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The Other Road to Serfdom

by Eric Zencey Mon Apr 19th, 2010 at 12:30:31 AM EST

Back in the 1940s Austrian economist F. A. Hayek published a book that has been enormously influential: The Road to Serfdom.  In it he made a strong argument that centralized planning of an economy is incompatible with maintaining democratic freedoms.  There's just one large and consequential flaw in his argument:  he assumes the planet is infinite. Once we admit that it isn't, we  discover that what Hayek gave us with his defense of (relatively) unregulated capitalism was just The Other Road to Serfdom.  


The Other Road to Serfdom

A hundred and fifty years ago John Stuart Mill looked ahead to the sort of world we'd have if human population and economic activity continued the growth rates he was seeing in 1848.  He did this in order to argue against the idea that more is always better, but today his reductio ad absurdum reads like dismally accurate prediction.  There isn't much to like, he said, in a world

with nothing left to the spontaneous activity of nature; with every rood of land brought into cultivation, which is capable of growing food for human beings; [with] every flowery waste or natural pasture ploughed up, all quadrupeds or birds which are not domesticated for man's use exterminated as his rivals for food, [with] every hedgerow or superfluous tree rooted out, and scarcely a place left where a wild shrub or flower could grow without being eradicated in the name of improved agriculture.

It' not quite literally true to say that we have exterminated every animal we haven't domesticated, or that "every rood of land" has been brought into cultivation.  The human estate continues to expand, as forests are clear-cut to make way for cattle, as rocky slopes and other marginal lands are brought under the plow.  But this growth in arable land has slowed in the past decade, and it now no longer outpaces the rate at which arable land is lost (mostly through salinization from irrigation) to desertification.  Total cultivated acreage is declining.  As population continues to grow, arable land per person is declining even more rapidly.  One result:  land that's farmed has to be farmed hard--with techniques that amount to "soil mining," an unsustainable draw-down of soil fertility that will reduce further the amount of arable land in the future.

And, while there are non-domesticated species that continue to share our planet with us today, they are there largely because we allow them to be--or because there's a time lag between our acts (like dumping CO2 into the atmosphere) and the consequences of our acts (like the disappearance of polar bear habitat from global climate change), or because extinction-producing processes currently underway (the cutting of rainforest, for instance) have not yet reached their full expression in the world.

In many places, including the U.S., the few remaining ecosystems that register as "wild" are not large enough to support the spontaneous operation of nature within their juridicially defined borders.   We have to manage the wilderness in order to sustain it--and the oxymoron inherent in "wilderness management" has long since faded from view, as necessity makes routine what logical consistency would have forbidden.

To many of us who were born into the fossil fuel era, it seems normal and ordinary that we should have vast energies available to us to effect our will in nature.  It's all we've ever known, and the pages in history books that tell us it was ever different can be dismissed as reporting a remote, quaint and benighted time.  But the handful of centuries that comprise the fossil fuel era are just an instant in geological time, the time scheme in which life evolved, the time scheme in which the natural processes of the planet largely operate.  To put things in a bit of historical perspective:  biologists speak of the Net Primary Productivity of ecosystems, the amount of food energy present within them that comes from the conversion of solar energy into biomass through photosynthesis.  It's the planet's energy budget, the fuel for all life. Two centuries ago humans made an insignificant dent in Net Primary Productivity, taking a fraction of one percent, with the rest being available to power Mill's "spontaneous operation of nature."  Today, biologists estimate that humans are responsible for consuming or destroying an astounding 40% of the Net Primary Productivity of planetary ecosystems.  The remnants of nature that we have so far allowed to remain must make do with what's left.  Many ecologists and biologists fear it isn't enough; systems that evolution designed to make maximum efficient use of 100% of the available solar energy are having difficulty adapting to little more than half of that.  To keep those ecosystems alive and operating in something like a stable (albeit stripped-down) state requires human intervention:  management, regulation, husbandry, legal protection, seeding, subsidy.

Because of the power unleashed by oil, the dystopia that Mill envisioned in 1848 is very much the world we have today----not an Edenic  paradise, not even a garden planet, but a world in which the "spontaneous activity of nature" has been circumscribed, bounded, broken, eliminated.

Call it Factory Planet:  a world in which natural processes are treated as parts of a vast world-machine operated to produce a maximum amount of wealth for humans.

It's a world that King Midas would have recognized.  Having built our economy beyond the limits of what the planet can sustainably give to us in the form of resource inputs, and sustainably take from us in the form of the wastes it struggles to absorb, we face the problem Midas faced.  He enjoyed his power to transform everything he touched into gold until he sat down to dinner and touched his daughter; that's when he learned that an unlimited power to create wealth was neither sustainable nor especially desireable.

I think that like Midas, we're headed for a similar epiphany.

Factory Planet, as it's operated now, is not sustainable.  But even were we to make it so--even were we to rein in our productive engines to the level the planet can sustainably support-there's another problem:  our conversion of nature into wealth at the maximum rate practicable within environmental limits would still leave very little room for something we cherish as much as Midas cherished his daughter.  I don't mean wilderness hikes or the possibility of encountering whales or polar bears or virgin forest --things that only some of us seem to cherish-but something more far-reaching and widely valued:  democracy and civil liberty.

