Let’s take a look at some of the philosophy of anti-laissez-faire, particularly in its heyday: just before the first World War. There is little doubt the explosive growth of America’s economy was the result of the great human effort, the application of knowledge to production to create technology and capital, and the vast land and natural resources at its disposal. The framework of classical liberal (in full form, laissez-faire) economics pioneered by Great Britain gave great incentive for this process. A century of liberalism arose from thousands of years before of dysfunctional human civilization, growing the population and standard of living of human beings far larger than ever before in any century.

However, following the Civil War and the Second Industrial Revolution, class divisions had grown and fresh voices bemoaned the supposedly unjust distribution of wealth in society, calling into question the validity of the free market. Though lacking true ideological conformity, changes in attitude toward laissez-faire capitalism[1] since the Founding have been generally defined by any or all of three major shifts: most importantly, the replacement of liberal political rights with economic entitlements; closely connected, a new emphasis on collective instead of individual good; and in effect, the belief in the use of government as a valuable tool for bettering those collectives.

Of course, some important qualifications must be made. Firstly, not all objections made to the state of the nation under capitalism in the late 19^th– and early 20^th– centuries were necessarily at odds with traditional liberal principles. Truly consistent advocates of laissez-faire capitalism such as William Graham Sumner believed that government obstruction of trade unions and other forms of collective bargaining[2], for example, interfered with the individual’s right to freedom of association and self-determination. Broadly speaking, the political environment that permitted wealth to buy power in government was an essential threat to traditional liberty. Furthermore, it would be disingenuous to attempt to collectivize the entire spectrum of objections to liberal society, as they can be vastly different in their moral values, justifications for their principles, and the nature and practical execution of their policies.[3] Overall, the following breakdown is only a brief approximation of the characteristics of those opposed to laissez-faire economics, with a select few of several possible examples.

The Rise of “Economic Freedom” As a Standard of Living

The issues of most profound significance to any attitude toward economic and legal systems are the moral concepts that underlie them. Almost universally, opponents of capitalism believed that wrong-doing necessarily occurred from its implementation, whether in its means or in its ends. Previously, most of an individual’s rights in America were defined by a Lockean theory of natural law. Freedom of contract (and a right to a fulfillment of those contracts) permitted one the ability to freely associate with others economically. However, great disparities in wealth concentration led critics of capitalism to denounce the status quo, which was allegedly caused by the consistent legal enactment of these principles. Factions such as the Populist movement, the Progressive movement, and the Socialist Party of America formed in the antebellum period as a response.[4] The introduction of a new kind of right pervaded these new alternatives to laissez-faire capitalism: the economic freedom.

Karl Marx’s famous maxim, “from each according to his ability, and to each according to his need,” was one widely accepted economic substitute for property rights. Looking Backward (1888), a novel by Edward Bellamy, details a futuristic society that has supplanted competition with economic rights and duties in line with Marx’s axiom. “The reward of any service depended not upon its difficulty, danger or hardship, for throughout the world it seems that the most perilous, severe, and repulsive labor was done by the worst paid classes…,” states Dr. Leete, a knowledgeable member of the society.[5] Indeed, this was not the case in 1887; the natural system of economic rewards resulting from liberal rights is, first and foremost, based on the mutual exchange of desired values, i.e. supply and demand. “Wage slavery” became a popular phrase to describe status of the common laborer. In The Living Wage (1906), John A. Ryan argues that the “American standard of living” is a “natural and absolute right” of citizenship. Though he argued it as a dictum of Christian values, many other leftists embraced a similar belief, and an ends-oriented theory of economic freedom gained popularity. No longer would individual autonomy provided by rights determine one’s economic freedom, but the level of wages would.[6]

Collectivism vs. Individualism

Logically entailed by the change in moral principles was an insistence that the good of the collective trumps the good of the individual. Since the notion of the fairness of market-defined wages was fully rejected, the market was replaced by newly-found social and moral considerations. Henry Demarest Lloyd, one of the foremost antagonists of Social Darwinism, placed great emphasis on collective governance and production. “Our liberties and our wealth are from the people and by the people,” he contends, “and both must be for the people.” His use of “the people” is not merely political euphemism, but imperative: “wealth, like government, is the product of the co-operation of all, and, like government, must be the property of all its creators.”[7]

