Lecture 7: The Anticapitalists

The Anticapitalists

I now want to mention a book by German American sociologist Helmut Schoeck in regard to the question of why intellectuals tend to be opponents of the marketplace. Schoeck wrote an important book that is titled, simply, Envy.1 Schoeck was a very smart man, very widely read and learned, a sociologist and anthropologist. He was not an economist, although he was familiar with economics. The book begins by saying that it’s a very funny thing, it is as clear as anything can be, that envy is a universal human motivation. You find it in every culture. However, there’s very little in the sociological literature of the West on the question of envy. Why? Because if it is as universal as it seems to be, and as deep-seated as it appears to be, then it stands in the way of that beautiful, perfectly harmonious utopian society that the left-wingers and the socialists wish to bring into existence.

THE PROBLEMOF ENVY

In connection with envy, he uses social psychology, history, anthropology, and sociology. This is basically what his theory is: Human beings are by nature prone to envy, which springs from a primitive conception of causality that interprets the good fortune of others as having been achieved at the cost to oneself—for instance, in economic and financial matters. People are equally subject, however, to an aligned

1Schoeck, Envy: A Theory of Social Behavior (New York: Harcourt, Brace and World, 1970).

161

feeling—a kind of reaction to this—to “a universal fear of one’s neighbor’s envy and the envy of the gods and spirits.”2

There is also fear of the envy of others in regard to the “evil eye.” The evil eye is a concept that is found all over the world, certainly among the Mediterranean peoples, the Italians, the Greeks, the Arabs, and even in Northern Europe, throughout Africa, throughout South America, and in the Far East. The evil eye is a malediction directed at you by somebody who envies something you have. Folklore of all peoples are filled with stories about the evil eye being wielded by envious people against somewhat more prosperous neighbors. The wish is that the neighbor’s cow doesn’t give milk anymore or his wife is not fertile. For anything that someone else has, there are people who envy them for it and wish to deprive them of it. So, there is this envy, and it gives rise to a “primitive, pre-religious, irrational sense of guilt.”3

With these behavior patterns that aim at avoiding the envy of oth-ers, in various societies varying means have evolved to cope with this sense of guilt and to ward off the retribution of the envious. A characteristic of Western society—that is, capitalist society—is that envy has been suppressed much more than it has in any other society in history. The result is that although people are envious, they tend to be somewhat ashamed of their envy and try to hide it. This is Schoeck’s theory: With intellectuals in capitalist society, envy avoidance, trying to avoid the envy of others, manifests itself in support for egalitarian causes. The diffuse dread of the envy of others, Schoeck finds, is “the root of that general, aimless sense of guilt which, during the past hundred years”—now 150 years—“has exercised so disrupting and disorienting an influence. The pangs of guilt (social conscience), and the naïve assumption that there could ever be a form of society that was either classless or otherwise non-provocative of envy, have been responsible for the adherence to leftist movements of large numbers of middle and upper-class people.”4 In adhering to movements that preach social and economic equality, they assuage their guilt and anxiety, for now they can feel that they’re helping to set up a society in which no one is envious.5

2Ibid., p. 257.

3Ibid.

4Ibid., p. 280.

5Ibid., p. 292.

Schoeck’s theory has the advantage of accounting also for the peculiar self-righteous idealism often displayed by leftist intellectuals, especially among the young. He says, Sensitivity to the envy of others is so deep-rooted in the human psyche that most people erroneously interpret the sense of redemption and peace, which they feel when they have made concessions to envy, as confirmation not only of their moral superiority, but also of the expedience of their action in the reality of the here and now.6

We may add that the blessed release experienced by those who have, they feel, placed themselves safely beyond the envy of the resent-fully dispossessed often turns to fury when they are faced with those of their class brethren who have casually spurned the psychological capitulation.

DO INTELLECTUALS MATTER?

We’ve talked about theories that try to account for the anticapitalism of intellectuals, but is it really so important what intellectuals think? The authors so far considered have agreed, at least, in assign-ing a great deal of weight, in the ultimate determination of political events, to intellectuals and the ideologies they generate. But the political relevance of the intellectuals has been challenged by another group of classical liberal scholars that would include today Gary Becker but most particularly George Stigler, whom I’ve mentioned before.

Stigler, with Milton Friedman, was the head of the Chicago school in its heyday. Stigler was aware that despite the many benefits they reap from the capitalist system, intellectuals have by and large been its impla-cable critics in all the sectors they dominate. In Stigler’s view, claims regarding the decisive influence of intellectuals, however, are unscientific, since the claims have never been quantified and subjected to empirical testing.7 This is a typical Chicago school positivist approach. In fact, he says, there is a total lack of any theory of how ideologies originate and change. Stigler proposes to attack the problem with the conventional analytical methods of neoclassical economics. Hypotheses are to be

6Ibid., p. 304.

