Saturday, November 6, 2010

Conservatism versus Liberal Capitalism

By James Peron

Let me begin by stating my thesis: social conservatism is undermined by, and inconsistent with free, or depoliticized markets. More specifically depoliticized markets undermine the sort of static social structure that conservatives yearn for. Far more consistent with such goals is a system of state, or bureaucratic socialism. Social conservatism is not achievable with depoliticized markets operating within a system of limited government. The very nature of the markets themselves undermines the goals of the conservative.

What do I mean by social conservatism? First, I am not referring to individual preferences or choices. A woman who becomes pregnant and decides to not terminate the pregnancy may do so out of certain conservative convictions. But, if she has no desire to prevent others from making their own choices, she may be a personal conservative, on that issue, but not a social conservative. One may choose to shun the use of various drugs for recreational purposes, or even alcohol, and have personal preferences that do not translate into social preferences—that is they do not wish society to restrict those choices.

A recent, somewhat bizarre piece on social conservatism was written by Right-wing pundit Peggy Noonan, entitled The Adam Lambert Problem. She cited a poll where many Americans said the country is going in the wrong direction. I would agree with that. But Noonan then leaps to the conclusion that what this means is that, “Americans are worried about the core and character of the American nation, and about our culture.” This concern she says was “perhaps most vividly expressed in the Adam Lambert Problem.” I might note that not a single poll has listed the Adam Lambert Problem as something that is on the minds of most people.

Noonan speaks in the collective we throughout her piece. She speaks about New York, which she says is metaphorically about social liberalism, “shouldn’t impose its cultural sensibilities” on the rest of America. What she means is that network broadcasting must make certain programming decisions that conservatives applaud. If they don’t then broadcasting networks are imposing their will on Americans. Conservatives have an odd way of using words like “imposing”. You will see this in the hot issue of marriage equality. Conservatives say that if gay people are allowed to marry they will be “imposing” their will on others. Some go so far as to be unintentionally humorous by pontificating about how gay people “shouldn’t be free to cram their lifestyle down our throats.” What Mr. Freud would say of that unfortunately choice of words we can only guess.

The social conservative sees the freedom of others as a direct assault on them.
Right-wing theocrat, Gary North once described American entertainment “as an insidious cultural invasion.” Invasion, of course, is a term of violence, not one of market choices. North lamented that this “onslaught of American entertainment is irresistible. The satellite network, the video, the DVD, and the Internet respect no borders. They respect only profit and lose. As technology gets cheaper, it penetrates lower economic strata like a bunker-busting bomb. What the Hutterites and Amish understand, some mullahs understand but cannot enforce. If you don’t stop the zipper, you can’t stop Madonna. Culture is a package deal.”

North is correct. Depoliticized markets, where people are free to make their own decisions, are not conducive to the static society. They are dynamic. The economist Joseph Schumpeter once referred to free market forces as “creative destruction.” We see that in the death of old industries replaced by new ones, of stagnant corporations bought out by more dynamic ones. But, free societies also engage in creative destruction of social values. Old values die; new values replace them. And this process terrifies the social conservative.

The Liberal Revolution, by which I mean the revolutionary ideas of classical liberalism, changed Western society. The privileged order of centuries was overturned. Wealth was no longer a function of status, but of one’s ability to satisfy the wants and needs of others. Church and state were separated, something that terrified both the priest and the politician who relied upon one another. Feudal orders were disrupted. State monopolies were broken up. Property rights were extended to all segments of society. It was a truly revolutionary time.

Freedom of thought and of belief was defended. Freedom of speech took its first tentative steps. And that horrified the conservative hierarchy. People challenged the prevailing social order and lived. Ideologically the idea of liberalism was becoming ascendant. This classical liberalism emphasized rationality, natural individual rights, the maximization of individual freedom and the minimal state. It was this spirit of reason that brought about the challenges to both theology and the unholy alliance of church and state. With the rise in the standard of living larger numbers of people were able to seek out formal education. Not only did the number of those educated rise but so did the level of education obtained.

