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DeLongTODAY 2021-02-18
DeLongTODAY
Mike Konczal:
Freedom From the Market
J. Bradford DeLong
U.C. Berkeley Economics
&
Blum Center,
&
WCEG
2021-02-18
4182 words
<
https://www.icloud.com/pages/0qngUKWzJT3-FHnxHh2HH_M8w
>
<
https://github.com/braddelong/public-fi les/blob/master/delongtoday-konczal-
freedom-from-the-market-2021-02-18.pdf
>
1
DeLongTODAY 2021-02-18
This is the DeLongTODAY Briefi ng. I am Brad DeLong, an economics professor
at the University of California at Berkeley, and a sometime Deputy Assistant
Secretary of the U.S. Treasury. This is the weekly DeLongToday briefi ng. Here I
hold forth here on the Leigh Bureau’s vimeo platform on my guesses as to what I
think you most need to know about what our economy is doing to us right now.
I promised Wes Neff when he agreed to provide the infrastructure for this that I and
my briefi ngs would be: lively, interesting, curious, thoughtful, and relatively brief.
Relatively.
I promised I would provide briefi ngs on a mix of: forecasting, politics,
macroeconomic analysis, history, and political economy.
Today is entirely a political economy, a moral philosophy, an intellectual history
and orientation briefi ng. And it is also, sort of, a book review.
Mike Konczal of the Roosevelt Institute has a wonderful new book:
Freedom from
the
Market <
https://books.google.com/books?id=0aDLDwAAQBAJ
> <
https://
tinyurl.com/dl-2021-02-18a
>. What is it about? And why do I love it?
Let me start with what may seem to you to be—but is really not—a digression. Let
me start with the moment in 1964 when the Republican Party went all-in against
African-American hopes for voice, status, and a fairer share of America’s wealth:
the 1964 presidential campaign of Arizona’s Barry Goldwater. As he ran for
President, Goldwater was dead certain that the Republican Party should make no
effort to win any African-American votes. “If you go hunting for ducks,”
Goldwater said, “you go where the ducks are”. And there were no ducks in even
making noises in support of African-American aspirations. Goldwater believed that
Nixon had lost the election of 1960 because his running mate Henry Cabot Lodge’s
prediction that Nixon would name an African-American to the cabinet, coupled
with Nixon’s “change in language of the civil rights plank… it changed the sound
of that and they didn’t like it”, had “curdled” Nixon’s chances in the south.
Goldwater was not going to make that same mistake.
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DeLongTODAY 2021-02-18
It was in that election that
Supreme Court Chief Justice William Rehnquist won his
spurs by running “ballot security” efforts in which “every Black or Mexican[-
looking] person was being challenged.” Why did he do this?
[As] a deliberate effort to slow down the voting… to cause people waiting their
turn to vote to grow tired.., and leave…. Handbills were distributed warning
persons that if they were not properly qualifi ed to vote they would be
prosecuted…
And that effort never harmed Rehnquist one iota within the late-twentieth century
Republican Party. Rather, it boosted him.
Up until 1901, twenty African-Americans had been elected to the U.S. House of
Representatives. All of them had been Republicans. The last of them, George
Henry White, left his offi ce representing the 2
nd
District of North Carolina in 1901.
As he left he said:
We have 32,000 teachers in the schools of the country; we have built, with the aid
of our friends, about 20,000 churches, and support 7 colleges, 17 academies, 50
high schools, 5 law schools, 5 medical schools and 25 theological seminaries
….
We have done it in the face of lynching, burning at the stake, with the humiliation
of “Jim Crow” laws, the disfranchisement of our male citizens, slander and
degradation of our women, with the factories closed against us, no Negro
permitted to be conductor on the railway cars…no Negro permitted to run as
engineer on a locomotive, most of the mines closed against us
…
With all these
odds against us, we are forging our way ahead, slowly, perhaps, but surely… You
may use our labor for two and a half centuries and then taunt us for our poverty,
but let me remind you we will not always remain poor! You may withhold even
the knowledge of how to read God’s word and…then taunt us for our ignorance,
but we would remind you that there is plenty of room at the top, and we are
climbing…!
