Having been issued a sort of philosophical summons to render an account of my opposition to the political economy of the neoconservatives, and indeed, of the American consensus of the past several generations, I propose to provide an answer to the question, "Why such stridency against cooperation for mutual betterment, AS DETERMINED BY THE PARTICIPANTS"? Ultimately, this is a question that implicates what I take to be the fundamental questions of political thought, namely, what is justice? and how is justice to be sought and approximated in the ordering of our earthly affairs?
Sometimes, conservatives exasperated by such skepticism concerning freedom and markets will frame the question as one of hypocrisy: Why would an executive who has arrived at a decision to outsource his manufacturing in order to save x dollars per hour on wages and benefits be regarded as greedy, while the American employees who wish to retain those wages and benefits are not so regarded, and are often considered to be struggling to retain something to which they are entitled? And what has this to do with public policy? Any one of several different, though interrelated conservative answers to such a query could be articulated, though I only wish to focus on one for the present. For the purposes of political economy, the executive has a higher set of hurdles to clear.
Consider an hypothetical executive who has purposed to outsource his labour in order to reduce his costs, avail himself of certain efficiencies, and reap the benefit of an increase in profits. Supposing that we prescind from the question of whether a discourse of rights is actually optimal for the embodiment of what is most vital in a system of social relations, the pertinent question might concern whether he has a right - in the sense that this is an action that ought to be permitted, at a minimum, by law - to undertake such a course of action, given that it will throw a certain number of employees within the community into (hopefully temporary) unemployment. And it would seem that, in virtue of the rights of ownership and control, whether those of simple private property - in the case that our executive is a sole proprietor - or of corporate property - in the case that he holds a right of decision as the manager selected by shareholders to pursue their interests - he does possess that right: their company, their money, their authority, their rightful decision.
Upon reflection, however, I am not persuaded that the matter is ever so uncomplicated; and in consequence, I am not persuaded that an appeal to the rights of property and ownership, and the material productivity of the economic system itself, suffice to answer the question of whether the asserted right should be uncontroverted. For this answer remains wholly innocent of the weightier questions of the common good and order, and subtly elides them.
The answer given for our hypothetical scenario presupposes answers to other questions, answers which are problematic, and yet seldom explicitly addressed and justified. If the foregoing answer is to be taken as valid, and questions not simply begged along the way, the moral and legal status of persons and communites affected by such decisions must be resolved. For example, one possibility is that the executive in the hypothetical simply lacks any meaningful obligation to the affected employees, their families, and the community of which they are part; the nature of the relationship between the executive and these people is entirely specified in the terms of an economic contract, and contract which he retains the power to terminate or withdraw upon receipt of a superior offer. We could elaborate upon this for a while, but the essence of the situation would not thereby by altered in the slightest: on this assumption, the executive is under no obligation imposed by the propinquity of these people; that is to say, there exists no obligation to pursue the common good of those with whom one is bound up in community - no obligation, that is, that is not mediated by commerce.
Alternatively, such obligations might well exist, but might then be held to occupy a lower order of obligation than the obligations the executive has towards his shareholders and bottom line. That is to say that such obligations obtain, and we could spend time teasing out what this would entail, and how these obligations would relate to the economic ones, and in what circumstances, but that ultimately, they are defeasible by the economic considerations. Economic efficiency, or contractual, commercial community - the artificial, abstract community of investors and shareholders seeking higher returns simply - trumps actually existing community.
Alternatively, yet again, in accordance with certain of the arguments of classical political economy itself, it might be asseverated that the obligation of the executive is to profitability and efficiency per se, or perhaps to these insofar as this accords with his rational self-interest, and that by discharging his responsibilities with this object in mind, the Unseen Hand, which might be the fist that forces his community to be "free", will ensure that the unplanned concinnity of economic actions redounds to the greatest material advancement of the greatest number.
Undoubtedly, one might tease out yet another hypothetical explication of the relationship - or lack thereof - of our executive to his erstwhile employees and their community, but in all cases the fundamental presuppositions will remain identical: each argument on behalf of the executive presupposes that economic considerations are trumps. They are considered overriding; they are defeaters for community ties, non- or an- economic relationships within a community, family, personal ties, and all of the tacit obligations that most people intuit as attaching to such relationships and statuses. They presuppose, and that uniformly, that efficiency trumps community and custom, and therefore, somewhat ironically - and incoherently - that community is not really community, but that community is nothing more than the aggregate of individual commitments undertaken in the interstices of commercial relationships. Community is the sum of individualisms; and a certain form of utility is the dominant discourse of society - dominant because it serves as the architecture of society, and secures itself against the intrusions into its sacred space of other discourses. The corporation may constrain - or worse - the community in order to preserve itself; the converse does not hold.
Even were it is the case that the highly specific legal forms through which these ostensible rights of property and commerce are expressed existed in some timeless, Platonic realm, such that all that remained to us was the imperative of recognizing - in both the Platonic and modern senses - them, this would generate a type of inconsistency. However, this inconsistency is only intensified by the fact that these legal forms are, in their specificity, historically elaborated and evolved - which is to say, contingent - and thus dependent in still greater measure upon the security afforded by the political system and its laws. The ostensible rights are politically-secured and intrinsically contestable, as amply demonstrated by the fact that political controversy has attended virtually every phase of the evolution of the modern corporate system, inclusive of the current phase of globalization. The rights of economic activity in question, by the logic of rights-claims, must be things which state and society are obliged to recognize, each in its own sphere and in accordance with its own social capacities, and to defend, the former by law and the latter by acceptance and adaptation, ensuring that the possessors of the rights are secure in their exercise. And in the case of the specific claims I am considering, what follows is that there obtains an obligation on the part of government and society generally to secure the right of certain individuals and actors within society to - potentially, and often actually - uproot entire ways of life, undermine the stability of families and communities, and render more tenuous the positions of others within society - this, in the pursuit of efficiency.
My point, for the present, is the limited one that these aspects of the economic system simply cannot be defended as rights, for this generates the absurdity that society must defend, and acquiesce in, its periodic dispossession (creative destruction, baby!). To the contrary, these rights-claims are inherently contestable, and thus part of the political process; any argument to the contrary is really an attempt to evade historical realities. The market is neither the foundation of society, nor the foremost institution thereof, for this very reason; the foundational questions of political thought cannot be evaded by taking refuge in the Market.
Now, for the details:
What concerns me is the strident accusations you make against the natural consequences of human freedom, if property and contractural rights are protected -- cooperation for mutual betterment, AS DETERMINED BY THE PARTICIPANTS.
Participants in commercial transactions determine their subjective and largely material interests, not necessarily their objective interests in accordance with justice and the common good. It is to the latter sphere that republican self-governance should be oriented, for it is in the nature of governance and authority that it deliberate over, and ultimately instantiate some vision of order transcending the mere riot of individual preferences, of market subjectivities. Eric Voegelin referred to this as a cosmion of meaning, or something like that; but whatever we elect to call it, the point remains unchanged: those who elevate markets to a position of centrality are evading the central questions of political discourse. This accounts for some of the sterility of that discourse, as it survives.
Yet, upon examination, I am always led back to the view that the tension is a product not of the market, but of human nature and inclination that in the best case is disciplined to restaint by a higher call. The First Law of Economics, I teach my students, is "Everyone wants to be better off." Or as Michael Oakeshott said, "to replace what is with what ought to be." Ludwig von Mises simply called it "Human Action."
It is perfectly correct to observe that this tension is present within the very fabric of human nature, prior to its instantiation in any given social order. However, two points are apposite. First, our economic system, privileging as it does material advancement over other human goods, defines this "pursuit of betterment" largely materialistically, and both demonstrates and entrenches this materialist bias by declining to countenance much in the way of limitations upon the ability of the economic to poach on the turf of other human goods. Second, the fundamental question here is not vice, considered in itself, but the nature of the social order and the degree to which it either facilitates or hinders the social manifestation of vice. The dogma of modern political economy, namely, that our infinite wants are the foundation of material progress, is simply the dogma that our avarice is the foundation of social order and progress.
