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.