….
This, Mr. Chairman, is perhaps the Negroes’ temporary farewell
to the American Congress; but…phoenix-like he will rise up some day and come
again…
The next African-American to be elected was in 1929, and was, again, a
Republican:
Oscar Stanton De Priest
, from the 1
st
District of Illinois, the seat now
held by Bobby Rush. Congressman De Priest served until 1935, when he was
replaced in his district by a Democratic African-American,
Arthur W. Mitchell
.
(Then come 41 Democratic African-American congress members before the
election of Republican Gary Franks from the 5
th
District of Connecticut in 1991.)
Over 1936-1944 African-American registration was split equally between
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DeLongTODAY 2021-02-18
Democrats and Republicans. From 1948-1960 African-American voter registration
was split 5-3 with the advantage to the Democratic Party.
The Democratic edge from 1948 to 1960 was… peculiar. The Democratic Party
then had all the biggest racists in America, after all, and gave many of them very
powerful positions as committee chairs in the U.S. Congress. A greater proportion
of Republican than Democratic congress members were, after all, going to vote for
Johnson’s Civil Rights Act—although, note, not the Voting Rights Act. Truman’s
Secretary of State Dean Acheson mused that the “
apparent contradiction in the fact
that the Southern racist belongs to the same political party as the New York
supporter of the
Fair Employment Practices Commission” was resolved by the fact
that both saw themselves—were—getting a short end of the stick in the business-
centered civilization of America. Nevertheless, the historical commitment of the
Republican Party to African-American rights and uplift still had real bite, and if
were offset in the 1950s by a superior Democratic commitment to lunchpail issues,
to organization and mobilization, and to patronage, the growing number and
proportion of African-American votes was a battleground Republicans should have
been eager to contest.
But… not. Why did Goldwater decide to throw away that historical commitment—
that founding principle of the Republican Party—in pursuit of voters whose deeply
racist principles were antithetical to all that the Republican Party had stood for for
more than a century. How did this make sense to him? And to Rehnquist? And to
those who made Rehnquist fi rst a justice and then chief justice of the United States
government, and who still revere Goldwater?
The answer, I think, is that African-American aspirations—hopes for an equal
voice, and then that with that equal voice they could ask and get a redistribution
and redefi nition of property to redress at least some of past injuries and abuses—
made Goldwater and company extremely uneasy. They were asking for real
democracy.
And real democracy—especially African-American democracy—for
Rehnquist and his compadres in Arizona’s Republican Party in 1964, and for many
others as well,
touched uncomfortably on matters of
governance with respect to
the
market economy, and notions of the just and the fair and the equitable.
To make sense of
this fear, let me now
turn to
two Vienna-born intellectuals: the
Austrian-British-Chicagoan
right-wing
economist Fr
i
edrich August von Hayek
(1899-1992)
,
and
the
slightly-earlier
Austro-Hungarian economist Karl Polanyi
(1886-1964).
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DeLongTODAY 2021-02-18
We fi rst give the floor to
von
Hayek
, who teacheth the lesson: “the market giveth,
the market taketh away: blessed be the name of the market”.
Hayek always argued that to inquire whether a market economy’s distribution of
income and wealth was “fair” or “just” was to commit a fatal intellectual blunder.
“Justice” and “fairness” of any form requires that you receive what you deserve.
But a market economy gives not to those who deserve but rather to those who
happen to be in the right place at the right time. Who controls resources that are
valuable for future production is not a matter of fairness. Once you step into the
morass of “social justice,” Hayek believed, you would not be able to stop chasing a
“just” and “fair” outcome “until the whole of society was organized… in all
essential respects… [as] the opposite of a free society.”
