Free Market Fevers

I spent a half day at the Adam Smith Institute Conference yesterday—held in the suitably evangelical gathering of the Emmanuel Hall in Westminster—and a curious experience it was. Madsen Pirie turned up in pumps and a Nixon-era sky-blue suit to give a polished rendition of ‘capitalism—it’s wonderful’ before denying most of the nostrums of the economic literati, including rational choice and market equilibria theories, and finished with a vague distinction between systems, examples and mechanisms. At heart, I think that he shares a good deal with the distributists’ embrace of small business but probably depends upon the donations of larger ones, and I wouldn’t be surprised if several decades of abuse from the more stupid of modern journalists and politicians hadn’t set up a whole wall of defensive straw men in his mind. Tim  Worstall appeared—raving like a sort of Arthur Mullard or Peter Vaughan about the Monetary Policy Committee being the ‘essence of communism’ (which to be fair it resembles) and rounded conference seats. A nervous young woman attempted to show that the Great Fire of Chicago indicated that states shouldn’t be the first port of call when responding to natural disasters. I nearly knocked Michael Gove over accidentally getting a diet coke in the prêt outside, and I skedaddled to Westminster Cathedral, where Gordon Brown and Ed Milliband were attending a memorial mass, before the Fat Tax debate.

Such was my Pepys-like day. Except that there was one item of real interest, which came from the presentation of a Conservative MP with whom I was not familiar, Steve Baker. Baker’s performance was intriguing because he gave the impression that he was genuinely confused and grasping for ideas. He quoted, then rightly rejected, Ayn Rand, bounced over Austrians and their neoliberal acolytes, held up the Ten Commandments, and gave every appearance of trying to weld three or four incompatible ideas together. It wasn’t an FDR-style ‘chameleon on plaid’ moment by any means, and I’d be inclined to give him the benefit of the doubt. In short order, he wanted liberty, prosperity, virtue, mutualism, morals, and social discipline.

I blame Lloyd George for the troubles of people like Mr Baker. If the Welsh Wizard had actually concentrated on this country rather than the upcoming Paris Conference in 1918, even for a moment, the Representation of the People Act 1918 would have brought in the Alternative Vote. The Gladstonian and Manchester liberal tradition would not have been reabsorbed into the Tory Party, and conservatives would not have to be pretending to be market liberals. There is a reason Burke stopped being a Whig and became a Tory, and a clear dividing line, though Baker didn’t quite see it yesterday.

His talk was called ‘can market’s make us moral?’ I would have thought, given the Austrian school’s understanding of creative destruction, or even a cursory reading of the maths-free Hyman Minsky, that a better question was ‘will markets always tempt us to be immoral?’ That’s because a market is a mechanism to get us what we want, in circumstances where the value attributed to the good can be agreed upon or where the good in question can be bought and sold. Where those things are impossible, markets are dysfunctional. By blending action with intentionality as the only cause and the definer of the consequence, we make a basic mistake. Do the flawed intentions and knowledge of human beings in the light of their actions and any breach of social duties lead to immorality through the seductions of the market? There’s the best question.

 Tim Worstall called a market a natural thing, which did not need regulation later in the day, and he had a point—but nature has limits. The analogy breaks down when one realises that nature does not appear on the moon; on earth, the limits of secular mechanisms, the channels they have access to, the water they grow in, are provided by people, and people can regulate themselves and their society. In fact, they must. Markets are an ecology destabilised by people, because people are flawed; so when the market offers them everything, many will take it, and create an incentive for others to offer it, leading to a delusional boom. Impatience leads to a time problem, which leads to interest, and then to the deliberate repression of interest, which leads with other eruption and eructations into breakdown.

Like many marketeers, Baker and Worstall were an odd combination of fatalist and optimist about people. Fatalists because they believed in a natural fallacy that the qualities of spontaneous markets make them superior to that which is planned, and so people are there to be struck and bandied by group forces. This is the central failing of Menger’s philosophy. People are not individuals alone. They are the product of families and groups and communities and societies and they learn their liberties and owe their duties within such groups. They can altruistically give to the group, but TH Green’s pleasure mechanism isn’t required. People almost never build or decide alone, and are the sum of their memories and their soul. Rational choice delusions cannot cover such creatures, and limit them.

But the marketeers are optimists too, because they believe in benign outcomes at all times. To be fair, they have a point. I don’t wear state-designed clothes. The old Arthur Marwick thesis that states in war accelerated invention fails when you consider that the enigma machine, for example, started out in the 1930s as a device for secure banking. But how can a room of, say, 500 people, actually pick their own lunch down to the salad? It’s nonsense. They get a range of limited choices over which they have to compromise because order and common sense demands it.

