Yuval Levin: The Free-Market Tradition

Editor’s Note: This is a work in progress.

Yuval Levin:

“We live in an era of collapsing confidence in institutions, and the market economy has been no exception. Polls show declining support for capitalism, especially among the young. And the market system is increasingly under attack not only from the left but from some smart social conservatives, populists, and nationalists on the right. To effectively defend democratic capitalism, its champions will need to understand the nature of these criticisms, to see where they have a point, and to think about how to make a case for markets that takes them seriously. …”

I would all of these things are related.

We’re living through one of those turbulent periods in history where an old system is becoming increasingly dysfunctional and breaking down and making life in general seem a little crazier than it has been in the past while a new system has yet to emerge to replace it. Specifically, it is the exhaustion and collapse of the liberal paradigm and free-market capitalism that is driving the rise of populism around the world by creating both large amounts of social and economic stress within the electorate.

“For the most part, these complaints are not fundamentally economic but rather are moral. This sometimes is not obvious even to the people lodging them.  …”

My criticism of free-market capitalism is both economic and moral.

In my view, conservatism and free-market capitalism destroyed itself back during the Great Depression by concentrating too much wealth in the hands of the privileged few. FDR and his successors reformed and stabilized the system during the New Deal populist-progressive coalition.

It was their success in saving capitalism from destroying itself and the backlash against the Civil Rights Movement that gave conservatism and free-market capitalism a new lease on life during the Baby Boomer generation. Since around the 1970s, we have been systematically dismantling our country socially and economically from both the Left and the Right, and this has produced both the polarization and dysfunction in Washington, which is symptom of the collapse of our common culture and an economy which no longer fairly distributes the benefits of economic growth, as well as the demise of many of the guardrails which were put in place during to prevent something like that from happening again.

Here’s a useful thought experiment: what would unfettered free-market capitalism do to itself if ALL those guardrails and bandaids which are currently in place to restrain and stabilize the system like FDIC insurance or child labor laws or environmental protection laws or minimum wage laws or the welfare state were removed at the stroke of a pen tomorrow? What would happen then?

“This means, for one thing, that evidence of capitalism’s ability to produce prosperity will be of limited use in response. It is important to make people aware that the market system has brought billions out of grinding poverty and continues to do so still. This is essential to the moral case for capitalism and is an answer to the shallowest charges against it. …”

I would argue that it is scientific and technological progress, which is now bound up in an incestuous and ever expanding web of influence with the state through research and development, which has lifted billions out of grinding poverty. It is also due largely to harnessing new sources of energy to perform work since the Industrial Revolution and the Second Industrial Revolution. All it would take to return all those billions of people to grinding poverty tomorrow is removing those three things.

“The case for markets as engines of liberty is crucial to the defense of capitalism too, but in a similarly constrained way. The right to property is especially vital to human dignity, and no society could be just while violating it or trampling our other liberties. …”

What are the limits of private property?

In the 19th century, we used to believe that slaves that worked on our plantations in the South were our private property. We’ve since replaced all of those slaves, as well as the sharecroppers who succeeded them, with new technology that has mechanized agriculture and eliminated the need for human labor. Only a tiny fraction of the population now works in agriculture.

This development which occurred in the 20th century didn’t inspire much self reflection because the welfare state was created and new jobs were created for displaced agricultural workers in manufacturing and services. What happens though when automation abolishes most of the jobs in manufacturing and services? What happens if this time it is different and new jobs aren’t created for human beings and it dawns on them that machine slaves are producing the wealth? Will the property rights of the owners of the machine slaves like Jeff Bezos of Amazon that have driven millions out of the workforce in areas like retail trade still be considered sacrosanct or will the matter be reconsidered?

“The deepest challenges to capitalism therefore have to be answered on the grounds of morality. If, as Irving Kristol once asserted, the market economy promises us wealth, freedom, and a just society, it is the third of these promises that the system’s most serious critics insist it is failing to keep. And a sense that our way of life is in some key respects unjust is behind much of our broader loss of faith in institutions too.”

