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On the interplay of markets, interests and associations

Ralph E. Ancil (Prof. of Economics at the Franciscan University in Steubenville and President of the Wilhelm Roepke Institute), gave a clear critique of the pure market subjectivism of Friedrich Hayek in "Hayek’s The Road to Serfdom: Fifty Years Later". The title of the piece refers, of course, to Hayek's famous (or some would say infamous) The Road to Serfdom which, written while he was in England at the tail end of World War II (1944), is a prophesy of the mess we are in today and will most likely be in tomorrow.<.p>

Hayek's analysis of the collectivist project, a project that was bought into by post war Great Britain and France and largely adopted as well by West Germany (in the central planning tradition of Bismarck, in their case) but not immediately adopted by the U.S., showed that the central economic planning model required, by its nature, increasing despotism and the replacement of the rule of law by the rule of central fiat. We see that here in the U.S. in the drift toward a centrally planned economic system with the federal government increasingly dominated by the executive branch and the domestication of a Congress increasingly cowed into passing highly complex laws that the legislators have not read as well as a judiciary cowed into inventing specious arguments to justify the results. Here in the U.S., however, in place of the "serfdom" allegory, we prefer "the plantation" in deference to the political/economic victimization of America's Blacks as a result of the Johnsonian "Great Society."

As I see it, Ancil's essential critique is that Hayek's theory of economics as founded upon purely subjective value defines a market system that is ultimately unstable and it is unstable essentially because of its lack of moral grounding.

But the relation of choice and meaning is not as straightforward as his philosophy allows. As he himself states, one objection of collectivist planners is that almost everything can be had for a price in a competitive economy. There is excessive commercialization. Yet this is merely another name for extension of choice and so of freedom as comprehended in Hayek's social and economic thought.

But is it possible to overextend choice, to allow too much of it? Dostoyevsky remarked that if there is no God, all things are permitted. Without God, there is no meaning and nothing is forbidden. A nation that allows all things is a nation acting as if there were no God, and certainly is living without Him. Restrictions reflect meaning in limiting choice to appropriate spheres, affirming obligation and duty and thus ultimate value. This "anything goes" mentality is both reflected in and promoted by a materialistic society, excessively commercialized. Its members naturally seek short-cut methods to achieve their goals, including the use of manipulating government policy for private purposes.

Let me describe the syndrome Hayek's subjectivism leads him to another way. Since all values are merely subjective preferences, the individual's power or freedom to choose, so it is argued, should be correspondingly extended. But it is gradually realized that if everything is just a matter of personal subjective choice, nothing is meaningful and ultimately fulfilling, not even the newly extended power or freedom to choose. Until this is understood, or from the erosion of moral character which it causes, the cycle of extended freedom/boredom/extended freedom is repeated. Each go-around, however, involves an ever-widening circle of social and moral destruction as more and more spheres of human action are brought under the umbrella of the arbitrariness of personal preferences (total subjectivism) or what may rightly be called the "tyranny of the trivial." And from this it is inevitable to enthrone the tyrannical and the arbitrary in government, for here, too, there can be no standard but personal taste. Man is simply not capable of living in the absence of objective, transcendent standards to which he must submit. He craves meaning and purpose above all things but he cannot find them by making his desire his god.

There can be no doubt that Ancil has an important point here. In an unregulated economic system one can anticipate increasing economic dislocations brought about by invention. To fully grasp this, we must consider inventions like the following, and their unforeseen consequences:

  1. Mass production, enabled by the invention of molds to create, through metal casting, interchangeable parts. This invention of the modern factory system replaced the private guild system of prior centuries, led to urban congestion, low wages and an economy dominated by entrepreneurs and low skilled labor. This, in turn, spawned the Marxist critique, which in turn led to most of the 20th century's social and political atrocities.
  2. Automation, enabled by the invention of computer controlled devices, such as numerical control machines and automated assembly lines, elevated the role of the industrial engineer while enabling greater production with less labor. The result was a generation of unskilled factory workers without jobs and increasing union militancy. This led, in turn, to the combination of political forces we see today, with increasingly captive voting and consuming populations treated as cash cows for public and private unions.
  3. Broadcast journalism, enabled by the invention of over-the-air radio and television, led to the centralization of political opinion and the rise of the modern two-party political system. In recent decades, however, this effect has been somewhat moderated by talk radio and the Internet as a communication medium. These forces are currently in flux, and there is a fascinating war being waged for market dominance. It remains to be seen whether those forces which currently dominate the national political party structure and government will crush their upstart competition, merely coopt them or themselves fall to a third force.
  4. The growth of the addictive culture enabled by such inventions as artificial contraceptives, video games, designer drugs and the penetration of old inventions, like pornography, shopping and sports, into new media, such as the Internet. The effect here has been an increasingly pacified (some would say zombified) populace. Like with any population of addicts, however, the sudden withdrawal or restriction of the "drug" (of whatever form) quickly leads to violence.
  5. It is these sorts of dislocations of cultural and economic forces that led to the radical distrust of a pure (i.e., purely subjectivist) market economy and the tendency to supersidiary solutions, such as Marxism and modern (and post-modern) Progressivism. Hayek's critique reacted against central planning essentially for two reasons: (1) it failed to address the inevitable loss of economic efficiency and (2) it failed to address the inevitable loss of personal freedom, with the latter being the root problem of the former. I have addressed this problem before in my critique of supersidiarity.

