Wednesday, March 21, 2012

On the Road to Redemption?

Scott Galupo writes in HERE

He quotes August Heckscher essay, "Where Are the American Conservatives?" in which he declared “it to be as relevant today as when it was published in 1953”:

The concept of a pure conservatism, its pattern ‘laid up in heaven’, was an illusion; it was in fact the same illusion that had possessed the Liberals and the Utopian democrats through the nineteenth century. That the conservatives should have fallen under its spell was particularly strange, for traditionally the conservatives mistrust an excessive rationalism—they know that the world moves by habit, by values, by inherited faith, quite as much as it moves by getting new ideas. The conservatives, when they are in their right mind, avoid tearing up the roots of something they do not like almost as instinctively as they avoid tearing up the roots of institutions and procedures of which they approve. The fact that American conservatives to so large a measure forgot, or never learned, this healthy prudence and this basic tolerance, I can only attribute to the fact that they had grown so uncontrollably angry. In attacking the New Deal they became inflexible in their thinking, unresponsive to the settled expectations and tacit consents of the great public; and they wanted instead to impose a doctrinaire program of their own.”

Scott Galupo adds:

Replacing one's notion of Nanny with a sterner Daddy will not restore the prelapsarian paradise of Adam Smith's Invisible Hand and Friedrich von Hayek's Spontaneous Order—because those paradises never existed to begin with.”

This may be an example of someone waking up and realising that he cannot smell the coffee because there is none to smell.

Samuelson’s authoritative myth (and getting more authoritative through the following decades) of Adam Smith’s ‘selfish’ invisible hand that nevertheless miraculously benefitted society had hardly got the traction by 1953 that it was to acquire a few years from his highly successful textbook: Economics: an introductory analysis McGraw-Hill (1948) – achieving 5 million sales by 2010.

It took a little time for Samuelson’s, or his teachers’, oral invention to spread into western consciousness, as graduates across the world went out to teach on other campuses, or claim through the media and democratic politics that there was salvation in the optimism in markets, nowhere free, but freer in the ‘land of the free’ than in war-shattered Europe, and incomparably freer than the drab communist central-planning regimes of Soviet occupied states, and to a much lesser extent, in Western European social-democratic states and in their newly independent former colonial states of the British Empire.

The Soviets grabbed East European territory after World War 2, and their communist allies grabbed China, but all was not lost because the West had the “miraculous magic”, wrongly attributed to Adam Smith, of the “invisible hand” that worked its wonders in markets irrespective of the selfish motives of those who were “led” by it.

Those who wanted a “doctrinaire program of their own” found it in “Adam Smith’s invisible hand”, which the Soviets could not match, despite Oscar Lange’s attempt to portray central planners as doing the work of an invisible hand, but only ‘better’. Such unconvincing fantasies were of no avail compared to the success of post-war capitalism, supposedly with its genuine invisible hand in its markets.

Events showed the superiority of the democratic capitalist economies, particularly in the collapse of Soviet communism and the opening by communist China by aligning its imitative state producing for capitalist world markets. With the economic crisis in Western capitalist economies from reckless over spending and borrowing, their over confidence was challenged globally.

Scott Galupo reacts with his conclusion that “the prelapsarian paradise of Adam Smith's Invisible Hand” never existed. He’s right, but that truth was available to anybody who consulted Adam Smith’s Works and read the very limited contexts in which he used the metaphor (only twice in fact), and certainly he never associated it with the blank cheque of “selfishness” and the assertion that society automatically would be better off.

This last assertion, shouted everywhere in the US on every media, is contradicted in Adam Smith’s “Wealth Of Nations” , much as the “selfish” libel is contradicted in his “Moral Sentiments”. Smith laid into the selfish behaviours of “merchants and manufacturers”, many of whom acted directly contrary to the interests of consumers (tariffs, prohibitions, the anti-labour combination acts, settlement acts, the town guilds, apprentices acts, and all attempts at narrowing competition to raise prices).

It is a mystery beyond explanation why so many voices, even among academics, simultaneously believed in the myth of the selfish invisible hand and were unaware of the content (not just quotes from) Adam Smith’s two works.

I put it down to a form of collective amnesia much closer to a theology than to social science.

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