One strong principle underlying our freedoms--the rights encoded into our Bill of Rights--is the idea that citizens should be left alone in all things except those that directly affect others.  (This distinction between what's public and what's private, and not the false ground of release from work or duty or responsibility, is the true foundation of our experience of freedom, Wendell Berry tells us.)  This democratic ideal, fresh and new three hundred years ago, evolved on Garden Planet:  a world in which there was a vast distance between what culture took from nature and what nature could sustainably provide.  Back then, humans lived in ecosystems that were lush, healthy, resilient.  But on Factory Planet the ecosystems that support civilization are strained to the breaking point.  In consequence, acts that were private on Garden Planet have public consequences that make them legitimate subjects of public regulation and control.

For instance:  two hundred years ago if you burned a bit of carbon fuel or clear-cut a forest, it was pretty much nobody's business but your own.  (This simplifies things:  English kings and nobles did reserve forests and game for their own use and harvest, and some civilizations disappeared because they cut down the forests and mined the soils that sustained them. But the point is valid:  on Garden Planet, humans generally had discretion to do with nature what they wanted.)  In our era, when every ton of CO2 emissions puts a burden on the planet's limited ability to absorb it, and when forests and their necessary services to civilization are becoming scarcer and scarcer worldwide, its clear that carbon emissions and deforestation impose real and measurable damage on us all, and are therefore legitimately controlled by public authority in pursuit of the public good.

Or, suppose you live in Colorado and want to catch the rainwater falling on your roof for use to water your lawn.  This is a fundamental prerogative; rain is the free gift of nature, right?  Not in Colorado Compact States.  In the watershed of the Colorado River every drop (and then some) of the river is assigned to a use--mostly irrigation to grow food,  pace Mill-and law forbids property owners to impede the flow of rainwater to the river.

Or suppose you fancy making a living as a fisherman or lobsterer.  Sorry--there's no room for you on the water anymore, not unless you can be taken on by one of the existing quota holders.  Every ton of fish, every pound of lobster that nature is capable of producing has been anticipated, counted, assigned to a harvester, a market, a use.

Because our economy exceeds the limits of what nature can sustain, we are experiencing an increasing need for resource regimes:  an International Whaling Commission to limit the harvest of whales, a Fishing Treaty to apportion tonnages of catch from world oceans, a Green House Gas treaty to apportion the planet's strained carbon-absorption capacity, international water compacts to apportion river flow among users, and on and on.

The alternative to this kind of rule of law is the absence of the rule of law--and a world in which "extra-legal" conflict over increasingly scarce resources will flourish.  Countries in a state of war find it difficult to hang on to civil liberties.  Resource shortages displace populations, create failed states, breed resentments on which terrorism feeds, and send nations to war--circumstances under which we'll see further erosion of civil liberties.

The one option that is not available is to continue things as they once were:  no  resource regimes telling us what we can and can't do, and economic growth without apparent limit.  The sad truth is there are limits to sustainable economic activity: the planet can support only a finite amount of throughupt.  Our transgression of those limits will force change of one sort or another upon us.

The conclusion is inescapable:  if we grow farther beyond the planet's ability to support us, the best option we face is that more and more of our lives will be hemmed in by the imperative to control our collective environmental impact while maximizing our production of food and wealth.  To extend the metaphor:  factories are marvelously efficient, but they are not generally places where humans are given much room to exercise prerogative, discretion, choice or free will.  A factory planet, budgeted right up to the edge of what's ecologically sustainable, and run for the sole purpose of maximizing the wealth that the human species enjoys, is a planet from which we've eliminated the literal ground on which democratic freedoms flourish.

Support for this thesis comes from an unexpected place.  Fifty years ago Friedrich Hayek argued that centralized economic planning like that being done behind the Iron Curtain was The Road to Serfdom. There is, he said, "an irreducible clash between planning and democracy."  A country can maintain its democratic institutions and civil liberties only if it has a free-market economy and the egalitarian free-for-all of (relatively) unregulated capitalism.  His argument has a great deal of merit and influenced generations of neoconservatives, many of whom have cheapened it quite a bit.  Hayek was not opposed to government regulation of the economy, though the million-selling Reader's Digest Condensed Version of his long, dry treatise didn't dwell on that element, and so Hayek's delineation of the legitimate grounds for governmental control of markets went largely unread and generally underappreciated.  Today many conservatives take Hayek to have supported an idea he would have found abhorrent, that there is no public good other than the one that emerges from the cumulation of private greeds expressed in markets.

Even correctly understood, Hayek's argument has a serious flaw.  Hayek, unlike Mill, implicitly and comfortably assumed that we could have infinite economic growth on a finite planet; ecological limits to economic development played no part in his theory.  From our perspective fifty years later it's easier to see that planning is planning whether it's done to minimize poverty and injustice (as socialists were advocating then) or to preserve the minimum flow of ecosystem services that civilization requires (as we are stumbling toward today).   In the absence of limits on population growth and resource uptake, the free-market economic development that Hayek advocated turns out to have been just The Other Road to Serfdom.

It's going to take some work to preserve democracy in an era of ecological constraint.  A key element is achieving a sustainable, stable level of human population; if we need to budget ourselves to a finite, sustainable level of resource throughput, then continued growth in the human population will reduce the average standard of living that humans can enjoy, and democracy doesn't flourish when the standard of living is in decline.  World wide, education of women and girls has a strong effect in depressing birth rates; equal access to education should be seen not just as a civil right, but as a necessary step toward ecological sustainability--and, therefore, a necessary step toward the preservation of democratic liberties for all of us.

