How Does One Apply Rational Egoism in a Mixed Economy, Welfare State? BY JAANA WOICESHYN | JAN 15, 2021 | BUSINESS

While the welfare state cannot be transformed into a free-market system overnight, businesspeople can help by speaking up (in forums open to them) when restrictions on freedom of business are being proposed by government and other groups.

I recently taught a short course introducing business ethics and rational egoism to Executive MBA students. One student observed that it would be easier to apply egoist principles in free markets where acting on such principles, for example, rationality, productiveness, and justice, would be rewarded and profit-making valued. But, the student asked, how does one apply rational egoism in a mixed economy, the prevailing welfare state system?

The student’s question was apt: the welfare state system makes it challenging for business to pursue its (owners’) self-interest—long-term profit maximization—because the rational egoist moral principles are at odds with the dominant moral code on which the welfare state is founded: altruism. It is a code that guides putting others’ interests always ahead of one’s own. This contrasts with the free-market system—capitalism—that is based on in rational egoism. This code advocates the pursuit of self-interest that allows only voluntary and mutually beneficial interactions and renounces the initiation of physical coercion against others.

In a welfare state, many investors, customers, employees, and the government expect business to act altruistically at least some of the time. The business is expected to sacrifice profits for the causes that these stakeholders favor, such as fighting climate change, reducing income inequality, and for various government programs that support them. In contrast, in capitalism, business is expected to focus on creating material values on which people’s lives depend and on trading these values for profit.

The social pressures to conform to others’ altruistic expectations can be significant in a welfare state system and can lead to business appeasing them. As an example, in 2019, the Roundtable of CEOs of 200 major corporations re-defined the purpose of the corporation from creating wealth for its shareholders to serving all its stakeholders equally, including “communities.”

However, if business wants to perform its proper—necessary—role as the creator of material values, such appeasement will not do. It must pursue its long-term self-interest, guided by the rational egoist principles. For that, business must claim the moral high ground. This requires recognizing that business is a tremendous force for good in society. Businesses produce the goods and services that not only make people’s lives possible, but make them better: from food to medicine to energy and beyond. Businesses do this by trading freely with their employees, customers, and suppliers, without violating anyone’s rights.

Understanding that business is a moral endeavor which enhances human life gives businesspeople the courage to defend their companies’ profit-maximization against demands for altruistic sacrifice for the sake of social and environmental goals. A good recent example of moral clarity and courage is Adam Anderson, CEO of Innovex Downhole Solutions in Texas, who wrote an open letter defending his company and industry to North Face. The latter had refused an order of 400 jackets with Innovex logo. North Face did not want to sell branded products to companies in the oil and gas industry because of their CO2 emissions (despite the fact that North Face’s products are derived from oi).

In a welfare state, it may not be always possible for business to pursue self-interest by applying the rational egoist principles, or to benefit from doing so. In such a system, the government controls the economy and business to varying degrees. Governments can prevent the creation of material values altogether, for example, by banning the production of fossil fuels, construction of oil pipelines, or operations of new businesses that disrupt existing industries (such as ride-sharing services Uber and Lyft). In addition, welfare state governments use cronyism to grant favors (exclusive contracts, tax breaks, coercive monopolies, etc.) to some businesses, thus disadvantaging others. Governments also curtail companies’ profits through regulations and welfare programs.

Therefore, business claiming the moral high ground is not enough for it to be able to pursue rational self-interest. It must demand also freedom to operate: being left alone by the government. But once the morality of business has been asserted, this is easier to do. Because the mixed economy welfare state is unstable, always being pulled to the opposite directions of its main elements—government control and freedom, it is possible to help move it to either direction.

While the welfare state cannot be transformed into a free-market system overnight, businesspeople can help by speaking up (in forums open to them) when restrictions on freedom of business are being proposed by government and other groups. This way, business can move the needle towards more freedom, and therefore, towards more value creation, more prosperity, and more human wellbeing.

Thomas Sowell: From Marxism to Free Markets

Government programs that are supposed to help minorities end up doing more harm than good.

Joe Biden says he’ll “advance racial equity” by making “bold investments” in “Affordable Housing,” aiding “businesses owned by Black and Brown people,” establishing an “Equity Commission,” etc.

Gosh, that’ll do it.

Others demand reparations for slavery, more social programs, and defunding the police.

Yet, economist Thomas Sowell says, “I haven’t been able to find a single country in the world where policies advocated for Blacks in the United States lifted any people out of poverty.”

Sowell’s a Black man who grew up in poverty. His father died before he was born, and his mother died soon after.

“We were much poorer than the people in Harlem and most anywhere else today,” he reflects. “But in the sense of things you need to get ahead, I was enormously more fortunate than most Black kids today.”

That’s because he discovered the public library. “When you start getting in the habit of reading when you’re 8 years old, it’s a different ballgame!”

