Freeman

ARTICLE

To Repair The Culture, Free the Market

Economic Interventionism Destroys the Culture

MARCH 01, 1994 by LLEWELLYN H. ROCKWELL JR

Filed Under : Inflation, Welfare State, Capitalism, Government Intervention, Liberty, Social Security, Morality

Mr. Rockwell is president of the Ludwig von Mises Institute in Auburn, Alabama. A much longer version of this article will appear in The Intercollegiate Review.

Traditionalists and economic libertarians have more in common in the culture war than they might think, for capitalism helps create and sustain a conservative culture. The enemy, for all of the genuine Right, is government intervention.

Today, our economy is a mixture of state planning and impaired markets that no nineteenth-century observer would have recognized as free. Barely half of all new wealth survives the tax police. No part of the economy, from a grocery store in rural New Hampshire to a car dealership in urban California, is exempt from the toils of a hundred agencies. For all business, our planning apparatus is distinguished from the Soviets’ only in degree.

Our labor markets are crippled by anti-discrimination laws, which punish old standards of merit and reward political power. And the welfare state grows no matter which party is in power, further subsidizing the slothful and inept at the expense of the dwindling band of the productive and energetic.

“Of the many species of liberty which compose the freedom we enjoy,” Michael Oakeshott wrote in The Political Economy of Freedom,“we have long recognized the importance of two: the freedom of association, and the freedom enjoyed in the right to own private property.” It is these two areas where we have lost the most, with a heavy cultural as well as economic cost.

The Welfare State

Under the welfare state, the beneficiaries need not work. In fact, they cannot work if they want to keep getting the checks. Thus the condition that welfare is supposed to alleviate—poverty, illegitimacy, etc.—is also the condition required for a continued flow of benefits. The welfare state subsidizes, and thus increases, the very problems it is supposed to solve.

What’s more, welfare takes from earners and gives to non-earners. Thus it not only encourages a something-for-nothing attitude, it also legitimatizes the idea that it is moral to take other people’s property without their consent–a lesson the government should not be teaching.

The rigorous rules of the market—roughly akin to the New Testament admonition that he who doesn’t work shouldn’t eat—are circumvented in the welfare state. Add to this an effort to erase the just stigma of welfare, and the work ethic is overthrown.

In the market economy, there is a hierarchy of success. But welfare increases the income and the status of the failures in society. It thus devalues the older signs of achievement and reduces the market class structure—especially at the lower end—to a jumble.

Older forms of welfare were provided privately, usually through religious institutions that were well aware of its potentially corrupting effects. Work was required from those who could do it, and the “undeserving poor” were treated appropriately. Most important, the rules of social advancement were the same for all.

Of course, the old order’s free market was not footloose and fancy-free. It produced not what today’s libertarians call “freedom,” but a rigid environment of work and saving, and of punishments for those who failed to do both, as witness the discipline of the company towns of the laissez-faire era.

Capitalism is as conspicuous for what it requires as for what it allows. As F. A. Hayek argued in The Constitution of Liberty, “liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions and will receive praise or blame for them. Liberty and responsibility are inseparable.”

Group Privilege

The welfare state “produces the habit of complaining,” said Ludwig von Mises, and in response, it long ago moved beyond redistribution of property. If certain groups have failed to get what they think of as their due, they are able to get themselves designated official victims. This is a culturally corrupting effect in itself, as if failure is always someone else’s fault. The welfare state then forces society to treat these groups as if they had earned what they demanded, especially through anti-discrimination law.

As Oakeshott said, “the freedom which separates a man from slavery is nothing but a freedom to choose and to move among autonomous, independent organizations, firms, purchasers of labor, and this implies private property in resources other than personal capacity.”

Yet today, from business to housing to schools to clubs, the free association that Oakeshott regarded as the difference between slavery and liberty is all but gone.

The Family and the Free Market

Not everyone can make his own way in society. Children, of course, require the help of parents, and the elderly require the help of the young. These, and many other needs, are met in the family. But the mixed economy has displaced private provision with welfare, dramatically weakening the family. For example, Social Security and Medicare have relieved children of the obligation to care for their elderly parents, as Allan Carlson has shown.

