fited the aver­age Amer­i­can. The slo­gan of course referred to the dynam­ics of Amer­i­can cap­i­tal­ism, and behind it lies a basic assump­tion about human nature, that indi­vid­u­als are for the most part moti­vated by eco­nomic self-interest. To an extent not gen­er­ally appre­ci­ated, the suc­cess of the Amer­i­can sys­tem can be attrib­uted to the founders’ incor­po­ra­tion of this insight into the Con­sti­tu­tion. The result was a political-economy that achieved an impor­tant goal of polit­i­cal phi­los­o­phy, link­ing the inter­est of what the Greeks called the “few strong”, on the one hand, with the “many”, on the other. Until recently, our sys­tem did a pretty good job at doing just this. But it did so only because in addi­tion to self-interest, eth­i­cal val­ues guided pub­lic pol­icy and busi­ness prac­tice enough to limit the excesses of self-interest.

Through­out Amer­i­can his­tory, there have been two dis­tinct strands influ­enc­ing both our pol­i­tics and busi­ness prac­tices. The first strand is cap­tured in the above slo­gan and is grounded in clas­si­cal lib­er­al­ism. Out of this strand of thought comes the Amer­i­can who believes it is good to pur­sue his nar­row eco­nomic self-interest, under­stood pri­mar­ily in terms of prop­erty and its preser­va­tion. The sec­ond strand is the clas­si­cal repub­li­can ideal in which pri­vate inter­ests are sub­or­di­nated to the pub­lic good. This ideal is present when a cit­i­zen chooses a way of life because he per­ceives a social ben­e­fit asso­ci­ated with it. When one is influ­enced by this strand, he is not solely moti­vated by his nar­row eco­nomic inter­est, but also by care for the com­mon good. Exam­ples would include the indi­vid­ual who freely chooses to go to war for his coun­try, or one who con­sciously chooses a career in gov­ern­ment or the non-profit sec­tor because he or she wants to serve the pub­lic in way that would not be able to in the for-profit sector.

At this point in our his­tory, it is no longer pos­si­ble for us to assume that busi­ness activ­ity will auto­mat­i­cally con­tribute to the com­mon good. The clas­si­cal repub­li­can strand that has his­tor­i­cally func­tioned as a source of ethics for Amer­i­can busi­ness prac­tice has been under­mined by two par­tic­u­lar forces. What are these? Glob­al­iza­tion and a phi­los­o­phy of eco­nom­ics inspired by Ayn Rand, von Hayek and Lud­wig von Mises have eroded a pub­lic phi­los­o­phy that func­tioned to bal­ance the latent anti-social ten­den­cies inher­ent in clas­si­cal lib­er­al­ism. The increased pop­u­lar­ity of a phi­los­o­phy that treats the free mar­ket as a source of virtue has been both cause and effect of a move­ment that praises self-interest while den­i­grat­ing pub­lic ser­vice. Adher­ents of this new dis­pen­sa­tion make a very dif­fer­ent argu­ment than clas­si­cal lib­er­als do, one whose essen­tial dif­fer­ence is not easy to dis­cern at first glance. While clas­si­cal lib­er­al­ism does rely on self-interest to sus­tain a pro­duc­tive and sta­ble political-economy, the tra­di­tional under­stand­ing of cap­i­tal­ism views the self-interested pur­suit of wealth to be jus­ti­fi­able because it ben­e­fits soci­ety as a whole. In sharp con­trast, the newly influ­en­tial par­a­digm holds that the self-interested pur­suit of wealth is a virtue in itself and that indi­vid­u­als and cor­po­ra­tions should be able to do what­ever they want and can to increase their wealth even if their actions demon­stra­bly harm oth­ers in soci­ety. Adher­ents of Rand and von Hayek hold that pri­vate enter­prise not only is moti­vated by self-interest, but should be self­ish. And this brings up a sig­nif­i­cant dif­fer­ence between the tra­di­tional under­stand­ing of cap­i­tal­ism and the one that has dom­i­nated our cul­ture for a decade or so. The view of the free mar­ket cur­rently favored is one that expresses a rad­i­cal form of indi­vid­u­al­ism, in which the human per­son is treated like an atom with no essen­tial con­nec­tion to oth­ers. In the remain­der of the essay, I dis­cuss the source of this new par­a­digm, and offer an alter­na­tive which is con­sis­tent with our tra­di­tion yet more suited to sus­tain­ing a soci­ety we will want to live in.

