In memoriam: The older one grows, the more one's mentors die. For me, the latest is Charlie Kindleberger, economic historian, whom I invited to lecture in my classes at Johns Hopkins in the 1950s and who has guided much of my teaching and writing since then. He died July 7 at age 92. See The Economist, July 19, 2003, page 64. This Letter is dedicated to Charlie.
Interventionists and Freemarketers
The West (Europe and North America) lives in a divided era, in which much of the population prefers a welfare state, where benefits are provided by the government, to be paid for by progressive taxes, of which the rich pay more than the poor. But the West was not always that way. Until the latter part of the nineteenth century, we were more individualist. I would like to discuss these two ideologies before turning to my feelings on them. Because I do not like the terms "left" and "right" (leftovers from the French Revolution), I will invent new ones: "Interventionists," who believe that the economy will not act "properly" unless it is regulated, presumably by government. and "freemarketers," who that believe that no government can do better than the billions of people, acting each on his or her own account, all over the world.
Although most of us espouse some interventionism and some free market, we tend to fall "more or less" in one of these two camps. From my unscientific observations, unprogrammed Quakers and Unitarians are mainly interventionist, while other religions are more diverse. In the universities, the anthropology, sociology, and political science departments tend to be interventionist, the economics departments free market. By age groups, the younger tend to be interventionist, and the older free market.
Over the years, I have shifted from intervention toward the free market. In high school I was a socialist, pinning up radical notices on the bulletin boards. It was only when I studied economics that I began to shift toward the free market. I learned why free markets lead to the greatest human welfare spread over the greatest number of people. The free market allows creative individuals full rein with their creativity, while government intervention puts barriers in their way.
Studies in economics find that historically, free markets have tended toward creating the most fair and prosperous societies. The countries that have achieved the greatest economic development, and the most fair distributions of income, have been those tending toward the free market. Even today, Third-World countries open to the world market have become more prosperous, and have lifted their poor economically above those in counties that have remained closed. All this is shown by scholarly investigations, many of which I studied for twenty years before writing a book on why the world is divided into rich and poor.
Since historical scholarship shows the free market to have promoted fairness and economic development, therefore much literature that is anti-free-market must be based on ideology rather than scholarship.
My second reason for tending toward the free market is my experiences as economic consultant and lecturer in 35 countries of Asia, Africa, and Latin America. In each country I would (either or both) (1) consult with officers of the central bank, ministers, and sometimes presidents, and (2) lecture in universities for mostly Marxist students who hated the United States. On both types of occasions, I would also walk around the slums to ask poor people what they were thinking. I discovered that, usually, the high officials had no idea what slum people thought. Economic plans (which sometimes I had to write) emanated from the high-ups, and what they thought the poor wanted. In fact, I concluded, most of the plans took far better care of the bigwigs than of the poor.
Why do many Quakers tend toward intervention? (Note "tend;" we aren't all that way.) First, because we are compassionate. We want to help the poor, and we are impatient. Second, since early nineteenth century Quakers and other interventionists have gradually pushed us toward a society in which social security, health care, public education, employer insurance, and the like are provided for us. The idea of "doing good for others" has pushed self-reliance out of our minds.
Why do so many young “activists” want to boycott sweatshops, when boycott might deny the near-destitute workers their only opportunity for entry employment? Why do they protest the World Trade Organization, which may be the only institution through which starving people may bargain their way into selling their products? Why do they proclaim against biotech foods, which may feed millions of hungry people and which, after decades of use in the United States, have not been shown to harm either environment or people? Why do they condemn multinational corporations, which provide technology and capital for the less developed world? (Multinationals also pay higher wages than local companies and provide better employee services health care, housing, education, etc.) All these institutions have their faults but do not merit the blanket condemnation sometimes heaped upon them.
Why do students of anthropology, political science, and sociology tend toward interventionism? (Again, note "tend.") I believe it is because recently, these fields have attracted compassionate younger students, eager for “peace and justice” but who do not understand the economic implications of their postulates. Their eagerness makes them less willing to apply scholarly analysis that would teach them why their proposals may not do what they think.
These fields do produce scholarly researchers, such as anthropologists Clifford Geertz and Grace Goodell, who studied Indonesia and Iran respectively; Emil Durkheim, the father of sociology; and Samuel Huntington, eminent political scientist. All of these are tops in scholarship. By contrast, some economists write ideologically.
