So we have a worrisome stock sell-off yesterday, likely–so the financial pundits say–to be followed by further losses today. What does a seasoned politician and contender for the White House do? If you are Hillary Clinton, you propose that “the government,” that is, the bureaucracy she proposes to lead, meddle even more than it has done hitherto. Yesterday, Glenn Reynolds cited this news report about what Hillary had promised (or should I say “threatened”?) yesterday:
“Senator Hillary Rodham Clinton said that if she became president, the federal government would take a more active role in the economy to address what she called the excesses of the market and of the Bush administration.”
(The title of that piece, by the way, was “For Clinton, Government as Economic Prod,” as in “cattle prod,” presumably.)
Reynolds juxtaposed Hillary’s expression of interventionist longing with the fact that London’s stock market lost, according to some estimate, some £60 billion yesterday. “Coincidence, I’m sure,” he comments, a sterling deployment of rhetorical irony.
Lest readers go away thinking that this was a temporary aberration on Hillary’s part–that, really, she is a firm believer in free markets and the individual liberty they depend upon–let me re-post a comment I made early last month when HRC assured the press that “as president she would be happy to intervene in the management of the economy if she thought the free market was failing middle-class Americans.” I called the piece (which first appeared on December 3, 2007) “Hillary Clinton and Friedrich Hayek.”
“Those who cannot remember the past,” Santayana famously wrote, “are condemned to repeat it.” What he didn’t say, but what often seems to be the case, is that we can remember the past just fine and then go on to repeat it anyway. A variation, perhaps, of Ovid’s observation that “video meliora proboque, deteriora sequor”—“I see and approve the better path, but follow the worse.”
I entertained some such melancholy thoughts this morning when I saw the news that Senator Clinton had gone to Wall Street to inform the assembled multitudes that, were she President, the world could expect plenty of government intervention in the U.S. economy. As a front-page story in The New York Sun put it, “Clinton Gives Wall Street a Warning”:
Senator Clinton gave a clear indication yesterday that as president she would be happy to intervene in the management of the economy if she thought the free market was failing middle-class Americans.
Who would doubt it? “Mrs. Clinton demanded,” the story went on, “an immediate injection of $5 billion into the economy to help those facing foreclosure on their homes. And she proposed another $2 billion to be spent to help poor families in cold-weather states afford heating fuel.”
“Mrs. Clinton demanded,” indeed. We’ll be hearing that phrase a lot in the months to come. And don’t ask where that $5 billion, that $2 billion are coming from—you know the answer: your pocket. (“What’s a paltry $5 billion in an economy of $12.5 trillion?” you ask. Remember Senator Dirksen: “A billion here, a billion there, pretty soon it adds up to real money.”)
Mrs. Clinton had a few words of criticism for irresponsible borrowers, but she laid the the lion’s share of the blame for what she called “the subprime crisis” at the feet of those in Wall Street whom she accused (as The Sun put it) of “deliberately engineering a mortgage system that abandoned traditional notions of lending responsibility.” (The best, or at least the most entertaining explanation of the subprime crisis I’ve seen is available on YouTube here.)
Well, government intervention into the economy (and just about everything else, come to that: tobacco, transfats, you name it, they want to control it) seems to be back in season. Even President Bush is talking about a five-year freeze on raising the rates on all those adjustable-rate mortgages bankers were passing out a few years ago.
This is not, of course, a new idea. “We were the first to assert that the more complicated the forms assumed by civilization, the more restricted the freedom of the individual must become.” So thought Benito Mussolini, who did what he could to restrict the freedom of the individual.
Admittedly, Mussolini was a rank amateur compared, say, to V.I. Lenin, but when it came to curtailing individual freedom by expanding the coercive power of the state, they worked from the same songbook. Back in the heady days of 1917, Lenin boasted that when he finished building his workers’ paradise “the whole of society will have become a single office and a single factory with equality of work and equality of pay.” A single jail cell was more like it, but who thought that at the time?
In The Wealth of Nations, Adam Smith noted the paradox, or seeming paradox, of capitalism: that the more individuals were left free to follow their own ends, the more their activities were “led by an invisible hand to promote” ends that aided the common good. Private pursuits conduced to public goods: that is the beneficient alchemy of capitalism. In The Road to Serfdom and other works, Friedrich Hayek expanded on Smith’s fundamental insight, pointing out that the spontaneous order created and maintained by competitive market forces leads to greater prosperity than a planned economy.
The sentimentalist cannot wrap his mind, or his heart, around that datum. He (or she) cannot understand why “society” shouldn’t favor “cooperation” (a pleasing-sounding arrangement) over “competition” (much harsher), since in any competition there are losers, which is bad, and winners, which may be even worse.