Also paramount is the development of a sustainable economic infrastructure--the smart grid, energy from renewable sources, and conservation of all forms of energy through retrofitting and the gradual redesign of how and where we live, work, travel, shop, grow food, recreate.  Under a stable rate of throughput, such technical change and innovation will be our only avenue of increasing output--a process ecological economists call development to distinguish it from footprint-increasing growth. There is an enormous amount of waste of resources in our system because resources, particularly energy, were underpriced for most of the twentieth century.  We need to pick that low-hanging fruit-and then we'll need to pick quite a bit more.

But these changes, alone, won't be enough.  We need, also, a green intellectual infrastructure:  reconstruction and adaptation of the mistaken ideas on which our unsustainable institutions and practices were built.

What ideas needs changing?  First and foremost, economic theory.  I've written elsewhere about the need to devise a better measure of our standard of well-being than the current default, GDP, which was never designed to perform that service.  Among the other places in which economic theory presumes that an economy's ecological footprint can grow forever is the concept of Pareto Optimality.  Back at the close of the nineteenth century Wilfred Pareto helped split Political Economy in two, separating "scientific" economic theory from the messier, less-easily-quantified realm of political theory.  Crucial to the split was his notion that because satisfactions and pleasures are subjective and not interpersonally comparable, all an economist can say, scientifically, is that one system is better than another if it satisfies more needs and wants than another.  The implication:  we cannot be confident that we improve the level of satisfaction in the world if we take a dollar from a billionaire and give it to a starving man to buy food.  For all we know the billionaire might derive as much satisfaction from that last dollar spent as the starving man does buying food.  This counter-intuitive result, as hard-hearted and absurd as it is on its face, remains fundamental to economics as it is practiced today.  It is one strong impetus pushing us toward unsustainable growth.   Thanks to Pareto, in economic circles (and among policy makers who listen to economists), all talk of income redistribution is off the table.  If you care about the starving masses of the world, economics tells you, the only solution is to work to increase production, to produce two dollars where before there was only one.  Thus, through Pareto, a supposedly value-free science became committed to infinite economic growth--a value-laden, quixotic ideal if ever there was one.

Once we recognize that the planet is finite, and that there is a limit to the stream of resources that can sustainably be used to make wealth, we have to face the difficult questions of distribution of wealth instead of simply--childishly, romantically-assuming the problem away.

And, in our calculations of the minimum amount of nature that should be left alone to preserve a necessary flow of ecosystem services, we need to remember Hayek's warning:  democracy and planning are irreducibly in conflict.  If we want to avoid the technocratic administration and centralized economic planning of Factory Planet, if we want to make unnecessary the development of an international technocratic elite who manage our interactions with earth's ecosystems in order to preserve the grand project of industrial civilization, we need to preserve some substantial and additional measure of Mill's "spontaneous activity of nature."  Only by doing so will we inhabit a planet on which civil liberties remain possible.

Display:
Henry C K Liu, a sharp commentator before and during the financial crisis, gives his version of the history how influential was Hayek's work.

Keynes versus Hayek

.... Events in the 1930s had showed the socio-economic damage caused by free markets. Subsequently, the macroeconomics of Keynes's 1936 General Theory dominated academic circles as well as government policy establishments.

By the time Keynes died in 1945, Hayek and the classical, trade-cycle theory had very few serious followers ....

Hayek maintains that only free markets, with individuals making disaggregated decisions in their narrow self-interest, can generate the information necessary to intelligently coordinate social behavior. Freedom of individual choice without "distortive" regard for social impacts is considered as necessary input for an efficient economy that would lead to prosperity. Hayek argues that free-market prices are the true expression of a rational economy.

For three decades after World War II, reality ran counter to Hayek's theories. Even conceptually, macro-economists began to suggest that with the aid of computerized macro input/output models, central planning can accommodate the very information problem that Hayek had raised ....

The shift from the "guns or butter" trade-off of the pre-war era to the "guns and butter" fantasy of 1960s and '70s pushed post-war prosperity into spiraling inflationary bubbles in countries that had benefited from Keynesianism, led by the United States and the UK.

... Capital understood that managed inflation is pro-labor and anti-capital. Keynesian economics was essentially pro-labor in its macro approach by treating unemployment as a social virus for which healthy doses of managed inflation should be tolerated as its cure. Government fiscal policy was deemed the natural venue to administer the medicine.

Capital, to combat this serious threat to its very existence, adopted a strategy with three legs.

The first leg required that guns remain an untouchable priority. The rationale was that guns were needed geopolitically in a world that had become fatally dangerous to capitalism.

The second leg required that government be blamed for high inflation and unemployment. Voters had to be convinced that inflation was bad for them and that the pain workers with low wages were suffering was caused by big government and inefficient central planning that distorted the natural self-adjustments of a free market.

The third leg required the introduction of the threat of hyperinflation in the economy to scare the gullible masses into accepting an anti-government and anti-inflation frame of mind. This leg of the strategy encouraged the economy to run into prolonged runaway inflation and recurring government deficits that hurt both labor and capital, setting a stage for a anti-labor onslaught through anti-inflation and anti-government rationalization in the name of protecting the welfare of the nation.

The general public bought into the propaganda readily, but the intellectuals had to be won over with a new school of economic thought that would seize policy initiative from the Keynesians in government. Hayek's discredited free-market theories appeared tailor-made for this purpose.