7Stigler, The Economist as Preacher and Other Essays (Chicago: University of Chicago Press, 1982), p. 35.

formulated in quantifiable terms and tested against the data. A central implication of economic theory, he says, “is that man is eternally a utility maximizer, in his home, in his office—be it public or private—in the Church, in the scientific work, in short, everywhere.”8 Just as they act on the market to maximize the personal utility, “so individuals consistently behave in a utility-increasing manner with respect to the use of the state”9—that is, these individuals are supporting measures that in the aggregate constitute the historical expansion of state power. Stigler, therefore, recognizes the existence of ideology. The question is, Does ideology really have much of an impact on individual decisions, or are those more or less determined by the individual’s perception of his own self-interest and utility maximization? Very sensibly, Stigler warns against defining utility in such a way as to make the hypotheses tautological, conceding that “there is no accepted content to the utility function.”10 He proposes one—namely, that a person’s utility “depends upon the welfare of the actor, his family, plus a narrow circle of associates.”11

How far this advances the argument, however, is unclear. After all, a person’s adherence to a given ideology is usually conditioned by his belief that it will in some sense promote his welfare and that of his family and close associates. So, that reliance on utility functions does not automatically obviate the need to reckon with the impact of ideology. In fact, with Stigler, utility appears, for all practical purposes, to mean maximization of income.12 This is sensible, from his point of view, since employing another value—for instance, maximization of power—would seem to create insuperable difficulties for formalizing and empirically testing in Stiglerian terms. Stigler further holds that the desire of intellectuals to maximize their incomes—sometimes, he says income includes prestige and apparent influence—explains the distribution along the political spectrum.

8Ibid.

9Quoted in Ralph Raico, Classical Liberalism and the Austrian School (Auburn, AL: Mises institute, 2012), p. 131, https://mises.org/library/book/classical-liberalism-and-austrian-school.

10Stigler, Economist as Preacher, p. 26.11Ibid., p. 36.

12See Stigler, “The Adoption of Marginal Utility Theory,” History of Political Economy 4, no. 2 (1972): 571–86, https://doi.org/10.1215/00182702-4-2-571.

He refers to Schumpeter as having partially accepted this position, but that is incorrect. Schumpeter’s description of economic motives to the intellectuals is a very different one from Stigler’s. As we have noted, Schumpeter held that economic factors—e.g., overproduction of university-trained individuals and their underemployment—tend to create a mindset among intellectuals which is apt to generate anticapitalistic ideologies that, in turn, spread throughout society. Stigler seems to maintain that economic factors operate upon intellectuals directly and immediately.

Stigler, who was in my understanding a very great scholar, sometimes says things which are very hard to believe. (That could also be said for Milton Friedman, by the way, especially in regard to his remarks on Austrian economics.) Stigler sometimes combined his dep-recatory estimation of the influence of intellectuals with a similarly low evaluation of the influence of individual human beings altogether, including political leaders.

As a general explanation of political change, Stigler’s own hypoth-esis is as follows: We live in a world of reasonably well-informed peo-ple acting intelligently in pursuit of their self-interest. In this world, leaders play only a modest role, acting much more as agents than as instructors or guides of the classes they appear to lead.

This view illustrates why there are very few economists, I think, who can be trusted when they discuss historical matters.13 Here, Stigler really gets himself into trouble. He says, as a rule, the effect of prominent leaders on history is “almost infinitesimal.”14 It is safe to say that this assessment would find little agreement among students of the careers of Mohammed, Napoleon, Bismarck, Hitler, Lenin, and Stalin. Those individuals made quite a difference.

WHY IDEOLOGY MATTERS: THE CASEOFTHE SOVIET UNION

We can take as a case study of the impact of ideology the Soviet Union itself. Authors who minimize the impact of ideology in politics

13Raico contends there are exceptions to this, such as economists Robert Higgs, Murray Rothbard, and Ludwig von Mises.14Stigler, “The Intellectual and His Society,” in Richard T. Selden, ed., Capi-talism and Freedom: Problems and Prospects (Charlottesville, VA: University Press of Virginia, 1975), p. 319.

would seem to have a very hard time accounting for the rise, duration, and final demise of communism in Russia. It is difficult to imagine what could explain crucial episodes in the history of Soviet communism if ideology is relegated to a subordinate position. Such episodes include Lenin’s own revolutionary career, the formation of the Bolshevik Party, the coup d’état of October 1917, the institution of war communism—as it was called—victory in the civil war for the Bolsheviks, and the fanatical dedication of the cadres who carried out the collec-tivization and the terror famine.

