The great tug-of-war

An EXCERPT below from Arnold Kling -- who tries to make sense out of what Leftists appear to believe. That they are motivated by a wish to destroy rather than anything rational, he is courteous enough not to consider. In the full article, however, he heads his essay with a quote that shows that it is hatred that really motivates Leftists

Franklin D. Roosevelt's economic policies during the 1930's were a terrible failure. Why, then, is he so revered in history? I believe that Roosevelt's restrospective halo is derived in part from the fact that he catered to the anti-capitalist trend among intellectuals. This trend long preceded Roosevelt, and it persists to this day. Historians are predominantly anti-capitalist, which inclines them to favor Roosevelt. And if historians do nothing else, they do influence our view of history.

This essay is about the history of polarized intellectual views of capitalism. I make no claims that my thesis is original. On the contrary, it is a central theme in a number of recent books, including Jerry Z. Muller's difficult but highly rewarding treatise The Mind and the Market, Deirdre McCloskey's erudite and offbeat The Bourgeois Virtues, and Brink Lindsey's just-published perspective on capitalists, beatniks and hippies The Age of Abundance.

McCloskey talks about the anti-capitalist "clerisy," as she describes the academics and others who hold the bourgeoisie in contempt. Lindsey describes the way that post-WWII affluence in the United States helped foster widespread cultural experimentation and criticism, with protestors attacking the very capitalist institutions that enabled such experimentation and criticism. Muller offers an intellectual history of the controversy about capitalism. He shows, for example, how Joseph Schumpeter predicted exactly the sort of critical rebellion against capitalism that Lindsey chronicles.

GMU economist Robin Hanson notes that ideological positions tend to come in "clumps." He writes: "The policy world can thought of as consisting of a few Tug-O-War "ropes" set up in this high dimensional policy space. If you want to find a comfortable place in this world, where the people around you are reassured that you are "one of them," you need to continually and clearly telegraph your loyalty by treating each policy issue as another opportunity to find more supporting arguments for your side of the key dimensions. That is, pick a rope and pull on it."......

Jerry Muller points out that anti-capitalism can be traced as far back as the Greeks and to ancient religious tradition. Throughout much of human history, it was natural to see wealth as fixed, so that if one person were particularly wealthy then others would be correspondingly poor. This zero-sum perspective naturally leads merchants and profitable market activity to be viewed with suspicion and hostility.

Modern P's see market activity as positive-sum. In a voluntary trade, both sides are better off. Widespread trade makes many people better off. Competitive innovation is an extreme example of a positive-sum game, leading to very large cumulative improvements in the living standards. Nonetheless, A's still see wealth in zero-sum terms. They see the rich as having too much wealth, and they see a need for redistribution.

For the P's, business success is a good thing. For any one individual, it may represent luck, but overall business success is correlated with the introduction of innovations that improve our lives. For A's business success comes from exploitation. P's look at Wal-Mart and see efficiency and lower prices. A's look at Wal-Mart and see a large, profitable firm hiring employees at low wages and benefits. For the P's, business failure is also a good thing. In order for productivity to improve, obsolete products and inefficient processes need to disappear. A's focus on the adverse consequences of firms going out of business.

Robin Hanson is pessimistic that differences such as those that exist between P's and A's will be resolved through reasoned argument. People have their identities wrapped up in their particular sides of the tug-of-war. See my essay on trust cues. Jerry Muller reminds us that over one hundred years ago, Vilfredo Pareto was equally pessimistic. In his chapter on Joseph Schumpeter, Muller writes:

Pareto's 1901 essay "The Rise and Fall of Elites," conveys two themes to which Schumpeter would return time and time again: the inevitability of elites, and the importance of nonrational and nonlogical drives in explaining social action. Pareto suggested that the victory of socialism was "most probable and almost inevitable." Yet, he predicted...the reality of elites would not change. It was almost impossible to convince socialists of the fallacy of their doctrine, Pareto asserted, since they were enthusiasts of a substitute religion. In such circumstances, arguments are invented to justify actions that were arrived at before the facts were examined, motivated by nonrational drives

Part of the A's outlook is that the economy can no longer improve. As Amity Shlaes and Jerry Muller point out, there was a widespread belief in the 1930's that capitalism had run its course. As Muller puts it:

Analysts of very diverse political hues concluded that the era of dynamic capitalism was over and that the United States and other "mature economies" had entered into a period of long-term economic stagnation. Some argued that there were no new technologies in sight for consumers to buy. Others feared that natural resources were nearing exhaustion, or that slowing population growth translated into a lack of consumer demand. Such assumptions lay behind Roosevelt's 1932 campaign address...

For pro-capitalists, capitalism offers an endless wellspring of renewal. For anti-capitalists, there seems to be an endless wellspring of reasons for capitalism's doom. The tug-of-war between the two sides is likely to be endless.


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