To provide theoretical underpinning for this three-legged pro-capital strategy, the old classical economics prescriptions - savings, investment, balanced budgets, competition, productivity determined wage levels and supply-side growth - were dug up from the intellectual graveyard and dusted off with new bells and whistles  to be paraded as the sound economic policy goals of good government.

Conservative politicians began to demonize Keynesianism domestically and rational socialist economic planning internationally. Third World socialism, burdened with endemic poverty from imperialism, was never given a chance economically by the new financial imperialism and politically by Cold War containment ....

To anoint respectability on the worn theories of free-market voodoo economics, as propaganda against Keynesianism in the West and socialist planning in the Third World, Hayek was plucked from three decades of homelessness in the economics fraternity, to be awarded a surprise Nobel Prize in economics in 1974.

.... overnight, the extremist right transformed a joker in the person of Friedrich August von Hayek (born in 1899, died March 23, 1992, in Freiberg, Germany) to guru status, as the greatest philosopher of capitalism since Adam Smith ....

The difference between [Keynes and Hayek] was that to keep the economy going, Keynes would fight unemployment with inflation and Hayek would fight inflation with unemployment ....

So, the revival of Hayek's work was due to a social-political convenience rather than economic merit?!

More generally, the supply of scares is rather plentiful the last years. It is interesting to observe the pattern which scares get real political and media traction. The concerns of economic bubbles, climate change, peak oil and sustainability are still very much obscured to the point that nothing is really done until very late. But political action on terrorism scares, some "evil dictators", grand scale financial collapses and certain "roads to serfdom" has a streamlined routine by now. How artificial is this selection of scares?

In particular, the economic crisis of the 1970s somehow passed a harsh judgment on Keynesian policies, and gave a free pass to Hayek's and Friedman's theories of fredom. But was that crisis really a big failure of Keynesian economics? Even Krugman describes it as a nasty crisis. But firstly, I wonder how painful (in relation to the Great Depression and this crisis) was it to the contemporaries. Secondly, how much was it a fault of Keynessian economics? The more I read about macro-economic management in the last decades, the more I may wonder how much political design or anticipation is there.

by das monde on Mon Apr 19th, 2010 at 03:44:31 AM EST
born in 1899, died March 23, 1992, in Freiberg, Germany

I never knew that he chose to become a serf for the latter part of his life. Didn't he really die in Freiburg?

by gk (g k quattro due due sette "at" gmail.com) on Mon Apr 19th, 2010 at 03:58:24 AM EST
[ Parent ]
Hayek was a propagandising whore, not a serious philosopher.

The argument is theological, not rational. It starts from the assumption that 'free markets' (i.e. capital) are the best thing evah, and works backwards to a transparent rationalisation for their rollicking awesomeness.

The reality - that markets are just brutal empires run by spivs pretending to be aristocrats (and sometimes by aristocrats pretending to be spivs) - is inexplicably absent from his work.

You can pretty much file Hayek under anti-Soviet propaganda. It seems to have been necessary to create an intellectual counterweight to Marxism, and Hayek's witterings were tailor-made for that role.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 19th, 2010 at 06:24:55 AM EST
[ Parent ]
I think  that his come-back in the 1970s was more for domestic Western "consumption" rather than for taunting the Soviets. The direct impact of those Nobel (Memorial) prizes to Hayek and Friedman was legitimation of the reforms in Chile, and political preparation for the Reagan-Thatcher "revolution" and the Washington Consensus.

Some say that (post WWII) the West supported good conditions for the labour to keep good social and consumer conditions in comparison with the Soviet system. As we see, the preparation for the neo-capitalist reversion was in full swing in the 70s, disregarding the possible social Soviet competition. The Reagan-Thacher reforms started while the Soviet Union still looked impenetrable. Ten years later, the Western capitalism still looked great, the Soviet Union fell apart, and the Soviet block was treated with ready Washington Consensus recipes. Everything seems to happen just in time for a global anti-labour transition.

A wild question: In its last decades, was the USSR doing its best to make a joke of itself and prepare the citizen for consumerist desires? If you accept that the KGB was doing actually nothing to guard and preserve the system, real intentions of the Central Planning Bureau can be suspected just as much ;-)

by das monde on Mon Apr 19th, 2010 at 07:05:54 AM EST
[ Parent ]
I suspect there's an extent (and it could be a very large extent) to which the ascension of Hayek and co can also be traced to the victories of the civili rights movement in the US. If you're no longer allowed exclude blacks economically simply on the base of their skin colour a theoretical basis which allows you do the say thing in the name of economic philosophy is rather useful.

There's an argument that government subsidies - which pretty much built the middle class white heaven of 1950s America - become unpopular when it becomes clear they're going to have to be shared with blacks in the 70s. Cultural hegemony and nationalist impulses exports this point of view to the European right pretty quickly, especially since it's in the short-term self interest of rich supporters.  

Hayek's philosophy is predicated on exclusion - there is a small in-group which deserves your support, the rest can simply be exposed to the market. It's his argument against the possibility of a social Europe - German workers will never agree to support Portuguese fishermen. His disciples have spent a long time trying to make that true.

by Colman (colman at eurotrib.com) on Mon Apr 19th, 2010 at 07:22:49 AM EST
[ Parent ]
The psychology of antagonism against "loosers", "white trash" (be it with or without racial hints) is being introduced and spread rather efficiently. This factor ended much of solidarity and sense of community in Eastern Europe, in particular. And then "society psychologists" talk about importance of looking at things positively in those countries - the same talking heads that were convincing that nothing was valuable in the old society.

