05 March, 2010

Hayekian progressivism and the capitalism/socialism debate

At the same time that Cassady's class reading has been leading him to re-litigate the age old debate over the costs and benefits of various economic systems, I have been coming across an interesting quote from Hayek's Road to Serfdom. RTS is, of course, held up by libertarians as the Bible for its (layman's terms here...) description of how increasing state intervention in economic affairs snowballs into a repressive state that comes to exert control over all aspects of its citizens' lives -- far from the "free, happy and social existence" that Cassady thinks capitalism has squelched. Here is the quote:

Nor is there any reason why the state should not assist individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance, where, in short, we deal with genuinely insurable risks, the case for the state helping to organise a comprehensive system of social insurance is very strong. There are many points of detail where those wishing to preserve the competitive system and those wishing to supersede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatibility in principle between the state providing greater security in this way and the preservation of individual freedom. (Italics Yglesias')

So it appears that Hayek, the god of the libertarian right, is defending as common sense the idea that the dread State should intervene to provide a basic level of social services, and here he refers specifically to health care.

I bring this up because one of the best things I have ever read on the trade-offs between capitalism and socialism is this essay on Hayek. Its a bit long, but clearer than the many, many books I have read on the subject, and it lays out a path of compromise between the Cassadys and the Spencers of the world.

What the article makes clear is that the heart of capitalism, its most basic insight, centers on the nature of knowledge and its communication. Human desires are subjective, often implicit, and ever-changing based on context and circumstance. How much a person values, say, a pair of shoes changes based on location, weather, and social circle. The utility of a pricing system is that it is an aggregator and sorter of constantly shifting desires. It is the only mechanism ever conceived that can take the unspoken wants that reside in the hearts of millions of simultaneously interacting individuals and make that tacit information visible and useful in real time. Its incredible really -- and in that sense, a market is infinitely more sensitive to the wants and needs of its participants than a system of socialist production and distribution could ever be.

But that is not to say that a large part of Cassady's critique is not also true. Market outcomes produce winners and losers in often arbitrary and unpredictable ways. Bad luck of birth, illness, injury all mean lots of people have much less, if any, ability to make of their lives and themselves what they want. Many men and women are denied the pursuit of happiness that is guaranteed to them by Jefferson's founding poetry. This is obvious to any observer now, as it was even to Hayek in his day. And to Hayek's moral and intellectual credit, he did not let his ideology paper over or explain away this basic injustice, nor did he retreat behind the offensive notion that "it is my job to critique only".

And so many modern economists such as Amartya Sen have sought a synthesis in which the redistributive powers of the state are used to guarantee that each citizen has the opportunity to lead what they call "choiceworthy" lives within the capitalist framework. "Choiceworthy" is a fancy academic jargon for a state of affairs in which citizens have a reasonable ability to live a dignified, healthy, and creative life -- in other words, a happy, fulfilled life which Cassady in his more strident moments doesn't seem to think is possible under capitalism. In practice, this can take many forms. The "traditional" progressive/European model is heavy state investment in the basic building blocks of a stable, healthy life -- health care, child care, education and other safety net programs. Other ideas include a large "stake holder" grant provided to each citizen upon their reaching the age of majority. For instance, in one proposal each person upon turning 18 would receive a one time lump sum grant of $80,000 to begin their lives with. In another, the state would provide a minimum yearly income of $10,000.

To my mind, a commitment on the part of the state to provide generous access to these "foundational goods" answers many of the legitimate complaints that Cassady raises, without significantly attacking the basic structure of competition based on price signals that is at the heart of capitalism's success. There may still be more metaphysical grounds on which Cassady critiques capitalism -- specifically his charges about its fundamentally "exploitative" nature. To which I say: sure. Life is exploitation. The trick is managing that basic evolutionary reality in a humane, sustainable, and productive way.


Elliot said...

Re-reading Cassady's post I realized one thing I didn't address was his comments on the way capitalism orders work v. leisure time and how that leads to a hollowing out of vital human relationships.

Assuming you accept that premise. I get that Marxists like to say they are "just critiquing", but at some point, you have to grapple with what really are the alternatives to what you are critiquing. Marx, in fact, wasn't just critiquing social relations, he was actively arguing that his model would create new and better ones. Well, turns out that what he proscribed didn't work at all - which is why Marxists now pretend that all they have to do is critique.

The fact is, the pre-capitalist ordering of work v. leisure time went something like this: most people had no leisure time and a tiny minority had only leisure time. Thus, aristocratic rituals and art, designed to pass the days of soft handed noblemen.

These days, most people drudge away at a job they don't care much for but at least get a couple extra hours every day to do with what they will, as well as the money and much higher living standards to do so. Lucky people get a job they like/care about. And, as always, there are really lucky people that never have to worry their heads about work.

It seems to me that the real obstacle to being able to "relate on a truly human level to other individuals" is not that we tend to buy stuff while we do so. It is, rather, not having any leisure time at all because you are working three minimum wage jobs to pay off your family's medical bills. Or whatever.

Anyway, I think its true that modern life can be alienating. The breakdown of close-knit families, the breakdown of close-knit religious groups, the prevalence of migration which leads to economic insecurity and the breakup of emotionally supportive relationships can all make modern humans scared, empty, and isolated creatures. The problem is, I don't really know how to solve this, and I'm really sure that Marxism doesn't either.

Elliot said...


Cassady said...