It’s very difficult to believe how those could possibly be explained without bringing in the major role of ideology. In a major study, Martin Malia—I’ll be talking about him when I discuss Soviet communism; he is now professor emeritus from Berkeley—wrote a book called The Soviet Tragedy: A History of Socialism in Russia, 1917–1991.15 Malia asserts that “the key to understanding the Soviet phenomenon is ideology”—specifically, Marxism-Leninism.16 He traces the story back to mid-nineteenth-century Russia. It’s a great book, with a lot of important information there. In Russia, civil society was weak—I mentioned that in discussing the European miracle—and the state was strong. Russia proved to be fertile ground for the spread of socialist ideas very early on. Liberal social theory—the ideas of Locke, Hume, Adam Smith, Turgot, Madison, and others—never really struck root in Russia. By the time an intelligentsia sprang up in Russia, European intellectuals, from whom the Russians derived most of their political ideas, had made capitalism into an object of horror. The chaos following the fall of its tsar and the demoralization caused by the First World War permitted Lenin and his highly disciplined, ideologically driven Bolsheviks to effect their coup d’état.

I say “coup d’état,” by the way, since modern research has shown that there was no October Revolution. There was in fact a coup d’état in Petrograd, and then in Moscow and other cities, that brought the Bolsheviks to power. The Bolsheviks at once set about to realize the Marxist dream—to construct a free and prosperous society by abolishing private property in the market. That task, Malia maintains, was inherently impossible. Malia cites the Austrian school, by the way—particularly,

15Malia, The Soviet Tragedy: A History of Socialism in Russia, 1917–1991 (New York: Free Press, 1994). In the original lecture, Raico misspeaks and states the book’s title is The Socialist Idea.

16Ibid., p. 16.

Mises and Hayek—and Malia was somebody who realized that Mises and Hayek had something to say about central economic planning. Malia calls the idea of trying to plan society in the way that the Bolsheviks intended—and that Marx intended—as inherently impossible. He calls it an assault on reality. From the start, the Soviet Union was, he says, “a world-historical fraud.”17 The land that was supposedly in the vanguard of progressive humanity was in truth an arena of endless oppression, mass poverty, and boundless despair. Suppressing this reality and generating and propping up a pseudoreality became the job of the legions of state intellectuals at home and abroad. This included the fellow traveling intellectuals in every Western country.

Similarly, the collapse of the Soviet regime can only be understood as a case study in the operation of ideology in this sense—of the end of a particular ideology’s sway. The subversion of the Leninist faith began after Stalin’s death. It was the intellectual and cultural thaw introduced by Khrushchev. In the 1960s, a few dissident intellectuals, often “samizdat” publishers—that’s the Russian word that meant the publishers of illegal antiregime writings generally using carbon paper on typewriters—sowed the seeds of doubt in small urban and university circles. That’s what samizdat intellectuals were often reduced to, since they by law and terror had no access to reproduction of writings by other means.

Still, the great mass of Soviet citizens remained indoctrinated until the declarations of perestroika and glasnost under Mikhail Gorbachev. Those reforms were a big mistake of his—especially glasnost, the open airing of political and other opinions. He himself wanted to preserve communism, at least in its last Leninist form of the New Economic Pol-icy, but the reforms undermined everything. It was then that the truth of the crimes of Lenin as well as Stalin—the truth of the poverty prevailing in the socialist homeland, the true nature of the fantasy world, the pseudoreality woven by Soviet ideologists for decades—came to light. This fantasy world had been propagated by what Hayek called “the secondhand dealers in ideas” in the press, television, and radio.18 And Malia says that by 1991, the majority of Soviet citizens and a substantial majority of urbanites had lost that basic faith in the system.

17Ibid., p. 15.

18F.A. Hayek, “The Intellectuals and Socialism,” University of Chicago Law Review 16, no. 3 (Spring 1949): 418, https://doi.org/10.2307/1597903.168 Ralph Raico

The Soviet world picture had been wrecked, not by tanks and bombs but by facts and opinions—by the release of information bottled up for decades. What changed minds was the cumulative synergistic effect of a great deal of new information on a variety of subjects at once. The swelling cascade of information shattered the faith of the Soviet ruling class, which is an important point of a revolution. It’s what happened in France, for instance, after 1789, when the ruling class itself lost faith in its right to rule. The faith of the Soviet ruling class was shattered, including, finally, its will even to coerce. It was impossible, with this cascade of information, for anybody not to laugh or snort in derision at the great slogan of the Brezhnev years: “Soviet communism, the radiant future of all mankind.”19