Quite predictably, higher "business class" masters of the universe look at the middle "economy" class of winners with as much indignation as those middle winners are taught to look upon hopeless loosers.

by das monde on Mon Apr 19th, 2010 at 07:47:32 AM EST
[ Parent ]
Why would the Swedes have ever wanted to legitimize the government of Pinochet?  Or prepare the West for Reagan and Thatcher for that matter?
by santiago on Mon Apr 19th, 2010 at 10:00:35 PM EST
[ Parent ]
... or the Bank of Sweden?

Since when is capture of central banks by the Finance Sector something that is somehow surprising ... any more than capture by an industry of any public authority affecting that industry is somehow surprising.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Apr 19th, 2010 at 10:16:23 PM EST
[ Parent ]
Yeah, financial wolfs are deciding welfare-for-sheep prizes. And they have a privilege to call them "Nobel".

The Swedish Riksbank invented the Fractional Reserve Banking, remember.

Recently, Swedish banks had created a credit bubble in the Baltic states just 15 years after their own banking crisis.

by das monde on Mon Apr 19th, 2010 at 10:29:15 PM EST
[ Parent ]
Looking at the historical roots can be interesting.

In the late 60ies the cash value of the Nobel Foundation and thus the prizes had shrunk due to restraints on investment - as I understand it only government debt was safe enough. On the other hand influential government circles wanted a prize in some appropriate social science to award prizes more relevant to politics then the boring physics and chemistry. Tit for tat and the Nobel in Economics was born.

I suspect that Economics was a strong candidate largely because of the
Stockholm school:

The Stockholm school, or Stockholmsskolan, is a school of economic thought. It refers to a loosely organized group of Swedish economists that worked together, in Stockholm, Sweden primarily in the 1930s. The Stockholm school had at the same time as John Maynard Keynes, but independently, come to the same conclusions in macroeconomics and the theories of demand and supply. Like Keynes, they were inspired by the works of Knut Wicksell, a Swedish economist active in the early years of the twentieth century.

Two of the most prominent members of the Stockholm school were Stockholm School of Economics professors Gunnar Myrdal and Bertil Ohlin.

Myrdal (soc dem, minister of trade) and Ohlin (liberal, briefly minister of trade then leader of the opposition) both received the prize, Myrdal sharing it with Hayek. Myrdal later argued for its abolishment, on the grounds of it being given to reactionaries like Hayek and Friedman.

I think it was instituted by keynesians, but turned into a right-wing project. Exactly how, I do not even guess. Who were the key actors and key institutions? What influence did math envy play?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Apr 23rd, 2010 at 02:51:06 PM EST
[ Parent ]
Not to be confused with Stockholm syndrome, which is also about the haves controlling the have nots by psychological means.
by njh on Sat Apr 24th, 2010 at 06:42:22 PM EST
[ Parent ]
Good point.
by santiago on Mon Apr 19th, 2010 at 11:31:31 PM EST
[ Parent ]
It was refreshing to read that.  

There's a truism in political history that one man's founding father is another man's terrorist; and it seems that the same disjunction happens with social thinkers.  (For the life of me, I can't see why anyone takes Ayn Rand seriously as a thinker.)  I've been taking Hayek seriously enough to criticize him, because I think others have taken him seriously.  I suspect that some kind of youthful encounter with the Reader's Digest Condensed Version of Hayek lies behind the political judgments that have been rendered by some of the US's Republican Congressmen and
Senators, the ones who offer wrote, unthinking support for (what they think are) free markets.  To the extent that they have a philosophy, and to the extent that they believe they are acting on principle, Hayek seems to be it.

Industrial society is not sustainable. Unsustainable systems change--or disappear.

by Eric Zencey (Eric dot Zencey at ESC dot EDU) on Mon Apr 19th, 2010 at 08:31:01 AM EST
[ Parent ]
Our elected representatives have to reflect the attitudes, prejudices and limitations of their electorate. They can do this in two ways: by dissembling or by themselves largely incorporating those attitudes, prejudices and limitations. They are, for the most part, intelligent, able people and I suspect that most do a bit of both. But to the extent that they are aware of their prejudices and limitations, they are careful to be very calculated in how they publicly confront them.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Apr 19th, 2010 at 11:54:55 PM EST
[ Parent ]
I'm developing what I posted here as an essay for inclusion in a book being published next year, and this reply is very useful.  Very useful.

I'll check out Liu's commentaries.  

Liu is saying that a threat of hyperinflation was engineered for cynical reasons, and that doesn't ring quite true to me.  It seems to imply that at least some of the people with their hands on the levers of economic policy knew perfectly well how to avoid inflation, but were choosing inflationary policies not as the lesser of several evils but as a purposed tool for these hidden reasons.  Hmmmm....I'd like to see more analysis in support of that.  I think that one strong driver of the inflation of the 70's was the decreasing EROI of oil (as the energy cost of energy went up, the existing money supply was chasing fewer and fewer real goods and services) and the shift in control of world oil prices from the Texas Railway Commission to OPEC, which quickly exercised its power, the way a runner wants to go running the moment he buys new sneakers.  

Industrial society is not sustainable. Unsustainable systems change--or disappear.

by Eric Zencey (Eric dot Zencey at ESC dot EDU) on Mon Apr 19th, 2010 at 08:47:23 AM EST
[ Parent ]
Liu implies that if you look at the recent history of economic propaganda, you will see a pattern that big policy makers were not people particularly concerned with inflation, wages, common well-being.