Exploring Manhattan, he saw disparities in wealth. “Nothing in the schools or most of the books seemed to deal with that. Marx dealt with that,” says Sowell. He then became a Marxist.

What began to change his beliefs was his first job at the U.S. Department of Labor. He was told to focus on the minimum wage.

At first, he thought the minimum wage was good: “All these people are poor, and they’ll get a little higher income. That’ll be helpful,” he reasoned.

But then he realized: “There’s a downside. They may lose their jobs.”

His colleagues at the Labor Department didn’t want to think about that. “I came up with how we might test this. I was waiting to hear ‘congratulations!’ (but) I could see these people were stunned. They’d say, ‘oh, this idiot has stumbled on something that would ruin us all.’”

Once he saw how government workers often cared more about preserving their turf than actually solving problems, Sowell rethought his assumptions.

He turned away from Marxism and became a free-market economist, writing great books like “Basic Economics,” “Race and Culture” and my favorite title, “The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy.”

Today’s self-anointed leaders talk constantly about how America’s “systemic racism” holds Black people back.

“Propaganda,” Sowell calls it. “If you go back into the ’20s, you find that married-couple families were much more prevalent among Blacks. As late as 1930, Blacks have lower unemployment rates than whites.”

But if systemic racism was the cause of inequality, he says, “All these things that we complain about, and attribute to the era of slavery, should’ve been worse in the past than in the present!”

Sowell says the bigger cause of Black Americans’ problems today is government welfare initiated in the 1960s. The programs encouraged people to become dependent on handouts.

“You began to have the mindset that goes with the welfare state,” Sowell says. “No stigma any longer attached to being on relief.”

Sowell concludes that government programs that are supposed to help minorities do more harm than good. Affirmative Action, for example.

In 1965, he took a teaching position at Cornell. The college, he said, had lowered admission standards to diversify the student body, and most students admitted under affirmative action did not do well.

“Half of the Black students were on academic probation,” he wrote, later adding, “Something like 1/4th of all the Black students going to MIT do not graduate. (There is) a pool of people whom you are artificially turning into failures by mismatching them with the school.”

Saying such things makes Sowell an outcast in academia, and now most everywhere.

Sowell writes, “If you have always believed that everyone should play by the same rules… that would have gotten you labeled a radical 50 years ago, a liberal 25 years ago, and a racist today.”

Starting next week, you can watch a new documentary on Sowell’s life, “Thomas Sowell: Common Sense in a Senseless World,” online at FreeToChooseNetwork.org.

Individualism and the Industrial Revolution

Liberals stressed the importance of the individual. The 19th-century liberals already considered the development of the individual the most important thing. “Individual and individualism” was the progressive and liberal slogan. Reactionaries had already attacked this position at the beginning of the 19th century.

The rationalists and liberals of the 18th century pointed out that what was needed was good laws. Ancient customs that could not be justified by rationality should be abandoned. The only justification for a law was whether or not it was liable to promote the public social welfare. In many countries the liberals and rationalists asked for written constitutions, the codification of laws, and for new laws which would permit the development of the faculties of every individual.

A reaction to this idea developed, especially in Germany where the jurist and legal historian Friedrich Karl von Savigny (1779–1861) was active. Savigny declared that laws cannot be written by men; laws are developed in some mystical way by the soul of the whole unit. It isn’t the individual that thinks—it is the nation or a social entity which uses the individual only for the expression of its own thoughts. This idea was very much emphasized by Marx and the Marxists. In this regard the Marxists were not followers of Hegel, whose main idea of historical evolution was an evolution toward freedom of the individual.

From the viewpoint of Marx and Engels, the individual was a negligible thing in the eyes of the nation. Marx and Engels denied that the individual played a role in historical evolution. According to them, history goes its own way. The material productive forces go their own way, developing independently of the wills of individuals. And historical events come with the inevitability of a law of nature. The material productive forces work like a director in an opera; they must have a substitute available in case of a problem, as the opera director must have a substitute if the singer gets sick. According to this idea, Napoleon and Dante, for instance, were unimportant—if they had not appeared to take their own special place in history, someone else would have appeared on stage to fill their shoes.

To understand certain words, you must understand the German language. From the 17th century on, considerable effort was spent in fighting the use of Latin words and in eliminating them from the German language. In many cases a foreign word remained although there was also a German expression with the same meaning. The two words began as synonyms, but in the course of history, they acquired different meanings. For instance, take the word Umwälzung, the literal German translation of the Latin word revolution. In the Latin word there was no sense of fighting. Thus, there evolved two meanings for the word “revolution”—one by violence, and the other meaning a gradual revolution like the “Industrial Revolution.” However, Marx uses the German word Revolution not only for violent revolutions such as the French or Russian revolutions, but also for the gradual Industrial Revolution.

Incidentally, the term Industrial Revolution was introduced by Arnold Toynbee (1852–1883). Marxists say that “What furthers the overthrow of capitalism is not revolution—look at the Industrial Revolution.”