Note that this did not mean you were morally obligated to watch the poor starve
and the injured bleed out and die in the street. Society should make “some
provision for those threatened by the extremes of indigence or starvation due to
circumstances beyond their control” if only as the cheapest way to protect the hard-
working and successful “against acts of desperation on the part of the needy.” And
note that Hayek did not believe (much) in inherited feudal, guild, and customary
blockages to decentralized market exchange. They should be steamed away.
But
beyond that you should not interfere with the market
.
The market was, or would
lead us to, utopia—or as close to utopia as humans could attain. And in von
Hayek’s eyes interference with the market was, as John Maynard Keynes snarked,
“
not merely inexpedient, but impious
”.
That a market economy can produce a highly unequal distribution of income and
wealth just as it can produce a less unequal distribution of income and wealth was
beside the point.
To even raise the question of what distribution of wealth should
be made the presumption—false to Hayek—that people
had rights other than
property rights and obligations to others in addition to those they freely assumed
through contract.
Besides, r
ectifying inequality was
awful
because it was chimerical. Hayek believed
we lacked and would always lack the knowledge to create a better society.
Centralization always led to misinformation and bad decisions. Top-down was a
disaster. Only bottom-up “spontaneous orders” could possibly lead to progress.
What humanity had was market capitalism
, the only system that could possibly be
even moderately effi cient and productive, for “
prices are an instrument of
communication and guidance which embody more information than we directly
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DeLongTODAY 2021-02-18
have,
[and so]
the whole idea that you can bring about the same order based on the
division of labor by simple direction falls to the ground
”
.
Any attempts to reorder
the market distribution of income in order to reward the deserving at the expense
of the undeserving would erode market capitalism: “
the idea [that] you can arrange
for distributions of incomes
…
correspond
[ing]
to
…
merit or need
” does not fi t
with your
“
need
[for]
prices, including the prices of labor, to direct people to go
where they are needed
.” And once you start planning you are on the Road to
Serfdom: “
the detailed scale of values which must guide the planning makes it
impossible that it should be determined by anything like democratic means
”.
Hayek's
was a “this-is-as-good-as-it-is-ever-going-to-get” sort of utopianism.
Accepting that this better organizing of society cared not a whit for the fair and the
just, Hayek understood, was not likely to be done to universal huzzahs! That the
only rights the market economy recognizes are property rights—and indeed only
those property rights that are valuable—didn’t inspire the multitudes. The fact that
the most valuable property rights are those useful in making things for which the
rich have a serious jones made matters worse.
I
t was clear that people thought they
had other rights beyond those that accrued to the property they happened to hold.
And this feeling posed an enormous problem for Friedrich von Hayek. He
identifi ed two substantive enemies to a good (or at least as good as it is likely to
get) society:
egalitarianism
and
permissiveness
.
In a younger generation of libertarians, Milton Friedman would dismiss Hayek’s
worries. Friedman was morally certain that most wealth was not and would never
be inherited, and that most people were pretty much equal. Provide people with
access to education and reward them for what contribution they made to
production and you would have a middle-class society in which it did not matter
much that rights accrued to property rather than to people. Voila: the overwhelming
bulk of people would have a not-grossly-unfair share of the property.
So long as we train our gaze on white male Americans in and around the 1970s,
their income distribution lent Friedman’s belief credence. Widen the pool of
Americans, or look back on the more unequal distribution of 1900, or forward to
that of today, and the sense of his position dissolves.
For the less pollyannish Hayek, however,
democracy
itself was a grave danger
because it taught
egalitarianism
—that society should treat me as well as it treats
you even though you have the property and thus the right to the market economy’s
concern and solicitude. “‘Egalitarianism’ is,” Hayek wrote, “a product of the
necessity under unlimited democracy to solicit the support even of the worst.”
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DeLongTODAY 2021-02-18
Poisonous to Hayek was
democracy
in Alexis de Tocqueville’s sense that mere
luck made one master and the other valet—and luck might change tomorrow. “It
is,” warned Hayek, “not by conceding ‘a right to equal concern and respect’ to
those who break the code that civilization is maintained.”
