Where have the supporters of capitalism gone?

 

Cartoon by Peter Nicholson from “The Australian” newspaper: www.nicholsoncartoons.com.au

Some erstwhile supporters of capitalism probably don’t realize that they have gone missing. They still support private ownership of property and businesses, and may claim to see merit in the profit motive. However, they overlook that capitalism also involves “prices, production, and the distribution of goods that are determined mainly by competition in a free market”.

The quoted words are from the Merriam-Webster definition of capitalism. Use of a definition from an American dictionary seems appropriate because the supporters of capitalism who have gone missing seem to me to be mainly Americans. That is unfortunate because Americans were once the world’s strongest supporters of capitalism.

In Australia, most of the people I hear talking about capitalism seem to use it as a term of disparagement. The people who support capitalism talk about free enterprise and economic freedom.

I have the impression that it is fairly common outside of America for supporters of capitalism to avoid using the word because it is commonly viewed as a term of disparagement. That may stem from the word’s origins. When I was growing up, someone told me that Karl Marx had invented the word. That is not correct. Marx rarely used the word. He preferred to describe capitalism as “the capitalist mode of production”. Nevertheless, even in America the term was apparently considered to be a socialist expression until well into the 20^th century.

In the latter half of the 20^th century, the strongest supporters of capitalism had no qualms about using the word. Milton Friedman used the word in the title of a book, Capitalism and Freedom. Friedman made it clear that he was writing about “competitive capitalism – the organisation of the bulk of economic activity through private enterprise operating in a free market”. Ayn Rand used the word in the title of a book, Capitalism: The Unknown Ideal. She defined capitalism as “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned”.

Where have America’s supporters of capitalism gone? Johan Norberg prompted me to think about that question as I was reading his latest book, The Capitalist Manifesto: Why the Global Free Market Will Save the World. This book is a follow-up to In Defence of Global Capitalism, which Norberg wrote about 20 years ago. Globalization has now become a dirty word to many erstwhile supporters of capitalism, but Norberg remains a strong defender of global capitalism.

Who opposes the free market?

One of the most interesting contributions of Norberg’s new book is his account of the changing opposition to the ideal of a global free market. Norberg wrote In Defence of Global Capitalism to counter the arguments of left-wing activists who mistakenly believed that free trade, foreign investment, and multinational corporations were making the world’s poor even poorer. George Monbiot, Oxfam, Bono etc. eventually began to see some merit in free trade, but opposition then migrated to economic nationalists on the conservative side of the political spectrum.

Norberg suggests that the opponents of globalization share an underlying misconception that it is a zero-sum game – someone’s gain is another one’s loss:

“The worldview is the same, the roles are just reversed – twenty years ago free trade was considered bad because we exploited them, now it is considered bad because they exploit us.”

Norberg seems to assume that most readers will already understand why free trade is a positive-sum game – beneficial to both importers and exporters. He uses colourful illustrations to reinforce the point:

“Free trade allows the farmer to grow a new mobile phone in his wheat field, the textile worker can sew a new motorbike and the author can (if lucky) write a holiday trip to Tuscany.”

The author argues that free enterprise is primarily about “opening the dams of human creativity – to let everyone participate and test their ideas and see if they work”.

The opposition of economic nationalists to free trade is associated with the narrative that during the early years of the 21^st century, cheap imports from China caused deindustrialization and wage stagnation in the United States.  Norberg’s most important contribution seems to me to be in challenging that narrative. He makes the point that the loss of jobs in manufacturing is attributable largely to automation rather than import competition. He suggests that the slow-down in wages growth in the US dates from the mid-1970s, reflecting a necessary correction of cost levels because wages had previous been growing faster than productivity. The Rust Belt apparently lost more jobs in the decades before globalization reached the US, than it has in recent decades. The share of manufacturing jobs in the US declined more rapidly prior to 2001, when China was admitted to the World Trade Organisation (WTO), than it has in the decades since then.

 Fear of China

Economic nationalists suggest that the involvement of China in international supply chains has been particularly problematic because of the theft of technology. Norberg points out that China has been by no means unique in that respect. The US itself apparently once had a policy of smuggling inventions and bribing European artisans to reveal their secrets. There is evidence that the Chinese government has a relatively good track record in following WTO rulings relating to disputes about intellectual property and government subsidies.