Marx assigned a special meaning to slavery, serfdom, and other systems of bondage. It was necessary, he said, for the workers to be free in order for the exploiter to exploit them. This idea came from the interpretation he gave to the situation of the feudal lord who had to care for his workers even when they weren’t working. Marx interpreted the liberal changes that developed as freeing the exploiter of the responsibility for the lives of the workers. Marx didn’t see that the liberal movement was directed at the abolition of inequality under law, as between serf and lord.

Karl Marx believed that capital accumulation was an obstacle. In his eyes, the only explanation for wealth accumulation was that somebody had robbed somebody else. For Karl Marx the whole Industrial Revolution simply consisted of the exploitation of the workers by the capitalists. According to him, the situation of the workers became worse with the coming of capitalism. The difference between their situation and that of slaves and serfs was only that the capitalist had no obligation to care for workers who were no longer exploitable, while the lord was bound to care for slaves and serfs. This is another of the insoluble contradictions in the Marxian system. Yet it is accepted by many economists today without realizing of what this contradiction consists.

According to Marx, capitalism is a necessary and inevitable stage in the history of mankind leading men from primitive conditions to the millennium of socialism. If capitalism is a necessary and inevitable step on the road to socialism, then one cannot consistently claim, from the point of view of Marx, that what the capitalist does is ethically and morally bad. Therefore, why does Marx attack the capitalists?

Marx says part of production is appropriated by the capitalists and withheld from the workers. According to Marx, this is very bad. The consequence is that the workers are no longer in a position to consume the whole production produced. A part of what they have produced, therefore, remains unconsumed; there is “underconsumption.” For this reason, because there is underconsumption, economic depressions occur regularly. This is the Marxian underconsumption theory of depressions. Yet Marx contradicts this theory elsewhere.

Marxian writers do not explain why production proceeds from simpler to more and more complicated methods.

Nor did Marx mention the following fact: About 1700, the population of Great Britain was about 5.5 million; by the middle of 1700, the population was 6.5 million, about 500,000 of whom were simply destitute. The whole economic system had produced a “surplus” population. The surplus population problem appeared earlier in Great Britain than on continental Europe. This happened, first of all, because Great Britain was an island and so was not subject to invasion by foreign armies, which helped to reduce the populations in Europe. The wars in Great Britain were civil wars, which were bad, but they stopped. And then this outlet for the surplus population disappeared, so the numbers of surplus people grew. In Europe the situation was different; for one thing, the opportunity to work in agriculture was more favorable than in England.

The old economic system in England couldn’t cope with the surplus population. The surplus people were mostly very bad people—beggars and robbers and thieves and prostitutes. They were supported by various institutions, the poor laws,1 and the charity of the communities. Some were impressed into the army and navy for service abroad. There were also superfluous people in agriculture. The existing system of guilds and other monopolies in the processing industries made the expansion of industry impossible.

In those precapitalist ages, there was a sharp division between the classes of society who could afford new shoes and new clothes, and those who could not. The processing industries produced by and large for the upper classes. Those who could not afford new clothes wore hand-me-downs. There was then a very considerable trade in secondhand clothes—a trade which disappeared almost completely when modern industry began to produce also for the lower classes. If capitalism had not provided the means of sustenance for these “surplus” people, they would have died from starvation. Smallpox accounted for many deaths in precapitalist times; it has now been practically wiped out. Improvements in medicine are also a product of capitalism.

What Marx called the great catastrophe of the Industrial Revolution was not a catastrophe at all; it brought about a tremendous improvement in the conditions of the people. Many survived who wouldn’t have survived otherwise. It is not true, as Marx said, that the improvements in technology are available only to the exploiters and that the masses are living in a state much worse than on the eve of the Industrial Revolution. Everything the Marxists say about exploitation is absolutely wrong! Lies! In fact, capitalism made it possible for many persons to survive who wouldn’t have otherwise. And today many people, or most people, live at a much higher standard of living than that at which their ancestors lived 100 or 200 years ago.

During the 18th century, there appeared a number of eminent authors—the best known was Adam Smith (1723–1790)—who pleaded for freedom of trade. And they argued against monopoly, against the guilds, and against privileges given by the king and Parliament. Secondly, some ingenious individuals, almost without any savings and capital, began to organize starving paupers for production, not in factories but outside the factories, and not for the upper classes only. These newly organized producers began to make simple goods precisely for the great masses. This was the great change that took place; this was the Industrial Revolution. And this Industrial Revolution made more food and other goods available so that the population rose. Nobody saw less of what really was going on than Karl Marx. By the eve of the Second World War, the population had increased so much that there were 60 million Englishmen.

You can’t compare the United States with England. The United States began almost as a country of modern capitalism. But we may say by and large that out of eight people living today in the countries of Western civilization, seven are alive only because of the Industrial Revolution. Are you personally sure that you are the one out of eight who would have lived even in the absence of the Industrial Revolution? If you are not sure, stop and consider the consequences of the Industrial Revolution.