It was as a result of these higher levels of education that much of the theological hold over people began to diminish. With the rise of reason and the waning of theology social tolerance began to increase. In his book Capitalism and the Permissive Society Samuel Brittan wrote, "Capitalist civilization is above all rationalist. It is anti-heroic and anti-mystical." He points out that the capitalist, as a profit maximizer, is forced to ignore the "traditional, mystical or ceremonial justification of existing practices." The capitalist who doesn't do so will lose out to the capitalist who does. Thus he concludes, "The breakdown of theological authority, the rise of scientific spirit and the growth of capitalism were inter-related phenomena."

The book Intimate Matters: A History of Sexuality in America notes that in the United States the government shifted its law enforcement focus from morality to property with the rise of the libertarian ideology that spurred on the American Revolution. "The new laws formulated by the American state and federal governments took a laissez-faire attitude toward the regulation of the family in general and of sexuality in particular. In the early 19th century, property rather than morals offenses preoccupied legislatures and courts." What this means is that instead of trying to regulate the sexual lives of people the state changed its focus to stopping individuals from violating the life, liberty or property of others.

The authors of this book, John D'Emilio and Estelle Freedman, point out that classical liberalism became the dominant ideology in the United States and that there was "an overall decline in state regulation of morality and a shift in concerns from private to public moral transgressions." Because classical liberalism removed the church from the levers of state power "state regulations of morality declined noticeably. .... According to Robert Wells, 'government in the American colonies gradually lost interest in prosecuting sexual sinners...'" "Thus with the formation of state and local governments during and after the Revolution, and the gradual separation of church from civil authority — a process that extended into the 1830s — the prosecution of sexual offenses lost the central place it had held in early colonial society." D'Emilio and Freedman realize that expanding sexual freedom in the United States was "protected by the laissez-faire attitude toward morality and commerce." It should be noted that much of the morals legislation and enforcement that is associated with the Victorian era came about under the influence of the so-called "progressive" movements of the Left. Social purity groups that had a decidedly collectivist, anti-laissez-faire attitude brought about all censorship, the regulation of prostitution, and the increase in age of consent.  

The rise of censorship followed an ideological shift. When American's supported the suppression of "vice" they believed that group rights superseded individual rights and that it was the function of government to regulate all aspects of human existence. The American Revolution was based on certain liberal ideas such as minimal government and free markets and following the Revolution state control of sexuality declined radically. But with the rise of the Progressive movement, and it's support for state control of the economy attitudes shifted again, in favor of government enforced morality. Some, like Frances Willard, the founder of the Women’s Christian Temperance Union actively embraced the role of moralistic busybody, ala the Moral Majority and socialist. Williard, a fundamentalist who wanted a centralized state body to control entertainment, also wanted centralized state control of the economy.

There are only two ways for humans to allocate resources in any society. In other words, there are only two ways to order an economy. Western society, on a whole, follows the market process. The alternative is the planned economy. The latter relies on the use of state coercion while the former is the result of voluntary choice.

While the market economy encourages diversity, the political process of central planning, relies on, and creates, conformity. Milton Friedman wrote, "The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity." Planning, or the political process, by its nature creates a bureaucracy. Since it repudiates profit management it must instead rely on bureaucratic management. The latter is centralized with decisions being made by a hierarchy whose leadership is usually conservative and dependent on obtaining general consensus.

Free markets are known for producing a plethora of goods and services. The choices almost seem endless. This diversity is so distinctly a feature of competitive capitalism that collectivists of the Left and Right both attack this feature. They say it is "wasteful". They say that we don't "need" so many choices and advocate economic systems that will strip us of those choices. Conservative collectivists use the diversity of the marketplace to demand state control. They, for instance, argue that the fact that a free market produces pornography is proof that control is needed. They would argue that some diversity is "good," by which they mean those goods and services that they personally want. They also argue that other goods and services are "bad," meaning those that they don't want, or more importantly which they feel no one should want. To them pornography is a "bad" product which should be banned. But the market is morally neutral. It doesn't pass judgment on the wants of consumers. One great error that conservative collectivists make is assuming that they can ban the "bad" diversity while still encouraging the "good."