In the 1970s, the bureaucracy was probably still very much proudly involved in its public duties. Even Nixon said, "We are all Keynesians now", and systems theory was in high regard. But alternative political and intellectual institutions were forming, particularly well-funded think tanks. Despite well-wishing appearances, the think tanks had a very narrow core determination - to change the economic and political discourse in the way Liu describes, in favour of rich funders. And they succeeded very fast.

by das monde on Mon Apr 19th, 2010 at 09:27:48 PM EST
[ Parent ]
Many of the changes Lui described could just as reasonably be ascribed to motives to maintain levels of profitability to which they had become accustomed by shifting from growth in production to growth in the portion of the value of existing production which the economic elite extracted for themselves. This culminated in the brilliant strategy to convince much of the middle class to consume the apparent increase in value of their homes via re-finance, which fed securitizations and the whole derivative phenomenon, from which they profited mightily, while masking the true extent of the impoverishment which they were imposing on the bottom 90% of the population.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 20th, 2010 at 12:04:55 AM EST
[ Parent ]
So, seeing the small potatoes relative to this one 70s crisis generated such a fundamental change in governments' economic thinking . . . Well, that's what's so frustrating at the outset of this lost decade. Not a hint (!) in mainstream academia or government of the kind of fundamental rethinking that occurred in the 70s and in the 30s. The 'mainstream radicals' of the New Deal 30s would find this evidence of what they feared was coming, the complete, untouchable takeover of economic/social power and influence by the very large corporations.

fairleft
by fairleft (fairleftatyahoodotcom) on Mon Apr 19th, 2010 at 10:38:19 AM EST
[ Parent ]
What bothers me about this essay is what feels to me like an Americo-centric subtext, which I could illustrate by highlighting a couple of points.

One is the acceptance of Hayek. Without going into the extent to which the promotion in America of Hayek's economics-over-politics was a full-blown corporate plot (or not), it seems to me the view of Hayek as a central serious thinker is far more a part of the common wisdom in America than in Europe (with a possible exception for Britain thanks to Margaret Thatcher). Hayek was adopted into mainstream American thinking because he offered apparently respectable intellectual weapons in favour of corporate liberty on "free" markets and against Keynesian State intervention, and in favour of capitalist freedom as opposed to Soviet-style planned economies. In other words, he fitted right into a Cold War narrative and at the same time an American libertarian narrative. Both of which profoundly modelled today's American mass consciousness, and both of which have been instrumentalized in favour of corporate power.

The second is a fairly common American assumption that freedom and democracy are properly American. "Our freedoms" (yikes! Shades of GWB!), "our Bill of Rights" -- which was named for, and several of its major tenets taken from, the English Bill of Rights promulgated a century earlier after the Glorious Revolution deposed James II, and formed the basis for oft-repeated references by colonial Americans to "the Liberties of Englishmen". Not that England was the only place in Europe where ideas of freedom and democracy grew during that century, between 1689 and... 1789. And the idea that Americans today enjoy freedom and democracy to a superior degree than anyone else in the "developed" world doesn't seem to me based on any more than American exceptionalism.

So when you oppose American "freedoms" to (Hayek's Soviet-style) "planning", I have a job following you into the American CW involved. The jump is then strenuous from "freedoms" to the "spontaneous action of nature", and from Hayek's anti-"planning" to "Factory Planet". We could (since you go back to Mill) think of the influence on classical economics of Enlightenment ideas about nature and natural law, and that could lead us down to the neoclassicals, and we'd be in bed with Hayek again (I'd rather not).

What does the "spontaneous action of nature" mean in economic terms? How can you have smart grids (for example) without some degree of centralized planning? If we leave it to free markets, we'll have gas and coal power plants and no smart grid...

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Apr 19th, 2010 at 12:52:46 PM EST
I'm sorry for the US-centric stuff in here.  It's a valid criticism.

I wrote this piece for a fairly conservative audience here in the US, taking some delight in undercutting Hayek; and thought I would share it to the Trib, but didn't re-focus it for the larger audience.  My mistake.

(And I don't usually address audiences that need to be convinced that we have an ecological problem; an editor over here specifically asked for me to include stuff about how "of course, not all species are domesticated" and some other development along that line.)  

And so, yes, I spoke of "our" Bill of Rights, to Americans; I should have retooled the language for publication in the Trib.  I'll aim to do better next time; for now, think of the piece as being directed by an American at American conservatives, in an effort to subvert their faith in Hayekian ideology.  It's good to hear he's not taken seriously, much, in Europe.  I will note that some of my Eastern European students in Prague have been given heavy doses of free-market stuff in their economics classes, and think of Hayek as an important thinker.  

I don't think that Americans enjoy civil liberties to a greater degree than other nations (and think quite the contrary, sometimes.)  I don't know where that came through; probably through a shifting referent for "we".  Sometimes I mean Americans, sometimes I mean citizens of industrialized nations, sometimes I mean humans.  Shifting referents is sloppy writing.  