The free market is by its very nature a democracy..
Democracy, by its very nature, as has been recognized by political philosophers since antiquity, and as was presciently understood by our own Founders, tends towards the aggregation of power; that is, towards tyranny and concentration. Hence, the democratic element in any polity or social system must be checked and limited by other aspects of the system both in order to forestall the possibility of despotism, and to enable the democratic element itself to realize its own telos. Democracy tends toward aggregation on account of its homogenization or reduction of the masses under one aspect, be it the franchise or the market; it facilitates the emergence of a managerial elite in both politics and the economy, and this managerial elite is the essence of the attenuation of self-government.
Think about it: to make myself or my product valuable enough to you to “win your vote” (get hired, make the sale, etc.), I must necessarily figure out what it is you are looking for (even if you yourself are not entirely sure). This is the very essence of entrepreneurism, which is from the French word often used for explorers. I must “explore” the opportunities that exist to satisfy you (from the First Law of Economics). Sounds suspiciously like the Golden Rule (Matthew 7:12 and Luke 6:31 – I must “do” unto you as I myself would desire to have done to me; that is, I want to be better off, and in order to be so, I must give you something that you value.
As the scholastics might have said, sic et non. Yes, in a well-balanced economic system, in order to secure my own means of sustenance - assuming that we are not speaking of a more agrarian order in which many of us will be raising our own food - I must provide my neighbour with something that serves his needs. However, it is morally imperative to distinguish between needs and thneeds, those artificial wants that we do not comprehend until The Market stimulates them and awakens them within us. I will be serving my neighbour if I actually, you know, serve his genuine needs; if I am doing nothing more than serving his thneeds, I am not truly serving him because I am actually degrading him by circumventing his rational nature and stroking his disordered passions.
When thought of from this perspective, we see quickly that the most successful entrepreneurs -- the Henry Fords, Sam Waltons and Bill Gates of the world – have figured out how to serve people extremely well in terms of giving them things they value highly; greater mobility, greater purchasing power or more time and information. And these great ORGANIZATIONS of "free cooperators" necessarily require skilled managers who concern themself with the "big picture" and move the parts around FOR THE BENEFIT OF ALL INVOLVED.
Tell that to Chinese slave labourers or American workers who may once have laboured for decent wages in domestic firms, or maintained small businesses now submerged by the Wal-Marts of the world. Aggregration benefits the aggregator, just as democracy benefits the demagogue. The benefits are not uniformly distributed, and that by the nature of the case, as a consequence of the logic of democracy, and of those inequalities of talent and endowment which pre-exist and condition the operations of markets, the rewards to which the present system grossly exaggerates.
What most seek to do is to restrain this system in some way, either for their personal benefit or the "greater good". Both are tyrannical at their roots. Rent-seeking, meaning attempt to create through coercion financial income which is not matched by corresponding labour or investment in the market sense, is precisely what Adam Smith criticised in The Wealth of Nations.
The concept of rent-seeking is most often a question-begging and underdetermined rhetorical device by which defenders of The Market seek to disparage the alleged motivations of thier critics while shielding their own from critique. There is rent-seeking, and there is "rent-seeking". Some of this is just rent-seeking; some of this is the inexorable outworking of the concentrating logic of the system; and some of this is merely an attempt to secure and defend non- or an- economic goods from the depredations of the system. In other words, the very concept of rent-seeking cannot be defined in purely economic terms, regardless of what the political economists have to say, for the very notion of a social rent cannot even be defined absent a broader conception of the social good that the very apparatus of politics is intended to secure for a society.
To a large degree, it seems to me, the question of what constitutes an excess of earthly goods must be seen within the context of one’s culture.
Again, sic et non. There does obtain a significant degree of relativity in the assessment of what constitutes wealth and poverty within any given society. On the other hand, to whom much is given, much is required.
Even if you could assemble a room-full of the very smartest and morally best people in the country (or the world, for that matter) as your planners, they simply do not have the brainpower or, most importantly, the "processing speed" (decision feedback) of millions upon millions of free actors (even dumb ones) making decisions and adjusting to outcomes.
This is all very well and good, and true for that matter - as a matter of purely economic thought. I have read The Road to Serfdom and Socialism. Nevertheless, there exists an abundance of reasons to deny that this fact, and the recognition thereof as a fact of economic activity considered in abstraction from other human goods, is sufficient as a basis of social order, or that it suffices as the primary determinant of social order. This decentralized processing of information must occur within a broader societal framework conditioned by ethics, religion, tradition, custom, and a sense of the imperatives of limits and balance; for this is the very essence of the specifically political: to pursue justice, to deliberate as to its nature and obligations, and to strive for its approximation. The market, considered in itself, is at best orthogonal to justice, inasmuch as justice is apprehended by reason, and elaborated by reason in tandem with tradition, while the deliverances of the market are mere transcriptions of desire; and desire is not merely other than reason, but is that which must, if the soul and the society are to attain to a right order, be itself limited and submitted to the tutelage of reason.
Comments (70)
Brilliant stuff, Jeff.
I would add that the essence of the political theory you advance -- that the State must be oriented toward the good, or toward justice, which stands in decided tension with mere material desire, even refined by rational self-interest -- is found in our own great official documentary literature, which as Chesterton remarked, is "perhaps the only piece of practical politics that is also theoretical politics and also great literature."
The Preamble to the Philadelphia Constitution is just not a statement in line with the modern (i.e., materialist) theory of political economy.
To arrive at the notion that the Market should be our final legislator, which is the assertion at base of this theory, one must let "promote the general Welfare" crowd out virtually all the other purposes to which "We the People" have dedicated ourselves.
Posted by Paul J Cella | May 11, 2007 9:55 AM
Jeff, I suspect we're on trains passing in opposite directions here. I'll stand by my original assertion: that we both believe in freedom (I think) and, based on that belief, I cannot see how one can deny that people should be allowed freely to cooperate, organize, contract and determine what constitutes the "best life" within the realm of their opportunities and talents. We simply have too much evidence of the Law of Unintended Consequences when rulers (including republican democracies) attempt to get in the middle of this natural process.
The way the world has operated historically, for the most part, is "the few vs the many", with the few in power benefiting at the expense of the many. This can operate on the large scale we see today in most of Africa or the Mid Eastern Orient, or on the small scale we see when manufacturers or unions or farmers or small grocery or shop owners (in opposition to WalMart, for example) or any other group collude to extract concessions from the rest of -- most of which we are unaware of because we have better things to think about. Think about the Kelo decision: it was all about making the community better -- at the point of a gun, if necessary. When enough of us discover that we can extract funds from the exchequer, this becomes the Hobbesian war of all against all. And it's always the little guy who gets hurt. WalMart has made the lives of the poorest residents of any community in which it operates financially better. And for people in that situation, financially better is better in alot of ways.
I am adamantly opposed to the tyranny in China, but I am honestly torn regarding whether boycotts would effect change there any better than in Cuba. The reports I hear from missionaries are that people in the interior of China are doing better as the result of the liberalizations, such as they are, from trade. I'm not sure that I would be helping them by "sacrificing the good for the perfect." But give me a break with the allusions to wage slavery here in America, the land with the richest poor people on earth, most of whom are so because of their own choices or the unintended consequences of "do-gooders" (see Thomas Sowell).
I have no right to zip up the tent once I'm inside, which is EXACTLY what I'm doing if I oppose global free trade. And by the way, the more perfect union that the Constitution sought to achieve was, among other things, a free-trade zone among the States, some of which had been acting against the others.