Their arguments are flawed by what F.A. Hayek calls a "pretense of knowledge." They assume that they can judge which diversity is good and which is bad. But what proof do they have to justify placing themselves in such a lofty position? Where do they obtain their knowledge to determine "right" for the rest of us? And if we allow one group to start imposing their personal preferences on society then where do we stop? If other groups also demand the right to ban "bad" diversity will this be allowed? In the end such a process will destroy diversity itself. The great strength of competitive capitalism is the diversity it generates. The fact that none of us possess total knowledge is the reason we need liberty. Hayek, in his monumental The Constitution of Liberty said:
 If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also all our future wants and desires, then there would be little case for liberty—while liberty of the individual, in turn, would of course make complete foresight impossible. Liberty is essential in order to leave room for the unforeseeable and unpredictable: we want it because we have learnt to expect from it the opportunity of realizing many of our aims. It is because every individuals knows so little, and in particular because we rarely know which of us knows best, that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.
In his classic book Bureaucracy Austrian economist Ludwig von Mises wrote:
...the first step [in bureaucratic management] is to obtain the consent of old men accustomed to doing things in prescribed ways, and no longer open to new ideas. No progress and no reforms can be expected in a state of affairs where the first step is to obtain the consent of old men. The pioneers of new methods are considered rebels and are treated as such. For a bureaucratic mind, law abidance, i.e., clinging to the customary and antiquated is the first of all virtues." 
British socialist Evan Luard noted, in agreement with the anti socialist Mises, that "collective power is also conservative because within the democratic system, political parties and leaders are obliged to converge to a point near the average views of the majority... Because the majority are rarely in favor of important or imaginative changes, this inhibits any radical challenge to the status quo.”

This conservatism is apparent in any bureaucratic system. Those outside the mainstream are rejected and the system does not allocate resources for their use. A centrally planned economy is simply the bureaucratic method of management taken to its ultimate extreme. The result is the stifling of creativity and diversity. Old ways are clung to because promotions in the system are given to those who don't rock the boat. It is not necessary to meet the needs or wants of the consumer because advancement is not based on the generation of profits as it is in the market process.

Gordon Tullock, in his Politics of Bureaucracy, showed that a bureaucratic system does not meet human needs for two reasons. First, the structure is centralized with the older superiors having control over their subordinates and secondly, most subordinates are self-interested and thus unwilling to challenge their superiors. Since profits play no part in this system there is no counterforce encouraging these individuals to promote new ideas. Thus the same force, self-interest, encourages diversity in a market economy but discourages it in a bureaucratic one. In the market economy the self-interested individual wants to profit and can only do so by meeting the needs and wants of consumers. In the bureaucratic system advancement comes only by meeting the expectations of Mises' "old men."

The quandary for moral conservatives is that economic prosperity requires economic freedom, which is only secure in a society based on classical liberal values. Economic prosperity ultimately rests upon a liberal theory of values. Conservatives, of the Left and the Right, claim to favor economic prosperity and thus they are forced to reign in state power and unleash individual initiative.

But once the forces of competitive capitalism are unleashed, entrepreneurs produce goods and services which conservatives oppose. The market economy creates competition in ideas, information and images. Yet the conservative forces don't want these new ideas competing with their own. But if the conservative succeeds in controlling the economy to the degree necessary to achieve this goal he will simultaneously destroy economic prosperity. This happens because to control the "undesired" effects of modern capitalism is to control capitalism. If central control of the economy is imposed the creative nature of capitalism is destroyed. Whether the conservative elites, be they Afrikaner Calvinists in South Africa or the Chinese Communist Party, like it or not economic liberalization will ultimately lead to social liberalization. Brittan's "permissive society" is deeply and inseparably tied to the capitalist society.