Socialism is a version of sentimentality. Even so hard-headed an observer as George Orwell was susceptible. In The Road to Wigan Pier (1937), Orwell argued that since the world “potentially at least, is immensely rich,” if we developed it “as it might be developed … we could all live like princes, supposing that we wanted to.” Never mind that part of what it means to be a prince is that others, most others, are not royalty. (Or, as that admirable logician W. S. Gilbert put it: “When every one is somebodee, / Then no one’s anybody!”)
As Hayek observed, the socialist, the sentimentalist, cannot understand why, if people have been able to “generate some system of rules coordinating their efforts,” they cannot also consciously “design an even better and more gratifying system.” Central to Hayek’s teaching is the unyielding fact that human ingenuity is limited, that the elasticity of freedom requires the agency of forces beyond our supervision, that, finally, the ambitions of socialism are an expression of rationalistic hubris. A spontaneous order generated by market forces may be as beneficial to humanity as you like; it may have greatly extended life and produced wealth so staggering that, only a few generations ago, it was unimaginable. Still, it is not perfect. The poor are still with us. Not every social problem has been solved. In the end, though, the really galling thing about the spontaneous order that free markets produce is not its imperfection but its spontaneity: the fact that it is a creation not our own. It transcends the conscious direction of human will and is therefore an affront to human pride.
The urgency with which Hayek condemns socialism is a function of the importance of the stakes involved. As he puts it in his last book The Fatal Conceit , the “dispute between the market order and socialism is no less than a matter of survival” because “to follow socialist morality would destroy much of present humankind and impoverish much of the rest.” We get a foretaste of what Hayek means whenever the forces of socialism triumph. There follows, as the night the day, an increase in poverty and a diminution of individual freedom.
The curious thing is that this fact has had so little effect on the attitudes of intellectuals and the politicians who appeal to them. No merely empirical development, it seems—let it be repeated innumerable times—can spoil the pleasures of socialist sentimentality. This unworldliness is tied to another common trait of intellectuals: their contempt for money and the world of commerce. The socialist intellectual eschews the “profit motive” and recommends increased government control of the economy. He feels, Hayek notes, that “to employ a hundred people is … exploitation but to command the same number [is] honorable.”
Not that intellectuals, as a class, do not like possessing money as much as the rest of us. But they look upon the whole machinery of commerce as something separate from, something indescribably less worthy than, their innermost hearts’ desires. Of course, there is a sense in which this is true. But many intellectuals fail to appreciate two things. First, the extent to which money, as Hayek put it, is “one of the great instruments of freedom ever invented,” opening “an astounding range of choice to the poor man—a range greater than that which not many generations ago was open to the wealthy.”
Second, intellectuals tend to ignore the extent to which the organization of commerce affects the organization of our aspirations. As Hilaire Belloc put it in The Servile State, “The control of the production of wealth is the control of human life itself.” The really frightening question wholesale economic planning raises is not whether we are free to pursue our most important ends but who determines what those “most important ends” are to be. “Whoever,” Hayek notes, “has sole control of the means must also determine which ends are to be served, which values are to be rated higher and which lower—in short, what men should believe and strive for.”
There has been a great deal of agitation over the sub-prime so-called crisis in the last few months. Probably, there is more agitation to follow. More fiscal pain is on the way as banks make further write downs and (nota bene) the market corrects itself. But let’s keep a little perspective on the matter. Yesterday, the market closed at over 13,400. In 1982, the market plunged to about 700—that’s seven hundred—thanks in large part to Jimmy Carter’s brilliant handling—and “handling” is le mot juste—of the economy and America’s political fortunes.
On economic matters, Mrs. Clinton is at heart a socialist of Keynesian disposition. We’ve been there, done that. Do we have to go through it again? There is some irony in the fact the Keynes provided a most penetrating criticism of the top-down rationalism that he himself propounded in economic matters. Writing about Bertrand Russell and his Bloomsbury friends, Keynes tartly observed that
Bertie in particular sustained simultaneously a pair of opinions ludicrously
incompatible. He held that in fact human affairs were carried on after a most irrational fashion, but that the remedy was quite simple and easy, since all we had to do was to carry them on rationally.
What prodigies of existential legerdemain lay compacted in that phrase “all we had to do”! To my ears, anyway, it is redolent of one of the most nauseating epithets in recent memory: “It takes a village.” We all know that more government intervention and control means high taxes, greater inefficiency, and economic stagnation. We’ve seen it happen dozens of times. We remember the past. Are we still condemned to repeat it?
It will be interesting to see what sorts of “all-we-have-to-do” proposals Hillary and the other aspirants to the job of running your life for you will propose as we muddle our way through this latest financial contretemps. Don’t say she didn’t warn you.