The interpretation given by Marx to the Industrial Revolution is applied also to the interpretation of the “superstructure.” Marx said the “material productive forces,” the tools and machines, produce the “production relations,” the social structure, property rights, and so forth, which produce the “superstructure,” the philosophy, art, and religion. The “superstructure,” said Marx, depends on the class situation of the individuals, i.e., whether he is a poet, painter, and so on. Marx interpreted everything that happened in the spiritual life of the nation from this point of view. Arthur Schopenhauer (1788–1860) was called a philosopher of the owners of common stock and bonds. Friedrich Nietzsche (1844–1900) was called the philosopher of big business. For every change in ideology, for every change in music, art, novel writing, play writing, the Marxians had an immediate interpretation. Every new book was explained by the “superstructure” of that particular day. Every book was assigned an adjective—”bourgeois” or “proletarian.” The bourgeoisie were considered an undifferentiated reactionary mass.

Don’t think it is possible for a man to practice all his life a certain ideology without believing in it. The use of the term “mature capitalism” shows how fully persons, who don’t think of themselves as Marxian in any way, have been influenced by Marx. Mr. and Mrs. Hammond, in fact almost all historians, have accepted the Marxian interpretation of the Industrial Revolution.2 The one exception is Ashton.3

“Everything the Marxists say about exploitation is absolutely wrong! Lies! In fact, capitalism made it possible for many persons to survive who wouldn’t have otherwise.”

Karl Marx, in the second part of his career, was not an interventionist; he was in favor of laissez-faire. Because he expected the breakdown of capitalism and the substitution of socialism to come from the full maturity of capitalism, he was in favor of letting capitalism develop. In this regard he was, in his writings and in his books, a supporter of economic freedom.

Marx believed that interventionist measures were unfavorable because they delayed the coming of socialism. Labor unions recommended interventions and, therefore, Marx was opposed to them. Labor unions don’t produce anything anyway and it would have been impossible to raise wage rates if producers had not actually produced more.

Marx claimed interventions hurt the interests of the workers. The German socialists voted against [Otto von] Bismarck’s social reforms that he instituted circa 1881 (Marx died in 1883). And in this country the Communists were against the New Deal. Of course, the real reason for their opposition to the government in power was very different. No opposition party wants to assign so much power to another party. In drafting socialist programs, everybody assumes tacitly that he himself will be the planner or the dictator, or that the planner or dictator will be intellectually completely dependent on him and that the planner or dictator will be his handyman. No one wants to be a single member in the planning scheme of somebody else.

These ideas of planning go back to Plato’s treatise on the form of the commonwealth. Plato was very outspoken. He planned a system ruled exclusively by philosophers. He wanted to eliminate all individual rights and decisions. Nobody should go anywhere, rest, sleep, eat, drink, wash, unless he was told to do so. Plato wanted to reduce persons to the status of pawns in his plan. What is needed is a dictator who appoints a philosopher as a kind of prime minister or president of the central board of production management. The program of all such consistent socialists—Plato and Hitler, for instance—planned also for the production of future socialists, the breeding and education of future members of society.

During the 2,300 years since Plato, very little opposition has been registered to his ideas. Not even by Kant. The psychological bias in favor of socialism must be taken into consideration in discussing Marxian ideas. This is not limited to those who call themselves Marxian.

Marxians deny that there is such a thing as the search for knowledge for the sake of knowledge alone. But they are not consistent in this case either, for they say one of the purposes of the socialist state is to eliminate such a search for knowledge. It is an insult, they say, for persons to study things that are useless.

Now I want to discuss the meaning of the ideological distortion of truths. Class consciousness is not developed in the beginning, but it must inevitably come. Marx developed his doctrine of ideology because he realized he couldn’t answer the criticisms raised against socialism. His answer was, “What you say is not true. It is only ideology. What a man thinks, so long as we do not have a classless society, is necessarily a class ideology—that is, it is based on a false consciousness.” Without any further explanation, Marx assumed that such an ideology was useful to the class and to the members of the class that developed it. Such ideas had for their goal the pursuit of the aims of their class.

Marx and Engels appeared and developed the class ideas of the proletariat. Therefore, from this time on the doctrine of the bourgeoisie is absolutely useless. Perhaps one may say that the bourgeoisie needed this explanation to solve a bad conscience. But why should they have a bad conscience if their existence is necessary? And it is necessary, according to Marxian doctrine, for without the bourgeoisie, capitalism cannot develop. And until capitalism is “mature,” there cannot be any socialism.

According to Marx, bourgeois economics, sometimes called “apologetics for bourgeois production,” aided them, the bourgeoisie. The Marxians could have said that the thought the bourgeoisie gave to this bad bourgeois theory justified, in their eyes, as well as in the eyes of the exploited, the capitalist mode of production, thus making it possible for the system to exist. But this would have been a very un-Marxist explanation. First of all, according to Marxian doctrine, no justification is needed for the bourgeois system of production; the bourgeoisie exploit because it is their business to exploit, just as it is the business of the microbes to exploit. The bourgeoisie don’t need any justification. Their class consciousness shows them that they have to do this; it is the capitalist’s nature to exploit.