John Locke and Adam Smith are the pri­mary sources of the strand in our pub­lic phi­los­o­phy that stresses a role for self-interest. In Locke’s “Sec­ond Trea­tise of Gov­ern­ment,” one of the most influ­en­tial for the founders of the nation, we are told that “the rea­son why men enter into soci­ety is the preser­va­tion of their prop­erty.” For Locke, indi­vid­u­als do not agree to sub­mit to a social con­tract because they care about virtue or a com­mon good. Rather, they are moti­vated to lend power to a gov­ern­ment because they believe that by doing so they will be able to pre­serve the fruits of their labor. Adam Smith is the other great thinker who claimed that indi­vid­u­als are pri­mar­ily moti­vated by eco­nomic self-interest. In the fol­low­ing excerpt from Book One of the “Wealth of Nations”, we see Smith ground the ben­e­fits of eco­nomic pro­duc­tion not on benev­o­lence, or care for the com­mon good, but on self-love. In his words:

…man has almost con­stant occa­sion for the help of his brethren, and it is in vain for him to expect it from their benev­o­lence only. He will be more likely to pre­vail if he can inter­est their self-love in his favour, and show them that it is for their own advan­tage to do for him what he requires of them. Who­ever offers to another a bar­gain of any kind, pro­poses to do this. Give me that which I want, and you shall have this which you want, is the mean­ing of every such offer; and it is in this man­ner that we obtain from one another the far greater part of those good offices which we stand in need of.

In the fol­low­ing, he makes the per­ti­nent point:

It is not from the benev­o­lence of the butcher, the brewer, or the baker, that we expect our din­ner, but from their regard to their own inter­est. We address our­selves, not to their human­ity but to their self-love, and never talk to them of our own neces­si­ties but of their advantages.

The pri­mary goal of West­ern polit­i­cal thought has been to dis­cover a way to link the self-interested actions of pow­er­ful indi­vid­u­als who have “regard to their own inter­est” to a social ben­e­fit. Why is it so impor­tant to find a way to con­nect the self-interest of these few to the inter­est of the aver­age cit­i­zen? All main­stream polit­i­cal thinkers hold that there is a small per­cent­age of indi­vid­u­als in all soci­eties who are much bet­ter than the rest at get­ting and keep­ing what they want. At the out­set of The Repub­lic, Plato addresses this motive through the per­son of Thrasy­machus. He tells us that jus­tice is defined by what­ever group is in power. Later in the same work, we are told that their inter­est is to max­i­mize their wealth and influ­ence. In brief, the claim is that those in power will do what­ever they can to attain and pre­serve this end. In his words:

“… each rul­ing group sets down laws for its own advan­tage; a democ­racy sets down demo­c­ra­tic laws; a tyranny, tyran­nic laws; and the oth­ers do the same. And they declare that what they have set down— their own advan­tage — is just for the ruled, and the man who departs from it they pun­ish as a breaker of the law and a doer of unjust deeds. This, best of men, is what I mean: in every city the same thing is just, the advan­tage of the estab­lished rul­ing body. It surely is mas­ter; so the man who rea­sons rightly con­cludes that every­where jus­tice is the same thing, the advan­tage of the stronger.”

One of the impli­ca­tions of the claim that there are a few who seek to max­i­mize their wealth and sta­tus is that we are not all equal in the way Amer­i­cans tend to assume. While there are good reli­gious and philo­soph­i­cal rea­sons to hold that we are all equal before God and law, we are not on firm philo­soph­i­cal ground when we assume that all indi­vid­u­als are iden­ti­cal in their abil­ity to get basic needs met. While no philo­soph­i­cal or reli­gious tra­di­tion claims that human beings are equal in this sense, many pub­lic intel­lec­tu­als and activists today seem to believe that all are equally able to suc­ceed in the free mar­ket. Unless we become more hard headed in acknowl­edg­ing the dis­tinc­tion made by all main­stream philoso­phers, one that serves as a jus­ti­fi­ca­tion for and not a bar to the free-market, we are at risk of con­tin­u­ing to under­mine those qual­i­ties in our soci­ety that have made the United States a desir­able place for all, not just a few, to live.
From where did the treat­ment of the self-interested pur­suit of wealth as a virtue come? Influ­en­tial books that ide­al­ize self-interest and have had a sig­nif­i­cant influ­ence on polit­i­cal activism since the 1980s include Ayn Rand’s “The Virtue of Self­ish­ness”, “Cap­i­tal­ism: the Unknown Ideal”, and “Atlas Shrugged”, George Gilder’s “Wealth and Poverty”, and Michael Novak’s “The Spirit of Demo­c­ra­tic Cap­i­tal­ism”. What is philo­soph­i­cally sig­nif­i­cant about the treat­ment of the pur­suit of self-interest as a virtue is that it turns Thrasy­machus’ posi­tion on its head. While Plato was resis­tant to Thrasy­machus’ claim that the few either do or should call all the shots, many Amer­i­can activists believe pas­sion­ately that this is morally good. Let all good cit­i­zens be clear: the treat­ment of self-interest as a virtue is a rad­i­cal depar­ture from the West­ern as well as Amer­i­can tra­di­tion, and no main­stream polit­i­cal philoso­pher sug­gests that seek­ing one’s self-interest is a moral virtue. There is a sig­nif­i­cant dif­fer­ence between prais­ing hard work and effort, on the one hand, and prais­ing the self-interested pur­suit of profit, on the other. Any­one who does not under­stand the dif­fer­ence has no busi­ness being involved in pub­lic pol­icy debates. The founders of the United States observed the ten­dency of a few strong to seek to max­i­mize their wealth and influ­ence in ways that harmed the rest of soci­ety. On the basis of this knowl­edge, they sought to cre­ate a sys­tem that would con­trol and chan­nel the poten­tially desta­bi­liz­ing results of allow­ing these few to do what­ever they wanted in the eco­nomic arena. The eco­nomic free­dom treated as a moral absolute by some today is in fact a thought­fully con­structed set of laws and tra­di­tions whose goal is to bring the inter­ests of the few into line with the inter­ests of all. To put this another way, one set of “few” has been bal­anced by another set, namely those philoso­phers who gave us a strong cen­tral government.