Baker couldn’t understand yesterday, it seemed to me, whether he believed in ‘little platoons’, in society, in mutualised hospitals, and in virtue, prudence, faith and patience, all of which are representative of Toryism or what Americans and Florentines might have called ‘republican liberty’, or whether he believed in individuals and markets and ‘liberty’. I know which I believe in. Believing in individuals, markets and liberty is like believing in steering wheels, Michelin tyres or driving. It’s a fallacy that emerges from a limited and parallax view.

You do get the impression that people like Baker, Douglas Carswell, and David Davis are in the wrong party sometimes. Wellington and Peel, Disraeli and Palmerston just don’t mix—this is what the contradictions of William Gladstone’s career prove. I also noticed, whilst on that subject, a worrying tendency for what one can only call advanced goldbuggery. Gold can never be anything other than a useful panic room for subjectively agreed wealth, unless you are in the electronics industry; and anyway, there is very little of it to go around. Why are so many people embracing it after the example of its past?

Perhaps it is because gold does have a past. Fiat money, after all, is only a claim on wealth, and an imputed but not real store of value. It is clear to me that no one understands how it works in an electronic age. Sixteen trillion of dollar printing, for instance, wasn’t printing. It represented the leverage of US wealth to paper which in itself was leveraged substantially by global interests on global trade and production. This led to the Persians and Chinese using it to pay off Africans who in turn found their debts massively reduced by the mechanism of lending to and reclaiming from Americans in a specific period of historical time. By electronically generating the money to do it, the USA punished the banks that had recklessly or maliciously lent to the Africans, and also faced a collapse which will have the benign social consequence of weaning or ripping Americans from debt and consumerism without some government instruction to do so. The risk is collapse—but what a reward! That went unnoticed yesterday, except insofar as it advanced the agenda of privatised money and the insanity of some future gold standard.

Inflation destroyed 98% of the value of the £ since 1950. That was 98% of landed wealth. 98% of the secular borders between rich and poor. 98% of what remained of domestic service, and the desperation of people who just happened to be born in the ‘wrong’ place to survive. The destruction represented a disproportionate transfer of income and assets from the middle and upper classes to the poor. With its ally, global finance, it was a conspiracy against the sort of society we had in the years straddling 1870 and 1945. It liberated and then destroyed the working class, fuelled a period of narcissism, and corresponded with cheap oil and, not surprisingly, globalisation. Only a madman would want a repeat of such inflation, but only a madman would refuse to acknowledge that over the decades it did some good. It was, after all, why my relatives could own houses, finance cars and holidays, and why my granddad could have a fridge, and more importantly why their children could now demand to, given hard work. The job of politicians now it’s over is to restore something from the pebbles and rubbish on the beach, after markets, rising real incomes (when added to credit) and global growth led to immoral and greedy behaviours which have brought things down. It isn’t to return to Downton Abbey world.

We could start not just with the education of the young, but by applauding the attempt of politicians, however clumsy, to re-educate themselves. To that extent, I was genuinely surprised by Steve Baker, who hung around and chatted to the students at the conference with some zest. I suppose it made more sense that trudging up to the Brumberg Rally.


Martin said…
Martin, please do not think I'm being facetious when I ask this, but was this the same Tim Minchin who has been touring as Judas in the revival of 'Jesus Christ Superstar'?
Martin Meenagh said…
Martin, you've exposed a failing of mine, which is to listen to the voice in my head more than people's names. Tim Worstall was the man, but his speech was so preposterous--though he was trying to entertain, I suppose--that I blended him with Minchin in my head. This is how rumours get started...I apologise! They say that after Churchill reached a certain age, he just called everyone by the names of officers he had known in India so long as they sounded a little like the person in front of him whom he'd forgotten, but I can neither claim the mental state nor the inebriation to pull that one off...
Martin Meenagh said…
I have done the same thing several times in my life. At Balliol, I kept mistaking the tort professor, Jane Stapleton for the commonwealth historian Judith Brown, whom I confused with Catherine McKinnon, the feminist, and, for some reason, I referred to them all as 'Janet'. It didn't endear me much to them. I'm terrible with names, which is yet one more reason why I would make an awful politician.
Martin said…
Thanks for that, Martin, and my apologies for havingtaken a while to get back to you - connection uissues this week.

From experience, Tim W is a very nice and very helpful guy, so I'm sorry if his speech didn't go down well.


Martin Meenagh said…
I think that he was playing up for the audience. The strains on my somewhat frayed patchwork of views probably gave me grief because Mr Worstall had a clear view of the market in all circumstances and I am deeply--I'd say properly--suspicious of it since it is often a product of dodgy or deluded people. I'd choose it over a command system seven times out of ten, though....