If my situation changes for the worse due to some factor having to do with free trade (as opposed to rent-seeking), I have choices to make if I want to make it better -- I can move away to pursue better opportunities elsewhere (we used to call such people pioneers), get training in a new field, etc. But I have no right to insist that nothing can ever change because I don't like the result. And by the way, this has happened to me in my own career, so I am not simply pontificating.
What you propose is nothing other than a veto power over any real or perceived threatening change, either by the affected party or by the government as their proxy and the power to determine and enforce some vision of the annointed on everyone else. Sounds like France. That seems to be working out well. Buggy whip manufacturers should have been able to put the kibosh to the internal combustion engine, the source of all evil in the modern world. I revere G.K. Chesterton, but his fuzziest logic was saved for his idea (with Hillaire Belloc) of Distribuvitism, which was a utopian agrarian vision that would have relied on tyrannical coercion for its achievement. Your vision would rely on the same thing. You THINK it would make things better, or at least somehow more righteous, but righteousness "achieved" by the sword is no righteousness. If we have problems with rampant materialism, and I do, we should preach and urge and call people to sanity, as well as modeling the happiness to be found by living such lifestyles. Any of us has an option under free markets to abstain. That's what's free about them -- I'm free to opt out by any number of methods, including living simply and humbly.
More domestic "untranquility", both in America (see: Nullification crisis and Civil War) and around the world has to do with governments intervening on behalf of one group against another, even in the guise of forming more perfect unions and establishing justice. One man's justice is another's tyranny and very un-unifying. Trade wars do VERY often become shooting wars.
Maybe when Jesus comes back that might change, but not before. He would be the only one with the wisdom to foresee all outcomes and select the best, but even He calls rather than coerces. Unless you're a Calvinist, by which I do not mean to open a whole 'nother can of worms.
Posted by Jim McAlister | May 11, 2007 12:56 PM
I take it, then, that in the hypothetical situation you lay out at the beginning you are saying that the executive should not outsource? Perhaps should not be permitted to do so?
I look at a sentence like this and just cannot really agree:
"The dogma of modern political economy, namely, that our infinite wants are the foundation of material progress, is simply the dogma that our avarice is the foundation of social order and progress."
I don't see such a dogma being advocated by everyone who disagrees on the matter of (say) outsourcing or with other paleo or Crunchy recommendations such as protectionist tariffs. Why do we have to be saddled with such a dogma? Maybe there are "neocons" who hold it, but not every advocate of the free market must. I might buy that many _reasonable_ wants provide stability to the social order and can help people to better their conditions. Yes, physical conditions, but not to be sneezed at therefore. And I use the free market an awful lot for non-economic needs as well--books, curriculum for home schooling, lectures or teaching services for myself and my children, and so forth.
I probably won't be able to do as much in this discussion as I'd like, but I do find myself rather more sympathetic to Mr. McAlister from what is admittedly a scanning read of the discussion. It's just that (this for Mr. McAlister's benefit) Maximos and I already whacked at one another on this subject in a different forum, so I'm not getting as involved here. :-)
Posted by Lydia | May 11, 2007 3:07 PM
With a wink to Paul, I have to say "brilliant stuff" Jim.
I am reluctant to tangle with Maximos due to his superior erudition. (I am still trying to get through reading recommendations he made many months ago).
I had in my mind many of the same points you made but would have had to make them from the particular experiences of my own life; since I am only just now investigating political science and my knowledge of our political and social systems comes primarily from a life lived as a benefactor, as it were, of a fortuitous birth and a loving family.
I discovered that America presented me -- as a peasant provided with an education -- with the opportunity to employ my capacity and inclination to pursue the good. And of all the other circumstances and situations I can presently comprehend, save the last that you mentioned Jim, this one seems preferable.
My pursuit of the good inspires me toward charity, and it is that charity that makes me wish to bequeath that which provides me this opportunity to all humanity. It is a universalistic sentiment born of love not philosophy.
What alarms me is movements to diminish this opportunity. What hardens my heart is failure to make use of this opportunity. That is shorthand for what's wrong with the world in my estimation.
Point me to a real live fully functioning paleo-conservative community somewhere – it seems to me the opportunity to create one exists thanks to America – and then I shall be able to make a better assessment about the superiority of that life and socio-political system by more directly comparing it my own.
Posted by John E. | May 11, 2007 5:00 PM
Excellent insights from Jeff. My only input is that when analyzing these aggregators, it is important to consider the quality of employment they offer and whether or not they distribute the wealth among smaller, local suppliers. WalMart is disturbing for both of these reasons. The whole enterprise is a lose-lose proposition for the community, as the jobs "gained" have such pitiful wages and benefits that many families receive government welfare, and the skilled labor pool is permanently diminished by outsourcing.
Honestly, I don't know what Jim means when he writes that it is tyrannical to want to see your own community enriched by successful enterprise. Sending most if not all of those benefits to another nation shows an amazing lack of concern for one's neighbor. The perfect union posited in the Constitution is meant for this society, not some other one.
Posted by Step2 | May 11, 2007 6:15 PM
It is tyrannical to enforce defensive, exclusionary insularity, which is what happens when you forbid people to deal with who they wish. It's been tried; indeed it is the way the world has operated most consistently since the Fall. Erect a wall, keep others out and "ours" in. All too familiar. Walmart distributes wealth at an incredible level, precisely because it allows those who choose to deal with it to keep more of their wealth. Far from losing richness, a community that parts with less of its wealth on the mundane, mass produced "necessities" (I'll not presume to be the judge of what is or is not such) has more available for the things that "count", and the aggregated capital of the community of millions of "WalMart savers" is available, if they choose to invest it, to fund new attempts to meet the needs or the "thneeds" of others. If no one is being forced to the table, who gets to say no? Nothing has been offered here as an alternative to voluntary dealings among people (otherwise known as the free market)that would not entail force or be subject, ultimately, to what some person or group decides is the way it's going to be. If that floats your boat, then you'd be very comfortable in most of what we call the Third World today. And it's the Third World for precisely that reason. I don't shop at WalMart very often, but millions do. I don't understand why their being forced to pay higher prices to local merchants is in their benefit. The vast majority of those seeking to shut down WalMart are rich folks who have no need to shop there an who think WalMarts are tacky and ugly, not "our" sort of shop, or rent seeking merchants (in most cases other large, but less competitive, corporations like Krogers). When the first A&P "supermarket" opened in the early part of the 20th century, the very same hue and cry was raised. Likewise when the Sears catalog stores came to tiny burgs across the fruited plain and offered products unknown previously. I'll ask again, why should I be able to dictate who you deal with for legal products?
As Jesus asked, "who is my neighbor?" It's an amazing lack of concern for the poor in my community when I force them to deal, to their detriment, with their "friends and neighbors" who will charge them more for the same items they could have bought from WalMart, and to the poor elsewhere when we restrict their ability to offer us their products. We can absolutely enjoin WalMart or any other vendor from dealing with true slave-labor operations, but our well-meaning attempts to apply American wage levels (or what is euphemistically called "living wage" requirements)simply means that the opportunities will never arrive for our "neighbors" elsewhere. But that's their problem, isn't it?
Posted by Jim McAlister | May 11, 2007 11:20 PM
Well, astringent though it may be, the judgment that our form of political economy is predicated on avarice is well founded. The judgment is just because our society routinely, and with exceptions denounced as interferences in the alleged natural order of things, privileges the purely utilitarian calculus of material progress and efficiency over competing values, humane, communal, and familial. A system is known and judged by its works no less than an individual.
Moreover, in respective analyses of the philosophy of John Locke, a pivotal defender of the political philosophy undergirding modern political economy, no less than Eric Voegelin, Leo Strauss, Wilmoore Kendall, and Sheldon Wolin all concluded that Locke's philosophy aimed at the legitimation of the liberation of the acquisitive instinct from the restraints hitherto imposed by a Christian society. Avarice would seem to be the term for this.