Norberg acknowledges the potential for Chinese investment in digital and physical infrastructure to pose a security threat because the Chinese government views Chinese companies as its agents. He points out that this does not mean that the US and its allies were wrong to encourage China to open up to the outside world. He suggests that if China had not opened up, it is much more likely that the Chinese people would have generally perceived Westerners as irreconcilable opponents. He fears that use of trade barriers to isolate China could strengthen the most reactionary and nationalist forces in China.    

Leviathan’s helpers

Where have the capitalists gone? Many business owners and executives now seem to spend less time on conventional entrepreneurial activities than on seeking to ingratiate themselves with politicians and bureaucrats who are engaged in active industrial policy.  

The chapter in The Capitalist Manifesto entitled “Picking Losers” should be of particular interest to Jim Chalmers, Australia’s Treasurer. In his article in The Monthly (Feb 2023) Chalmers wrote:

“As the influential economist Mariana Mazzucato has explored in her work, markets built in partnership through the efforts of business, labour and government are still the best mechanism we have to efficiently and effectively direct resources.”  

Johan Norberg has quite a lot to say about Mariana Mazzucato’s naïve views. I will not attempt to provide a summary here because it might spoil the fun for readers. However, I particularly liked this sentence:

 “Governments are bad at picking winners, but losers are good at picking governments.”

That observation seems particularly relevant to Australia at present.

Concluding remarks

In focusing on reasons why support for capitalism has declined, I have failed to mention many of the virtues of capitalism discussed in The Capitalist Manifesto. For example, I was particularly interested in what Johan Norberg had to say about the relationship between capitalism and various aspects of happiness, in his chapter on “the meaning of life”.

I began by noting that many supporters of capitalism are reluctant to use the word because socialists have historically used it as a term of disparagement. I commend Johan Norberg for writing a capitalist manifesto. In doing that he is following in the footsteps of great advocates of economic freedom who had no qualms in talking about the virtues of capitalism.

In this book, Norberg has provided an interesting account of how many erstwhile supporters of capitalism have come to oppose global free markets. The most important contribution of the book, in my view, is the challenge it offers to the narrative that cheap imports from China have caused deindustrialization and wage stagnation in the United States.

Why were Australian Aborigines still hunter-gatherers in 1788?

Some readers may think this question is based on a false premise. So I will begin by considering the claim that Australian Aborigines were farmers rather than hunter-gatherers before 1788 when Britain established a penal colony in New South Wales.

The Dark Emu debate

 In 2014, Bruce Pascoe published the book entitled Dark Emu in which he argued that, in contrast to what most Australians believed, Aboriginal people were engaged in farming at the time British rule was

established. Unfortunately, Pascoe’s view remains influential despite having been debunked by Peter Sutton and Keryn Walshe in their book, Farmers or Hunter-Gatherers? which was published in 2021.

Sutton and Walshe acknowledge that the 1788 economy was somewhere between simple hunter-gathering and agriculture. They argue:

“Referring to certain regionally specific Aboriginal economic practices as ‘incipient agriculture’, as ‘proto-agriculture’ or as being at ‘an early stage in the development of agriculture’ is to suggest an unfulfilled developmental journey. We seek here to avoid this deficit model of the Old People, which is why we prefer the term ‘hunter-gatherers-plus’. It describes people accurately without attempting to place them in some supposed one-directional evolutionary scheme.”

Sutton and Walshe suggest that the hunting and gathering economy in pre-colonial Australia was as complex as gardening or farming. Even though it did not require deliberate planting of crops, it required fine-grained knowledge of hundreds of species and their habitats, annual cycles, names and generic classifications; of methods for processing them and for preparing them as food, as tools, as bodily decoration, and as ritual paraphernalia.

As documented by Sutton and Walshe, the hunting and gathering lifestyles of Australian Aboriginals does not conflict greatly with what I remember being taught about at school over 50 years ago. I think the main deficiency in the impression I gained was excessive emphasis of the role of British pioneers in clearing wilderness, and insufficient attention to the role of Aborigines in using slow-burning fires to make the landscape more suitable for kangaroos and other grazing animals. 

Bill Gammage’s book, The Biggest Estate on Earth (2012) made it abundantly obvious that European pastoralists did not need to make huge improvements to the land to make it suitable for grazing of sheep and cattle. Gammage compiled numerous descriptions of the landscape written by explorers and settlers and his book contains many landscape paintings made at the time of invasion/settlement.