The fearsome result would be
permissiveness
, which “assisted by a scientistic
psychology, has come to the support of those who claim a share in the wealth of
our society without submitting to the discipline to which it is due.” The lesson to
learn was clear. A prosperous market economy could only flourish if it were
protected from the tides of
democracy
and permissiveness.
Perhaps, indeed probably, for von Hayek societies would periodically need a
Spartan Lykourgos, a Chilean
General Augusto Pinochet. They would need
someone to seize power and reorder society in an authoritarian mode that would
respect the market economy. That the spilling of more than ink would be necessary
to enforce such reordering was a regrettable consequence of this tarnished utopia.
Hayek, standing on the shoulders of giants and tyrants alike, articulated a position
about the market economy that throughout the twentieth century generated a strong
willingness on the political right to view democracy—political and social—not
even as a lesser good but as a genuine evil. These forces did not lose strength as
World War I came nearer.
Hayek he serves as a marker for a very powerful current of thought and action,
powerful not least because it found itself congenial too and backed by very rich
and powerful people. And it is true that the democratic political sphere can turn
into one in which the logic is not cooperation and growth but rather confi scation
and redistribution to the “deserving”, or even one of friends and enemies in which
the logic is punishment for the “undeserving”. Hayek is not altogether wrong that
keeping your head down, concentrating on win-win production for market
exchange, and ignoring appeals to "social justice”—for “justice” involves not just
treating equals equally but treating unequals unequally, and humans have not
historically been very good at treating all others as of equal signifi cance—as
chimerical can be vastly better.
And Hayek was a far-sighted genius in one aspect. He did grasp most thoroughly
and profoundly what the market system could do for human benefi t. All societies in
solving their economic problem face profound diffi culties of getting reliable
information to the deciders and then incentivizing the deciders to act for the public
good. The market order of property, contract, and exchange can—if property rights
7
DeLongTODAY 2021-02-18
can be arranged so that they are carved at the joints so that those principally
affected by an action are at the table—pushes decision-making out to the
decentralized periphery where the reliable information already is, thus solving the
information problem, and by rewarding those who bring resources to valuable uses
automatically solves the incentivization problem. (There remain the distribution
problem, and many of the flaws in Hayek’s thinking come from his inability to
recognize the nature of those problems at all. But absolutely nailing two out of
three ain’t bad. Plus there is the
macro-coordination problem, but that one is at a
lower, more technical and technocratic level than the study of history and moral
philosophy.
)
On the other side, there is
Karl Polanyi
, who teacheth the lesson: “the market is
made for man, not man for the market”.
Friedrich von Hayek loved that the market turned everything into a
commodity
, and
feared those who thought it a fundamental strike against the market that it did not
make everybody materially equal. Polanyi disagreed emphatically. In
The Great
Transformation,
Polanyi explained that land, labor, and fi nance were “fi ctitious
commodities,” They could not be governed by the logic of profi t-and-loss but
needed to be
embedded
in society and managed by the community, taking into
account religious and moral dimensions. The result, Polanyi wrote, was a tension, a
contest, a
double movement
. Ideologues of the market and the market itself
attempted to dissembled land, labor, and fi nance from society’s moral and religious
governance. In reaction, society struck back by restricting the domain of the
market and putting its thumb on the scales where market outcomes seemed
“unfair.”
As a consequence, a market society will face a backlash—it can be a left-wing
backlash, it can be a right-wing backlash, but there will be a backlash—and it will
be powerful.
Now these were—are—brilliant insights. As expressed by Polanyi in the original,
they are also, sadly, incomprehensible to an overwhelming proportion of those who
try to read him. With deference to comprehension, Polanyi can be summed as
follows:
The market economy believes that the only rights that matter are property rights,
and the only property rights that matter are those that produce things for which the
rich have high demand. But people believe that they have other rights.
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DeLongTODAY 2021-02-18
1.