One powerful way in which competitive capitalism destroys "conformity" and encourages the permissive society is through technological development. Societies which have competitive markets tend to advance technologically more rapidly than controlled societies. These technological advancements them self undermine the ability of government to regulate. While it has been a popular theme in fiction to imagine authoritarian regimes to be technologically sophisticated the opposite is more likely true. The more controls imposed on an economy the more likely it is to rush into the past. A society of total control would be one that is relatively primitive. The reason is basic: controls destroy the creative nature of competitive capitalism.

Similarly technological advances limit the ability of the bureaucratic state to control people easily. Each step in technology has made censorship more difficult. It was one thing when the censor had to smash a single printing press in a town to end the circulation of subversive, or salacious materials. It is quite another when the technological revolution puts the tools of the media in the hands of billions of ordinary people.

There is a marvelous section in Victor Hugo’s Notre Dame de Paris, where he depicts a printing press. Through the window we see the cathedral. Inside a man is standing. He points first at the press, and then to the cathedral, saying: “this will destroy that. The Book will destroy the Edifice.”  Hugo wrote further:

To our mind, this thought has two aspects. In the first place it was a view pertaining to the priest—it was the terror of the ecclesiastic before a new force—printing. It was the servant of the dim sanctuary scared and dazzled by the light that streamed from Gutenberg’s press.

Of course, today this technology has taken forms that Hugo would never have dreamed of.

Most free speech advocates have not discussed the link between capitalism and free speech. Some economists have mentioned it briefly but many civil libertarians have ignored the connection. Nicholas Wolfson, professor of law, at the University of Connecticut, however, did recognize the link.

It is no accident that capitalism and free speech are so frequently present together. The free flow of information, ideas and technology is essential in the modern age. We live in an age of information. The computer, the microchip, the fax, television, and cinema have created a universe in which the barriers to information and new ideas fail everywhere. Efforts to restrain free speech limit not only intellectual freedom, but result in a stultified and failed economic system. It is no accident that communism collapsed as this age came to fruition. Communist systems were unable to compete in the new technology and the new economies based upon the computer. The explosive mix of free speech, fax machines, and computers has created a universal knowledge and appreciation of the achievement of democracy and capitalism. Students in China, before the regime murdered them, marched with statues of liberty and slogans based upon the Jeffersonian ideals of the American Revolution.
The new critics stress the value of equality above all other values. Only an authoritarian or totalitarian state can impose that goal. Only the state can place all individuals and all groups in a position of equality with all other groups. More successful groups or individuals must be restrained in speech as well as conduct. Interest group politics are suspect, and would be ended. Only the authoritarian or totalitarian state can accomplish those results. A strong libertarian version of the First Amendment is a threat to that goal. The new critics view free speech as a wild card that creates uncertain, unpredictable, unequal results. Hence, they desire to dampen spontaneous change and create a fixed and static society. Their efforts would fail, given the difficulties in the modern age of fax machines and the computer, to restrain the speech they detest.

Conservatives often like to quote F.A. Hayek, who said that the functions of traditions or institutions are often not understood by those who participate in them. He warned of the danger of consciously manipulating such traditions and said they might have unintended consequences. Conservatives use this as a sort of social precautionary principle. But Hayek also said that his form of liberalism does not “stand still.”

He accepted the idea that natural evolution can take place within institutions. So let us look at the favored conservative battleground of today: marriage. This nicely illustrates my point about the dynamics of a free society versus the stagnancy of conservatism.

Marriage, as an institution, is regimented by legislative action. It is not, and was not, free to evolve legally with any ease. Ever since the Protestant Reformationists demanded state control of marriage, this institution has been controlled by the bureaucratic state. As noted earlier, that means it has been regulated in a very conservative manner.