The painting by Joseph Lycett at the top of this article shows people and scenery in about 1820, somewhere near Newcastle (possibly Eleebana on Lake Macquarie, close to where I currently live). Lycett was a convict who had been convicted of forgery. The local authorities made good use of his skills by encouraging him to paint what he saw.

What prevented Aborigines from farming?

 Sutton and Walshe make it clear that Aborigines were botanically knowledgeable. It was not lack of knowledge that prevented Aborigines from farming:

“Knowing—as the Old People did full well—that plants grew from seeds and tubers, ignorance played no role in this rejection of farming. It was cultural resistance, and loyalty to their own ways.”

Sutton and Walshe note that Aborigines in northern Australia adopted some of the cultural practices of Torres Strait people but did not adopt their horticultural practices. They also note that British settlers “tediously and repeatedly” claimed that many of the Aborigines they encountered were “averse to hoeing, weeding and planting”.   

The Aboriginal aversion to farming seems to have been associated with religion. They saw the practical aspects of obtaining food as “inseparable from their commitment to a spiritual understanding of the origin of species, to conservative values in relation to change, and to a cosmology in which economics had to be in conformity to ancestral authority”. In their way of thinking, the combination of “spiritual propagation” and practical resource management made farming unnecessary.

Sutton and Walshe explain the concept of “spiritual propagation” as including speaking to the spirits of ancestors and other rituals at species-related sites, maintaining a rich system of totems for various species, and handling food resources with reverence. They provide examples of the ways in which spiritual maintenance and practical resource management combined to characterise “the classical Aboriginal economy” in different parts of the country.

My response to the question posed at the outset is that Australian Aborigines were still hunter-gatherers in 1788 because they did not have strong incentives to adopt different lifestyles. By today’s standards their pre-1788 societies were not idyllic, but a stable equilibrium seems to have evolved in which change-resistant cultural practices had become embedded.

That is only a partial answer to the question of why Australian Aborigines did not become farmers. At some stage in the past, people not far away had also been hunter-gatherers before adopting farming practices. They must have faced different incentives. Perhaps their cultures evolved to become less hierarchical, providing greater scope for innovative individuals to try new ways of doing things. Perhaps they had an incentive to begin farming because population pressures were a greater problem for them. If so, that raises further questions. For example: Was climate change a greater problem in the regions in which they lived? Was their mobility restricted in some way to make a hunting and gathering lifestyle impossible to sustain?

Conclusion

 Prior to the establishment of a British colony in Australia in 1788, the lifestyles of Australian Aborigines can best be described as complex hunter-gathering. Their lifestyles required at least as much botanical knowledge as does simple gardening or farming.

 Lack of botanical knowledge certainly does not explain why Aborigines did not become farmers. Peter Sutton and Keryn Walshe suggest that Aborigines had an aversion to farming that stemmed from their religious beliefs. As Aborigines saw it, the combination of spiritual propagation of species and practical resource management made gardening or farming unnecessary.

Aborigines were still hunter-gatherers in 1788 because they did not have strong incentives to adopt different lifestyles. A stable equilibrium seems to have evolved in which change-resistant cultural practices had become embedded. However, that leaves open the question of why people living nearby on Torres Strait islands had stronger incentives to adopt gardening practices. 

Where is the soul of libertarianism?

 

Matt Zwolinski and John Tomasi have contributed an excellent history of libertarian ideas in their recently published book, The Individualists. The question I pose for myself is related to the subtitle of the book: “Radicals, Reactionaries, and the Struggle for the Soul of Libertarianism”.

The reason Zwolinski and Tomasi refer to individualists rather than to libertarians in the main title is presumably because they believe that a commitment to “individualism is at the core of libertarianism”. They also note that many of the most intellectually active friends of liberty in Britain were known as individualists before the term libertarian caught on.

Synopsis

The authors spend some time discussing who is, or isn’t, a libertarian. They note that “libertarian” has been used in both a strict sense, to refer specifically to those who see liberty as a moral absolute, and in a broad sense, to include classical liberals who view liberty as a strong presumption. The book discusses the views of contemporary classical liberals, such as Friedrich Hayek and Milton Friedman, as well as those of “strict libertarians”, but doesn’t devote much attention to historical classical liberalism.

