Friday, February 8, 2008

Philosophical versus Empirical Underpinnings of Capitalism and Progressivism

The ultimate defense for free market ideas must be empirical, not philosophical. The reason is that philosophical arguments can be turned on their heads and pose an argument for socialism or progressivism. Neither capitalism nor socialism has any a priori or pre-experiential meaning. Both are derived from historical experience. Prior to the middle ages economies and societies were largely tribal or traditional in nature. There were a couple of democratic and republican experiments, most famously in Athens and Rome, but the distinguishing features of capitalism were absent. These include the limited state and natural rights, especially the rights of contract and property. Rome stopped being a republic more than four hundred years before the last western emperor (some historians would argue that western Rome never really fell, that there is no real dividing line between late antiquity and the middle ages, and that the transition from western Roman to barbarian rule in western Europe resulted from plagues and other dislocations rather than from any real conquest or the sackings that occurred twice late in its history.) The ideas of natural rights emerged in England and Scotland and to a lesser degree in France and Germany as markets expanded in scope facilitating the advance of technology. This began to occur toward the end of the Crusades (which themselves ensued from advances in European agriculture) and were in part a result of increased capacity for trade by the Italian city states and other European centers. At the same time, socialism, which argues against property, contract and other natural rights, also emerged in the specific historical context of advanced technology, increasing scale of business and the rejection of small proprietorship and agricultural-based free market capitalism of the late nineteenth century. Like conservatism, socialism was an attempt to rationalize social relations in the historical context of emerging large-scale industry which did not seem responsive to public welfare and similar interests. The socialists believe(d) that the way to maximize social welare is to inhibit greed and the ability of large industry to exploit. Capitalists believe(d) that the way to maximize social welfare is to permit corporations to innovate, develop new technologies and to compete in terms of Schumepter's creative destruction.

Both conservatism and socialism or progressivism saw the state as an essential response to the rise of corporate power, which in turn just means size or scale. Both conservatism and progressivism are utilitarian in nature. Utilitarianism, the philosophy of John Stuart Mill and Henry Sidgwick, holds that moral action maximizes human welfare. But both socialists and conservatives can claim that their policies maximize human welfare. The problem with utilitarianism is that no one can prove that one policy or another maximizes human welfare. That is the point of the debate about capitalism and progressivism. One side crows that progressivism can cure all ills, and the other side claims that capitalism and technological advance are better at doing this. Thus, the ultimate conclusion needs to be empirically driven. There needs to be evidence about capitalism versus socialism, and the evidence needs to be emphasized.

Murray N. Rothbard developed an alternative philosophical defense of capitalism in his book For a New Liberty. Rothbard argued that the fundamental principle of "no harm" necessarily leads to a free market conclusion. Rothbard argues that all government action depends of violence or the threat of violence and therefore causes harm. If you start from the principle that doing harm to others is always wrong, then government is wrong. This moral argument is what philosophers call a deontological one, because it is based on duty. We have a duty not to harm others and a corollary of the duty not to harm is not to force people to pay taxes or join the army. But the progressives can derive an equivalent argument. First, large business would not exist without government subsidy. Second, because large business is based on harm (i.e., it has extracted land entitlements forcibly) it is likely to cause further harm. Moreover, its size and market power enables it to cause harm. Therefore, the state is necessary to minimize the amount of harm.

Both utilitarian and moral arguments can lead to either capitalism or socialism. Conservatives argue that the greatest good for the greatest number necessitates state action in favor of corporate interests. Libertarians argue that the non-harm principle prohibits state action. Socialists argue that both duty and social welfare necessitate state control of the economy. Progressives argue that social welfare necessitates state action as well.

The nature of the debate takes on emotionally charged, quasi-religious overtones. John Dewey, the most famous of the Progressives, and the founder of progressive education that has rendered America an illiterate country, argued that democracy is an ultimate good. His belief in democracy was religious in quality. Likewise, Murray N. Rothbard and Ayn Rand devoutly believed in the no harm principle.

The question is who is right. Unlike the religious realm, where faith is the ultimate arbiter, in the economic and societal realm, empirical facts can be collected and observed. Creativity can have play. In my opinion, history has largely discredited socialism and progressivism for a number of reasons, and the devoutly religious progressives are obsessed with their viewpoint to a degree as dogmatic as the medieval proponents of religious doctrine. However, practical empiricism avoids the need for convincing arguments. If people are given choices among systems, they will vote with their feet. Thus, competition among ideas ought to devolve to competition among social systems. To some degree this has already occurred. New York, where the ideas of progressivism and the New Deal in large degree germinated and were implemented first, has been a state in decline in importance ever since. In contrast, states like Arizona, which have resisted progressivism's religious war against individualism, has flourished.

Thus, there are two philosophical defenses for capitalism, the deontological and the utilitarian. Both can be equally used as defenses for socialism. Philosophy leads to a stalemate. The question is what does history and the factual say about the alternative philosophies? The evidence seems clear to me, but the progressive-liberals superstitiously adhere to left wing ideology.

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