Black Mass: How Religion Led the World into Crisis (15 page)

The sentiments are innate to man; that is, man is endowed with them by providence. Under normal circumstances, the sentiments are infallible. It is reason which is fallible. Greatest of all in degree of fallibility is the speculative reason of the moral philosopher, unless the legislator is on a still lower level. Man, however, tends to attribute to the human reason what is really the wisdom of the Author of Nature as reflected in the sentiments.
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A conception of providence underpins the idea of a natural system of liberty advanced by Smith, and liberal thought as a whole is shaped by Christian beliefs. It was only in the mid-nineteenth century that liberalism came to be linked with secular thought. Since that time many attempts have been made to detach it from its origins, but liberalism remains an offshoot of Christianity.

In the early nineteenth century the chief argument for free trade was that tariffs thwart the divine design. In the most common formula, God scattered resources throughout the world so that widely separated peoples might come into close relations through trade and in this way recognize one another as brothers. Free trade was a means to brotherhood under the law of God. In the 1840s Richard Cobden waged a successful campaign against the protectionist Corn Laws in Britain with the slogan ‘Free Trade is the International Law of God’. For him this was not metaphor but literal truth. Later economists tried to reformulate the case for universal free trade in secular terms of comparative advantage, but they have never been very successful. A great deal of economic theory consists of attempts to deduce free markets from dubious axioms of rational choice. The resulting body of thought is markedly more dogmatic than Smith’s faith-based political economy. The free market became a religion only when its basis in religion was denied.
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The idea that the free market is grounded in science is central in the thought of Herbert Spencer (1820–1903). Born into a dissenting Methodist family that was strongly anticlerical (with some Quaker connections) but firmly Christian in its beliefs, Spencer became an
agnostic and spent his life trying to reformulate a version of Smith’s system of natural liberty in scientific terms. An eccentric personality who produced part of his vast corpus of writings while travelling back and forwards on the Channel ferry wearing earmuffs as a protection against noise pollution, Spencer became one of the most influential thinkers of the late nineteenth century, with a large following in the United States. It was chiefly his idea of social evolution that brought him this renown. In seeking a scientific basis for ethics, Spencer was much influenced by Comte, but while Comte invoked science to attack liberal values Spencer used science to defend them. In each case the science was bogus.

Spencer was the most influential exponent of Social Darwinism, a system of ideas that owes little to Charles Darwin – it was Spencer not Darwin who coined the phrase ‘survival of the fittest’. For Spencer society evolves and its evolution can have only one end, the free market, or – as he called it following Comte – industrialism. ‘Industrial’ societies faced competition from ‘militant’ societies – socialist and nationalist regimes – which attempted to organize the economy on a basis of command. Spencer had no doubt the free market would prevail, but he never specified any mechanism that would ensure this result. Spencer’s silence was not surprising. Market-based societies may be more productive than others. That does not mean they will be adopted everywhere. Even where they exist they may be abandoned – as Spencer himself observed with dismay, a type of
dirigisme
had replaced
laissez-faire
in Britain by the end of the nineteenth century. His theory of social evolution struggled to explain this fact, which planted a large question mark over his whole system of ideas.
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For most of his life Spencer was able to persuade himself that history was going his way. Faced with the rise of imperialism and protectionism towards the end of the nineteenth century he fell into despair. Some of his disciples were not so tender-minded. Sidney and Beatrice Webb shared Spencer’s view that more productive economic systems win out over less productive ones. Like him they could not help noticing that
laissez-faire
was in retreat, and they concluded that Soviet collectivism was more productive than western capitalism. The Webbs’ embrace of Stalinism illustrates a flaw in all evolutionary theories of society. Social evolution is nearly always
believed to lead to a single type of society, but history – like natural selection – has no overall direction or predetermined end-state. In practice, theorists of social evolution end up backing current trends. That is not far from equating might with right and often turns out to be a bad bet.

Towards the end of the twentieth century collectivism was in retreat. Neo-liberals believed a global free market was on the horizon; when it triumphed, peace and prosperity would be universal. This was the message of religious campaigners for free trade such as Cobden and John Bright. However, neo-liberals presented it as a fact established by social science – in this case the putative science of economics. Several different schools of economic theory were represented in the neo-liberal movement. Heavily influenced by Positivism, the Chicago School maintained that economics was a science containing universal laws just like the natural sciences, while the Austrian School maintained that the methods of natural science could not be applied to society. This was a fundamental disagreement, but it in no way dampened their enthusiasm for the free market; that was a tenet of their creed that could not be questioned. How it was justified did not matter.

The most ambitious and influential neo-liberal ideologue was F. A. Hayek (1899–1992). He grew up in the last years of the Habsburg Empire, viewing it correctly as in some ways a model liberal regime. He hated nationalism, rightly seeing in it a force of great destructive power, but he saw it as a reversion to tribalism. He failed to see that – like Nazism, communism and Jacobinism – nationalism is a modern phenomenon. He was a trenchant opponent of scientism – the mistaken application of the methods of the natural sciences to human affairs. Yet his defence of the free market was itself a type of scientism. In the 1930s he engaged in an extended debate on the origins of the Great Depression with J. M. Keynes, which Keynes – a more penetrating thinker as well as being more skilful in orchestrating opinion – won without difficulty. In the 1940s he gave up economics for social philosophy, but not before developing a powerful critique of central planning. Mainstream economists believed that under suitable conditions central planning could be highly productive. Against this consensus Hayek argued that it was inherently unworkable.