I will probably address other points raised in the comments, albeit in a dedicated front-page essay, as the matter warrants an extended treatment. After, that is, I have addressed some other topics that interest me!
Posted by Maximos | May 11, 2007 11:24 PM
Jeff, that greed exists and affects ANY socio-economic system you could name or imagine is not debatable, just as lust affects the God-given sex drive. If we contend that greed arises from trade, we must also say that lust arises from sex. I, like you, am very aware that there's something wrong with the world -- it's why I'm corresponding on this site. And I appreciate your vigor in identifying the "ills that kill." But I continue to be struck by the fact that free trade has only and always arisen in Judeo-Christian lands, or those profoundly affected thereby. Is this simply a Satanic device to ensnare the people of God? Its worth perusing.
I have full recognition that mankind had already fallen when this report was made, but Genesis indicates a division of labor and implies trade virtually from the get-go. As we know, Cain was an animal husbandman, while Abel was a farmer. Capitalism has ONLY grown under the Judeo-Christian ethic, with its introduction of the idea of the individual, linear time (and thus the possibility of progress rather than the pagan circle of life), property rights, the necessity of fullfillment of oaths (contracts), and most importantly, equality before the law (specifically in the first government God ordained in the Promised Land -- the great Demonstration Project). I see nothing that forbids trade, and much that implies and encourages it, in the admonitions of the Law. The prophets never decried trade, but greed (which was vitually always coupled with the corruption of the rulers) and called the people back to the original plan.
This is what we are called to do. Trade itself is a blessing from God, but LIKE EVERYTHING ELSE is susceptible to corruption. Like sex, it can be perverted. And, as in the case of sex, I lay the blame at the door of a materialist worldview, which produces materialism. The rejection of Eternity by the bulk of mankind creates awful mutations of good things. I remember as a boy watching baseball games interspersed with the old Schlitz commercials: "You only go around once in life, so grab for all the gusto you can!" When people don't REALLY believe in anything beyond this life, they live for the moment. This, not trade itself, is the issue. This is why we are called to be "salt and light" -- to redeem and preserve at least a remnant of mankind against these perversions -- not to forbid their proper application. I believe that the free-market, again, COMPARED TO ANYTHING ELSE, constrains, restrains and transforms the natural motivations of fallen men from greed into mutual benefit. It is our job as men of faith to contextualize the process, not forbid it.
Posted by Jim McAlister | May 12, 2007 8:24 AM
While I'm not perhaps as absolutely committed to global free trade as Jim is (I tend to be ambivalent about it and to look at claims for restrictions on a case by case basis), I do think a couple of things he mentions are especially worth emphasizing: People who attack, say, outsourcing as being bad for a community (because it in some cases puts people out of work) forget that those same people are also consumers who have to buy the very products in question. Outsourcing will almost certainly drive down final prices to the consumer, and this is helpful for the people in question. Nor should the response be, "But that's merely a matter of material welfare," since the _attack_ on outsourcing began by saying that these people are harmed in an area of material well-being--namely, the loss of a job. I'm not saying that being able to buy cheaper clothes is going to be all that much help to you if you are permanently without work. After all, you won't then even be able to afford the cheaper clothes. But if the loss of job is temporary and the lowered prices for goods you need is long-term, it may not be obvious that you are worse off in the long run. The paleo arguments tend to emphasize jobs as if they were quasi-spiritual goods and hence as not comparable on any level to lowered prices, even when both phenomena affect the same people, the same local friends and neighbors.
Moreover, jobs themselves are treated with scorn when they come from (cue eyeroll) _Wal-Mart_. The idea seems to be that, because Wal-Mart doesn't pay as much as some other employers in the U.S., Wal-Mart _isn't_ helping a community when it brings jobs to that community. Yet in other contexts the loss of jobs when an employer outsources is treated as so grave a wrong to the community that the employer is prima facie committing a wrong act. So what we apparently have is that jobs that pay more than X and that take place in small buildings and businesses that have existed for a long time are elevated to a very high status of worth, whereas jobs that pay less than X, take place in big, ugly buildings, or are offered by businesses relatively new to an area, are very nearly an insult to the community and of negative value.
I'm not saying there's a formal inconsistency in all of this, just that the whiplash differences in evaluation are so striking as to suggest to me an exaggeration of certain values beyond what I, at least, would be inclined to grant.
Posted by Lydia | May 12, 2007 10:19 AM
It is tyrannical to enforce defensive, exclusionary insularity, which is what happens when you forbid people to deal with who they wish.
If I take that statement seriously, it strikes me as utter nonsense. Few sane people think that any and every conceivable transaction ought to be permissable, legally or morally. This seems to me to be another one of those areas where people pretend we are arguing over what we are, when what is really going on is that we are arguing over the price.
Posted by Zippy | May 12, 2007 12:37 PM
Jim's comments are typical of the freetraders: free trade is a natural good that is simply bound up with the "Judeo-Christian ethic," and as such is sacrosanct. Anytime a commonsense objection is raised, as in Mr. Martin's article, we must all sit quietly and listen again to the lessons of Von Mises and Hayek, as though we hadn't heard the dogma before. I'm sure we've all heard it and concede the point; yes, free trade maximizes the efficient production of goods and services.
But in the real world there are things that are more important than maximal efficiency in production. Civilzations that aren't dying don't outsource. Japan has thrown us a bone and put factories here only because we demanded it of them. But they're not in a big rush slit their own throats and let their manufacturing base abandon the nation, like us. Neither will the Chinese ever allow this. They won't allow it because they know something free trade ideologues don't know: when trade barriers between nations are thrown down, wealth flows out of the rich nations and into the poor ones. It's not just jobs, the manufacturing capacity too is part of the wealth of nations.
I don't know what is meant when the talk is of the "rights" of elites to do business wherever they want. Perhaps a case can be made for such rights. Whether there is such a right or not, I would still call them traitors. Perhaps some of them believed they had no choice, when after the first wave of outsourcing began they suddenly found themselves unable to compete with a flood of cheap foreign competition. Once it begins, you either outsource or die, until there is no domestic industry left at all. We once had a domestic electronics industry. One day we may be refering to our automotive industry similarly in past tense terms.
Wealth grows slowly, it grows within unified cultures, and it belongs to the people that created it. A standard of living arises in accord with the abilites of that people. It is not the same as the standard in neighboring countries. Before a certain state in the development of capitalistic technologies, it is not possible to consider transnational exploitation of disparities in labor costs. But once it becomes possible, a moral people, a people who care more about their nation than about aquiring cheap trinkets, need to have a rational discussion on placing limits to this behavior. If there are rich nations bent on self destruction preaching free trade ideology (to their own working class)that would like to outsource into your country, you may want to take advantage of them. If there are poorer nations than your own tempting your own elites to outsouce, you may want to stop them. This is because at the end of the day, a nation buliding cars will become wealthier than a nation building potato chips. The nation building cars will have the money to buy all the potato chips it wants. The nation building potato chips, however, will not be able to afford any cars.
Neocon elites don't care about any of this, of course, because they are sure that they and their children will always have jobs as doctors, lawyers, academics, and in government. But it will affect them too, eventually, with the loss of the middle class, and all of the problems that we can see even now developing from that.
Can anyone really believe that the loss of millions of manufacturing jobs that we've seen since the implementation fo NAFTA is a good thing, and that we ought to have more of it? Apparently so, for the drones at the Acton Institute prattle on even as hordes of unemployed Michiganders gather by torchlight outside in the street. Their response: "Let them eat potato chips!"
Posted by Dan McCulloch | May 13, 2007 1:52 AM
I'm reluctant to jump in here, since Jim is doing a yeoman's job of defending free trade while simultaneously recognizing the evils of materialism and pointing out to any who will listen that the two are different phenomenon.