Well, it seems to me that this is a very good counterexample to the Stiglerian position. Some scholars have also reasserted the importance of the intellectuals in regard to politics, particularly Robert Higgs and Douglass North, whom I’ve mentioned before in connection with his work in the economic history of the European miracle. North freely concedes that public choice theory is invaluable in explaining much of political behavior, especially in democratic societies. Interest group pressures do account for a good deal of political decision-making, but to regard this as the whole story is to fall victim, in North’s view, to the “myopic vision” of neoclassical economics. He says, Casual observation provides evidence that an enormous amount of change occurs because of large group action which should not occur in the face of the logic of the free rider problem. . . . Large groups do act when no evident benefits counter the substantial costs to individual participation; people do vote, and they do donate blood anonymously. . . . Individual utility functions are simply more complicated than the simple assumptions so far incorporated in neoclassical theory.20

It may be noted that it would be especially difficult to explain the phenomenon of voting on the simple assumptions North rejects. It is

19The phrase “Long live communism—the radiant future of all mankind” was among the slogans used by the Soviet regime. The phrase became better known in the West through Alexander Zinoviev’s 1978 novel The Radiant Fu-ture. Zinoviev was a Russian dissident and used the phrase ironically.20North, Structure and Change in Economic History (New York: Norton, 1981), pp. 46–47.

well-known that in the United States, fewer than half of those eligible to vote do so in national elections. Still, tens of millions take the trouble to go to the polls to cast their individual vote, which they can be certain could not possibly affect the outcome of the national election. I’ll grant you five hundred votes in Florida might, and if I had five hundred votes to be cast, I probably would bother to go to the polls. But a single individual vote can’t possibly make a difference. It is morally certain, I think, that there are more people who get killed in traffic accidents on the way to the polls than people who can make a difference in a national election with their one single vote.

Ideology, according to North, is ubiquitous. It is “an economiz-ing device by which individuals come to terms with their environment and are provided with a ‘world view’ so that the decision-making process is simplified.”21 The fundamental aim of ideology is to energize groups that behave contrary to a simple hedonistic individual calculus of costs and benefits. Aside from rare exceptions, to cap the argument, ideologies develop under the guidance of intellectuals. A crucial part of ideologies—ignored by scholars who minimize the significance— are judgments of right and wrong, just and unjust. In this connection, North presents an argument that might well give pause to followers of Stigler’s position: If the concept [of just and unjust] is not crucial to the way in which choices are made, then we are left with the puzzle of accounting for the immense amount of resources invested throughout history in attempting to convince individuals about the justice or injustice of their position.22

In other words, if, as Stigler believed, people are reasonably well-informed and act intelligently in pursuit of their self-interest, how are we to account for the massive and continual “misuse” of resources in contending over questions of right and wrong?

Robert Higgs is another critic of the Stiglerian position. Higgs’s book Crisis and Leviathan is a treasury of important insights, analyses, facts.23 In just a few pages, as far as I’m concerned, he settles the question of whether ideology and intellectuals are important. In the book,

21Ibid., p. 49.

22Ibid., p. 51.

23Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (New York: Oxford University Press, 1987).

he presents a detailed examination of the growth of the US federal government in the twentieth century, highlighting the importance of intellectuals. “An understanding of ideology,” he asserts, “is essential to an understanding of the growth of government.”24 Higgs too believes that the conventional neoclassical approach does not explain a wide range of political behavior. Drawing on the accepted conclusions of social psychology, as well as the writings of Amartya Sen, Higgs notes that individuals often act to confirm or validate their “self-image.” For instance, he says, “The kind of groups to which a person chooses to belong is closely connected with the kind of person he takes himself to be—a prime concern to the typical individual.”25 (Sen won the Nobel Prize and is generally considered a left-wing intellectual but is an interesting writer nonetheless.)26 This also holds for the political dimension of the self-image that people have. Again, like North, Higgs stresses that in acting politically, people are often truly concerned with what is right and wrong, just and unjust. These are issues that cannot be reduced to a narrow hedonistic calculus. Citing Schumpeter on the purely formal nature of the utility theory of value as employed by the Chicago people—which implies nothing regarding the content of peo-ple’s wants—Higgs concludes that one cannot demolish an ideological fortress with the weapons of neoclassical economics.