But "ideological literature" is a bit easier to fit into anthropology, political science, and sociology than it is into economics. The literature of the former carries statements conforming to the ideology of the author but not always supported by scholarly investigation. Ideological literature includes innuendoes and selective perception (using facts that support the author's beliefs but omitting those that do not). One also finds snide remarks on the World Trade Organization, multinational corporations, and free trade.
"Scholarly literature," by contrast, consists of writings where the author doubts his or her hypothesis and comes to accept it only after he or she cannot prove it wrong. It is based on research, mostly by standard statistical methods.
I have asked several professors from the other social sciences to comment on a draft of this Letter, and mostly they agree. One sociology professor wrote as follows: "I've just read your letter and, acknowledging my limited knowledge, feel your assessment of sociology is probably correct, especially in terms of younger members of the discipline. In general, I would say that sociology is anchored in ideological assumptions. Also, with the exception of perhaps 10 percent of sociologists, few of us know anything about economics and the research about free-market issues."
Disclaimer: This is not a scholarly Letter. To make it scholarly, I would have to set up a system of objective measurements as to what is ideological and what is scholarly, select a large number of readings randomly from economics, anthropology, sociology, and political science, and make a statistical comparison to find out whether (as I hypothesize) the other social sciences contain more ideological readings than scholarly, compared to economics. I should be prepared to prove my hypothesis wrong.
Instead, this Letter (like others) is closer to journalism, or "educated observations." I have read a large number of selections from these fields, decided which ones appear to me ideological, and have presented my impressions in this Letter. For example, it was my impression that one course offered at the University of Colorado, which might have been titled, "Why the World Trade Organization won't work," was ideological because it started with its conclusion.
David Korten's book, When Corporations Rule the World (often cited by Quakers), is ideological. So is the publication, Utne Reader, and the web site Common Dreams. All of them oppose the free market on what seems to me sentimental reasons, without checking what can or cannot happen in the real world. In Latin America I have read many ideological papers written by my students (mostly Marxist), whom I had a hard time educating as to what "scholarly" is. I found Trimestre Económico, intended as the Mexican counterpart to the American Economic Review, to be a mix between ideological articles that would have been turned down by AER, and some scholarly. The same for Siglo XX, a Mexican publishing house, which not only translated scholarly works of English-speaking authors but also published the writings of Latin Americans, many of whom were ideological. (I don't know if they have updated their name with the new century).
I promised you, in TQE #77, that I would explain whether social security, health care, welfare, education, etc. could be entrusted to the free market, as many economists think. I will return to them next time; I promise you.
Sincerely your friend,
Free markets are an expression in the practical world of our belief that there is that of God in all people. Interventionism suggests that some external person can better choose for a person than their own leadings would, and seems to me to defy our belief in the inner light. Thanks as always, you are much more patient and thoughtful in attempting to convince Friends than I usually can manage.
Christopher Viavant, Salt Lake City (UT) Meeting.
Here is a point I intended to make in TQE #78 but forgot to do so. In that Letter, I suggested that sociology, anthropology, and political science are more ideological than economics. To find out if this is correct, every year I ask my students (who are mostly in economics) if they have ever felt it necessary (in other social sciences) to write on an examination something they believed not to be true. Usually half raise their hands "Yes."
Jack Powelson, Boulder (CO) Meeting of Friends.
One could rank the various social science disciplines along a continuum based on their technique in shaping and in proving hypotheses this sort of thing has often been done, and economics comes in first with "physics envy." My guess would be that most faculty in the further out disciplines are not aware of the difference. If they were, they would be rebelling loudly against political correctness, which they are not.
J.D. von Pischke, a Friend from Reston, VA.
If you divide the world into "freemarketers" and "interventionists," where do you place the multinational corporation? Few would oppose the root values of the free market, these being self reliance, free competition, etc. But are these the values espoused by the multinational corporation? Do these organizations not seek to limit competition through the exercise of their boundary-hopping power and wealth? Do they not seek to control and manipulate markets and are they not quite successful in doing so, at least in the developing world? Are they in fact not more powerful than many of the "interventionist" governments with whom they deal? Are they in fact often the real "interventionists"? It seems to me that the free- market assumes a likely number of small units freely competing on a level and fair playing field. Hardly a description of the world in which the multinationals live.
Bob Henderson, Tallahassee (FL) Meeting
For those who maintain that since Dividends are taxed "two times" and thus should be exempt from personal income taxes, I have a question. All sales taxes are levied on income that was taxed already as income. Does that mean we should do away with the sales tax?
Free Polazzo, Anneewaukee Creek Friends Worship Group, Douglasville (GA).