A Russian friend of Marx wrote him that the task of the socialists must be to help the bourgeoisie exploit better and Marx replied that that was not necessary. Marx then wrote a short note saying that Russia could reach socialism without going through the capitalist stage. The next morning he must have realized that, if he admitted that one country could skip one of the inevitable stages, this would destroy his whole theory. So he didn’t send the note. Engels, who was not so bright, discovered this piece of paper in the desk of Karl Marx, copied it in his own handwriting, and sent his copy to Vera Zasulich (1849–1919), who was famous in Russia because she had attempted to assassinate the police commissioner in St. Petersburg and been acquitted by the jury—she had a good defense counsel. This woman published Marx’s note, and it became one of the great assets of the Bolshevik Party.

The capitalist system is a system in which promotion is precisely according to merit. If people do not get ahead, there is bitterness in their minds. They are reluctant to admit that they do not advance because of their lack of intelligence. They take their lack of advancement out on society. Many blame society and turn to socialism.

This tendency is especially strong in the ranks of intellectuals. Because professionals treat each other as equals, the less capable professionals consider themselves “superior” to nonprofessionals and feel they deserve more recognition than they receive. Envy plays an important role. There is a philosophical predisposition among persons to be dissatisfied with the existing state of affairs. There is dissatisfaction, also, with political conditions. If you are dissatisfied, you ask what other kind of state can be considered.

Marx had “antitalent”—i.e., a lack of talent. He was influenced by Hegel and Feuerbach, especially by Feuerbach’s critique of Christianity. Marx admitted that the exploitation doctrine was taken from an anonymous pamphlet published in the 1820s. His economics were distortions taken over from [David] Ricardo (1772–1823).4

Marx was economically ignorant; he didn’t realize that there can be doubts concerning the best means of production to be applied. The big question is, how shall we use the available scarce factors of production. Marx assumed that what has to be done is obvious. He didn’t realize that the future is always uncertain, that it is the job of every businessman to provide for the unknown future. In the capitalist system, the workers and technologists obey the entrepreneur. Under socialism, they will obey the socialist official. Marx didn’t take into consideration the fact that there is a difference between saying what has to be done and doing what somebody else has said must be done. The socialist state is necessarily a police state.

The withering away of the state was just Marx’s attempt to avoid answering the question about what would happen under socialism. Under socialism, the convicts will know that they are being punished for the benefit of the whole society.

Ludwig von Mises was the acknowledged leader of the Austrian school of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’s writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science that he called praxeology.

Opponents of Liberty Remain Misguided Sore Winners

The 2020 presidential election has been the most divisive in many people’s living memory. Not only has there been the anger and fury over whether Donald Trump or Joe Biden should occupy the White House come January 20, 2021, there have been concerns and controversy about whether democracy itself is under attack in America.It is the competitive market economy that offers the “inclusiveness” and “diversity” that “Progressives” insist they want.
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One indication of people’s concerns about this latest presidential election was the number of those who believed that the outcome was of serious national concern. For instance, for more than 20 years, the Pew Research Center has asked prospective voters whether “it really mattered” who was going to win in an upcoming presidential election. Back in 2000, 50 percent of such prospective voters said the outcome of that year’s presidential contest between George W. Bush and Al Gore “mattered,” while 47 percent said that things would be pretty much the same, regardless of who won.

Presidential Election Outcomes Increasingly Matter to Voters

In the 2004, 2008, and 2012 presidential elections, Pew Research tells us, the differences on voters’ views of the possible outcomes were greater, with those considering the result “mattering” being in the 60s percentage range and those who thought it would all be the same were mostly in the 30s percentage range. In the 2016 presidential race, those considering that the outcome mattered increased to 74 percent, and those saying it did not really matter falling to 22 percent. But in the 2020 contest for the White House, Pew Research says that 83 percent of the voters said the result would matter, while only 16 percent replied that it would be all the same.

While the Florida “hanging chads” of 2000 and the Supreme Court’s decision to find in favor of George W. Bush over Al Gore made the legitimacy of the election’s outcome suspect for many Democrats, nothing compares to 2016 and 2020. For the last four years, a good part of the anger and disregard for Donald Trump as president has been due to not only his personality and policies, but the fact that many of those in the Democratic Party and on “the left” in general were sure that “the Russians” had interfered and somehow rigged the outcome for Trump’s victory. Otherwise, how could you explain “him” winning?

Were there really that many “deplorables” in America? Besides, Hillary Clinton won 3 million more of the popular votes than Trump in 2016, so if not for that “undemocratic” Electoral College, the “real winner” would have been in the White House. There can be little doubt that if the November 3, 2020 presidential election outcome had been, again, a Trump victory due to the Electoral College in the face of a popular vote majority for Biden, there would have been many violent and destructive demonstrations and riots across the United States.

