Freedom as the Recognition of Necessity

A Review of Masters of the Universe by Daniel Steadman Jones

As promised, I recently made my deep dive into the history of neoliberalism, starting with a book recommended by Professor Woodruff, Masters of the Universe by Daniel Steadman Jones. It is a masterful work of intellectual history that illustrates how close the relationships were between neoliberal entrepreneurs and their willingness to spread their ideas across a network of transatlantic academic and think tanks. As they toiled away in these institutions, often so heterodox that they were forced to find funding from anti-New Deal businessmen, they had a ready-made ideology that could be mapped onto the policy space should a crisis in Keynesian demand management arise.

I am of course a man of the left. But I am nonetheless intensely interested in this history for the same reason that Hayek was fascinated by the Fabian Society in the U.K. As documented in an excellent article in The Guardian, the left is beginning to learn that we can emulate the means of the transatlantic neoliberals for an equal and opposite political program. That political program is articulated best in Ann Pettifor’s Green New Deal. The next crisis in capitalism will ultimately be much deeper than either the Great Depression or the stagflation of the 1970’s and will produce tectonic shifts in ideology as well as foundational assumptions of liberal democracies.

The neoliberal era, in the final analysis, had the effect of glorifying, even reifying, individual freedom. In the process, we have ignored the balancing act every society must make between freedom and obligation—what Hegel once called “the recognition of necessity”. As a result of the climate crisis, we will have no choice but to reject key tenets of neoliberalism and adopt Hegel’s formulation of freedom.

The striking thing about close examination of this history is precisely how enduring the political fights between the left and right have been over the last three generations. I have been delighted to watch the old Firing Line episodes featuring the neoliberal thinkers and British politicians the author mentions in the book, noting the powerful parallels with the present day. Enoch Powell, the champion of the aristocratic British version of Trumpism, foreshadowed the immigrant hysteria fueling the Brexit debate in his River of Blood speech, which invoked many of the same tropes, such as losing one’s country, anti-white discrimination, and even white genocide that the far right uses today. In one crucial way, the warning Powell delivered in that speech was correct. The U.K. was following America’s course in becoming a multiethnic democracy, which would have potentially fatal consequences for the party of tradition, stability, and privilege he represented.

Likewise, Tony Benn is a very interesting figure to the fate of Labour, not least of which because he was a mentor of the current Labour leadership. His big idea is that the only way to deal with crisis is by bolstering public authority. Even restoring public trust, as the U.S. government did in FDR’s 100 days, is not sufficient to overcoming crisis in capitalism. As far as I can ascertain from the brief video clip I watched with him and Buckley, the problem with his philosophy was that it was not suited for the time. The odious forms of Fascism represented by the Nazi regime and Imperial Japan constituted threats that merited the necessity of public authority. So does the current climate emergency. But 6-7 % unemployment rates in the industrialized West did not offer Benn the same window of opportunity.

The truly eerie resonance is in Friedman’s ideas, particularly involving the critique of democratic socialism. Democratic socialism, of course, is a term that has come up in media quite often because Bernie Sanders has emerged as its champion. Sanders abhors the prospect of Soviet intrusions into political and social lives of all individuals, but seeks to interfere in the economic activity of some organized interests so as to better realize the fuller freedom of public interests.

Freidman wrote explicitly that such a division between economic and political freedom is a fantasy. Political freedom requires economic freedom to participate in the market, both as a consumer and as a producer, because it offers an opportunity for exit. Yet the left does not view a similar contradiction between democracy and socialism. They are in fact in perfect alignment. Democracy operates in the political sphere, while socialism is democracy in the economic sphere. The left critique of Friedman’s view is that the primacy of exit is inherently limited because most people do not exercise the substantive capacity for exit. They place their emphasis on voice because that is a capacity that people can, in theory, practice. 

My own view is somewhere in between. The importance of exit, which implies choice, is vital to the functioning of free societies, as Friedman argues. But, consistent with Hirschman’s famous observation, exit alone can impair the functioning of voice to enact societal change. The fusion of economic and political freedom requires exit between market alternatives and the exercise of voice to improve the selection of alternatives. The addition of voice ensures that the system is truly democratic, which of course is the reason why Mr. Friedman excludes it from consideration. Voice leaves his ideology vulnerable to assault by the mob.

Oddly, I share Friedman’s concerns about the durability between states and markets and between voice and exit. I think disequilibrium is inevitable if there is not a third option, loyalty, that only closely-knit communities can provide, which brings me to Adam Smith, his theory of moral sentiments, and the neoliberal project to erase enlightened self-interest from Smith’s view of capitalism.

There is good reason why the neoliberals might gloss over this reading of Smith. The overall message is indeed that the success of the market, unlike the attempts at collectivism or the mercantilist guilds of his day, does not depend on any public service motivation from individual parties. Even when the baker is operating out of narrow self-interest, he can still realize socially useful functions. That insight is important but not necessarily the important insight concerning contemporary political economies. We have developed integrated, specialized, and concentrated markets. The question is how to prevent economic agents that emerge in successful markets from capturing regulatory authorities without abandoning the vital role government has to play in generating wealth in modern societies.

The qualification is important because the small government approach has precisely the effect of abandoning the enterprises, such as investment in human capital and science and technology that have granted the U.S. its enviable position as the world’s sole superpower. The reason why Smith wrote about moral sentiments at all even though they appear unnecessary for his economic theories to work is that they are ultimately the last line of defense against venal corruption and rent seeking. If these seem like rather meager defenses, that is because they are. That is why there is some wisdom to the associational approach where the mediating institutions between states and individuals takes place at the level of the community. Community is the only place where individuals can participate in the embedding and encompassing solidarity groups that Lilly Tsai highlights as vital for public goods, the foundation of any good society.

Steadman ends his book by pointing out that the market destroys everything that they hold dear, security, traditional social mores, and community. It is not necessarily an original insight. Among others, Polanyi and the contemporary theorist Sheldon Wolin have the same refrain. Conservatives should embrace social democracy not because they harbor deep belief in that kind of social system, but for its effects. One of my questions is whether the market has to destroy community if not for the deliberate aims of the neoliberal project was to destroy all intermediating institutions so as to extricate the individual’s soul from traditional pulls. As Thatcher famously acknowledged, neoliberal leaders may have a policy program, but the object is to change the working man’s soul.

Community fosters a spirit of citizenship, solidarity, and service which must be discarded in favor of rugged individualism for the language of profit, efficiency, and the consumer to resonate. The neoliberal deceit is not that it was insufficiently aware of the ravages of the market, but that it knew and it knew precisely from an informed reading of the history of 19th century liberalism. The more interesting deceit was a self-deceit that individual freedom completely extricated from any sense of obligation to one’s community was desirable and would produce productive labor force rather than angry populist rebellion. With the mob storming the gates of Western liberalism, the architects are indeed in need of a paradigm shift away from unbounded freedom of the individual to “freedom as the recognition of necessity”.