"To critique only." This has been my big problem with Marxist criticism--at least what I have come into contact with so far. They are missing, largely, that praxis that I find so necessary actually improving things. You're absolutely right; the critic who refuses the responsibility of active work for change is an odious individual.

This "middle way" is exactly what I'm coming to appreciate more and more about modern capitalism. Modern American capitalism, I should maybe say. I like the idea of government intervention to a degree, because at my core I believe that a government has certain responsibilities to provide for the health, safety, and in some ways the effective and efficient labor of its citizens. This obviously isn't socialism, per se, and I think that the simple fact that Marx's "inevitable revolution" hasn't happened yet is telling.

Sure, some Marxists maintain that there just hasn't been enough time yet, capitalism is too young, and the people haven't suffered the extremes of what they will eventually. Whatever, obviously something was wrong with the theory.

At this stage of my budding critical career, I think the parts of capitalism that I am most eager to address are those more or less fundamental iniquities--the seemingly arbitrary production of winners and losers--of the system, and how to provide that equal chance for all involved.

That said, I'm not sure I buy the lump-sum or annuity pay-out plans. I don't envision them as being sustainable for any country with a population growing like ours. Also, it seems there would be plenty of ways to receive that benefit and live without contributing to the system that provided it. Has there been any scholarship on that?

Elliot said...

My understanding is that the direct transfer type arrangements appeal to the more libertarian minded, because they reduce the need for the large bureaucracies that are created when the government directly provides social services.

For sustainability, its not as bad as you might think. In the example of a one-time 80,000 grant, the authors estimated that the cost would currently be 250b per year. Which is a lot, but a perfectly sustainable amount. Of course, costs rise as population grows, but so does our GDP.

As for free riding, I suppose there is the situation in which a citizen collects their 80,000 and then decamps for Mexico or wherever. I would chalk that up to much better direct foreign aid than we can come up with now.

Cassady said...

That's really interesting...foreign aid as internal population and ethical control? It's like we'd be paying people who were inclined to freeload and/or cheat/swindle/loaf--basically immoral people, in one sense--to leave our country.

spencer said...

I guess having started this debate I should make an effort, however lackluster, to respond. Although I am replying on this post, I will mostly focus on Trevor's last post.

I was making a few fairly narrow points. First, (and this point has been dropped) that fascism is more idealistic than capitalism. This is more or less moot now that we've moved on to the much more important discussion of the system's consequences.

Second, that capitalist societies contra Marx's original predictions actually enjoy a rather high standard of living, particularly relative to communist (and former communist) countries. Cassady concedes this point. So we all agree that the average European has far more choices than they did 150 years ago, will live a far longer and healthier life, will have far more leisure, will labor under far better conditions, etc.

Marx's economics was internally consistent, but ultimately did not fit the facts. Marx postulated that there was an endless "reserve army" of labor, consisting of agricultural workers that could be pulled into industry. Because the reserve army was practically infinite, the demand for labor could always be perfectly satisfied, wages would never rise, and profits would rise without bound. This was not a terrible hypothesis at the time and may in fact hold in sub-Saharan Africa today. But in Europe, it turned out that the reserve army was not endless, wages rose, profits stayed constant, and living standards broadly increased.

Despite all of this, the Marxist is not satisfied. No, the average European (or American) is not truly happy. This is the point at which Marxism stops being economics and becomes amateur psychology and I'll abstain from making further arguments here because I don't know much about the topic. But suffice it to say I'm puzzled that Cassady takes a Benthamite standard like happiness to defend Marx who was decidedly non-utilitarian.

This is getting a bit long for a comment, so I'll stop here for now and pick it up again later.

Cassady said...

Decidedly non-utilitarian, and oddly--perhaps inconsistently--materialistic. At least concerning history. Marx's essential materialism, one could argue, would commit him to some material measure of success for his plan. That is to say, something other than abstract happiness. Or maybe Marx was secretly a contemporary American, and equated happiness to the accumulation of "stuff."

Spence, I certainly do concede your points about the obtaining standards of living in Europe and America. I don't exactly know what to make of the "endless army" postulate, but it does seem to jive with what I'm learning.

My main interest now is in what actually happened to the communist "project." This is largely in terms of Soviet "The Ursine Terror" Union vs. United States "The Free Peoples" of America. Obviously, the Soviet Union had plenty of internal problems, and wasn't a true communism anyway. Still, and my Russian komrade will back this up, to some extent the allocation of goods and redistribution of many things was actually working for awhile.

What killed communism was that it was placed in competition. More than that, it was placed in a competition framed in terms of capitalism. In that sense, a system not psychologically geared toward the production of more than it needs and can consume was doomed to fail unless it wasn't "fighting" anybody else. Communism isn't meant to accumulate, so any effort to create a surplus would necessarily (I think) take away labor from tasks like...oh I don't know...feeding your people.

All that said, I also think it's a little unfair for us to approach Marxist criticism in terms of capitalism. Of course, one placed against the other precipitates raging debates, that's what happens when two opposites (struggling for better analogy here)...really don't agree with each other. The debate between communism and capitalism needs to be extended, and then perhaps confined, to the debate over what is 'best' for humanity. These are the abstract questions like measures of happiness, satisfaction, human nature, etc. If we leave the debate there, then society is free to happily continue to make compromises between ideologies and incorporate theories and policies from all over the spectrum, just like it always has, without the never ending bickering of Marxists and Capitalists.