Dan Klein's "10 Reasons You Shouldn't Call Leftists Liberal"

Daniel B. Klein has written an excellent piece in Intercollegiate Review on the 10 reasons why you shouldn't call leftists "liberal."  Klein notes that the word "liberal" has two meanings: (1) that pertaining to generosity and (2) that pertaining to a free man, as in "liberal education."  The first to use the term in its political meaning was Adam Smith, and some scholars, such as Larry Siedentop, have claimed that liberalism was the result of Christianity.*

The ideology of the Progressives was not liberal, for it places state institutions at the center of economic decision making, leaving a sphere to a market that is shaped and dominated by the state.  This approach was the product of the later German historical school led by Gustav von Schmoller, and Bismarck implemented it.

As it turned out, Schmoller and Bismarck's third way turned into Hitler's third way, which adapted aspects of Mussolini's third way: Fascism.   Like Hitler and Mussolini, Franklin D. Roosevelt proposed cartelization and intense state influence on industry.  The Supreme Court scuttled Roosevelt's National Industrial Recovery Act, but elements of it, such as the National Labor Relations Act, were enacted. 

The interest in third way economic policies flowed from the war economy of World War I. Although World War I was on every level a fiasco, the media convinced the public--modern propaganda having been an important innovation during the war--that without a powerful state the Great War could not have been fought and won.

Alas, without its having been fought and won, the world would have been much better off, but that seems to have escaped my grandfather's and parents' generation, as well as my own.

Also during the World War I era, Herbert Croly and Theodore Roosevelt aimed to paint Progressivism, as Mussolini did Fascism, as a third way in between liberalism and socialism.   Hence, Progressivism, Fascism, and Nazism are variations of the same system.  They differ from the overt socialism of the USSR and Red China, and they also differ from liberalism, which is based on natural rights and profit-seeking and which leads to optimal economic performance.  The third way systems and the twentieth century socialist systems evolved from the war economies of World War I, and they are linked to the military state.

Klein is right that the use of the word "liberal" to describe the views of the World War I-derived ideologies--the third way and social democracy--is Orewellian.  Whenever the media calls a leftist liberal, a devil gets his horns.

*I was just listening to Professor William R Cook's Great Courses lectures  The Catholic Church: A History, and it is evident that mainstream Catholicism has not been in favor of liberalism.  In  1864 Pius IX  issued  Syllabus of Errors, which opposes separation of church and state and claims the right of the Catholic Church to use force.   In 1891 the Catholic Church moved to a third way approach under Leo XIII's  Rerum Novarum, which opposes class warfare, opposes socialism,  favors natural rights (grounded in Thomistic philosophy) and favors private property, but opposes free-market wage determination and favors workplace regulation.   Hence, the Bismarckian system, which was, I believe, the product of German Protestants, can also be called Christian.  Liberalism is associated with Calvinism, but Lutheranism and Catholicism may be closer to the third way.

New Year's Resolution: Ethics Is HR's Business

I submitted the following article to the American Institute of Certified Public Accountants' newsletter, AICPA Career Insider. 

New Year's Resolution: Ethics Is HR's Business

Mitchell Langbert,  Ph.D.

In the last two years several leading institutional players,  to include the Society for Human Resource Management, the Business Roundtable's Institute for Corporate Ethics, and the Deloitte accounting firm have noticed that trust between firms and their employees has flagged and that trust can, or ought to be, viewed as an ethical issue.  A 2009 Business Roundtable and Arthur W. Page Society survey found that the public sees a power imbalance that enables business to abuse its position.  The Business Roundtable recommends renewal of public trust in business through common sense:  the production of quality services; steady jobs in healthful environments; and reasonable stockholder returns. Last year, Deloitte found that of one third of Americans who plan to seek a job, 48 percent cite a loss of trust due to poor communication as a reason.  Deloitte notes that lack of trust affects talent management.  Moreover, competence and ethics go together.  91% of employees say that they are more likely to be ethical when they fit their jobs. 

But, if we are to believe Adam Smith's Theory of Moral Sentiments,  trust is, as statisticians might put it, a dependent rather than an independent variable. That is, trust depends on good ethics. It is not good ethics. As Smith argues[1]:

Our rank and credit among our equals…depend very much upon … our character and conduct, or upon the confidence, esteem and good will which these naturally excite... 

Three virtues, in Smith's view, constitute good character:  prudence with respect to our dealings, justice and beneficence with respect to others. Self-command is needed to ensure that knowledge of the right thing to do is accompanied by ethical action.[2] In these claims Smith follows the ideas of Plato, Aristotle and the Stoic philosopher Zeno, who emphasize virtue and self-restraint.  Smith distinguishes between commutative justice, according to which which we do no harm to others and distributive justice, according to which we give due credit. Much as Deloitte found, Smith argued in 1759 that a good life-work fit relates to ethics[3]:

(W)e are said to do injustice to ourselves when we appear not to give sufficient attention to any particular object of self-interest. In this last sense, what is called justice means the same thing with the exact and perfect propriety of conduct and behavior, and comprehends in it not only the offices of both commutative and distributive justice, but of every other virtue, of prudence, of fortitude, of temperance.

