In a as yet unpublished but privately circulated essay, Gus describes “The Tragedy of Classical Liberalism”, that resulted from its alliances with the neo-conservative forces, started in the 1980’s.
The paper ends with this assessment of the crisis:
“Classical liberalism has hit a dead end, abandoned by nearly all its allies, rendered politically inconsequential, and discredited in the eyes of many by the behavior of organized business, and irrelevant in the eyes of many because it cannot address the problems people actually confront except insofar as they are consumers. This is both a tragedy and an opportunity. The tragedy is obvious, the opportunity is less so.
By building on traditions far stronger among classical liberals than in the other two major strands of liberal thought particularly that of emergent orders and their interrelationships with one another and with the organizations inside them, this tradition of thought can be reinvigorated. It does not involve becoming ‘liberals’ in the pejorative sense of the term, it involves recognizing those liberals share more in common with them than do classical liberals’ historical allies, and that it might be possible to rethink the nature of liberalism once this happens.
Since the failure of the Great Society’s most ambitious projects managerial liberals’ faith in rational control has weakened substantially. Egalitarian liberals are frozen out of both parties for the most part because they are critical of our dominant oligarchy. Given the current marginalization of the Republicans’ strategy which had itself marginalized them, classical liberals have little to lose in reaching out to other liberals.”
Such emergent order can of course be seen as the market, but peer to peer is a newly emergent order that is just as challenging to liberalism. Tomorrow, we will quote Gus on the failures of the liberal tradition to recognize the importance of cooperation, now exemplified in peer production. But today, we bring his analysis on the ideological crisis facing the liberal tradition.
The Two Major Strengths of Classical Liberalism
When everyone enjoys equal legal status in all areas of life the breadth and depth of human cooperation expands enormously. As the web of voluntary relationships expends and links to other webs, social institutions are transformed. Networks arise that are far too complex for anyone to grasp in detail, nor do they need to, because impersonal feedback signals transmit coordinating information among people who have never met, and never will meet or even know of one another. Two seminal liberal theorists of these processes, F. A. Hayek and Michael Polanyi, termed these developments “spontaneous orders.” Today they are more widely termed “emergent orders.” Regardless of what we call them, emergent orders are the inevitable result of institutionalizing liberal principles, and by far the best appreciation for them until recently lies among classical liberals such as Mises, Hayek, Friedman, Boettke, Lachmann, and others.
Emergent orders coordinate vast numbers of independently conceived plans and projects in such a way as to facilitate more successes than could ever be accomplished through central direction. While other liberal traditions were captivated by the wonders of good management, political equality, and scientific control, classical liberals focused on processes that facilitated as many people as possible pursuing their own independently chosen plans while contributing to the successes of others in the process. In this important sense a revitalization of liberalism more generally depends on insights found within the classical liberal tradition.
Intimately connected to their focus on emergent order was classical liberals’ sensitivity to the importance of rules, particularly constitutional rules and the rule of law, as providing a framework within which such orders could flourish. Procedural rules facilitating unintended cooperation among unknown people seeking a multiplicity of unforeseen goals enabled more of them to succeed than could ever have been the case by deliberate organization. Over the past ten years in particular this tradition has weakened in classical liberal circles, and in crucial respects has shifted to other liberal traditions. A strong case could be made that the ACLU is a better defender of American principles today than classical liberals (except for those who joined it). But historically its deepest appreciation has been among classical liberals.
The two absolutely crucial insights that classical liberals have to offer a revived liberal tradition in the broadest sense are an appreciation for emergent processes, particularly the market, and recognition of the central role for the rule of law. These are not small elements.
But they have been undermined by some serious oversights and an analytical myopia that has led to political blindness for many, a blindness that has led to the present situation. Classical liberalism’s present disarray, disreputable allies, and self-reinforced irrelevance are the result.
Weaknesses of Classical Liberalism
I: Too Narrow a View of Emergent Orders
Ironically, much of classical liberalism’s current weakness is rooted in one of its greatest strengths. Classical liberals rarely explored the wider implications of their emergent order model. They applied it to the market, as Hayek had done, and in some cases to common law, also following Hayek as well as Bruno Leoni’s lead. But most classical liberal interest in common law was for its utility as a defense against ambitious social engineering plans and economic control. Issues of justice were de-emphasized except among some libertarians. This motivation opened many classical liberals to being captured by the later ideal of economic theories of law, where issues of justice tended to be subordinated to issues of economic efficiency. I will return to this issue at a later point.