It is useful to remember that State and Society are not the same thing. As Felix Morley noted, “society associates” people voluntarily while the state subjects them.

What is happening now, with political bodies recognizing marriage equality, is that the state, or civil institution of marriage is catching up the social, real nature of marriage. Society, the web of voluntary associations, has largely accepted marriage equality. Major corporations already recognize such relationships in terms of insurance and employment benefits. Even many churches, outside the Catholics, Mormons and fundamentalists, recognize or accept same-sex couples. Virtually all major branches of Society have evolved to accept gay couples. Not so the State.

In the realm where the State has not exerted control, marriage has already evolved. The anti-equality lobby has actually used state coercion to forbid private institutions from evolving. In essence, they are trying to prevent bottom-up, natural evolution through the use of top-down political coercion. It can be argued that the individuals who are meddling with the institution are those using political control to prevent evolution of marriage in the social sphere.

What we have here is not something to which Hayek’s concern can easily be applied. The State came in and took one aspect of marriage, that of the legal ramifications, and enforced stagnations upon it so that evolution was not possible.

Consider what happens along the San Andreas Fault. One side of the fault continues to move. The other side does not. Pressure is built up and then it suddenly lurches in an earthquake, which can be rather dramatic and intense. In this sense gay marriage is a cultural earthquake. One side of the marriage fault line, the private, societal side, has slowly been changing. The other side has stood still. Eventually the pressure builds and we get a quake.

Society has evolved when it comes to marriage. The State has not.

This is one of the problems of political control of various industries. The state, rarely forces evolution, it usually prevents it. This is especially true in the fields of technology where changes can be rapid. Politicians have a tendency to try to impose stagnation by mandating the status quo. This is true in the social sphere as much as in the economic sphere.

State control stagnates the field under control. It makes innovation difficult, sometimes impossible. It prevents evolution. We have marriage wars today because marriage is partially private and partially nationalized. The private side of recognizing relationships pretty much accepts same-sex couples on par with opposite-sex couples. The state side does not. Political control of aspects of marriage meant that those particular aspects didn’t take into account the real state of marriage, as it exists today. You can’t find what marriage means today by looking at the state sanctioned institution. To find out what marriage really looks like you have to look at the private sphere. And, whether social conservatives like it or not, that private sphere has substantially recognized same-sex relationships.

Interestingly that means the politicians pushing for marriage equality are not the ones trying to centrally plan marriage or force “significant changes” on others. Those changes have already taken place outside the state’s arena and politicians are merely playing “catch up.”

Does this mean that the state doesn’t have to change and we can stay where we are, with the private sector evolving and the State sector stagnating? That is not possible. The state has used marriage status as a major deciding factor when it comes to the recognition of the rights of couples.

For instance, one argument that was made to the Iowa Supreme Court, to justify denying same-sex couples marriage rights, was that the state taxes same-sex couples at a higher rate than “married couples.” The defenders of the status quo argued that allowing gays to marry would deprive government of needed tax revenues. I quote the Court’s description of the argument as presented to them: “By way of example, the County hypothesizes that, due to our laws granting tax benefits to married couples, the State of Iowa would reap less tax revenue if individual taxpaying gay and lesbian people were allowed to obtain a civil marriage.”

If all aspects of marriage were privatized then there would be no battle or conflict. The problem is that some aspects of marriage are under state control, or marriage is used by the state as a marker for the recognition of certain legitimate rights. Private contracts simply are incapable of granting those rights since they don’t reside, at this time, with society. Ultimately the full privatization of marriage is what is most desirable but such utopian dreams are just that, still dreams. And same-sex couples exist today in this world. Until then justice mandates that we allow them to marry. What that means is that the state system of marriage needs to evolve the same way the private conception of marriage already has.