 

Smith writes in the Aristotelian tradition of virtue ethics, according to which virtues or competencies ground ethics.  In Nicomachean Ethics  Aristotle claims that virtues, especially prudence, self-command, courage (risk neutrality) and most of all justice  need to be applied through practical wisdom and deliberation, which are similar to what Daniel Goleman has called emotional intelligence.[4]

Virtue Ethics as Emotional Intelligence

The 18th century Enlightenment philosophies of David Hume and Immanuel Kant created a gulf between ethics and competence.  Hume claims that there is no logical foundation for ethics and that ethics is pure emotion. Kant claims that ethics is based on practical reason.  In the late twentieth century Alisdair MacIntyre[5] pointed out that the attempt to absolutely ground ethics in emotion or reason through sweeping philosophical systems lead to Nietzsche's nihilism and rejection of ethics altogether.  Nietzschean nihilism is reflected in the evolution of management thought through writers like Chester Barnard, who claims that morality is malleable and grounded in the executive's ability to manipulate employees' emotions.[6] Arguably, the Nietzschean mindset has influenced fallen managers and investment bankers like Jeffrey Skilling and Ivan Boesky.  It is unfortunate that the Nietzschean view has come to be associated with business and capitalism when capitalism  more directly rests on the benevolent self-interest of Smith and Aristotle. 

Once the gulf between emotional intelligence and practical wisdom is bridged Milton Friedman's claim that business's job is to produce a profit in opposition to corporate social responsibility falls by the wayside.  It is business's job to produce a profit consistent with ethical norms, justice and benevolence. Neo-classical economic theory makes similar implicit assumptions.  The equation of wage and marginal revenue product echoes Aristotle's concept of justice as proportion, and some philosophers even have controversially claimed that Aristotle was the first to enunciate marginalist economic theory.   Given the free market's foundations of justice and benevolence,  illegal or unethical behavior is as bad as losing money.  We have seen this demonstrated again and again in government and business.  The failures of Robert Moses and Robert McNamara in government were failures of competence.  The failures of Long Term Capital Management and Arthur Anderson were also so.

Ethics Is a Human Resource Function

The Sophists were the first to claim that ethics is relative and can be viewed as a teachable competence.  Plato argued that ethics has a natural foundation and it depends on universal Ideas.  Aristotle agreed that ethics depends on natural foundations but that it needs to be applied particularly, to the appropriate circumstances, and the competencies on which it depends are subject to what March and Simon, 2,400 years later, call bounded rationality.[7]  Smith saw his ethical system as consistent with the Aristotelian view. Several Enlightenment philosophers, most importantly Kant, rejected Aristotle's emphasis on judicious contextual and particular application of virtues and argued for Platonic ethical universality.  This has the unfortunate effect of banishing ethics from profit seeking because there are always exceptions to universal ethical laws.  The exceptions debase ethical currency and managers adopt Nietzschean nihilism. In contrast, Smith grounded his ethics on virtue and competency and does not make universalistic claims.  Smith argues that culture modifies underlying natural ethical patterns.

Human resource managers are expert in understanding and applying competencies.  Job analysis is the gathering of valid information about jobs including job specifications or tasks and job criteria or competencies.  In fact, the trend in job analysis has been away from emphasis on duty or task and toward competency.  Yet, the classical Greek word for competency, arête, is the same as the word for virtue.  Hence, in Aristotle's view (if Aristotle could have imagined a world based on technology and trade, neither of which he saw as important or even desirable beyond a small degree) human resource managers are the arbiters of virtue in the corporation. Moreover, there are universals but they are modified by circumstances.  Universal rules need to be tempered with judgment and deliberation.

More to the point, justice is the fundamental competency on which all job responsibilities are based. Its application is imperfect and subject to cognitive limits on rationality. Practical deliberation and judgment are crucial to all professional and managerial jobs but without justice cooperation and coordination necessary in large firms are impossible.  Hence, HR managers ought to be the advocates of justice in the corporation.  For upon justice prudence, benevolence and all other competencies as we define them today depend.

---

[1] Adam Smith, Theory of Moral Sentiments. Boston: Wells and Lilly, 1817.  Volume II, p. 26

[2] Ibid., p. 65

[3] Ibid., p. 112

[4] Daniel Goleman, Emotional Intelligence: Why It Can Matter More than IQ. New York: Bantam Books, 1995.                             

[5] Alisdair MacIntyre, After Virtue: A Study in Moral Theory. Notre Dame, Ind.: University of Notre Dame Press, 1981.

[6] Chester Barnard, Functions of the Executive. Cambridge, Mass.: Harvard University Press, 1938.

[7] James G. March and Herbert Simon, Organizations.  New York: John Wiley and Sons, 1958.

Adam Smith on Third Parties

"It is needless to observe, I presume, that both rebels and hereticks are those unlucky persons who, when things have come to a certain degree of violence, have the misfortune to be of the weaker party.  In a nation distracted by faction, there are, no doubt, always a few, though  commonly but a very few, who preserve their judgment untainted by the general contagion.  They seldom amount to more than, here and there, a solitary individual, without any influence, excluded by his own candour, from the confidence of either party, and who, though he may be one of the wisest, is necessarily upon that very account, one of the most insignificant men in the society.  All such people are held in contempt and derision, frequently in detestation, by the furious zealots of both parties.  A true party-man hates and despises candour; and in reality there is no vice which could so effectually disqualify him for the trade of a party-man as that single virtue.  The real, revered and impartial spectator, therefore, is upon no occasion at a greater distance than amidst the violence and rage of contending parties.  To them, it may be said, that such a spectator scarce exists any where in the universe...Of all the corrupters of moral sentiments, therefore, faction and fanaticism have always been by far the greatest."

--Adam Smith, Theory of Moral Sentiments, pp. 205-6