Intellectuals, Moralists, and the Free Market; J. K. Williams

John K. Williams INTELLECTUALS~ MORALISTS, AND THE FREE MARKET "Capitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the de fense they may hear; the only suc cess victorious defense can possibly produce is a change in the indict ment." So wrote the noted economist and social scientist Joseph Schumpeter in 1942. The situation he depicts is worthy of Lewis Carroll; indeed, the bizarre principle of "justice" advo cated by his "hanging judges" "Verdict and sentence first; indict ment afterwards" -is remarkably reminiscent of the slogan cham pioned by Carroll's Queen of Hearts at the trial of the tart-stealing Knave of Hearts: "Sentence first; verdict af terwards." The Reverend Doctor John K. Williams is chaplain and teacher of classics at St. Leonard's College, Brighton, Victoria in Australia. The irrationality of the situation described by Sqhumpeter is not con fined to a verdict and sentence des perately seeking for an indictment.

In the work fIiom which the above quotation is t~ken he .argues that the chances of' a free market econ 0my surviving are remote: "Can capitalism survive? No, I do not think it can." At the same time, however, he proffers a !compelling case for holding that capitalism is a uniquely beneficent economic system enjoy ing an unsurp!assed, and arguably unsurpassable, irecordfor raising the standard of living of an entire com munity and thereby dramatically alleviating the' penury and want of the worst-off.. 'fThe capitalistic pro cess," he asserts, "not by coincidence but by virtue of its mechanism, pro gressively raises the standards of life of the masses." He wryly ob serves that "Queen Elizabeth (the 111 112 THE FREEMAN February First) owned silk stockings. The capitalist achievement does not typ ically consist in providing more silk stockings for queens, but in bring ing them within the reach of factory girls in return for steadily decreas ing amounts of effort."

Schumpeter Confirmed An examination of the diverse and mutually contradictory charges lev elled against the free market con firms Schumpeter's judgment as to the desperation marking the critics' search for a plausible indictment. In Schumpeter's day the standard charge was that a free market econ omy had produced the Great Depression, creating economic stag nation and permanent mass unem ployment. The data later presented by such scholars as Milton Fried man and Murray Rothbard docu menting that the Great Depression was the creation of decades of gov ernmental interference with the market, had been conveniently ig nored (just as, in contemporary ver sions of a similar criticism, a pleth ora of studies documenting the consequences of minimum wage laws for those whose labor is of marginal value are ignored). With the publication of John Ken neth Galbraith's The Affluent Soci ety, however, a stunning change in anti-capitalist criticism made its de but: the free market was too produc tive, tempting men and women to sell their souls for an obscene afflu ence measured in terms of burgeon ing super-markets and automobile tail fins. Today's fashionable charge is either that such institutions as private property, the free market, and material incentives to produc tion, which once constituted a re markably successful means for deal ing with the problem of scarcity, are no longer necessary because we are living in a "post-scarcity" age, or that rapacious capitalism has greed ily depleted the earth's material re sources and, by ushering in a new era of worldwide scarcity, has brought about its own demise.

Quaintly, some critics parrot both charges, happily indifferent to their mutually exclusive nature. Schumpeter's case for the uniquely beneficent nature of the free market also stands scrutiny after four dec ades; indeed, his rebuttal of the bor ingly familiar claim that the pro ductive success of capitalism, and hence its unintended lifting of the standard of living of the poorest, was the result of a chance combination of fortuitous circumstances and wise governmental constraints, has yet to be answered. Further, those four decades have witnessed the demonstrable failure of a wide-ranging diversity of social ist experiments. Documenting the by now commonplace is tedious; suf fice to suggest that the comparative beneficence of an economic system 1982 INTELLECTUALS, MORALISTS, AND THE FREE MARKET 113 which, in the Soviet Union, results in the one-third of its working pop ulace employed·in agriculture being unable to produce the food .required by a population of 265 million, and of an economic system which, in the United States of America, witnesses the four p~r cent of its working pop ulace employed in agriculture vastly exceeding the food requirements of its 220 million people, is not hard to determine.

A PuzzlingAttitude Indeed it is simultaneously ironic and tragic that many Third World countries, in bold but fashionable defiance of observable empirical reality, should have opted for collec tivist "agrarian reforms" and thereby have reduced nations once enjoying thriving agricultural bases to the unhappy situation of being obliged to import basic foodstuffs. In passing, it is worth noting the moral astigmatism of such reports as the Brandt Commission's North South: A Program for Survival and numerous similar publications of the World Council of Churches: one might have thought that the inflic tion of chronic food shortages upon an entire population by ideologues might be perceived as a betrayal of "human rights" or as incompatible with "social justice" -or even, per haps, as a new and particularly vi cious form of "exploitation." That such is not the case-indeed, that policies seemingly designed to produce equal destitution for all should be warmly commended-is a sad commentaty upon the ideologi cal captivity of many Western intel lectuals.