Historically, a principal element of collectivization derived from stressing the importance of labor, in contrast to the capital-focused Industrial Revolutions of the 1800s. In 1914, Congress announced via the Clayton Act, “The labor of a human being is not a commodity.”[8] There is no better example of American labor-class activism than the writings of Socialist Party figurehead Eugene V. Debs. In Revolutionary Unionism (1905), Debs argues for the unity of the working class and, in Marxist form, condemns the purported separation of the worker from the rightful fruits of his labor. He repudiates the validity and effectiveness of craft unions- usually selective organizations of skilled workers- underscoring that “infinitely greater than [their] loyalty to their craft is their loyalty to the working class as a whole.”[9] He fiercely criticizes the structure that denies the struggling laborer his desires, but fervently protects “the product of [the worker’s] labor, the property of the capitalist.” Then, when the dissatisfied become agitated and unrest begins, the government arrives to silence the menace: “If you… have made more steel than your master can sell, and you are locked out and get hungry, and the soldiers are called out, it is to protect the steel and shoot you who made the steel…”[10] Debs’ arguments reflected common sentiments of outrage toward a society in which a vast majority of people, though they were a necessary part of production, toiled heavily and possessed little while a tiny group reaped gigantic rewards.

A different form of collectivism, nationalism- in the spirit of the times- also was a popular source of ideological opposition to the free market. Similar opinions had already a large presence during the Founding in the form of the Federalist Party and Alexander Hamilton, who argued for state intervention as a means of furthering the nation’s economic goals. Bellamy’s Looking Backward, which cued a short-lived but large nationalist movement, extolled the replacement of self-interest with a higher cause: “Now that industry of whatever sort is no longer self service, but service of the nation, patriotism, passion for humanity, impel the worker as in your day they did the soldier,” says Dr. Leete. Another thinker, Herbert Croly, believed nationalism belonged hand-in-hand with democracy, stating “the first duty of a good democrat would be that of rendering to his country loyal patriotic service.”

The Role of the State in the Capitalist Economy

Government would be the primary tool in executing these policies, with force as the only way to guarantee Americans their social and economic rights. As German sociologist Max Weber explained, “The rise of modern freedom presupposed unique constellations which will never repeat themselves.” These “unique constellations” likely refer to the vast expanses of land and resources in North America, among other contingent facts, which gave rise to the harmony provided by decentralization. Otherwise, freedom must be centrally planned to be had beyond its occurrence through plain luck. Bellamy comments that Americans in the nineteenth century possessed a “galling personal dependence upon others as to the very means of life.”[11] The founder of the American Economic Association, leader of an organization created to battle laissez-faire economics, wrote “we regard the state as an educational and ethical agency whose positive assistance is one of the indispensable conditions of human progress.”[12]

Woodrow Wilson, in fulfillment of many of Herbert Croly’s ideas, advocated a “New Freedom.” In The Meaning of Democracy (1912), he claims that while laissez-faire Jeffersonian ideals furnished “a government of free citizens and of equal opportunity,” the contemporary physical characteristics of the nation were suited to it; families each lived in separate households, employers were closer to their employees, and so forth (arguments very much similar to Weber’s “unique constellations”). Using Glasgow as an example, Wilson draws a metaphorical parallel between the Scottish city’s common hallways in residential buildings being defined as public streets and the “corridors” of large corporations being regulated as part of the public domain. In this, he claims he is fighting against “monopolistic control,” and in turn “fighting for the liberty of every man in America, and fighting for the liberty of American industry.” [13]  Not coincidentally, the Wilson administration heralded the introduction of the discretionary federal income tax through the Sixteenth Amendment in 1913.

Is true capitalism dead?