In the present system, the elderly feel betrayed and ignored by everyone but the government, while grown children can disregard their obligations with little earthly penalty. There is less respect for old people, which—combined with a culture that glorifies immaturity—disrupts the natural hierarchy of age. Largely because of state intervention, each generation has become more isolated, self-indulgent, and irresponsible. One only has to contemplate the “baby boomers.”

In a free market, on the other hand, the family thrives. As G. K. Chesterton noted, the family “is at once necessary and voluntary,” and thus needs nothing from government other than the rule of law.

As Mises wrote in Socialism, however, leftist proposals “to transform the relations between the sexes have long gone hand in hand with plans for the socialization of the means of production.” To Mises, traditional marriage was reinforced by the institutions of capitalism, especially free contract, and because of the contractual nature of marriage, he thought that divorce should be allowed in only the most narrow circumstances.

It is interventionist government, said Mises, that undermines “age-old moral precepts,” and the battle for those precepts is the “great fight” of our age.

The greatest shock in recent decades to the traditional family has been the move of married women into the workforce. This puts a heavy strain on marriage (divorce rates have climbed) and especially on children, for day care workers can have nothing like a mother’s love or interest in the child.

Why did married women enter the workforce? For the vast majority, it was to maintain a decent standard of living amidst inflation, which, by dramatically lowering real incomes, destroyed the one-salary family. And such inflation is no natural phenomenon, but the result of central banking.

Time and the Market

The most important cultural effect of the mixed economy has been to change the way we think of time. We all want to have our desires met sooner rather than later, but gaining wealth takes time, and successful people are able to put off immediate gratification for future reward.

As might be expected, nineteenth-century America was a disciplined society of people who knew how to wait and save. As T. Alexander Smith notes in Time and Public Policy,“the culture which the older bourgeoisie dominated and the values it forged within the social order were particularly favorable to lengthy time horizons.” Moreover, “this culture was family centered.” As Joseph Schumpeter noted, the “capitalist order entrusts the long-run interests of society to the upper strata of the bourgeoisie.”

But interventionism has shortened societal time horizons, and inflation and easy credit are the villains. As Smith says, “credit-created inflation, if it persists for a sufficient period, shortens time horizons, as customs, values, and opinions begin to catch up with the growth of the money supply.”

In the nineteenth century, personal and installment loans were extremely rare. Debt of this sort was considered a sign of vice. Credit based on the real savings of the American people went to the entrepreneurs who built the country. But a central bank that pushes down interest rates produces easy credit. It also creates the illusion of low time preference without the reality (a large pool of savings), encouraging business borrowing that cannot be sustained through time, and even bringing about the business cycle.

Other aspects of the mixed economy shorten the social rate of time preference as well. Welfare subsidizes immediate satisfaction and discourages saving. Unemployment insurance discourages saving for possible job loss, lessens the fear of unemployment and therefore the incentive to work hard, and underwrites indolence for longer and longer periods, thereby raising the unemployment rate.

Social Security discourages people from saving for their retirement. The inheritance tax discourages saving for future generations. Income and property taxes penalize the accumulation of wealth. Taxes on businesses reduce their capital and thus their ability to sustain long-term projects.

As interventionism has rewarded short-term thinking, the behavior and values of high time preference have become the cultural norm. The sexual mores, manners, clothes, and music of the underclass, once seen as the evidence of immorality and failure, now attract the favorable attention of middle-class youth. Instead of the bourgeoisie fulfilling their natural leadership role, the lower classes have begun to set the tone.

Edward C. Banfield, in The Unheavenly City, persuasively analyzes classes almost solely in terms of time preference. The upper-class person “looks forward to the future of his children, grandchildren, great-grandchildren (the family ‘line’), and is concerned also for the future of such abstract entities” as the community or nation. He is able and willing to sacrifice “present satisfaction” so that he, his children, his community, etc., can “enjoy greater satisfactions at some future time.”

Middle- and working-class people are progressively less future oriented, while the lower-class person “lives from moment to moment.” Governed by impulse, he is “radically improvident: whatever he cannot consume immediately he considers valueless. His bodily needs (especially for sex) and his taste for ‘action’ take precedence over everything else” especially the “routine of work.”

