Thus every part was full of vice,
Yet the whole mass a paradise.
The Fable of Bees, Bernard Mandeville
In 1980, on an official visit to China, Milton Friedman, a Noble Laureate in Economics and one of the protagonists of the neoliberal thought, told Zhao Ziyang, then Communist Party General Secretary, “If China did not move to a free political system, it could never be rich.”
Ecstatic by the unprecedented wealth creation and augmented living standard in the Western world, Friedman was just decreeing the edict and intellectual euphoria of that era while condemning the government intervention in the market mechanism as evil.
Since then the conviction of the neo-liberalist thinkers in the virtues of idolizing one’s self-interests in unfettered market economy, as the only way of salvation and prosperity for the humanity, has accomplished the status of the article of faith and any deviation is reckoned as subversion.
But after five decades, China is only a rich and more authoritarian state with competency and ambition to replace the USA as the global leader and architecture of the contemporary economic and political thought.
If free market economy, as the neo-liberalists believe, is the only way of affluence then how does China managed to slink into the elite club and upset the credo? Or are there other ways to achieve riches without utterly venerating one’s naked self-interests while relegating the state intervention into the dark corners? And what does history tell us about the journey of nations to riches and ruins?
The philosophical fountain of neoliberalism gushes from the conception of “rational choice theory” in which rationality is identified with intelligently pursuing one’s self-interests.
Consequently, the neo-liberalists assert, paradoxically, that the dominant self-centered behavior of all people, bereft of any state involvement, is catalyst for all socio-economic virtuous.
Moreover, it seems that for them, the belief in goodness of unrestrained hunt, independent of civic ethos, to serve one’s own interests has surpassed the domain of academic debate.
Thus, they appear reluctant to admit that free-market doctrine is just a theory that needs to be verified and proved in different situations and times; rather they entail it as historically ascertained truth like laws of physics having universal applicability across time and space.
The intellectual lineage of enthusiasm in the idea of free-market is customarily sketched back to Adam Smith, known as the Father of Economics. Among the community of economists there is strong tradition that Smith believed that “self-interest dominates the majority of men.”
They widely quote the famous passage from Smith’s The Wealth of Nations, where he writes “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Consequently, rational choice political and economic analysts seem never wary of citing fragments, though out of context, from the works of Smith to substantiate the invincibility of the theory of human rationality.
However, when Smith’s whole writings are pondered upon it dawns upon the reader that Smith known to us today is completely different person than who breathed in the 18th century.
In the introduction to Smith’s Theory of Moral Sentiments, Commenting on Smith’s above mentioned passage, Amaryata Sen declares that when it comes to labeling Smith as guru of selfishness, the discussion actually doesn’t go beyond those few lines, even though these lines are written in specific context of exchange.
Smith was highly impressed by the writings of Cicero, a Roman Senator and Philosopher, who professed that individuals could learn self-discipline and morals to make a good society. Likewise, Smith also proclaimed that morality is essential for a market functioning and only moral agrarian society with strong state could create and maintain free markets.
Moreover, Smith believed that sound morals and strong aristocratic government is indispensable to constrain the powers of merchants and corporations in order to build vibrant market and society.
He alleged that corporations are parasites and enemies of the society, and preferred agrarian economy as Cicero did; both believed that agriculture is the real engine of economic growth.
Moreover, both cautioned politicians that they shall ensure that merchants and corporations do not control politics, if they did they would create monopolies and undermine markets; it was smith who coined the term “mercantile system” to mean “government run by and for the benefit of merchants.”
Peculiarly, this is contrary to what is taught today in the name of Smith such as: unfettered markets, no government intervention, pursuit for stark-naked self-interests, large corporations and innovations are the drivers of the nations’ wealth.
Western history also seems barren of any anecdote to justify the neoliberal narrative. Cicero, during pagan Roman Empire, stated that economics divorced of specific historical, cultural and material conditions is unthinkable; and economics’ utmost motive is to create common good.
When Roman Empire embraced Christianity the goal of common good ascended to the throne of heavens, spiritual rewards replaced self-love and prices were discovered through mixing of moral considerations and market values of the time. Though 13th century witnessed the rise of merchant constitution and civic freedom but the quest to accumulate riches independent of civic virtues and duty to the public was still demonized.
Moreover, to counter rise of British dominance in trade and commerce, France, under the guidance of Colbert, the Controller-General of Finances under Louis XIV of France, developed an absolute approach to market-building that later came to known as Colbertism and the goal was to create public good not individual riches; and China has applied the same absolutist economic development model to become a rich nation.
Likewise, the Newtonian mechanics solidified the belief that individuals through free-choice could create economic efficiency, but due to original sin, as Christians believe, government intervention was considered indispensable whenever greed fails humans.
Thus neither Smith nor Western History, if taken into account exclusively, upkeep the beliefs of the neo-liberalists. But from the beginning of 19th century, as Amaryata Sen claims, The Wealth of Nations eclipsed The Theory of Moral Sentiments and Smith was increasingly seen almost entirely the author of the former book that transformed subject of economics.
Subsequently, due to the abandonment of Moral Sentiments, as Sen further underlines, Smith has been ignored in contemporary ethics and philosophy. Therefore, reading The Wealth of Nations without reference to the framework of thought of Moral Sentiments has constrained the understanding of The Wealth of Nations; and the study of the connection between economics, ethics and institutions in the free market economy remained embryonic.
According Karl Popper true science works on the “principle of falsification”, it probes for the contrary evidences to falsify the scientific theory; but pseudo-science works on “the principle of affirmation” that always rummages for the affirmation of their premises, and disdains the antagonistic evidences.
Though many economists imply that economics is pure science but rational choice thinkers cling religiously to their inflexible beliefs and show contempt all evidences that highlight cracks in their assertions.
But in order to make a way clear of the daunting obstacles that humanity face now, free market thought, as Jacob Soll advocates in his book Free Market: An History of Idea, will need to be much more adaptable and sophisticated than it has been since the World War II.
Ishfaq Ahmad Thaku, teaches at Department of Commerce, University of Kashmir
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author.
The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.