But since Dan decided to take a swipe at the "neocon elite", of which I am a proud member, I thought I'd make just a couple of comments.
First, Dan says "at the end of the day, a nation buliding cars will become wealthier than a nation building potato chips." This is an empirical claim and as such should be tested. Of course, in America, the relevant comparison should be between cars and micro-chips, as millions in this country have gotten rich by creating software and hardware that have computerized the manufacturing process as well as just about every other process you can think of (including writing)!
Will we be in trouble if America stops producing cars? Were we in trouble when people stopped wearing hats or to use Jim's example, buggy whips?
Dan wants to make empirical arguments when the data is on the side of the free-traders. I think Maximos was doing a better job of attacking free-trade and market capitalism when he appealed to values that can't be quantified.
As for Japan, China and any other country you choose to name; yes, each has pursued trade of the less than free variety. But so has the U.S. (even now, with NAFTA and such, we still do much to restrict the true free flow of goods and services between nations). And the real question when comparing the U.S. economy with an Asian economy or any other is to ask a series of empirical questions, the answers to which will probably favor the U.S. (e.g. Japanese growth over the past two decades has been enemic and population growth is declining, China still has millions of peasants living a very basic agricultural life, etc., etc.)
So Dan, to answer your question, I say yes, it has been a good thing to lose millions of manufacturing jobs and we ought to have more of it, because we will continue to find new and productive uses for American labor and talent.
Posted by Jeff Singer | May 13, 2007 9:08 AM
"And it's the Third World for precisely that reason."
I would dispute that. Economically speaking, it is the Third World because it has almost no manufacturing capacity and primarily exports raw goods. This has two important effects. Applied science and engineering fields are integral to manufacturing, so those middle class professions are nearly extinct in the Third World. Since specialized labor is not as necessary for raw goods, it creates a downward spiral where new invention is stifled (per Adam Smith) and property ownership becomes concentrated among an elite class. For a variety of reasons, those elites perpetuate the cycle by sending their capital overseas instead of investing in local ventures.
The Third World has no comparative advantage in trade, only an absolute disadvantage. Comparative advantage depends upon certain assumptions: full employment, constant opportunity costs, relatively equal costs for retraining or new equipment, and markets free of tariffs and protective subsidies.
Posted by Step2 | May 13, 2007 1:50 PM
I'm far more interested in empirical arguments to the effect that free trade will harm America's material well-being in the long run than in arguments that it will harm ineffables. So call me a materialist. Maybe one reason I'm more interested in such arguments is because I'm more sure that I know what we are talking about. On the other hand, as Jeff Singer points out, _those_ sorts of claims have the virtue of being falsifiable. And I would note that the Mackinac Institute thinks it has some ideas about why Michiganders are out of work, and it ain't free trade. Not that the explanations are mutually exclusive. I suppose it could be some of each.
Now, I do have some concerns about sending "too much" of our manufacturing overseas in terms of national security. I'd be interested in Jim's and Jeff Singer's take on this: Isn't there a worry that if we become too dependent on other countries for manufacturing, we will not be able to defend ourselves vigorously and independently as a nation? Might we not become too dependent on other countries' approval of any defensive actions if we are dependent on them for a manufacturing base to our economy? And this might end up applying to defense production as well. I've often felt what a shame it is for the long-term existence of (for example) Israel that she is unable to produce enough of her own munitions. Being such a small country and so dependent on our munitions manufacture, she then is forced to listen to our sometimes very foolish defense advice lest we stop selling arms. I don't think America would want to be in anything like a similar position. Not that we are anywhere close. But if you just say, "Heck, yeah, let's send all those manufacturing jobs overseas," doesn't there come a point when you have to say, "Okay, enough, let's stop now"?
Another question for the free-traders (with whom I have a lot of sympathies): Not to mince words, but what about the men in the U.S. who aren't smart enough to take jobs making microchips and writing computer programs? Do we really want to leave ourselves without respectable jobs for people of middling to slightly-lower-than-average intelligence? Is that good for national stability?
Posted by Lydia | May 13, 2007 8:05 PM
Lydia,
Good questions!
With respect to the security question, I suppose a large country like the U.S. might want to keep a manufacturing base in order to produce weapons to defend itself, and therefore might have to restrict trade to do so.
But the real question to ask is whether or not we are confident we have something to sell the world and whether or not there are willing buyers who can sell us the weapons we need. Israel is instructive here. Yes, it has to listen to the U.S. if it wants to keep getting U.S. arms, but it also had to listen to the French and the Soviet Union back in the early days of its existence when the U.S. wasn't willing to sell Israel the weapons and technology (in the case of nuclear power and the French) it needed. Somehow it managed to buy the weapons/technology it needed because the world was full of willing buyers and Israel presumably had something worthwhile to sell.
I think your second question is even better and it points to an idea we haven't really discussed yet. Namely, while free trade is good for economic reasons, there are winners and loser and free traders should be willing to use government policy to help the losers. In general, when it comes to how to help those with low IQs or average IQs who won't be writing computer code for a living, I think Charles Murray's recent calls for strengthening vocational training makes a lot of sense. America will always need construction workers to build homes, roads, bridges, etc. and these are jobs that even a paleo should love as they pay well and require learning a skill or craft, which the paleos seem to romanticize (I'm guilty of romanticizing these skills as well every time I need to pay $150 to a plumber to check my old house pipes)! We will also always have manufacturing, but it will be the more skilled types of manufacturing that survive, jobs that pay well but also require some good basic skills and some technical training (e.g. how to weld or how to operate a machine lathe). So I agree with Murray that we have to do a better job of preparing folks for these jobs that don't require a college degree. We can also invest in more public infrastructure, thereby creating demand for these types of jobs while presumably filling a public good need (e.g. better trains to move goods and people all over the country...why is it that Japan and France have world class train systems and we don't? Because they invest in these systems).
Those are just a couple of simple ideas...I'm sure there are others out there. The point is not to restrict trade but to help those who will be temporarily harmed by it.
Posted by Jeff Singer | May 14, 2007 9:49 AM
There is so much abstraction in this thread it is hard to get a handle on it. What if we ask some historical questions, taking as our context our own country? Will some illumination be thereby thrown on the difficulties?
(1) At the time of the Ratification debate, the manufacturing interest in America, and moreover the manufacturing apologists, favored (a) free trade or (b) calculated tariffs?
(2) The Free Traders in the early Republic were (a) Northern businessmen or (b) Southern aristocratic agrarians?
And, a bit more polemically, since the answer to both questions is (b) . . .
(3) Do the advocates of free trade today often hearken back to the American republican tradition, which is also a free trade tradition, or do they bring over an altogether different tradition and try to present this as homegrown?
I acknowledge that Hayek and von Mises and the rest were powerful economic thinkers; but I would have a good deal more sympathy for our free traders today if now and then they gave evidence of some study of our native free trade tradition. Men like John Randolph of Roanoke and John Taylor of Caroline were not, rest assured, uninteresting people.
My old friend John E. asks for "a real live fully functioning paleo-conservative community somewhere." It's hard to say exactly what that means, unless it means simply a traditional community organized upon some non-economic (usually religious or moral) principle. If I may call upon the past, I would say that the Virginia planter society of the Old Republic was such a community par excellence. Virtue was her watchword; Christianity was vibrant but not Calvinist, and thus never possessed by that famed work ethic which was eventually shaped to fit the acquisitive instinct liberated by modern philosophy.
By some twist of fate this archaic commonwealth managed to produce about a third of the great men of the Republic. But the really perfect twist of irony is this: that this commonwealth tried -- and failed -- to resist levelling industrialism by means of Free Trade.