In the social realm, that area of human life where people are free to evolve they do so. Things change. Conservatives, attempting to prevent this evolution, use the power of the state to define and stagnate this central institution of human life.

The main obstacle to social evolution is not the world of business, as many assume. The market is willing to offer goods and services to those who don’t fit the accepted mold. Sure, some in the market will refuse to do so, but a depoliticized market has competitors who are only happy to take the business that the conservatives shun. And, as Samuel Brittan noted, they are rewarded for doing so.

There is a fun depiction of this in the film Milk. Scriptwriter Dustin Lance Black shows Milk and his partner, Scott Smith, in front of their soon-to-open camera shop.

Across the street is a liquor store affiliated with the Eureka Valley Merchant’s Association. The storeowner comes across to Harvey. Harvey attempts to be friendly. He says:
I want to join the, um… What is it? The Eureka Valley Merchant’s Association. I want to help in any way possible. I’m no interloper. A Jew perhaps, but I hope you’ll forgive that.
The businessman replies:
I don’t think your application will be approved, Mr. Milk. This is a family neighborhood. Your kind are far more welcome on Haight Street.
What ‘kind’ do you mean sir?
The Merchant’s Association will have the police pull your license if you open your doors.
Scott Smith: Based on what law?
“There’s man’s law and there’s God’s law in this neighborhood and in this City. The San Francisco Police force is happy to enforce either.”
Milk and Smith are talking in their apartment when Harvey says he will start his own business association. He says: “I’m a businessman, Scott. I think businesses ought to treat their customers right. Even their gay customers. For God’s sake, this is San Francisco!”

In the next scene Harvey has organized the first Castro Street Fair and the street is filled with celebrants. Black describes the scene in his script this way: “Harvey arrives at A LONG LINE OF GAY MEN winding out of the Irish liquor store (from earlier). He squeezes past them, into the store, leaving Scott outside.” Harvey greets the owner, who previously had threatened him. The script describes the scene: “McConnelly, at the register, is overwhelmed with all the new business.” The following exchange takes place:
Harvey: “I just wanted to stop in and see how business was doing.
“So you don’t mind all these homosexuals in here, do you?”
The storeowner smiles slightly and the men in line start to wonder. Harvey departs saying: “No. No. Just a joke. Mr. McConnelly here loves our kind. Spend away!”

The liquor storeowner found that tolerant behavior was rewarded.

The depoliticized market is flexible. It evolves. State institutions are stagnant, and like other examples of stagnancy, the Vatican and the old Kremlin, they change very slowly.

In conclusion, I believe that markets encourage “creative destruction” both in the economic realm and the social realm. The bureaucratic state, however, is inherently static. If conservatives ever understood this they would return to their past views of embracing statist economics. I also suggest that if our progressive friends understood this, they would need to reconsider their support for bureaucratic management.  In closing I would like to quote Hayek, once again, on conservatives.

He said: “Conservatives are inclined to use the powers of government to prevent change or to limit its rate to whatever appeals to the more timid mind. In looking forward, they lack the faith in the spontaneous forces of adjustment which makes the liberal accept change without apprehension, even though he does not know how the necessary adaptations will be brought about”

James Peron is the president of The Moorfield Storey Institute and past president of Laissez Faire Books. He is the author of numerous books including Exploding Population Myths, Die, the Beloved Country?, Zimbabwe: Death of a Dream, the novel City Limits and editor of The Liberal Tide: From Tyranny to Liberty. He has written for publications such as Reason, The Wall Street Journal (Europe), The Johannesburg Star and others. 


  1. Jim, I am interested in the topic. I read as far as I could. But it's just too much, sorry.

  2. Patrick: I'm not too sure what you mean by "it's just too much." Do you have questions?

  3. Mr. Peron, thank you for sharing your ideas. This was very informative and helpful. Wish more people would take the time to read thoughtful articles like this one, help us understand ourselves better as a society and understand the actual choices that are available to us (and those that are not).