As it is, Biden received 81.2 million votes, with Trump getting 74.2 million votes, or a bit more than 52 percent of the popular vote to Trump’s almost 48 percent; both were historically the highest numbers for any Democrat or Republican running for the presidency. And in the Electoral College, Biden won 306 to 232. Now, of course, the shoe is on the other foot, with Trump and many Republicans insisting that “voter fraud,” especially with so many write-in ballots and believed “irregularities” in this season of the coronavirus, has illegitimately given Joe Biden the White House.

Joseph Stiglitz is a Sore Winner Who Distrusts Talk of Liberty

But in spite of Joe Biden’s clear win over Trump in both the popular vote and the Electoral College, some “Progressives” remain sore and poor winners. A perfect example is economist and Nobel Laureate Joseph Stiglitz, who is a professor at Columbia University. In a recent opinion piece on “A Chance to Repair the Cracks in Our Democracy,” in The New York Times (December 8, 2020), Stiglitz insists that it is not enough that Donald Trump refuses to accept his defeat and gracefully accept Biden as his successor. It is that others in the Republican Party declare that in terms of political values, “Democracy isn’t the objective; liberty, peace, and prosperity are. We want the human condition to flourish. Rank democracy can thwart that.”

The latter quote was taken by Stiglitz from a tweet written by Utah Senator Mike Lee, while he was watching the vice-presidential debate in October between Mike Pence and Kamala Harris. Senator Lee also tweeted, “Government is the official use of coercive force – nothing more and nothing less. The Constitution protects us by limiting the use of government force.”

This shocks Professor Stiglitz to no end. The idea that something is of greater political value other than “democracy” itself convinces him that the foundations of America are being threatened. Said Stiglitz: “If people like Senator Lee have their way, and we turn our backs on democracy, then our lives and our conception of the United States as a bastion of popular representation and respect for human rights will change forever.”

If democracy is not politically an end in itself, not the defining institutional characteristic of a free society, then in Stiglitz’s view there is in the air “the sour odor of Hitler’s Brown Shirts.” In addition, in his eyes, the failure of achieving the social and economic policy goals that he desires, due to resistance and opposition in the congressional process, means “transforming a virtuous system of checks and balances into one of gridlock and confrontation.”

In other words, “the system” is a failure if he does not get his policy way. Why? Because the use of “gridlock” by those who hold policy views differing from his implies an unwillingness to “confront head on, our intertwined racial, ethnic and economic inequalities.” Stiglitz insists that a majority of Americans “have expressed their belief in universal access to health care, better access to education, higher minimum wages, tighter gun controls and so on.” To oppose the implementation and imposition of such policies on everyone in the country demonstrates a willingness to resort to a variety of “anti-democratic policies.”

Stiglitz’s Peculiar Views on “Court Packing”

Among these anti-democratic policies, Stiglitz states, is the Republicans “packing the Supreme Court.” This is the height of chutzpah on his part. The three appointments to the Supreme Court during Trump’s presidency have all followed the Constitutional and congressional rules and procedures for nomination and Senatorial approval. As a citizen and a voter, I have not always agreed with past nominations and appointments to the Supreme Court, though, undoubtedly for ideological and political reasons different from Stiglitz’s dislikes.

But I’ve never considered it a nefarious, deceitful maneuver of “packing” the Court with those holding views different than my own about individual rights, private property, and Constitutional restraint. I have feared for court decisions they might make, but unless you want to jettison the Constitutional procedures, the person in the White House and the majority party in the Senate pretty much determine who gets nominated and appointed to the Supreme Court. Those are the rules of the game, for better or worse.

On the other hand, whose preferred presidential candidate in this year’s election cycle refused to directly answer whether or not as president he would attempt to “pack” the Supreme Court with additional justices over and beyond the traditional nine, if Amy Coney Barrett was confirmed by the Senate as a justice to the Court? That the voters really did not have the right to know, and he would only decide after finding out whether or not he had won the White House. Now we are waiting to know Biden’s view on this until after the runoff elections in Georgia for two seats that will determine which party holds a majority in the Senate in January 2021.

Press Freedom and State’s Rights Have Been Alive and Well

Another absurdity in Professor Stiglitz’s article is his assertion that the last four years has supposedly “made us aware of just how exquisitely fragile our institutions – such as those ensuring equality, political freedom, a quality Civil Service, a free and active press and the rule of law – are.” If the last four years have demonstrated anything, it is just how strong and effective our political institutions remain in the face of a president who has been disagreed with and hated by so many in the country.

True to the spirit and letter of the American federalist system, attempts by the government in Washington, D.C. to impose policies and practices on state and local governments that they have found unacceptable and politically unpalatable have been opposed, resisted, and defeated by the actions of state governments and through court cases brought to limit or prevent federal government overreach.