Beyond this subsidiary interest in common law; classical liberals largely ignored the implications of Hayek and others having also identified science, custom, and language as also being emergent processes. I later made the same case for liberal democracies, and it was also ignored. Yet if these observations are well founded, very important implications grow from them.
First, if there are several emergent orders based on voluntary transactions, each coordinating different kinds of plans, then obviously no single set of procedural rules is a simple transmission belt coordinating human wants. Some are better for pursuing some purposes, others for other purposes. These questions were not investigated as a paradigm for researching liberal principles became subordinated to a program of political advocacy.
This intellectual myopia led to several theoretical weaknesses and political misdiagnoses. The most important was missing the insight that emergent orders are the signature institutions of liberalism, and so provide a unifying institutional framework for liberalism as a whole. Markets, science, and democracy are all expressions of the fundamental liberal principle of universal equality of status. It is no accident that the most important new such order, the internet, is a product of liberal rules: any one can post anything to anybody, with impersonal coordination processes preventing overload and assisting people in an unknown quantity of unknown endeavors.
Failing to appreciate the centrality of emergent orders to liberal society led many classical liberals into complacently accepting traditional conservative critiques of democracy, predicated on democracies being a certain kind of state. But democracies are no more states than science is a religion or markets are planned orders. Once this point is absorbed, the heritage of anti-statism with which classical liberals had closely identified needed to be rethought. Not abandoned, rethought. Obviously in some respects democracies are akin to states – they make laws, field armies, and collect taxes. But that goes no farther than to say planned economies are like markets in that they make products and employ labor. Very true, but seriously misleading when it is left at that.
Predictions of increasing serfdom from the growth in the activities of democratic government, often based on a misreading of Road to Serfdom, has demonstrably not happened in the Scandinavian democracies, where that process has gone farther than anywhere else. (In The Road to Serfdom Hayek explicitly exempted Sweden, and targeted Britain, because Sweden operated within a market order whereas British Labour then wanted to replace that order.) Hayek’s statement exempting Sweden from his analysis was ignored, rendering its broader implications invisible. Classical liberals as a whole, including for a long time this one, read him already ‘knowing’ what we would find: that big and growing government led to serfdom.
The old ‘state’ model should be jettisoned. I myself prefer a model of democracy as more resembling a residential cooperative with serious principal agent problems, particularly at the domestic level. Sweden ceases to be inexplicable and programs such as Social security take on a new look.
In addition, failing to appreciate science as a signature institution of liberal principles appears to have allowed many classical liberals to under appreciate the subversive impact of right wing conservative attacks on science. The subordination of science to political and religious agendas legitimates subordinating liberalism to illiberal religious and political agendas. When I was a student this subordination was regarded as one of the signature characteristics distinguishing communist regimes from freer ones. Obviously that can no longer be said to be true after the past 8 years.
Finally, if classical liberals had more fully appreciated culture as an emergent process, as Hayek had argued, they would have seen two possible loci for liberty: the market and civil society. Those who have read me before know I think civil society is far the better place to focus that judgment. It is the least specialized in terms of feedback for assisting people in cooperative endeavors, and both science and the market grew from it whereas democracy arose from subordinating the state to civil society. And this brings me to the second critical weakness of classical liberalism as a means for understanding the modern world.
Weakness II: Failure to See How Emergent Processes Interact
Once we are aware that liberalism has generated and sustained at least three emergent processes as direct expressions of its fundamental principles: the market, science, and democracy, inquiring minds will wonder how they interact. I would add modern civil society as a more complex fourth. The usual classical liberal argument that markets simply reflect human choices that are exogenous to the market process breaks down. We see in all three cases that the choices are mediated by the generative rules governing the order in which they are pursued, and these rules make some choices more easily realized than others. Importantly, this ease of realization need have little correlation with the values actors hold personally because the feedback coordinating these orders is abstracted away from the complexity of personal motives and values.