And it is the welfare state that skews the time horizons of the upper, middle, and working classes toward the lower class’s, a societally disastrous effect.

Materialism and Greed

Sometimes the word materialist is used as a synonym for capitalist. Yet capitalism, as a system of organizing resources, tends to encourage not a materialist ethic, but the prudence, thrift, and hard work that Wilhelm Roepke identified (see below). The less free the economy, however, the more materialistic everyone must be. Under Communism, women had to stand in line all day to feed their families and be constantly on the lookout for the most basic items. The demand for material possessions tended to displace other values.

The welfare state also directs man’s interest to the least important material activities. Unlike the free market, as Alexander Shand notes in Free Market Morality, the welfare state “removes from the individual much of the responsibility for matters that would be a great concern to him—his family’s health care, old age, and education—and leaves him with responsibility for choice only in comparative trivialities or luxuries.”

As for greed, capitalism can reward it. So can socialism, and so can the mixed economy. The temptation is unrelated to the degree of material opportunity. Whether one is striving for a grass hut in a primitive village or a vacation penthouse in Florida, it is corrupting if done at the expense of family and other deeper responsibilities.

Dynamism and Technology

It has often been objected that capitalism’s dynamic nature, its tendency to produce technological advances, undermines what T. S. Eliot called the permanent things. Yet this concern is misplaced.

Old values do not require old technology. The permanent things do not refer to particular kinds of consumer goods or modes of production. The complex of moral standards and priorities that make up the good culture cannot be reduced to technical categories. Societal virtue has nothing to do with whether goods are delivered in trucks or horse-drawn carts. It is the social commitment to traditional social institutions and patterns of living that matter.

In previous eras, liberty and democracy were not thought to be synonymous or even necessarily related. The confusion that they are has led to a subtle assault on property and its resultant social hierarchy.

It is thus unfortunate that the phrase democratic capitalism has achieved such status. Capitalism means an economy based on private property; modern democracy means the violation and redistribution of private property through political means.

The term democratic capitalism is therefore confused, unless it is meant to describe the kind of mixed economy that passes for a free market in the U.S., and is therefore deliberately misleading. In fact, the reestablishment of the market economy will require a curtailing of democracy as presently understood.

A Theory of Intervention

Mises argues that any intervention in the economy must lead to others. Interference in the market, which substitutes political power for the price system, causes more problems. The state then uses these problems as an excuse for further interventions, which in turn lead to other interventions.

The same is true of the cultural consequences of the mixed economy. For example, the government will point to the failing family as justification for more government control, even though the failure is a result of previous interventions. Or the government will announce that because everyone is engaging in short-term thinking, it must direct investment toward what it claims is the long term. The state, in other words, uses and thrives off the short-term thinking it itself creates.

The Culture War

Anyone who prefers a society of families instead of easy divorce, of children instead of depopulation, of prudence instead of waste, of high culture instead of underclass values, of independence instead of group privilege, of saving instead of immediate gratification, of self-discipline instead of decadence—must favor the free market over the mixed economy.

Why, then, haven’t capitalism and cultural conservatism been happily linked? Unfortunately, the defense of capitalism sometimes has been associated with egalitarianism, anti-clericalism, and general cultural Leftism.

Although they reject government power, market liberals reject the authority of family, church, and community, and thus advocate cultural values not only wrong in themselves, but antithetical to those encouraged by the free market.

If we are to return to the values of the old republic, cultural traditionalists must lead the capitalist fight. Because economic interventionism destroys the culture, that is exactly where traditionalists belong. []

Roepke on Capitalism and Culture

Wilhelm Roepke gave us the definitive litany of capitalist institutions in A Humane Economy: “Individual effort and responsibility, absolute norms and values, independence based on ownership, prudence and daring, calculating and saving, responsiblity for planning one’s own life, proper coherence with the community, family feeling, a sense of tradition and the succession of generations combined with an open-minded view of the present and the future, proper tension between the individual and community, firm moral discipline, respect for the value of money, the courage to grapple on one’s own with life and its uncertainties, a sense of the natural order of things, and a firm scale of values.

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March 1994

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