It is that "Ideological captivity" highlighted by Schumpeter's gro tesque but perceptive image of capi talism's critics. as "hanging judges" blindly determined to sentence cap italism to deat~, that merits careful thought and discussion. Why do so many intellectlJals and moralists at tack so readily and so unremittingly an economic system the worst about which even the most dogmatic of so cialists can say is that it is the best yet, save for the particular untried version of socialism the socialist in question advocates? There is nothing irrational about judging an economicsystem, as many moralists do, o~ the basis of how it serves the worst-off; what is irratio nal is that those committed to this criterion ofjudgment should display an almost instinctive abhorrence of a system which, at least to date, has demonstrablyqone best what they value most. It. ~s this puzzlingly ir rational abhorrence of the free mar ket-an abhorrence not explicable in terms of some simple, factual dis agreement as t9 the productive ca pacity or social i consequences of an economic system-that the defender of the free market must seek to un derstand and to 'address.

114 THE FREEMAN February Who Are the "Intellectuals"? Attempts to define the notoriously vague term "intellectual" are le gion, and none of them is entirely satisfactory. Perhaps the best that can be said was said some years ago by Friedrich A. Hayek in his justly famous paper, "The Intellectuals and Socialism." The intellectual trades in ideas: "What qualifies him for his job is the wide range of subjects on which he can readily talk and write, and a position or habits through which he becomes acquainted with new ideas sooner than those to whom he addresses himself." Hayek goes on to note the truly astonishing number of contempo rary professions and activities which belong to this class: "The class does not consist only of journalists, teachers, ministers, lecturers, pub licists, radio commentators, writers of fiction,cartoonists, and artists all of whom may be masters of the technique of conveying ideas but are usually amateurs so far as the sub stance of what they convey is con cerned. The class also includes many professional men and technicians ... who through their habitual in tercourse with the printed word be come carriers of new ideas outside their own fields and who, because of their expert knowledge on their own subjects, are listened to with respect by most others."

This description· of the "intellec tual" is substantially the same as the description usually provided of what such economists. and social sci entists as Fritz Machlup, Peter Drucker, Daniel Bell, Peter Berger, and Irving Kristol have called the "New Class." Irving Kristol has ar gued persuasively that, since the early 1970s, the most significant "class struggle" in Western nations is the struggle between the old ''business class" and the "New Class," the ascendant elite based on the knowledge industry. Peter Berger, commenting on the power of this new elite, notes its "capacity to in fluence public opinion through the communications media and through the educational system." "This in fluence," he continues, "... even ex tends into the old business class it self: Corporation executives go to churches where they are preached at by New Class clergy, their wives read magazines written by New Class authors and editors, and their children go to colleges staffed by New Class professors."

Reasons for Irrationality Perhaps the first feature to note about the "intellectual" is his essen tially prescriptive stance. The jour nalist, the teacher, the minister, and the writer are more concerned to prescribe what "ought to be" rather than to describe "what is." To the extent that "what is" is described, it is described in terms of its departure from some norm defining what 1982 INTELLECTUALS, MORALISTS, AND THE FREE MARKET 115 "ought to be." Put more simply, the intellectual is committed to the es pousal and advocacy of values. Ayn Rand to the contrary, the free market is supremely indifferent as to values. It prescribes no overall vi sion of moral or aesthetic or intellec tual excellence; it aims toward no all-embracing end or purpose. It simply coordinates the activities and skills of diverse individuals seeking radically different goals and espous ing widely varying values.

It does, however, reveal popular tastes and preferences. Commodi ties valued by the masses can, for the most part, be mass produced and sold cheaply; commodities valued by a few can, of course, still be produced but only if the few are prepared to foot the bill. And the tastes of the masses are deplorable. They prefer Agatha Christie to Dostoevsky; they rank the performances of "Abba" ahead of those of Pablo Casals; they value the compositions of Johann Sebastian Here-today-and-gone-to morrow more than they value those of Bach. That the intellectual finds such a state of affairs profoundly disturb ing is not surprising. It is disturb ing. And it is quite proper for the intellectual and the moralist to de nounce vulgarity of taste and to at tempt to transform the masses' tastes. To blame the free market for what it reveals is, however, su premely irrational-as irrational as indicting wet roads for rainy weather or thermometer readings for fevered temperatures.