This simplification is both strength and a weakness. Some, like Ludwig von Mises, granted this, but argued that the market was better than any alternatives. For purely economic issues he was right, but Mises only little explored was the issue of interactions between markets and other free orders of cooperation or the emergent orders if the natural world.
Each order will have areas where it can perform certain functions better than alternatives, and areas where it cannot. Determining the precise dividing lines will be empirical questions more than ones of abstract theory. Arguably, modern technology strengthens the case for toll roads by easing toll calculations whereas modern science weakens the case for private insurance by dissolving large groups of the insured into more differentiated ones based on genetic predispositions, health histories, and the like.
Theory can only give us some general indications. Neither basic scientific research nor courts of law will be best done in the market place, neither basic research nor commodity production will be best done within a democratic political system, and neither commodity production nor courts of law will be best done by the scientific community. Even so, in practice, all three emergent processes will unavoidably influence each other. I hope these are not controversial statements.
Finally, civil society can accomplish some important tasks better than can democracy, the market, or science. I would argue that this is a rich area for research, and that many tasks considered political might be better handled through civil society than democracy. In my opinion, much of the future of liberalism’s focus on liberty should rest here. But if classical liberals are to contribute much, they must free themselves from economic reductionism, and encompass a broader view of free cooperation and human well-being.
A final note on this issue. Ecosystems are also emergent processes, albeit ones tied to biological feedback rather than feedback through mentally interpreted information. Consequently their rate of adaptation appears to be slower than with social emergent processes, yet in the final analysis social processes depend on ecological ones. Simple market reductionism, assuming that somehow market feedback is all we need to harmonize society with nature, is highly dubious at best. Yet again, there seems little to no effort to explore this issue. Here also, civil society probably offers enormous promise in devising sustainable institutions and practices.
Weakness III: Failure to Understand Relations Between Emergent Orders and the Organizations Within Them
Perhaps due to what I now regard as the malign influence of Ayn Rand, far too many classical liberals have acted as if business is the natural ally of free markets rather than an intermittent and unreliable ally and often an enemy. A better appreciation of the dynamics between emergent processes and the organizations pursuing goals within them would have made this clearer. A company that is successful in the market can also be put out of business by that same market. The current unseemly rush of businesses for taxpayer funded bailouts is a perfect expression of an organization’s response to an emergent process, once that process threatens its existence. They seek either to escape it or to control it.
Classical liberals consistently give lip service to business not sufficiently supporting the market, but then turn their guns on everyone else who also wanted government to act. This all too often leads to their supporting businesses benefiting from political privilege while attacking the critics of that privilege, and in the process claim they are supporting “the market.” I will give one example close to my heart, but there are many.
When environmentalists seek to influence government forest policy, strengthening controls over the lumber industry, they are attacked as advocates of ‘big government.’ Yet the national forests are managed so that ONLY logging companies can bids for the trees, with the bidding rules further biased to favor very large logging companies and penalizing local companies. Environmentalists are legally prevented from bidding against the lumber industry, and are then accused of supporting big government over businesspeople when they seek to influence government policy by other means. Needless to say, environmentalists are not taken in by this ignorant or manipulative rhetoric, even if uninformed classical liberals usually are, and so the classical liberal position is rendered irrelevant to an issue of great concern to many people. And not just irrelevant. To the degree it is not ignorant it is also hypocritical.
Still more revealingly, over and over again classical liberals wonder why haven’t big businesses seen that their “real” interests lay with free markets. They never asked themselves whether big business might actually really see where their interests lay: in their survival and growth, with the help of markets if possible, with their suppression if necessary. I have a simple question for orthodox classical liberals, including almost every libertarian: why do you think so many corporations so consistently go against what you think are their best interests? Might it be because it is you who do not know what their best interests might be?
Consequently a great many classical liberals have allowed themselves to become allies of and apologists for the growing American oligarchy, an oligarchy that has little if anything to do with liberal principles. Today this fact is beginning to be realized, but many are still wedded to old modes of thought that blame “bad apples” in the business community for the problem, rather then the system that grew them, and will grow more of them if these “bad apples” are “picked.”