Perhaps turning to history would strike John as unfair or obscurantist. Very well. I know a community, living today, that stands athwart the materialism at the heart of modern Liberalism (and thus, in this context, would qualify as "paleoconservative," though I would not myself use that word). This community is my church, at which hardly a week goes by that attempts are not made to resist the political economy of modern America. Fitful, halting, often ineffective attempts; but sincere ones nonetheless.
Is this church community perfect or complete? Far from it. But there can be no doubt that near to its heart is a rejection of the modern political economy, and a recognition of how daunting a challenge this is; for "in the world you will have tribulation. But take heart; I have overcome the world."
Posted by Paul J Cella | May 14, 2007 11:27 AM
Paul's reference to the agrarian tradition of the Old South is also apposite in another respect. The free-trade policies of the Old South were as perfect an illustration of the classical theory of comparative advantage as one is likely to find; the South had an advantage in the production of such things as cotton, things that simply could not be produced elsewhere at that time with comparable success. The trading situation of the world, that is, was not a race to the bottom on costs and prices for goods that could well be produced just about anywhere except in the midst of a war zone or in far northern Siberia.
But that won't preclude the regurgitation of hoary old nostrums that were precisely adapted to 250-year old circumstances that no longer obtain.
Posted by Maximos | May 14, 2007 11:41 AM
Paul and Maximos raise the interesting historical case of the old South as a good example of a paleo-conservative community and as "perfect an illustration of the classical theory of comparative advantage as one is likely to find" because "the South had an advantage in the production of such things as cotton, things that simply could not be produced elsewhere at that time with comparable success."
It is worth noting at this point that the South was successful economically due to its slave labor and the importation of thousands of slaves from West Africa to help plantation owners farm their plantations. This fact alone shouldn't rule out the possibility that Virginia could still be used as a model of a good paleo-conservative community, although it does call into question how such a community would be compatible with a modern-day paleo ethic.
However, the problem of slavery is relevant to the debate on free trade today given China's potential use of prison labor in the manufacture of its goods that are sold in America. I would say that while the U.S. can still benefit from such trade (as the theory of comparative advantage suggests we will), there are strong moral reasons to oppose such trade and it would be worth while to consider these issues when negotiating trade agreements with China or any other potential trade partner that is involved in morally repugnant behavior.
Posted by Jeff Singer | May 14, 2007 12:56 PM
Just surfing the web and I came across this post from "The American Scene", which supports the argument that I made in my previous comment that we should implement policies that address the harms associated with free trade as opposed to implementing policies that would undermine free trade:
http://www.theamericanscene.com/2007/05/galbraith-few-weeks-ago-i-praised-james.php
Enjoy!
Posted by Jeff Singer | May 14, 2007 5:06 PM
I do think it's a bit interesting to note that paleos in the role of anti-free-traders are lamenting the loss of manufacturing jobs. Shouldn't an emphasis on agrarianism and on meaningful jobs and such have the effect of making one deplore manufacturing jobs, and particularly those that involve less-skilled labor? Certainly when people like C.P. Snow defended industrialism, they were doing so against claims that factory jobs are dehumanizing and so forth. With that as background, I'm surprised that we should be called by crunchy types to lament the loss of factory jobs in the U.S. Has there been a change of mind about their negative worth?
That said, I retain more uneasiness about the security and stability dangers of losing a manufacturing base in the U.S. than I sense coming from Jeff S. It seems to me that Israel (to go back to my example) has had to do a lot more than have the money or whatever-else to trade in return for weapons. There are such things as politically correct barriers to arms sales, and Israel has had to pay out in a lot more than material terms for armaments. Indeed, it really is a matter of looking from one visit of the U.S. Sec'y of State to the next, and even more from one administration to the next, to see what Israel will next be told it must do or cannot do to defend itself, with all the while the threat being of our ceasing to sell arms. There's a lot more going on there than just our saying, "Oh, that country has something we want in return for munitions." If all or most of our manufacture goes elsewhere, we may well have to contend with a situation in which people try to tell us that we can't do X or Y or Z to defend ourselves because those things are immoral and the like, even if they are not immoral except in the confused (or corrupt) minds of the rulers of the EU or Mexico, etc.
Posted by Lydia | May 14, 2007 5:27 PM
I read that post over at the American Scene, though not the linked essay over at The Nation, as I am loathe to register for another website. I am generally unimpressed by the counsel that free-traders ought, as a matter of principle or logic, support ameliorative measures designed to compensate for the instabilities of Destructive Creation. Perhaps the irony, not to say something more culpable, of those who believe that the freedom of contract is the foundation of the free society and private sector capital the bulwark of liberty advocating what amounts to a measure of unfreedom, a statist intervention in the workings of the economy, is too much for me to endure. There is a certain logic to the proposal; but as Zippy indicated in the thread above, once we have reached this acknowledgement, we are really only haggling over the price, to wit, who will be coerced or enjoined against something, when and where they will be so restrained, and why. But the fact of coercion is simply assumed; how else could the matter stand if I am to be taxed to finance the perpetual retraining of those uprooted by Destructive Creation, an instability I neither create nor profit from, while those who engender such necessities get to retain the profits they reap? No, this really does reek of the "private profit, public expense" dynamic that is become endemic to our society. I'll pass on the circumstances that create this vicious necessity, thank you.
Lydia is entirely correct to note that a lack of solicitude for an industrial base bodes ill for the sovereignty and liberty of action of a nation state, whether that state is a beleaguered Jewish state in the Levant or a (declining) superpower such as the US (don't imagine that China is unaware of the possibilities of influence that current economic arrangements will grant her twenty years down the line. The Chinese are not at all like us, submerged in the short-term...).
As regards Paleo allegiances, while many paleos might regard agrarianism as a model of a human society, they are quite resolutely anti-utopian, and, in consequence, fully accept that for the time being, industrialization is an ineliminable aspect of our way of life. Paleos would prefer that our industrial society undergo some significant measure of decentralization of both governance and production; but, manifestly, industrial society is to be preferred to the alternative of full integration into a globalized economy, with the attendant loss of sovereignty. Who said that paleocons couldn't also be pragmatic?
Posted by Maximos | May 15, 2007 10:41 AM
The labour laws which stipulate how much a worker gets paid are basically dependant on the local culture. Western societies as a whole feel that workers are entitled to more than just bare minimum wages. The benefits claimed by workers are ultimately taken from business profits. Given equal plant and technologies; western companies are far more profitable in countries with cheaper labour rather than in Western countries themselves.
Because transportation costs—which were once a natural trade barrier—are now so cheap, goods can be transported from across the world with minimal effect on their price.
Globalisation basically allows corporations to by pass local labour laws while at the same time competing in the local environment. The business model that conquers the world is the one that makes the most profit. Take it as a maxim that the company with the greatest profits eventually dominates the markets. Companies that wish to survive have to adopt this business model. It’s no wonder that companies such as McDonalds and Wal mart are some of the most profitable in the world. They have the same business model as the Chinese: Low wages, high turnover, large profits.
Globalisation undermines local culture. Businesses which embody the local wage laws—which are basically a reflection of our thoughts on the value of human beings and their rights to the fruits of their labour—are at a comparative disadvantage against companies which basically do not give their employees and equal share of the profits: They go broke. Basically the Good Christian Company--which gives it workers above award wages and benefits--is driven out of business by the Bad Christian Company which pays it workers minimum wages, etc. In a free market in order to survive, the dominant business model has to be adopted: our workers end up being treated as wage slaves while the owners of businesses get the profits. People here get treated like the people in China get treated and our business culture becomes more Chinese. I’m not sure this is a good thing.
While I believe Hayek and co were right about the free market being the most efficient producer of goods and services, I feel that their view of society was somewhat skewed. Economists talk of the world as if it is a giant market place, but that isn’t the way the world works; every now and then it becomes a battlefield.