Higgs’s insight that much political behavior involves the affirmation of one’s self-image prompts the question, How do people acquire political identities which they then act to instantiate and confirm? A fountainhead of such identities is clearly the system of formal education. From this point of view, it would prove highly instructive to examine how the educational establishments of Western countries, especially higher education, function not only to convey the panoply of particular anticapitalist ideas but also to impart a particular self-image to a significant portion of the students it processes. This is, then, a self-image— their identities as members of the adversary culture—which they will try to live out as the bearers of a lifelong animus against private enterprise. You’re all aware of fellow students who identify themselves as

24Ibid., p. 36.

25Robert Higgs, Neither Liberty nor Safety: Fear, Ideology, and the Growth of Gov-ernment (Oakland, CA: Independent Institute, 2007), p. 68.26Sen’s often-quoted observation on this topic is that “the purely economic man is indeed close to being a social moron.” Quoted by Higgs, Neither Liberty nor Safety, p. 41.

whatever type of leftist in some sense. How did they get that self-image? How did they come to adopt that self-image, which then will be with them probably for the rest of their lives?

HISTORICAL MYTHS, NATIONAL SOCIALISTS, AND BIG BUSINESS

Hayek, in his essay “History and Politics,” analyzes how historical myths influence how we think about the Industrial Revolution. It may be useful to focus on another example of a legend that has been part of the socialist pseudohistory—and which has also been exploded, as the myth of the immiseration of working people under the Industrial Revolution has been exploded. For decades, the prevailing view was that German big business played a central and essential role in the Nazi rise to power. Oddly enough, this interpretation echoed the official Comintern line set forth in the 1920s and 1930s. According to this myth, a generic fascism—including its German variant—represented the naked fist of a bourgeoisie confronting the final proletarian assault. The Comintern, the Communist International, played a crucial role in the terrible history of the twentieth century. It was set up by Lenin to promote the communist revolution in every country in the world, by any means necessary. It was very active in the 1920s, 1930s, the early 1940s, and the Comintern had a particular definition and analysis of German National Socialism which turned out to be the one that was accepted by so many historians.

For years, socialists continued to tout the line that the financial and political support of German big business was to a great degree responsible for Hitler’s coming to power, and of course, German big business was then responsible for World War II and all its atrocities. In the Federal Republic of Germany, when it was still just West Germany, intellectuals never tired of repeating Max Horkheimer’s aphorism, couched in the patented portentousness of the unspeakable Frankfurt school: “He who does not want to speak of capitalism should also be silent about fascism.”27 The view was shared and propagated, however, not just by leftists like Horkheimer and communists but also by prominent nonsocialist writers—famous writers on the subject—like Lord Alan Bullock, Norman Stone, H. Stuart Hughes, and others.

27Ernst Nolte, Marxism, Fascism, Cold War, trans. Lawrence Kader (Atlantic Highlands, NJ: Humanities Press, 1982), p. 76.

In 1985, a work of superb scholarship, German Big Business and the Rise of Hitler, was written by Henry Ashby Turner of, in those days, the great Yale history department. Turner demonstrated that this interpretation was simply a myth.28 His own analysis is now accepted by practically all writers in the field. Will Turner have any more success in seeing his version passed on to the educated public? I doubt it, because, don’t you feel, don’t you have the impression, somehow, that Hitler was brought to power by German big business? So, whether Turner’s interpretation will have any more success than the demolition of the myth of the Industrial Revolution remains to be seen. Turner posed the question, Why do we observe the persistence of historical accounts that are demonstrably false? Towards the end of his work, he reflects on why so many professional historians have accepted the view, and there you can see a great scholar at work. He goes into details. He went into the files of all of these German companies. He found out important details, such as the fact that a company’s vice president couldn’t have met with Hitler at a certain time because Hitler was known to be somewhere else at that time. Turner discovered those sorts of details. To put it very briefly, what Turner finds is that the Nazis adopted the fundraising techniques of the German Social Democrats and applied those methods to a substantially more affluent part of the population: the middle class. The Nazis charged for entry into their meetings. They sold matchbooks and playing cards with Hitler’s picture on them— and all sorts of fundraising techniques—and that was the major source of their funding, together with certain middle-class businessmen. Big business hardly came into the picture at all.

Now, why should so many historians keep repeating the myth? Turner concludes, “Bias, in short, appears over and over again in the treatment of the political role of big business, even by otherwise scru-pulous historians.”29 It’s not a question of fabricating evidence, but the historians are biased. His general conclusion is this: Professional historians generally have little or no personal contact with the world of big business. Like so many intellectuals, they tend to view big business with a combination of condescension and mistrust. . . . Since almost all of those who have concerned themselves with the relationship

28Turner, German Big Business and the Rise of Hitler (Oxford: Oxford University Press, 1985).

29Ibid., p. 350.