Re:  "'the spontaneous operation of nature' in economic terms."  You can find instances of thinkers comparing "the spontaneous operation of markets" to the spontaneous operation of nature--suvival of the fittest through selection under competitive pressure under conditions of constrained optimization, and all of that.  There is a formal similarity, but one can push these analogies too far.  Or perhaps they aren't pushed far enough.  In nature, selection through  competitive pressure under conditions of constrained optimization takes place within a background reality that is physical and unforgiving:  laws of thermodynamics, truths of chemistry, biology, mechanics.  (Grasshoppers can't be scaled up to the size of dogs; it just won't work.)  The same sorts of physical limits do in some ways apply to economic life, but sorting it all out is not simple.  Some thoughts:  

We (humans) have been led to think economic theory can ignore physical reality.  Ecological Economics, in contradistinction to neoclassical economics, takes the laws of thermodynamics as givens that are relevant to economic life.  The celebration of the "spontaneous operation of markets" ignores those laws, and ignores the historicity of economic life, in particular the (geologically) brief lifetime of a fossil-fuel-fed economy.  

Some of the reality that economics deals with are the realities of human nature; but unlike the laws of thermodynamics, biology, mechanics and etc., humans are malleable, and they employ a variety of idea systems that further broaden the range of (what counts as) success.  "What's the maximum efficient size for an economic entity?" is not as simply or easily answered as "how big can a grasshopper grow?"  Some researchers have said that when a human group exceeds twelve or so people, it can no longer efficiently function as a participatory democracy, but has to delegate.  If we valued participatory democracy, we'd see larger groups as inefficient.  We (industrial humans) have tended to measure success with one single metric:  GDP, which isn't even a good measure of material well-being. Changing what we measure would change the implicit definition of what counts as success in the "spontaneous operations" of economic life.

So here, the analogy seems to hold:  efficiency could be decided by success in maintaining longevity, which (we could presume) comes from meeting the organizational goals.  Except, except:  there are many other factors that impede or promote group success and longevity, and they can insulate groups from  selective pressure.  A bit of a jump, but I hope you'll follow:  sometimes I ask my European students "why did America become a superpower?"  I get a range of answers:  Its political institutions.  Its free markets.  Its corporations.  Its success in coming into WW II at the end, and the oceans that kept it from having its infrastructure destroyed.  Its national character and entrepreneurial spirit.  And so on.  Not one student has said "twelve feet of loess in the American midwest, which allowed American agriculture to achieve a degree of productivity, through soil mining, that was unprecedented in history, thus freeing up productive capacity for other pursuits."  Not one has said "the enormous Energy Return on Energy Invested of Oil, which the US was in the forefront of exploiting."  It seems possible that such physical factors insulated the US from (what we're calling) selective pressures, and allowed it to develop an annoyingly parochial sense of its own exceptional status.

Thanks for your thoughtful reply.

Industrial society is not sustainable. Unsustainable systems change--or disappear.

by Eric Zencey (Eric dot Zencey at ESC dot EDU) on Mon Apr 19th, 2010 at 07:38:59 PM EST
[ Parent ]
Eric Zencey:
twelve feet of loess in the American midwest, which allowed American agriculture to achieve a degree of productivity, through soil mining, that was unprecedented in history, thus freeing up productive capacity for other pursuits.

bingo, heh.

that's exactly what i would have said, with a hat tip to the native americans, humanity's greatest ecologists, who had struck a fine balance between resource management and respect for their descendants' rights to a clean and renewable environment, for thousands of years.

"you don't know what you got till it's gone"

great discussion, thanks for sparking it off Eric, and to the many very intelligent responses.

sterling stuff!

 

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Tue Apr 27th, 2010 at 06:34:07 PM EST
[ Parent ]
Beyond a critical point within a finite space, freedom diminishes as numbers increase. This is as true of humans in the finite space of a planetary ecosystem as it is for gas molecules in a sealed flask. The human question is not how many can possibly survive within the system, but what kind of existence is possible for those who do survive.

Frank Herbert
Dune

Excellent diary.

Now where are we going and what's with the handbasket?

by budr on Mon Apr 19th, 2010 at 01:21:46 PM EST
I read Dune a long time ago, and it's a bit chilling to think that I'm just tilling a ground that Herbert staked out decades ago.  Interesting.  "My freedom to swing my fist stops at the other fellow's nose," to quote a US Supreme Court decision--and on Factory Planet we live in a world of noses.

Industrial society is not sustainable. Unsustainable systems change--or disappear.
by Eric Zencey (Eric dot Zencey at ESC dot EDU) on Mon Apr 19th, 2010 at 08:45:26 PM EST
[ Parent ]
I first read Dune in the early '70s.  At the time I read it as an insightful look at Cold War geopolitics as well as a call for global ecological awareness.  As I've reread it from time to time over the years, I've come again and again to marvel at how stunningly prescient it was.  I wrote a diary about it a couple of years ago.

Your diary is a welcome contribution to a conversation that is at least as important as health care or renewable energy or any of our other current preoccupations.  The notion that continued, unlimited growth -- of human populations, of our so-called Western life styles, of practically any sort -- is possible or even desirable, is a fantasy that we can no longer afford.  In my diary I wrote about water as the bounding minimum on the planet Arrakis.  I got that wrong.  It is of course a bounding maximum.  As a people and as a species, we are fast approaching any number of planetary bounding maxima.  At present fossil fuels in general and petroleum in particular receive a disproportionate share of our attention in my opinion.  In the not too distant future, other resources may present much more serious constraints.  In the end, water may come to be our bounding maximum too.

Now where are we going and what's with the handbasket?

by budr on Tue Apr 20th, 2010 at 12:08:08 PM EST
[ Parent ]
yup, really tasty stuff, and the comments too.
Thanks Eric!

does the Mises institute fit in here somewhere too?