Clearly, attitudes toward laissez-faire capitalism have turned significantly against it since the Founding. This is not to suggest that there was unanimity over the issue during America’s formative years, but major policy battles accompanied by successful movements have led to aggregate changes in economic viewpoints. The prominent influences of the postbellum period, such as the Progressives, have nearly eradicated belief in the functionality and morality of absolute laissez-faire­ governance. Likewise, the public institutions established in the wake of those movements have furthermore ingrained the permanent, expanded role of government in the national consciousness (euphemistically speaking). Even “right-wing” politicians who profess the values of capitalism take their cues from business interests in exchange for financial and political support. Few candidates can plausibly survive electorally on a genuine non-interventionist policy platform. For America, the unabridged free market is dead.

[1] To clarify, any mention of “capitalism” alone still is referring to unlimited, absolute laissez-faire capitalism with the proper host of necessary political rights. Likewise, “liberal” refers to the host of values associated with it.

[2] This is, obviously, supposing that these trade unions are behaving by legitimate and economic means. In the “Forgotten Man,” Sumner attacks unions which restrict the free flow of labor, by limiting the pool of tradesmen in order to artificially raise wages.

[3] Some thinkers were nationalistic, like Bellamy; others were religious, like Ryan; and so forth.

[4] For space considerations, this analysis will not go past the Wilson administration.

[5] Edward Bellamy. “Looking Backwards.” In American Political Thought, ed. Kenneth Dolbeare and Michael S. Cummings, 293 (Washington, D.C.: CQ Press, 2004).

[6] Eric Foner, The Story of American Freedom, 144 (New York: W.W. Norton & Company, Inc., 2004.)

[7] Henry Demarest Lloyd. “Revolution: The Evolution of Socialism.” In APT, 304-305.

[8] Foner, 144.

[9] Debs, “Revolutionary Unionism.” In APT, 359.

[10] Eugene V. Debs, “Revolutionary Unionism.” In APT, 355.

[11] Foner, 129.

[12] Foner, 130.

[13] Wilson, Woodrow. “The Meaning of Democracy.” In APT, 393-395.

The post Anti-laissez-faire Ideas since the Founding: 1870-1918 appeared first on Rare Essays.

Changes in attitude toward laissez-faire capitalism historically have been generally defined by any or all of three major shifts: most importantly, the replacement of liberal political rights with economic entitlements; closely connected, a new emphasis on collective instead of individual good; and in effect, the belief in the use of organized coercion (government) as a valuable tool for bettering those collectives. Two contemporary thinkers, John Rawls and Robert Nozick, brought the debate about the role of government in a wealthy liberal democracy (such as ours) back to the philosophical forefront, asking the essential question: if they should at all, for what reasons should government be able to interfere with the market, beyond protecting its citizens from violence and fraud?[1] On one side, Rawls’ Theory of Justice attempts to justify a broader scope of government powers by appealing to a Kant-esque “original position,” in which agents must decide on principles of justice irrespective of what their physical position will actually be in the world. On the other, Nozick’s Anarchy, State, and Utopia sets out to construct a consistent account of the ideal libertarian state, and in the process reject Rawls’ arguments.[2] There is strong evidence- both in Nozick’s writings and elsewhere- that the position delineated in A Theory of Justice is a flawed justification for the liberal welfare state.

Rawls on Government

Though the focus of this paper is on government’s role as a redistributor of wealth, a holistic understanding of Rawls’ account of government is essential to understanding his position on redistribution. His primary concern in exploring social justice is what rights and duties members of a society must have in its institutions, and in turn how the benefits (and burdens) of social cooperation should be distributed. He argues from two principles of justice: the equality principle and the difference principle. The former prescribes that each individual must possess the same level of liberty as each other individual, and the latter prescribes that social and economic inequalities should be rectified for the greatest benefit of the least advantaged. These are ordered by priority; the institutions of the first can not be surpassed by “greater social and economic advantages.” Rawls defines these two principles are part of a larger, more general conception of social values:  “all social values – liberty and opportunity, income and wealth, and the bases of self-respect – are to be distributed equally unless an unequal distribution of any, or all, of these values is to everyone’s advantage.” One essential implication in this statement is that institutionally, the course of action we should take (as constrained by the equality principle) is an empirical question. If general property rights, freedom of association, and other facets of laissez-faire capitalism most frequently lead to material inequality compared to centrally planned production, yet produce a level of output that makes everyone better off, then they ought to be instituted.