The problem raised by Ancil, however, remains largely unsolved. There is no way to predict or to centrally manage invention which does not ultimately cripple it. The question is, are human beings sufficiently clever to invent decentralized social, political and economic institutions which are capable of moderating the effects of the dislocations brought about by invention? The rise of the union and consumer movements was supposed to yield a positive answer to that question, but both were quickly coopted by centralizing political forces. Modern and post-modern elite classes (the successors of the priestly classes of ancient times) such as academia, clergy, government and business bureaucratic classes, professional classes (doctors, lawyers, scientists and engineers), could have fulfilled their traditional role of quickly recognizing negative outcomes and guiding culture past the bumps. Unfortunately, their very self-recognition of prophet status has meant that centralization, the siren's shortcut to Utopia, was too great a temptation. They were like little Christs saying "Yes" to Satan when the latter offered the kingdoms of the earth.

While Ancil's critique is valid, it fails to offer concrete solutions. What shape might such solutions take?

Fortunately, human beings naturally form associations to solve mutual problems. The union and consumer movements are examples of this process. So are professional societies. Such organizations arise spontaneously and even often develop codes of ethics for the purposes of self-government. To the extent that they consciously set about to serve not only their own natural constituencies but society as a whole, they can be a truly positive force.

The proper model for leadership in the culture must be servant-leadership, hierarchically structured according to the operating principle of subsidiarity. Leaders must learn to be patient with failure and not overreact with crippling restrictions on autonomy. Leaders must also recognize that failure is the primary inducement to learning and invention, that in fact it is as much an indispensable component of a growing system as is success. The most creative inventors come from the ranks of the powerless, but the primary inducement to inventiveness is success and the power that comes with it. The temptation of society's leaders to step in and take over should be minimized. The institution of bankruptcy laws is an example of how the pain of dislocation can be well managed. The institutions of bailouts, preemptive oversight, "safety nets" (including golden parachutes as well as unemployment insurance), etc., which were intended to manage risk instead introduced the corrupting distortions of natural risk known today as "moral hazard."

As Ancil points out, the essential problem is cultural. What is needed is a virtue-oriented culture. Only a virtue-oriented culture can respond well to the sudden challenges of new inventions. Such a culture, however, is necessarily oriented to maximizing individual responsibility, and the natural structural principle for such a culture is subsidiarity. In a virtue-oriented culture, organized according to the operating principle of subsidiarity, experience is, indeed, a great teacher, and positions of leadership naturally devolve to the most wise members of society. Furthermore, the model of servant-leadership moderates the temptations to self-adulation and aggrandizement among leaders. Abuses like career politics and exceptions to insider trading restrictions granted to elected representatives might be purged from the political culture. It is surely no coincidence that the concepts of federalism and limited government were spawned in a frontier culture, where a spirit of self-reliance was essential to survival.

With all its faults, the institution that most closely resembles this ideal today is also the one with the greatest historical stability. I speak of the Roman Catholic Church. Guided through the centuries by Christ's model of servant-leadership, it found through bitter experience that its greatest challenges and internal corruptions arose during the times when it was most autocratic, and its salvation, time after time, grew spontaneously with new reforming movements that were ultimately permitted to flourish. Its survivability is due in no small part, also, to its preoccupation with spiritual, rather than material, matters and thus its limitation to an advisory role, rather than a participatory one, in the economy and in the affairs of state.

By contrast, every example of a supersidiary or central planning culture has fallen prey to the corruptions of influence peddling, moral hazard and unchecked growth of the entitlement culture, with leadership always aiming to pacify rather than empower the masses. In their very aversion to risk and failure, growth and reform stagnate. Collapse, whether induced quickly through common-mode failure, or gradually through a process of natural decay unmitigated by reform, is always inevitable.

We will undoubtedly experience such a collapse in the decades ahead. If and when the phoenix of civilization rises again from the ashes it will certainly be older. Will it be wiser?