Let’s say a country specialized in cheese making--because of comparative advantage—and another specialized at manufacturing. If a war broke out between these two countries the cheese making country would be at a great disadvantage. Its soldiers could stand behind cows and throw blocks of swiss or gruyere at the enemy, while the soldiers from the manufacturing based economy, could throw all sorts of groovy stuff at the cheese makers; like bombs, tanks and grenades. Not all comparative advantage is equal, and the secondary effects that flow from a manufacturing based economy are probably greater than those from a pastoral or service based economy. The massive investment in Chinese manufacturing has not only been financial. There has been a massive technology transfer from the West to the East and I’m not sure if we should be giving a country—which is governed by ideology which is hostile to conservatism—knowledge on how to make computer chips and rocket propellants.
Hasn’t anyone noticed that the countries which can throw their weight around the world are all manufacturing based?
Posted by The Social Pathologist | May 15, 2007 7:22 PM
The benefits claimed by workers are ultimately taken from business profits.
That assumes compensation and performance to be completely independent. They aren't. The real answer is "it depends". I've made additional profit by paying better in the past, and I'm sure I'm not the only MBA to figure this out.
Posted by Zippy | May 15, 2007 8:01 PM
I would just like to throw into the mix here, in response to one thing S.P. said, that to call minimum wage laws a reflection of "local" ideas about wages is a bit odd given the way Americans usually use the term 'local.' For example, I'm not at all sure Iowans and New Yorkers have the same ideas about what constitutes a fair wage. But in the U.S., minimum wage laws are set by the federal congress, which I have to say is probably dominated more by New Yorkish ideas about fair wages than Iowan ideas.
I grant that there are likely much _bigger_ differences between the ideas of Americans from all regions and the ideas of people from India on this subject than between Americans in different regions. But still, I'd much rather see minimum wage laws, if we must have them (and here I'm not terribly enthusiastic) be set at the state level rather than the federal level. And I can make a good constitutional case that the founders would have agreed with me. Maybe paleos will agree with me here, too. A lot of them are anti-federal-govt. in their attitudes. But I'm just a little disinclined to agree that the U.S. Congress speaks for all Americans when it sets a minimum wage for the whole country.
Posted by Lydia | May 15, 2007 8:17 PM
I "began" this thread (thanks alot, Jeff) with the contention that coercion in enforcing some "community standard" for whether a legal business should be allowed to follow the course its management determines to be in the best interests of it's customers and it's investors was morally and practically wrong, and would ultimately produce results the opposite of those intended. I have read nothing that even begins to explain the mechanism for an alternative to free markets (and I, with Jeff and others, condemn any attempts at economic favoritism and admit that there's never BEEN a totally free market). But who gets to decide what people can or cannot do with their property, and to what degree? I am saying that the world is full of the empirical evidence that restrictions of just this sort, whether tariffs (to protect EITHER manufactures or agriculture), guilds, unions, etc. always benefit the few at the expense of the many. The further away from freedom you move, the more poor people there are in a society.
One of my favorite economists, Russell Roberts, recently commented on the poignancy of old folk songs lamenting such things as the closing of a manufacturing plant that employed most of a town’s workers. He says he would love to write a song that tells the other side of the story, but admits “It's harder to write a song that shows what flourished because of creative destruction.” That’s an unfortunate truth, because in the history of free-market economies, the loss of one industry has always resulted in the rise of new opportunity. The problem is, because there is usually no direct replacement of a specific manufacturing plant with a new plant, and therefore seldom a new job arising seamlessly to replace an old one, to observers and participants alike there appears to be a zero-sum loss occurring. In other words, the closing of a clothing plant in Tennessee, with the jobs going to lower paid workers in Guatemala, is seen as a net loss to the specific workers as well as to Tennessee and the nation. We think: “Our loss is their gain…It’s unfair.” But, as the great 19th century French economic pamphleteer Frederic Bastiat reminds us, there are unseen as well as seen effects of economic events. It is difficult, but essential, to trace all of the other effects that very often leave people better off than previously, though they suffer temporary financial and emotional loss. To paraphrase the biblical patriarch Joseph, it may have started out bad, but it ended up good. And maybe the struggle itself is part of the blessing. Who knows? I've "been there" myself and know that it has been the case for me.
Successful companies continuously seek to be better off themselves by making their customers better off. They seek to improve products and to lower the prices of those products in order to ward off competitors (both direct and indirect) and stimulate additional sales. It causes those customers, who are most often employees of companies themselves, to continuously be on the lookout for better alternatives to get more for their money. I can be continuously better off, even if I never get a raise in pay, if I continuously get more for my money. In short, the desire to be better off is part of the human condition.
Second, as this process occurs, there is necessarily creative destruction. The process of seeking better ways of doing things, including lower costs (which in the vast majority of cases must be passed on, due to competitive pressure, rather than kept as additional per-sale profits) leads to the replacement of whole industries (think whaling, as refined petroleum oil became a cheaper alternative to whale oil, or the many industries that foundered in the wake of the rise of Henry Ford’s cheaper autos) with new ones, as well as to the movement of jobs from one place to another as long as the lower labor costs are not offset by lower productivity.
There are two questions to be asked: one, would people want to freeze the status quo in place if they were benefiting from the change, and, two, how can they protect their situation from change without doing the same for everyone? The answers to the first is; no, they will always want more for their money, and would never agree to stop progress, as long as they're not being hurt. To the second, the answer is that we can’t, though we may try and even succeed briefly through political action. Notice here that the only way to succeed in my efforts at self-protection is to impose my wishes on people who would have done something different if left free to do so. In other words, I must remove their freedom! But what’s good for the goose is good for the gander. Eventually, my freedom will also be curtailed in some area or another, and usually in several. But maybe I would be willing to trade that loss for the stability and safety I’d gain. But how is that safety financed? Through the imposition of inferior methods and products, with their higher costs. I’ve kept my job, but I’m also a little poorer now than I had been previously, and will be poorer still (or my kids will) as this process winds its way systemically through society. Meanwhile, the lower costs that the market would have enjoyed from the alternative that was shut out (multiplied by the many alternatives that have been restricted) have not been available to provide the surplus for consumers that would stimulate ongoing beneficial innovation (translate: higher ‘bang for buck’) or even could have financed those developments (read: I could invest my savings in these emerging ventures). The new products and new industries that could have provided better quality of life and even better employment opportunities either don’t come about or come about more slowly. This is the problem Bastiat was trying to convince his fellow Europeans of in his tract “What is Seen and What is Unseen.” He predicted exactly what has come to pass – Europeans becoming steadily poorer and less secure because of their shortsighted desire for protection from creative destruction.
Consider this, as well. Even within America, jobs have always migrated to lower wage areas, and the areas they left behind have always generated new and even better alternatives, as long as people were left alone to do so. For example, New England was originally the center of the American textile industry. As time went by, those plants were closed and the jobs moved South to places like the Carolinas, where people were happy to work for lower wages and where subsequently the wealth of those people grew. You can bet that those displaced New Englanders were plenty steamed about their loss. But here’s the interesting thing: though jobs were displaced, average incomes in New England have only recently been equaled by those in the South. So opportunities, often better opportunities, somehow showed up to replace those lost. And what’s the real difference in the migration of jobs within a country and the migration of those jobs out of the country? In each case, the consumer, and most particularly the poorest consumer, benefits from the resultant lower prices and the market as a whole ends up with the surplus to instigate the next new advance, which will require new employees to produce it. The overall worldwide market grows as people in heretofore economic backwaters begin the development of skills, opportunity and wealth. Rather than requiring charity, they can now dispense it. If I am afraid of being a loser in this process, I can let necessity become the mother of invention, seek the training to prepare to engage at the level I can or will, and be content with my place in the world. I could save money or even purchase insurance against the temporary setbacks that might occur. If I'm disabled or truly UNable to make my way in the world, then that is where Christians have the obligation to help. But when I seek to bend the world to my will and band with others to produce through political coercion what I couldn't achieve rightfully or extract that benevolence that was properly the domain of the church, I'm in the same camp with any other manipulator and intriguer. Trade wars, is I said in a previous post, often become shooting wars. Or as it has been otherwise put, if products don't flow freely across borders, armies will.