With respect to
land
, people believe that they have rights to a stable community.
This includes the belief that the natural and built environment in which they
grew up or that they made with their hands is
theirs
whether or not market logic
says it would be more profi table if it were different—say a highway ran through
it—or more lucrative if somebody else lived there.
2.
With respect to
labor
, people believe that they have rights to a suitable income.
After all, they prepared for their profession, played by the rules, and so society
owes them a fair income, something commensurate with their preparation. And
this holds whether or not the logic of the world market says otherwise.
3.
With respect to
fi nance
, people believe that as long as they do their job of
working diligently, the flow of purchasing power through the economy should
be such as to give them the wherewithal to buy. And rootless cosmopolite
fi nanciers who may be thousands of miles away should have no commensurate
right to decide that this or that flow of purchasing power through the economy
is no longer suffi ciently profi table, and so should be shut off. They should not
be able to make your job dry up and blow away.
People have not just property rights, Polanyi declared, but these other economic
rights. Which a pure market economy will not respect. It will lay down that
highway, ignore years of preparation when doling out an income, and allow your
purchasing power to dry up and blow away along with your job if someone
thousands of miles away decides better returns on investments are to be found
elsewhere. Hence society—by government decree or by mass action, left-wing or
right-wing, for good or ill—
will
intervene, and re-embed the economy in its moral
and religious logic so that these rights are satisfi ed.
Note that these rights that society will attempt to validate do not—or might not—
be rights to anything like an
equal
distribution of the fruits of industry and
agriculture. And it is probably wrong to describe them as
fair:
they are what people
expect
,
given a certain social order.
Equals should be treated equally, yes; but
unequals should be treated unequally. And societies do not have to and almost
never do presume that people are of equal signifi cance.
And now we come back around to Mike Konczal, and his excellent new book. He
takes a very Polanyian line, on how our freedom ought to be much more than
freedom to buy or sell limited by the wealth and income that history and the market
give us:
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DeLongTODAY 2021-02-18
The things we need to lead our lives are forced into markets where we are
compelled to obtain them, at the mercy of private, profi tseeking actors and our
own ability to pay
…
That is not freedom, but is instead a form of compulsion:
When citizens declare that health care is a human right, they are making a stand
against market dependency. In this view there are still markets. Doctors and
nurses get salaries, MRI machines and bandages are purchased, and so on. But it
also holds that individuals should not be dependent on the market as the sole
determinant of what care they get. Health care should
go to those who are sick,
not those who are sick and who also happen to have money
…
Konczal wants to reach into the past, for an American understanding that
market
dependency can be a source of unfreedom
both when wealth is unequally and
unfairly distributed and when individual market actors have too much market
power and can charge unfair prices—“all the market will bear” is not a general
principle. The rhetoric of the market is about how it is all voluntary exchange, and
voluntary exchange is what people agree to, and so how can that be unfair? Adam
Smith had an answer, with a piece of rhetorical judo in his
Wealth of Nations
.
Suppose the market produced an equilibrium in which the great majority of the
people were desperately poor and in want. What would we think of that? Smith’s
answer:
W
hat improves the circumstances of the greater part can never be regarded as an
inconvenience to the whole. No society can surely be flourishing and happy, of
which the far greater part of the members are poor and miserable. It is but equity,
besides, that they who feed, clothe and lodge the whole body of the people,
should have such a share of the produce of their own labour as to be themselves
tolerably well fed, cloathed and lodged
…
Focus on that “it is but equity”, besides. Fair—that is, voluntary—exchange can be
unfair, and lead to an overall outcome that nobody would voluntarily accept under
any defi nition of “voluntary” that excludes being under severe compulsion. Smith
has been ambling along throughout the book, pointing out the extraordinary
benefi ts of the market economy, and how it is an arena of freedom because people
choose to undertake acts of economic exchange which are in accord with equity, as
each trades what he or she values less for what he or she values more. And then he
brings people up short, with this passage.
10