Indeed, Democrats and “Progressives” who have long sneered at and pooh-poohed talk of “state’s rights” for decades suddenly rediscovered their value and use. In fact, the arguments made in defense of state-level autonomy from Washington sometimes have almost sounded like the words of that “unmentionable” 19th century state’s rights advocate, John C. Calhoun! Why, in one major “blue state,” some even spoke of the possibility of secession from the Union with Trump in the White House. Of course, that was a Democrat Party position for many in the South in 1860 and 1861, as I recall.

Also, Professor Stiglitz must live in some alternate universe when he suggests that the Trump presidency has threatened the freedom and independence of the press and social media. Trump had huffed and puffed at the press, calling them names, accusing them of “fake news,” rudely ridiculed particular reporters at presidential press conferences, and told them to stay out of his business of “running the country.” Under the secure protection of the First Amendment of the U.S. Constitution, the press has responded to his personality and his policies with criticism, contempt, and “fact checking” to challenge him on almost everything – without one reporter arrested and imprisoned or one news outlet shut down by federal agents. (See my article, “Presidential Hubris: ‘Let Me Run the Country,’” and, “The U.S. Revives the Personal State,” and “The Imperial Presidency Embodies Political and Economic Hubris”.)

The Constitution Has Well Served Trump’s Opposition

The Constitution and the Bill of Rights were instituted by those much-maligned Founding Fathers precisely to assure the checks and balances and restraints on the national government’s power when a president is as unpopular as Trump has been in various social and political quarters, so as to preserve the autonomy of the state and local governments and their citizens from what they may consider arbitrary and “authoritarian” policies from “above.”

In other words, the American system has worked, separate from whether someone is “for” or “against” much of what Donald Trump has attempted to implement during his four-year term in office. If the Republican Party retains majority control of the Senate after the Georgia runoff elections in early January, “the system” will again work in limiting a new president of the United States from imposing a blanket set of policies that others in the country may not fully agree with or want.

Praising “Democracy” as Long as It’s Policies You Desire

But what is most disturbing in Joseph Stiglitz’s piece is not only the disregard but clear contempt for those who even speak of individual liberty, private property, economic freedom and constitutionally restrained government. How dare there be any barriers to “the majority” from having its way with social and economic policy! “They” want socialized health care, “they” want government fully funded higher education, “they” want a $15 an hour minimum wage, “they” want redistribution of income and wealth for purposes of a certain conception of economic “equality” and “justice.” And, damn it, to deny the majority what it wants is the end to “democracy” in America, and the arrival of Nazi stormtroopers down Pennsylvania Avenue.

What if the majority wanted to shut down The New York Times and The Washington Post? What if the majority wanted to reinstate Jim Crow laws? What if the majority wanted to impose a mandatory course curriculum on Professor Stiglitz’s economics classes at Columbia University that he would be required to teach?

Why cannot the majority have their way on these matters as much as those that Professor Stiglitz would like to see imposed on a dissenting minority, presuming that a majority of voters actually want these things – if they have been more fully informed of all the costs and trade-offs and unintended consequences that may be forthcoming from their implementation? It would be “the will of the people.” Right? Would it not threaten “America” if it were not allowed?

The fact is, a majority can be just as tyrannical as a minority possessing political power and authority within a country. Numbers do not make something right or wrong, in itself. And Professor Stiglitz knows this because he would be no doubt – and rightly – shocked and opposed to any majority (or its elected political representatives) attempting to impose bans on newspapers, enforce mandatory segregation, or command a professor in a classroom about how and what he was to teach.

American Principle of Individual Liberty and Self-Ownership

So what and how shall it be decided what a political majority may do to a minority and what it may not? Possibly Professor Stiglitz would reply that a benchmark might be “social justice,” especially since he particularly refers in his article to overcoming racial, ethnic and economic inequalities. But there is more than one meaning and understanding to “equality” and more than one reason why individuals may experience unequal outcomes in various aspects of life.

In the American political tradition, the most fundamental notion of equality refers to “equality before the law.” That is, each and every person is seen as possessing the same individual rights to life, liberty, and honestly acquired property, with privileges and favors for none, including those holding political office and their agents and representatives. For the Founding Fathers, the presumption was that every individual possesses such “rights” by their nature as a human being, regardless of time and place and circumstance.

The American founding principles include and are inseparable from the idea of property rights. Why? Because the most fundamental property right is in your own person. If Professor Stiglitz were to start rolling his eyes when confronted with such an idea, then I would ask him whether or not a woman has a right to control her own body, including being safe and protected against rape, and allowed to make her own decision as to whether or not to terminate a pregnancy. On what political-philosophical premise may not a majority prevent her from having an abortion, if not that most fundamental one that she “owns” herself, holds a “property right” in herself?