My original post challenged the idea that the economic system would be more salutary if the desire for profit and personal gain by men directing their efforts solely to the satisfaction of material interests did not disturb its smooth course. Under that rubric, the existing state of affairs, whatever it is, would have to be preferred to any further progress. Agriculture and handicraft, and maybe small shopkeeping, are the only admissible occupations. Trade and investment are superfluous, injurious, and evil.
The assumption seems to begin with the premise that free-market capitalism is inherently predatory and evil, and therefore has no truck with Christian value systems. Anyone advocating free markets would, under such a belief structure, promote that which is harmful to society. I absolutely challenge that notion. I tried to do so by pointing out the only "ground" in which trade has grown at all has been Judeo-Christian ground, and I contended that the reason was because those societies touched by that truth were bestowed with the neccesary ingredients for it to occur: equality under law, secure property rights, and an ethic of respect for obligations, cooperation and service. It might, as I pointed out, be argued that trade was a device of the devil to corrupt Christianity, but I see more blessing than curse for the poor and downtrodden in capitalism. Corruptions of the system are not inherent to it; they are inherent to fallen mankind. Paul is correct to lay such corruption at the feet of materialist humanism, and to struggle against it.
That being said, (relatively)free markets have spread the blessing of plenty to every society they have touched. It will be argued that they have also spread excess. True as that may be, prior to the appearance of industrial capitalism, the reigning problem for all of history (with the exception of the Judaic theocracy under the judges), has been grinding poverty. Mass production was something entirely new in human history; production for the MASSES, not the privileged class, with its "sumptuary laws" to keep the riff-raff from deigning to aspire to what a stratified social order would deny them.
When I said I was opposed to coercion, I meant I was opposed to corruption of a truly free market for legal goods and services. Having read their writings at some length, I see nothing to indicate that John Randolph or John Taylor would not find themselves in nearly complete agreement with Mises and Hayek. Each of them absolutely decried the intervention of the state on behalf of some parties, whether manufacturing or agricultural, at the expense of others. John Taylor and John Randolph were both very wealthy men and lived sumptuously, richly supplied with the latest manufactures from England. They, very properly so, did not see what justice there was in
damaging their trading relations for their commodities by protecting fledgling American industries. Which seems to be where we started.
And as Forest Gump (to whom many of you no doubt think I bear resemblance) said, "And that's all I have to say about that."
Posted by Jim McAlister | May 15, 2007 11:36 PM
...with the contention that coercion in enforcing some "community standard" for whether a legal business should be allowed to follow the course its management determines to be in the best interests of it's customers and it's investors was morally and practically wrong,...
That is more than a little question-begging when precisely what is at issue is what ought to constitute "legal business".
But who gets to decide what people can or cannot do with their property, and to what degree?
The same people who are doing it now: those who are responsible for the common good. In the Republic of the United States that means various government entities (including government bodies at various levels which elect to grant community standards, in some cases, the force of law).
In other words, I must remove their freedom!
Every polity which enforces any law at all - including the enforcement of the obligations imposed by property rights - does so solely and only by restricting freedom through authoritative discrimination. We discussed this recently in this thread.
Posted by Zippy | May 16, 2007 12:01 AM
Hello Zippy,
I agree, high wages are not incompatible with high profits. But if we take two businesses in which the variables are equal with the exception of wages, the company that pays less gets more profit. Over the long run it will gain an advantage over its competitor.
Lydia: The U.S. congress sets the minimum wage laws but the Chinese communist party determines whether U.S. businesses--which employ these minimum wage employees--remain profitable. No business, no minimum wage and on to welfare.
Posted by The Social Pathologist | May 16, 2007 10:03 AM
Sorry all about not proof reading my first post on May 16th. It's past midnight here.
Posted by The Social Pathologist | May 16, 2007 10:05 AM
But if we take two businesses in which the variables are equal with the exception of wages, the company that pays less gets more profit. Over the long run it will gain an advantage over its competitor.
It depends on what you mean by "the variables are equal". Higher sales commissions often result in higher sales, for example, despite a bigger expense line for employee compensation and lower EBITDA for a given sales volume. The "all other things held constant" constraint exists only in the imagination of Marxists fixated on the labor Theory of Value.
Posted by Zippy | May 16, 2007 10:14 AM
Is "creative destruction" maybe getting a bad rap in part because it has such a nasty-sounding name? I realize this is a naive question. My own inclination is to feel that the loss of jobs consequent on new technologies or on moving plants from higher-wage to lower-wage areas may just be morally neutral. And sometimes I can definitely see the advantage. I don't _think_ the contemporary critics of capitalism really want to say that we should have outlawed the electric light bulb because it would put candle-makers out of business. At least, I hope not. And I'm sure glad we have electric light bulbs. I suppose in that example I'm in favor of "creative destruction" and think it was worth it for the candle-makers to have to find other jobs.
But I suppose someone could cook up an example (I'm too lazy to do so just now) where I would say that the change was not worth it.
Do we have to say, "I'm in favor of creative destruction" or "I'm horrified by and opposed to creative destruction" as an absolute matter? Surely it will vary from case to case.
Posted by Lydia | May 16, 2007 10:18 AM
Zippy, unfortunately my assertion IS question-begging, I suppose. But my point is that governments have been running roughshod over individuals in the name of the common good or good order or whatever slogan you choose for all of history. In the end, it has almost always meant that a few were benefited at the expense of the many. If you don't buy the idea that the government that governs least governs best, then just let me know when and where you're running for office and I'll make sure I'm not living there. Central planners just cannot ferret out all the contingent results of their decisions, however well intentioned. The road to hell is paved with such.
By the way, for an interesting article dealing with this concept, see this one by Don Boudreaux http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_507822.html
Posted by Jim McAlister | May 16, 2007 11:22 AM
My own inclination is to feel that the loss of jobs consequent on new technologies or on moving plants from higher-wage to lower-wage areas may just be morally neutral.
Of course, the entire argument has centered on this very issue, and its burden has been that present job losses owing to the creative destruction of the globalized economy are more often than not not morally neutral, and that precisely because they represent the dereliction of the duty of our public institutions to pursue the common good, and not the good of some particular faction, such as 'owners of capital', where the common good cannot be comprehended as some utilitarian scheme of preference aggregation or as the sum total of all preferences as expressed through the market.
Do we have to say, "I'm in favor of creative destruction" or "I'm horrified by and opposed to creative destruction" as an absolute matter? Surely it will vary from case to case.
Of course matters will often vary; but apologists for the globalized economy continue to intone the mantra of the Unseen Hand, according to which the more efficient employment of capital always and everywhere benefits the overwhelming majority of the people - and as for those not made the recipients of these benefactions, well, Progress mandates that the Unseen Hand become a clenched fist in order to smash the obstacles to Progress. What ought to be objectionable is the attempt of the apologists to exempt the determinations of the Market from moral and political judgment. Are we a republic or a corporatist state?
Posted by Maximos | May 16, 2007 11:23 AM
Zippy, unfortunately my assertion IS question-begging, I suppose.
Yep.
... governments have been running roughshod over individuals in the name of the common good or good order or whatever slogan you choose for all of history.
Yep. That includes doing so by enforcing certain conceptions of property rights, by the way.
...just let me know when and where you're running for office and I'll make sure I'm not living there.
No force on earth or heaven could get me to run for so much as dogcatcher. But the intuition that you would not like it if I were king is probably sound.
Posted by Zippy | May 16, 2007 11:31 AM