Blamingthe System Yet the temptation to such irra tionality is irresistible. To attribute deficiencies of tastes to the masses is to invite the ,charge of elitism, and that is a charge intellectuals will go to any lengths to escape. It is much easier, and much safer, to blame the "system," and the irrationality of the exercise can be disguised by ex traordinary arguments to the effect that advertising skillfully depraves the admirable' tastes and noble de sires of ordinary people. The self-ev ident fact that advertising must, if it is to succeed, address itself to ex isting tastes, and the prima facie implausibility.. of any advertise ment, however skillful, being able to sell and continue to sell food that is inedible, clothes that are unwear able, and gadgets that are unwork able, can conveniently be ignored as can a multiplicity of studies doc umenting the conspicuous failure of advertising to sell goods not satisfy ing the fickle tastes of consumers.

For such a strategy enables the in tellectual to hold to values which in truth are elitist, yet simultaneously to sustain the false belief that "really" his values are those of the "ordinary people." In the second place the intellec tual and the moralist are attracted 116 THE FREEMAN February to systems which are the conscious creation of trained intellects and work to the advantage of those deemed "morally worthy." The free market is neither. To be sure the free market is characterized by or der-it efficiently coordinates countless diverse skills, it automat ically draws upon a totality of infor mation embodied in innumerable individuals who for the most part never meet, it accurately indicates the tastes and desires of consumers and the most economic way of satis fying those tastes and desires, and it unfailingly indicates when random patterns of behavior "chance" upon new ways of more efficiently satis fying human needs-but this order is a spontaneous order, not a con sciously contrived order. Its subtle rationality is akin to the subtle ra tionality of language: a subtle ratio nality which no person or group of persons deliberately and consciously designed and which trained lin guists still strive to comprehend. In deed, the market coordinates skills no intellectuals could list and draws upon an ever-changing totality of information no intellectuals could synthesize.

That the random and uncoerced activities of the many could give rise to a system defying conscious imi tation by the gifted few is intrinsi cally threatening to the intellectual. And when that system "rewards" neither the best nor the brightest but those who actually satisfy the tastes and preferences of the mass es-however depraved or unenligh tened or tawdry those tastes and preferences might be-the threat ening becomes abhorrent. Conditions Change Connected to this almost uncon scious dislike of spontaneous as against contrived order, is the intel lectual's preference for the abstract as against the concrete. This is, per haps, nowhere more pronounced than in the enthusiasm of many econo mists for the abstract concept of "equilibrium." Such a concept presupposes a static world devoid of ordinary human fal libilities, where neither past nor fu ture human expectations matter. The concrete reality of purposive indi viduals seeking to improve their sit uation in a world characterized by imperfect knowledge and a conse quent lack of coordination, but a world in. which learning is possible, new opportunities for improvement can be perceived, and increasing co ordination can be realized, is effec tively ignored. Rather, the real world of purposive behavior in an environ ment of flux and change is sup planted by an eerie world of aggre gates the adjustment of which to their controlled and perfectly known environment is the entire story.

That any theory couched in terms of "equilibrium" cannot be tested by 1982 INTELLECTUALS, MORALISTS, AND THE FREE MARKET 117 measurements taken in a world of continuous disequilibrium, a world. of changing tastes, changing expec tations, changing technologies, changing information, changing op portunities, and changing material resources, was the great insight of such free market economists as Lud wig von Mises and Friedrich A. Hayek. Yet an enthusiasm for the abstract (and an addiction to what the philosopher A. N. Whitehead once called the "fallacy of misplaced concreteness") has led to a wide spread disregard-albeit no rebut tal-of the arguments leading to this conclusion. Galbraith'sOutlook The predilection of the intellec tual for the abstract finds a less technical expression in a recent, and quite charming, volume from the prolific pen of the much lauded op ponent of the free market, John Kenneth Galbraith. In Annals of an Abiding Liberal Galbraith writes patronizingly of those who, as an al ternative to the system of wage and price controls advocated by himself, argue for a return to a self-regulat ing market economy. "Conservative economists," he notes, "if suffi ciently archaic, have some justifica tion for this theology; the full em ployment equilibrium is basic to the conservative creed, and inaction is the way to realize that equilibrium.