Rawls’ idea of justice through the original position

He arrives at his principles of justice by creating a thought experiment, the “original position,” from which he derives his notion of “justice as fairness.” Before doing so, he establishes two primary premises. The first is a constraint of social unity; the freedom and equality of citizens must be respected. The second pertains to the fact that there always exists a plurality of conceptions of the good; these include one’s fundamental beliefs, values, projects, personal loyalties, and so forth. Because of these underlying necessities, Rawls holds a contractualist position in order to create a theory of justice which does not depend on any of those conceptions, but one with which free and equal citizens could be expected to reasonably agree. The establishment of a contract (a consensual agreement) would be the only way of respecting the autonomy of individuals totally, while at the same time providing a framework for universal governance. For a simple example, a comprehensive moral doctrine such as utilitarianism (“always act in such a way that leads to the greatest happiness”) would not, in Rawls’ view, be used as a starting point from which societal institutions would be designed, because one can always reasonably disagree with such a doctrine. Instead, the principles of justice would be determined by the hypothetical rational agreement in what Rawls argues to be the fair conditions of the original position (hence “justice as fairness”).

The original position has several necessary characteristics to achieve Rawls’ conclusions about justice. Firstly, he defines the participants, positing rational agents, who, in the negotiation, seek the guarantee of rights and resources to pursue their individual conceptions of the good, reflect on them and change them, and apply them. These assumptions are responsible for traditional liberal institutions (rights) of “freedom of conscience”: freedom of speech, press, religion, etc. Likewise, they are partially explanatory of common, universally accessible public resources: free primary schooling, public libraries, universities, etc. Secondly, he delineates the critical constraints: the finality of the contract, and most importantly, the “veil of ignorance.” Those participating in the original position have no knowledge of what their natural endowment, their place in society, or their conception of the good will be, but they will have general knowledge of how the world works and expect moderate scarcity of resources. The purpose of the veil of ignorance is to prevent these self-interested agents from supporting principles of justice that are biased in favor of their characteristics, instead forcing them to adopt universalizable principles. They will not know who they will be when they enter society (rich or poor, utilitarian or Kantian, etc.), and thus any preferential policy which they advocate in the original position is equally likely (from their perspective) to be to their benefit as their detriment.

Rawls on Wealth Redistribution

This leads to Rawls’ position on wealth redistribution. Its primary cause extends from the condition of utility maximization in the context of a lack of information about the distribution of outcomes. In effect, Rawls is appealing to the choices rational economic actors ought to make in the face of uncertainty. Imagine the following example of choice relating to uncertain outcomes. Someone must choose between two different coin-flip games: in one, the heads payoff is $5000, and the tails payoff is $0; in the other, the heads payoff is $2000, and the tails payoff is $1000. The coin is being flipped by a well-known trickster, who is reputable for his pleasure in biasing coins to every possible distribution. The player is aware of this, and thus does not know the probability that either heads or tails will occur on the coin, entailing a situation of total uncertainty. By Rawls’ (and standard game theoretic) reasoning, the player’s rational choice would be to choose the $2000-or-$1000 coin, in effect maximizing the outcome of the worst-case scenario. This coin is known as the maximin option, the uncertain game with the best worst outcome. In distributive justice, the maximin option would be the one in which the least advantaged, whoever it may be, will be guaranteed a certain payoff by society, whether it is in food, shelter, employment, healthcare, or education, at the expense of a higher payoff for others.

Rawls’ position is thus unique, in that he constructs it from no particular conception of the good except that of respecting individual autonomy at the inception of political principles. Unlike most advocates of distributive justice, he does not conclude his principles from some objective conception of the good, but only from a rational contractarian decision by agents to properly define the rules of social cooperation.

The post Rawls vs. Nozick: Rawls’ Theory of Justice and Some Objections appeared first on Rare Essays.