If I am cor­rect in argu­ing that the pri­mary source of insta­bil­ity in our sys­tem is a dis­or­dered pub­lic phi­los­o­phy, one that treats a vice as if it were a virtue, then the solu­tion is con­cep­tu­ally easy: to return to a social phi­los­o­phy that preaches care for the com­mon good and that calls for rea­son­able lim­its on the self-interested pur­suit of wealth. In think­ing about a solu­tion to what can real­is­ti­cally be described as a civ­i­liza­tional cri­sis, I ask the reader to imag­ine for a moment that you are a states­man. Assume that you are in the midst of writ­ing a con­sti­tu­tion for a new coun­try named the United States.

What judg­ments are to guide us as we play the role of imag­i­nary states­man? Answer­ing this ques­tion brings us to the heart of the model I am propos­ing can play a role in lead­ing our polit­i­cal and eco­nomic life back to sta­bil­ity. There are two lev­els of stances that we as imag­i­nary founders must take. On the first level, accept that your goal as states­man is not to make cit­i­zens vir­tu­ous, as well as the fact that most peo­ple most of the time are moti­vated by a desire to attain basic needs in peace and secu­rity. In short, we accept the real­ity of the nar­row self-interest dis­cussed above. On the sec­ond level, how­ever, there exists a stance that we as imag­i­nary founders must con­sciously take towards our obser­va­tion of the exis­tence of the first level motive. This sec­ond level stance must be adopted by the activist, politi­cian or pub­lic intel­lec­tual. While the ordi­nary cit­i­zen as well as the few strong are nat­u­rally and unself­con­sciously moti­vated by self-interest, the activist and pub­lic intel­lec­tual must con­sciously take an addi­tional stance: s/he must remain neu­tral towards the real­ity of self-interest. The claim I want to make is that if activists and pub­lic intel­lec­tu­als with influ­ence do not adhere to both stances in the right way, we will expe­ri­ence increased insta­bil­ity, as defined above. They must nei­ther demo­nize self-interest, as Marx­ists have done, nor treat it as a source of virtue, as the Amer­i­can right has done since the 1980s. By ide­al­iz­ing self-interest, exces­sive power is effec­tively given to those few Thrasy­machus claimed were nat­u­rally dom­i­nant in ways that are harm­ful to society.

Here’s the point: In a democ­racy, each cit­i­zen is called to play the role of “states­men” when they vote. In our role as vot­ers, we each must observe the real­ity of self-interest while at the same time impos­ing those laws, rules and reg­u­la­tions required to limit the anti-social con­se­quences that would result if those who cared only about their nar­row inter­ested were allowed unfet­tered pur­suit of these ends. Through elected rep­re­sen­ta­tives, cit­i­zens must impose eth­i­cal val­ues onto a sys­tem that con­sciously assumes that the only oper­a­tive motive is eco­nomic self-interest. Eth­i­cal val­ues are imposed when we elect gov­ern­ments that apply wise laws and reg­u­la­tions. To respond by claim­ing that gov­ern­ment can­not be trusted to do this is sim­ply a restate­ment of Lock­ean lib­er­al­ism. Since this essay is argu­ing that this strand of our pub­lic phi­los­o­phy is no longer viable, it won’t do to sim­ply claim that “big gov­ern­ment is bad” or that “taxes must be low”. In short, those pub­lic intel­lec­tu­als and activists who in recent years have treated eco­nomic free­dom as a suf­fi­cient con­di­tion of the good soci­ety must learn the polit­i­cal phi­los­o­phy they so far have only made assump­tions about. We must con­sciously return to a sit­u­a­tion where we bring eth­i­cal val­ues to bear on our political-economic sys­tem. It is a sign of deep intel­lec­tual, moral and spir­i­tual con­fu­sion when a polit­i­cal move­ment takes the stance that self-interest or worse, self­ish­ness, is a virtue. And this is pre­cisely what has hap­pened since the 1980s. No soci­ety can be either a good or a sta­ble soci­ety if it is moti­vated by the power of self-interest alone. We who are inter­ested in the com­mon good do accept the real­ity of self-interest, but we do not hold that it is a virtue. We hard-headedly know that we need eth­i­cal norms to inform the rules by which self-interested par­ties engage each other in the pur­suit of wealth and status.