Zwolinski and Tomasi identify six markers which form the core of a libertarian world view: private property, skepticism of authority, free markets, spontaneous order, individualism, and negative liberty. They observe that while libertarians don’t necessarily view those principles as absolutes, they typically see them “as a tightly integrated system of thought, with each commitment being supported by, and lending support to, the others”.

After providing a historical overview, the book discusses the history of radical and reactionary libertarian ideas relating to private property, libertarian anarchism, big business and free markets, poverty and spontaneous order, racial justice and individualism, and global justice and noninterventionism. Much of this information was familiar but I was surprised about how much was new to me.

Zwolinski and Tomasi’s final chapter focuses largely on the battle between bleeding heart libertarians, left libertarians and paleolibertarians for control of the libertarian party in the United States. The authors conclude that libertarianism is “intrinsically a diverse ideology”, and that “the struggle between libertarianism’s progressive and conservative tendencies, a struggle for the soul of libertarianism, is likely to go on”.

That may be an appropriate way to end a history of ideas directed to an audience composed largely of people who live in the USA. As a person who doesn’t fit into that category, however, I am concerned that describing differences of opinion as “a struggle for the soul of libertarianism” may generate more heat than light. As I see it, libertarians should be encouraged to acknowledge good ideas whether they are espoused by conservative or progressive libertarians. I would have preferred to see the book end by acknowledging that libertarians are engaged in an ongoing struggle against authoritarianism as people on opposing sides of the culture wars seek to enlist the coercive powers of the state to pursue their interests.

More fundamentally, the struggle the authors describe - about which set of political prescriptions will come to be most closely identified with the ideology – seems to me to be conducted without much reference to the soul, or essence, of libertarianism. The book left me wanting to promote the view that the soul, or essence, of libertarianism stems from the nature of human flourishing. Zwolinski and Tomasi may have good reasons for not exploring that idea more fully in their book, but it seems to me to be an idea that deserves to be given more attention.

The soul of libertarianism

In my view, the passage from Wilhelm von Humboldt quoted at the beginning of this review comes close to capturing the soul of libertarianism. Liberty is the best principle for the coexistence of humans because it offers conditions most favourable to self-directed individual flourishing.

Humboldt’s contributions influenced John Stuart Mill in writing On Liberty. They were also acknowledged by Friedrich Hayek in the conclusion of the chapter of The Constitution of Liberty discussing education and research:

“And we cannot think of better words to conclude than those of Wilhelm von Humboldt which a hundred years ago John Stuart Mill put in front of his essay On Liberty: ‘The grand, the leading principle, towards which every argument unfolded in these pages directly converges, is the absolute and essential importance of human development in its richest diversity’.”

Readers who are eager to know more about Humboldt will find an online article by George H Smith published on libertarianism.org to be of interest.

The discussion of egoism in The Individualists is relevant to considering the link between liberty and individual flourishing. Zwolinski and Tomasi note that in the 19^th century American libertarians, such as Benjamin Tucker, were influenced by Max Stirner, a German theorist, who held that the only standard or right was the ability to transform one’s will into action. That view is in stark contrast to the ethical egoism advocated by Ayn Rand and her followers during the 20^th century. Rand denied that might makes right and argued that egoism is compatible with recognition of universal natural rights.

The link between liberty and individual flourishing is recognized today in the writings of some classical liberal and libertarian authors. Doug Rasmussen and Doug Den Uyl deserve special mention because they have developed related ideas rigorously in their trilogy of books: Norms of Liberty, The Perfectionist Turn, and The Realist Turn.

Readers looking for a non-technical introduction to these ideas may find relevant discussion in various places including an article by Ed Younkins on The Savvy Street, and in my book, Freedom, Progress, and Human Flourishing.  Rasmussen and Den Uyl have provided a summary of their views in Chapter 2 of The Realist Turn. A quote from the conclusion of that chapter will convey the essence of their understanding of the role of liberty in the context of human flourishing.