I would argue the whole system is driven by avarice.

Historically speaking, the course of free-market capitalism over the past several centuries has been the gradual demolition of our common culture as well as our memory of what used to be morality. We’re living in a world in which our culture has been debased and hollowed out. No one remembers or can articulate morality in terms of practicing the classical virtues. Fewer people live by a Christian moral code. It has gotten to the point where even the “liberal” moral code of the Enlightenment – ideals like free speech, religious tolerance, individual liberty, a revulsion against political violence and fanaticism – has started to give way as well to the toxic cancer that is nihilism and the values of political correctness.

“Part of a moral defense of the market system would have to shed light on its moral goals and premises. These are not hard to discern, for instance, in the thought of capitalism’s intellectual progenitors.”

Our response to this defense of the morality of the market system is just look at the pornography industry it created in the 20th century. The rise of the pornography industry is the ultimate proof that the market system is blind that its incentives will reward evil unless it is restrained.

“Adam Smith was a professor of moral philosophy, and his project sought to ground a modern successor to Aristotelian ethics in a sophisticated sense of human sympathy and sociability. “

Clearly, Adam Smith has failed in this project, as nothing but moral confusion and cancers like nihilism and political correctness have flourished in the wake of the collapse of Aristotelian ethics and the Christian faith in Western Europe and North America.

“In a free society, Smith suggested, men and women cannot be compelled to act morally, so we require institutions that form our characters and dispositions so that we might choose to act morally. The market is one such institution.”

I would argue that under Free Society the market DOES NOT encourage people to act morally. Quite the opposite. As proof of this assertion, I will point out that simply speaking honestly about any number of subjects in our society is now considered IMMORAL under the political correctness. How did we get to the point where honesty is immoral?

“Through the division of labor, it enables essentially every person to approach the larger society on the basis of what he can offer rather than just what he needs, reinforcing his dignity.”

What about the millions of people who are not in the workforce because of cognitive stratification in the context of a free-market economy? What about the people who are excluded from the division of labor in society for the crime of violating the mores of the dominant political correctness?

“And by valuing reliability, honesty, civility, discipline, and similar bourgeois virtues, markets give us the habits required to handle an enormous amount of freedom responsibly.”

Is this is an accurate description of our world? Do we as a society value reliability, honesty, civility or discipline? Have you seen the “public conversation” on Twitter? If we value honesty, then why are all the people who lied to the public about Iraq still around trying foment the overthrow of Venezuela’s government? Why are all the people who lied about the Russia conspiracy hoax for two years still employed?

“Because they prioritize the needs of consumers, rather than just those of the owners of capital, markets are also powerfully democratizing forces. And because they are so very good at making us productive and rich, they help the poor to rise as well.”

The markets are very good at creating false needs by manipulating ordinary people with advertising. It is also being taken to a whole new level in the age of surveillance capitalism. It is also the state through government intervention in the market and redistribution of wealth which has kept the poor even hanging on because otherwise the inequality in our society would be several orders of magnitude greater than it is now.

“Left to itself, it would tend to prioritize consumption over every other human endeavor and profit over every other standard of the good, and so could badly distort our priorities. If our politics and culture were merely extensions of the market system — if market signals were our primary measures of merit, virtue, decency, freedom, responsibility, and worth — then ours would indeed be an unjust society.”

Yes, the free-market capitalist system is blind and if left to itself would encourage and facilitate everything from child labor to prostitution to pornography to gambling to market hunting to organ harvesting to pedophilia. Imagine a free market in child sex slaves.

“But our politics and culture are much more than that. The best case for capitalism is a case for markets as one crucial set of institutions in a free society deeply rooted in the West’s liberal and pre-liberal soil …”

How can free-market capitalism possibly stay rooted in the West’s liberal and pre-liberal soil while simultaneously demographically replacing the people who created the system in every Western country?