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Tue Apr 20th, 2010 at 05:52:55 AM EST
[ Parent ]
My personal problem with this essay - as well, I hasten to add, with as the entire body of discourse it refers to and seeks to address - is the extreme reduction of "freedom" and "civil liberties" to signify exclusively the freedom to exploit the commons at will ("economic freedom").

Intellectual freedom does not appear at all in this coordinate system, and freedom of self-realization is implicitly reduced to consumption decisions. Yet these are ultimately the important freedoms; "economic freedom" only exists to make these possible, and is only necessary to that extent.

There is no compelling reason why constraining "economic freedom" would automatically curtail these higher liberties. In fact, I would go further, and assert that the history of the last 40 years provides the basis for circumstantially arguing that, beyond a certain point, "economic freedom" is actually inimical to intellectual freedom and freedom of self-realization.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Tue Apr 20th, 2010 at 03:17:35 AM EST
By coincidence right now I am reading Charles Van Doren's A History of Knowledge: Past, Present, and Future.*  He writes at some length about that very issue.

At the time of the American Revolution, human rights were defined almost entirely in terms of property rights, a la John Locke.  That is the almost-fatal flaw in the American experiment.  Jefferson was on the right track, substituting "life, liberty, and the pursuit of happiness" for Locke's "life, liberty, and property," but he was at least a generation ahead of his fellow conspirators.  The French got it almost right a few years later, but then they went off on that whole Napoleon thing.  To this day, with few exceptions, any discussion of human rights is heavily influenced by Locke's framing, at least in the West(TM).  It is long past time for us to find a better frame.

I take the point of Eric's diary to be that in the not so distant future our personal liberty -- however defined, but especially in terms of our current definition of liberty as primarily economic freedom -- will increasingly be constrained by ecological reality, no matter what political or economic regimes we may choose.

*And finding it fascinating.  I'm having to force myself to put it down and go to bed at a reasonable hour the past couple of work nights.


Now where are we going and what's with the handbasket?

by budr on Tue Apr 20th, 2010 at 02:54:01 PM EST
[ Parent ]
Isn't liberty of the mind MORE important than a crescendo of consumption? And isn't liberty of the mind inversely proportional to attention to consumption/status. (Without a nod to status, no discussion of this sort works.)

Align culture with our nature.
by ormondotvos (ormond no spam lmi net no spam) on Sun Apr 25th, 2010 at 05:20:34 AM EST
[ Parent ]
And isn't liberty of the mind inversely proportional to attention to consumption/status.

Only for the affluent.

If you don't have vaccination, clean water, preferably a home that won't fall down on you if you give it a nasty look, then you have very little time to exercise the freedom of the mind.

There comes a point, of course, where the time, difficulty and effort saved by adding a further convenience of life no longer exceeds the trouble of acquiring it. But hard resource constraints may well turn that into an academic discussion in a few decades.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 25th, 2010 at 06:45:06 AM EST
[ Parent ]
JakeS:

Only for the affluent.

If you don't have vaccination, clean water, preferably a home that won't fall down on you if you give it a nasty look, then you have very little time to exercise the freedom of the mind.

while there's more than a grain of truth to that, one has surely to acknowledge the possible capacity for deep and wide-ranging human thought before these material comforts arrived on the scene.

with the exception of clean water, for sure... your version implies until we attained all these things, we were all knuckle-dragging imbeciles. somehow i suspect this is not what you meant, lol.

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Tue Apr 27th, 2010 at 06:27:55 PM EST
[ Parent ]
Actually, the people who did exercise the freedom of the mind were the people who had reasonable protection from disease (not precisely vaccinations, but reasonably clean homes and slaves to attend to their personal hygiene), reasonably clean water and a home that didn't fall down on them if they gave it a nasty look.

Most people, for most of the time that our species has existed, have had very little time to exercise the freedom of the mind in any way that we would recognise.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 1st, 2010 at 08:29:40 PM EST
[ Parent ]
maybe our definitions differ...

what does a peasant have, while hoeing his patch? is your understanding of FoM dependent on school education?

once able to read and write, there are fountains to drink from in search of freedom from ignorance, but is not an illiterate able to feel free in his mind, as you see it?

pardon me if i misunderstand you!

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Sat May 1st, 2010 at 10:26:54 PM EST
[ Parent ]
To you or me, certainly, but I think we are exceptions.  I suspect most Americans, and maybe most Europeans, would not even understand the question, at least not in the way you mean it.

Now where are we going and what's with the handbasket?
by budr on Sun Apr 25th, 2010 at 12:30:29 PM EST
[ Parent ]
How much status do you derive from 'liberty of mind'?

What matters about status is your perception of what other people who you feel are competent to judge your status think of you.

by Colman (colman at eurotrib.com) on Sun Apr 25th, 2010 at 12:55:03 PM EST
[ Parent ]
Colman:
How much status do you derive from 'liberty of mind'?

status is acquired by admiration, no need to suppose admiration is only for material social markers.

more to the point, i feel, would be to ask why we care what others think about our status, since it doesn't depend just on ourselves to create this kind of codependent relationship, neither is the other wholly responsible.

see: tango...two. i think it's amusing to see the amount of energy people invest in this kind of positioning, and the values this kind of social mindset engenders.

'keeping up with the Jones's', it used to be called, now it's 'presenting oneself to advantage'.

SOS...

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Tue Apr 27th, 2010 at 06:22:41 PM EST
[ Parent ]


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