Liberal economists must believe that they are of the chosen-that, as I've said often, God is a Keynesian Dem ocrat." Now it would be churlish to disal low Galbraith his much tried and frequently tes~ed rhetorical device of describing views·he dislikes in re ligious terms.! Yet when such rhe torical flak is dropped his utterance reduces to th~ fascinating proposi tion that a fully employed economy would be marked by "inaction." What has happened is clear: in boldly he retical defiance of The Shorter Ox ford English ,Dictionary Professor Galbraith has redefined the verb "to act" and the nouns "action" and "ac tivity." The words no longer refer to such concrete, flesh~and-blood realities as the labors oftl;le carpenter, the toils of the garbage collector; or the ex ertions of the transport driver. They refer rather to!the abstract rumina tions of those who determine what people "ought" to value, decree what men and women "deserve" to earn, and decide how much money "should"

be extracted fnom football fans and movie buffs to subsidize the extrav agant tastes o~ ballet and opera en thusiasts. A Vested Interest The "most active" people of all are, of course, members of the veri table army of Keynesian economists who, perceiving the economy as a potentially workable, but always 118 THE FREEMAN February troublesome and recalcitrant pa tient, with a continual tendency to hive off into greater inflation or un employment, function as Court Phy sicians, ever watchful of and ever tinkering with· the economic pa tient. (That the disease from which the patient is alleged to suffer is ia trogenic-that is, caused by the pro cedures purportedly fighting the disease-is the thesis of so-called "Austrian" economists; not surpris ingly, perhaps, such economists tend to be ignored in Court Economic cir cles.) That the tidy mathematical ab stractions so amenable to intellec tual manipulation give rise to con clusions serving their creators' class interests is, perhaps, the decisive cause for intellectuals' dislike of the market. The majority of intellec tuals derive their livelihood from public-sector employment; they ipso facto have a singularly tangible in terest in expanding such employ ment.

The enthusiasm of the New Class for such fashionable contemporary causes as consumer protection, the environment, and-of course-the "war on poverty" makes perfect sense when related to the intellectuals' class interests. If business interests are served by the proposition that open access of producers to the mar ket and ordinary laws prohibiting fraud are sufficient to protect the in terests of consumers, those employed by State-funded consumer protection agencies are no less served by a denial of that proposition. If in dustry and consumers have an in terest in holding back environmen tal protection measures that increase costs, the New Class has an equal interest in creating environmental protection agencies that provide its members with jobs and political power. If the participator in private enterprise has a vested interest in asserting that increased productiv ity proffers the only meaningful, long-term solution to the problem of poverty, those administering com plex welfare systems have every reason to claim that such proffers no solution.

Part of the Problem Interestingly enough, some of the most vocal critics of the "New Class" are to be found among those con cerned to improve the economic lot of the poorest and most vulnerable of the community. Such black, ghetto-born U.S. economists as Pro fessor Thomas Sowell and Professor Walter Williams have argued, and argued convincingly, that it is much more difficult for a disadvantaged minority in a "transfer society" to gain the political "clout" necessary to wrest substantial wealth from po litically sensitive redistributors than it is for such a minority to gain eco nomic power in a free market econ omy. Sowell has, in fact, gone much 1982 INTELLECTU ALS, MORALISTS, AND THE FREE MARKET 119 further, brutally stating that "The poor are a gold-mine. By the time they are studied, advised, experi mented with, and administered, the poor have helped many a middle class liberal to achieve affluence with government money." To suggest that the interests of the New Class, professional "poverty fighter" might not parallel those of his unhappy clients may be unkind; it is not, un fortunately, self-evidently untrue.

Enforced Equality: Reform the Tastes of the Masses Anti-capitalist clergy constitute merely a special sub-set of "intellec tuals"; the val ues they seek coer cively to impose upon a society are, perhaps, more explicit than those of their fellow opponents of the free market, but no substantial differ ence obtains. They too are anxious coetcively to reform the tawdry tastes of the masses; they too find the no tion of "spontaneous" as against "consciously directed" order threat ening; they too prefer the static ab stractions of an idealized world to the dynamic change of the real world; they too have a vested interest in a society proffering positions of power to moralists decreeing who "de serves" to earn and own what. They are, however, subject to two particular temptations. Firstly, the doctrine that all people are valued equally by God can easily lead to the notion that an economic system producing some "equality of distribu tion" is preferable to a system pro ducing substalltial inequities. Apart from obvious difficulties attending the very notion of "equality," the en thusiast for "equal distribution"

simply cannot· admit any liberty to dispose of initially equally distrib uted goods in his utopia. Consider, for example, a society of one thousand~ersons, each of whom possesses exactly one thousand dol lars. One me~ber of this society happens to be Joan Sutherland. Suppose Joan Sutherland were" to state that she was going to stage a concert and that any person wishing to forgo fifty do~lars and hence other goods for which that fifty dollars could be exchanged might attend that concert. Suppose further that all the remaining members of the society prefer to forgo: that sum of money (and alternatiye goods) and hear Joan Sutherland sing than to retain that money or, procure such goods and not hear, her sing. The ex change, in o~er words, is purely voluntary: each person surrenders what he values: less for what he val ues more. At the conclusion of the concert massive inequity obtains: Joan Sutherlalld possesses $50,950 whereas each. Qther member of the society possesses only $950. Yet if the initial state of affairs is deemed "just," and if i the voluntary ex change ofgoods ~s also deemed proper (and if people. are not at liberty to 120 THE FREEMAN February exchange what they value less for what they value more, the point of owning anything is obscure), it would seem to follow that the final distrib ution must be ''just.'' As noted, how ever, "equality of distribution" is no more.