“In essence, natural rights represent a realization of certain normative requirements that are inherent in the individualized nature of human flourishing within a social context. In particular, when thinking about rights, we are concerned with the conditions that must be secured for the individualized nature of flourishing to function. Although liberty is the key term in this context, we regard it not as the central concept for flourishing generally, but only with regard to setting the social context for flourishing. And although we reject constructivism as a foundational principle, we recognize the role of social constructs within the constraints provided by a framework of natural rights. As such, our theory is not about the whole of political and social life, but about the political/legal structure within which such life should and must be allowed to function if flourishing is our standard.”

Conclusions

My reading of The Individualists by Matt Zwolinski and John Tomasi has prompted me to present a view about the soul of libertarianism. Zwolinski and Tomasi end their excellent history of libertarian ideas by suggesting that progressive and conservative factions within libertarianism will continue to struggle over the soul of libertarianism. I put the view that the soul, or essence, of libertarianism stems from the nature of human flourishing. Wilhelm von Humboldt came close to capturing the soul of libertarianism 230 years ago when he suggested: “The highest ideal … of the co-​existence of human beings seems to me to consist in a union in which each strives to develop himself from his own innermost nature, and for his own sake”. The link between liberty and individual flourishing has been recognized by many libertarians and classical liberals, and is rigorously explained in the writings of Doug Rasmussen and Doug Den Uyl.

References

Bates, Winton, Freedom, Progress, and Human Flourishing, Hamilton Books, 2021.

Den Uyl, Douglas J., and Douglas B Rasmussen, The Perfectionist Turn: From metanorms to metaethics, Edinburgh University Press, 2016.

Rasmussen, Douglas B., and Den Uyl, Douglas J, Norms of Liberty, Pennsylvania State University Press, 2005.

Rasmussen, Douglas B., and Den Uyl, Douglas J, The Realist Turn, Palgrave Macmillan, 2020.

Smith, George H., ‘The Culture of Liberty: Wilhelm von Humboldt’, libertarianism.org, 2013.

Younkins, Edward W., ‘Rasmussen and Den Uyl’s Trilogy of Freedom and Flourishing’, The Savvy Street, 2021.

Can Cultural Values Explain Authoritarianism?

 An article on this topic has now been published on The Savvy Street.  The article draws on material published in recent posts on this blog.

Comments on the article are most welcome. 

The conclusions are reproduced below.

Conclusions

In this article I have adopted an international perspective to consider the extent to which cultural values explain authoritarianism. The analysis has been conducted in terms of ideological maps which position governments by reference to the levels of personal freedom and economic freedom in the countries they control.

The article introduces the concept of international ideological mapping by first considering how individuals might assess their own ideological positions. I argue that the positioning of a person on a political compass, incorporating both economic and personal freedom, is more informative about attitudes to liberty than attempts to position them on a single dimension.   

The Human Freedom Index provides data on economic freedom and personal freedom for a large number of countries. That data can be viewed as an ideological map of the world because it reflects the prevailing ideologies of governments throughout the world.

Ideological maps show high correlation between economic freedom and personal freedom. The liberal democracies have relatively high levels of both economic and personal freedom. Authoritarian governments have relatively low levels of both personal and economic freedom.

I argue that the question of whether cultural values can explain authoritarianism is worth exploring because survey data shows that people in some countries with relatively low levels of economic and personal freedom (e.g. China and Russia) claim to have more confidence in their respective governments than do people in some countries with relatively high levels of personal and economic freedom (e.g. the U.S. and Australia).

Data from the World Values Survey was used to test the extent to which levels of personal and economic freedom could be explained by cultural values. Christian Welzel’s index of emancipative values was used to explain levels of personal freedom. and an index of facilitating values was constructed to explain levels of economic freedom.

The existence of emancipative values and values facilitating economic freedom does help to explain why some countries have higher personal and economic freedom than others. In general, the high freedom levels of the high-income liberal democracies are fairly well explained in terms of facilitating and emancipative values.

However, the ideologies of many other governments cannot be adequately explained in terms of the values held by the people they govern. The freedom ratings of most of the countries with low personal and economic freedom are substantially lower than predicted by emancipative and facilitating values. Suppression of liberty in those countries is a product of the ideologies of the governments rather than the cultural values of the peoples.

The analysis also shows that a substantial number of countries with relatively high personal and economic freedom are performing better in that regard than can readily be explained on the basis of prevailing values. One possible explanation is that market-friendly economic reforms tend to separate economic power from political power, enabling greater political freedom to emerge before it is fully supported by emancipative values.