Does a woman not have a right to say “No” to a sexual advance that is unwanted by her, that any sexual intimacy may only be morally and legally allowed when it is between two consenting adults? That is, on the basis of freedom of association and voluntary, mutual agreement? This means that even if a majority of men in a social setting voted to have sex with her, she cannot be forced or compelled to accept the “democratic” decision.

If the principle is true in this type of situation, then I would argue that it holds in all other social and political settings and circumstances. Each of us has a right to determine our own goals and purposes, select the means available to us that we consider to be most efficacious and likely to bring about the desired result, with any and all human interactions with others to further our peaceful and personal purposes occurring only on the basis of voluntary agreement and mutual consent concerning the terms of association and trade.

Follow through with this idea – I would say this ideal – of human liberty and there are no political justifications for the type of “social justice” goals concerning government-supplied health care, government-funded higher education, government-imposed legal minimum wages, or government-coerced redistributions of wealth. Why? Because none of them can be done without an unjustifiable government “taking” of that which may be the honestly and peacefully earned financial and physical property acquired through the gains from trade in a free marketplace.

The only issue of “justice” in this matter is whether or not the larger or lesser earned income and accumulated wealth a person has, has been acquired through peaceful voluntary trade and exchange, or through force and fraud in dealings with others, including through the political processes of interventionist and welfare statist policies. (See my article, “Don’t Confuse Free Markets with the Interventionist State”.)

A Classical Liberal vs. an Unlimited Democracy

But what of “democracy?” Democracy is a political mechanism or method for determining how individuals will be chosen to hold political offices for specified periods of time. As the old phrase says, it replaces bullets with the ballot box. But while the democratic procedure determines how and for how long a person will be elected into political office – rather than shooting his way into power – it does not tell us, per se, what that government is to do, regardless of who is holding a political position.

That is defined implicitly or explicitly through the political principles underlying an unwritten or written constitution under which a government and a society operates. The constitutional order that Joseph Stiglitz rejects is the classical liberal one upon which the American political order was founded. Its grounding is in liberty, that word that he seems to be contemptuous of, believing that it means unfairness and injustice. Why? Because it does not guarantee social and economic outcomes that he prefers to the ones that emerge from the voluntary interactions and associations both within and outside of the free, competitive marketplace.

“Democracy” is the magic word that is used to represent all that he would like to do in social engineering society in the shapes and relationships that he prefers and considers good and right. Suppose that this last presidential election had gone the other way. Suppose that Trump had received the 81.2 million votes and Biden had won the 74.2 million votes, instead. And the Electoral College had gone for Trump, as well. Would Professor Stiglitz be shouting “Hosanna,” the will of the people had spoken, and all is right with the world? That the majority of Americans were on the “right side of history?”

Somehow, I just don’t think so. He probably would be insisting that this showed how poisoned the American people had been by four years of Trump, that the “reactionary,” racist and sexist forces had duped a majority of voters. It would show just how “sick” the country really is. In reality Donald Trump is a product of the interventionist-welfare state that has long replaced a truly liberal market system in the United States. He is one version of the “activist” government order that Professor Stiglitz wants more of, to overcome what he sees as the ills of society. (See my article, “Donald Trump is the Corrupt Creation of America’s Bankrupt Politics”.)

The Liberal Market Order Offers Inclusiveness and Diversity

What is also missing from Joseph Stiglitz’s worldview is the understanding that it is the liberal free market order – however imperfectly and incompletely existing – that has raised humanity up from poverty over the last two hundred years, that has offered multitudes of hundreds of millions, now billions, of people in the world opportunities and standards of living unimaginable in the pre-capitalist world of political privilege, position, and status; that has done far more to create an appreciation, desire, and a reality of human rights, respect, and dignity than any socialist or interventionist arrangement could ever imagine and has ever done. (See my article, “The Rise of Capitalism and the Dignity of Labor”.)

It is the competitive market economy that offers the “inclusiveness” and “diversity” that “Progressives” insist they want, precisely because of the market’s “democratic pluralism” of offerings and opportunities through multitudes of demands and desires satisfied simultaneously and continuously, rather than the coerced “winner takes all” outcomes of increasingly unrestrained political democracy that requires and imposes primarily one set of social and economic policy preferences on everyone based on the outcomes of elections. (See my articles, “Clarity on Diversity and Pluralism” and “The Market Democracy vs. Democratic Socialism”.)

Be assured that when the interventionist-welfare state policies are intensified and made more intrusive into the social and economic fabric of American society, and when, over time, it brings about more corruption, privilege, stagnation, and social hostility, the Joseph Stiglitz’s of the world likely will not admit that the cause has been the political paternalism and social engineering for which they so much never stop yearning.

No. They will, once again, insist that it is all due to the free market capitalist system that their own policies will have continued to undermine, subvert, and, indeed, to have eliminated at the end of the day. The last thing that they can admit is that they are the anti-freedom and real anti-democratic forces that will leave America far worse. (See my book, For a New Liberalism [2019])

This article was originally published at The American Institute for Economic Research.


This post was written by: Richard M. Ebeling

Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).