The Good Samaritan In the second place it is extremely easy for clergy to glide from the claim that the carrying out of some action is "good" to the quite distinct claim that coercing others to carry out that action is good. It is instructive, how ever, to observe what such a glide does to a story familiar to all clergy. The wicked priest and Levite (inter estingly a clergyman and an intel lectual!) pass by a beaten victim of society, leaving him for dead. A Sa maritan traveller (again, interest ingly, a businessman prudent enough to have accumulated some capital) assists the stranger and funds his care and accommodation at an inn. The welfarist clergyman would, however, have to posit a "Better Sa maritan." On espying the beaten stranger this Samaritan would rap idly return to Jerusalem, call out the Roman armies,' coercively ex tract money from other wealthy businessmen, and establish an aid to-wounded-travellers' benefit. The moral excellence of this strategy is, surely, obscure; so, for that matter, is the coerced "charity" of those whose money is forcibly redirected.

Can the Accused Get a Hearing? Schumpeter was right to observe that capitalism is standing its trial, and standing it before judges with the "sentence of death in their pock ets." He said, however, nothing about a jury; yet there is a jury. It is true that that jury is more familiar with the caricature of capitalism created by its accusers than the actual de fendant, but while not warmly dis posed towards that caricature the jury is not unambiguously enthu siastic about "intellectuals" either. The jury, in other words, may well be ready to listen to a case for capi talism-especially if that case can stress that they, the ordinary con sumers, are the ultimate benefici aries and controllers of the free mar ket. There is good evidence that ordinary men and women are be coming impatient with the only al ternative to "profit management'" in a free market: bureaucratic man agement. There is good evidence that the level of taxation demanded in a "transfer society" has led to the re discovery of the core free-market principle of mutually benefiting vol untary exchange-whether that in volves barter or undisclosed cash payments. There is good evidence that the almost inevitable conse quence of a currency unrelated to the reality of the market and at the mercy of a State enjoying unre stricted, monopolistic control of the money supply is inflation-and in1982 INTELLECTUALS, MORALISTS, AND THE FREE MARKET 121 flation is not popular with the masses.

The time is ripe-indeed is over due-for the practitioners of the free market to enter the world of ideas and to promote the free market. Corporations simply must start sup porting thinkers who challenge the dogmas of Statists. And such think ers are not unknown. The collapse of the socialist ideal is a reality. The "new philosophers" of France (in particular Jean -Fran<;ois Revel and Bernard-Henri Levy) have mounted a devastating critique of Marxian thought. Faculties of economics, tom by disputes between Keynesians, neo-Keynesians, "neo-Classical Keynesian synthesists," Monetar ists, and Marxists are more pre pared than was, until recently, the case to give some voice to pro-mar ket economists. Dissenting intellec tuals, such as George Gilder (author of the widely discussed volume Wealth and Poverty), are making out new and interesting cases for a free market economy. That such materials are "trans lated" into terms accessible to ordi nary men and women is vital. That corporations should, both individu ally and collectively, aid the dissem ination of such translations is im perative. Michael Novak has put it well: "[The free market] is now en gaged in a war of ideas. The meth ods and means for conducting such a war successfully can be clearly discerned-they·. are well known, even if seldom set forth in system atic form-and the resources for em ploying them wisely . . . and in an atmosphere of freedom and diversity are plainly available. The next step is to make them operational."

The time for that "next step" is now, while democratic institutions still exist. "Hanging judges" tend to dislike such institutions, particu larly juries, for iordinary men and women are, so itiis claimed, the un happy victims of a "false conscious ness" which prevents their seeing the free market for what it is. Only the enlightened· few, the fortunate possessors of an "authentic con sciousness," are able to see the truth. It is not sufficient that such "true believers" simplty be judges. They wish also to be tiurors. And execu tioners. @ IDEAS ON LIBERTY John Milton FOR who knows not that Truth is strong next to Almighty; she needs no policies, nor stratagems, nor licencings to make her victorious, those are the shifts and the defences that error uses against her power.