Jack's answer: YES.
While the letter is correct in saying that free markets are absolutely the most efficient means of allocating resources, I would point out that that doesn't automatically make them the most equitable solution. In fact, the letter's statement that "...history shows the free market to have promoted fairness and economic development" is quite debatable. Free markets tend to allocate resources in the most efficient manner (that is, resources cannot be reallocated in any way that makes someone better off without making anyone else worse off), but that has little to do with "fairness." Rather, "fairness" is an issue of equity, not to be confused with efficiency.
Morris Cornell-Morgan, Bloomington (IN) Meeting
Thank you for another cogent and instructive newsletter. I think it is axiomatic amongst "freemarketers" that the engine of job creation in our system is the small-business sector. Less remarked upon is the role Big Business plays as partner with government to supply the "interventionists'" beloved social engineering. One might say it is the prime engine of same. In order to stay in business and maintain their state provided anticompetitive advantages, multinational corporations willingly sign up for most anything Big Brother demands. Witness "equal opportunity employer" (as if anybody can be any other kind) or Exxon's bankrolling of the Save the Tiger program or any of countless other approved, PC, interventions by giant corporations into the culture and environment. This is not done merely to have good public relations. It keeps the regulators at bay and the profit margins high. For this reason, it seems the interventionists are being disingenuous with their constant anti-Big Business drumbeat.
Sam Walmer, Menallen (PA) Meeting
I am reminded of the situation where in a school yard one sees a big boy bullying a small one. Everyone would agree that that is not right. Surely the same applies in the field of international economics as well? You say that Third World countries which have opened up to the world market have become more prosperous but you do not quote examples. I think that the opposite could also be quoted, that some countries have become worse off. Here are two statements on this from Christian Aid, the main church fund raiser and development organization in Britain: "Women in Bolivia struggle to make ends meet. They will be the ones hit hardest by the proposed Free Trade Agreement of the Americas, as trade liberalisation may mean fewer rights for women who already earn pennies." Also this: "Following Christian Aid's expose of flawed water privatisation plans in Ghana which would triple water prices, the government agreed subsidies for its poorest citizens." It is interesting that most welfare organisations who work to help the third world rise out of poverty and have first hand experience on the ground, are intensely opposed to the idea of a free market. They say that there must be safeguards for the underprivileged and point out that the major successful countries such as the USA, Britain, Germany, Japan etc, all developed their industries behind tariff walls.
Eric Walker, Ipswich P.M. Britain.
Well said, Jack. For me the clarifying approach is found in the three "eyes" of St. Bonaventure, about which I learned from Ken Wilber. The "eye of the flesh" deals in empirical observation. The "eye of the mind" deals in inductive and deductive logic and the "eye of the soul" deals in visions and revelations. For me it is the eye of the soul that produces ideology and where most of the world's intellectual activity resided until Galileo and Copernicus came along. It is not surprising to me to find that Quakers and Unitarians and other religious people of progressive bent, regardless of how well educated they are, are indulging in passionate ideological positions concerning the world's problems. They are using only one of their eyes.
It is surprising that the Academy today is so full of ideology. I believe the problem is connected to the antiwar protests of the '60s and to the civil rights movement of the same period when it seemed as though almost all of our ways were flawed. But that doesn't explain why we try to solve our problems with ideology rather than scholarship.
Bob Davis, Unitarian, Boulder (CO).
Why do many economists favour tax cuts for the wealthy? (Seems like rationalizing greed, to me.)
Jim Caughran, Toronto (Ontario) Meeting
Reply by Russ Nelson (publisher):
It's not that simple (nothing is), but that's generally how it works. Russ
We have lost a model scholar/teacher with the death of Charles Kindleberger. I was only around him for a few hours on one occasion, but I found him to be one of the most stimulating, enthusiastic, and encouraging persons a young economist could hope to meet.
Bill Shropshire, Atlanta (GA).
Grace Goodell, a Johns Hopkins anthropologist who does not have email, has reminded me that economists may be ideological when they believe that imposing economic solutions on other nations will straighten out their economies. There are many cultural considerations that prevent the "proper" economic solutions from being accepted. (This is happening right now in Iraq.)
While I still believe that economics is less ideological than the other social sciences, nevertheless I agree with Grace, that the imposition of economic solutions is neither proper nor successful.
Jack Powelson, Boulder (CO) Meeting of Friends.
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Publisher: Russ Nelson, St. Lawrence Valley (NY) Friends Meeting
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