The core of Hayek’s argument was that the planners could never possess the knowledge they need to organize economic life efficiently. Like the philosopher of science Michael Polanyi – who visited the University of Chicago at the start of the 1950s when Hayek was a professor there – Hayek argued that knowledge of society is mostly embodied in practices. The price mechanism is a response to this problem – it enables us to use widely dispersed knowledge that is completely available to no one. Hayek overlooked the distortions to which free markets are prone, and exaggerated when he suggested that centralized economic planning was impossible – the British command economy worked pretty well during the Second World War, for example. But he identified an insuperable obstacle to economic planning of the sort that was advocated by Marx and attempted in the Soviet bloc, Maoist China, Cuba and other communist countries. Even where some of the planners’ objectives were achieved – as in sections of the Soviet military-industrial complex – it was against the background of colossal waste. At a time when the majority of economists had no doubt that central economic planning could produce a level of prosperity comparable with that of market-based systems, Hayek showed it was bound to be far less productive. His position was vindicated by the record of the planned economies that emerged fully only after their collapse, and it is as a prescient critic of state socialism that he will be remembered.

Unfortunately it was as a theorist of the free market that Hayek achieved influence.
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His impact on leading politicians was slight, but he contributed to a harmful type of thinking: while illuminating the irrationality of central planning he overlooked that of market processes. Markets are prone to cycles of boom and bust and recurrent collapse. Keynes and others argued the Great Depression was a result of the mistaken belief that the free market is self-stabilizing. As Michael Polanyi’s brother, the economist Karl Polanyi, put it, ‘The origins of the catastrophe lay in the utopian endeavour of economic liberalism to set up a self-regulating market system.’
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Even if government policies aggravated economic collapse in the thirties (as Hayek argued), it does not follow that markets can be relied on. There is nothing in market processes that makes them self-adjusting. Hayek’s achievement was to show that a successfully planned economy is a
Utopia. He failed to notice that the same is true of the self-regulating market.

Hayek also believed the free market appears spontaneously. Emerging as the unintended consequence of countless human actions, it is not the result of any human design. In the most complete statement of his views,
The Constitution of Liberty
, he praises ‘British philosophers’ because they rejected the ‘French’ idea that social institutions embody a rational design: ‘They find the origin of institutions,’ he writes, ‘not in contrivance or design but in the survival of the success-ful.’
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As an account of the emergence of the free market this is the opposite of the truth. It is only a slight exaggeration to say that
laissez-faire
came about as a result of central planning. The free market in Britain in the mid-nineteenth century was an artefact of state power. The same was true in the late twentieth century. Reinventing the market meant curbing spontaneously evolved institutions, such as trade unions and (though this was not often recognized) monopolistic corporations. This could be done only by a highly centralized state.

If free markets are normally the result of deliberate construction, spontaneously evolved social institutions are rarely liberal – in Hayek’s meaning of the term, at any rate. A political system of the sort Hayek admired came into being in England without anyone planning it; but – as Hume showed in his
History of England
– that was by chance, not as a result of the operation of any divine or natural law. In much the same way, feudal societies came into being without anyone intending it or understanding how it happened, and no one designed the curbs on free markets that were imposed in late Victorian Britain. If there is such a thing as spontaneous social evolution it produces institutions of many kinds.

The error of Hayek’s belief that the free market develops spontaneously was shown in Russia during the Yeltsin era. Western governments believed that once state planning was dismantled a market economy would develop automatically. A market economy emerged, but it was dominated by organized crime. Under Putin, Russian anarcho-capitalism was replaced by a new system – still intertwined with crime but seemingly more organized and popularly legitimate than before – that was more efficient than central planning but far
removed from the free market. The result of relying on spontaneous processes was a new type of command economy.

Hayek is often compared with Edmund Burke, the Irish-born eighteenth-century parliamentarian who founded English conservatism, and they do have something in common. Like Hayek, Burke believed that tradition encapsulates the wisdom of generations. However, unlike Hayek, Burke based this belief in religious faith: the invisible movement of tradition was providence at work in history. It was difficult to reconcile this idea with the fact of the French Revolution, but provided he was ready to accept the Terror as divine punishment for human wickedness, Burke could maintain his faith. As a secular thinker, Hayek lacked this recourse. Instead he based his belief in tradition on science, and here he was closer to Auguste Comte. Hayek was a sharp critic of Positivism who would have been horrified by the suggestion that he had anything in common with Comte the Positivist ideologue. Yet, like Comte, Hayek turned to science to validate a providentialist view of human development. Though they differed radically about its structure, both believed a universal system was the end-point of history.

Hayek and Comte viewed history as a one-way street, and in this they were at one with Spencer and Marx. All these thinkers underrated the persistent power of nationalism and religion, which have interacted with new technologies to produce a wide variety of economic and political arrangements. Some may be too repressive and unproductive to survive – for example, Soviet-style central planning and the Taliban regime in Afghanistan – but at the start of the twenty-first century the world contains several sorts of regime. China has adopted a mix of nationalism and state capitalism, Iran a type of popular theocracy, America a blend of free markets with protectionism and crony capitalism, Russia an ultra-modern version of authoritarianism, Europe a combination of social democracy and neo-liberal economic integration, and so on. None of these systems is fixed for ever. They are all interacting with one another and changing continuously. But they are developing in different directions, and there is no reason to expect any ultimate convergence.

In many respects Hayek’s view of the free market resembles that of Marx. In common with Marx, Hayek viewed the unfettered market
not only as the most productive economic system that had ever existed but also as the most revolutionary. Once it has come into being capitalism cannot help spreading, and unless some disaster intervenes it is bound to become universal. However, while Marx understood that the advance of capitalism would overturn bourgeois life, Hayek did not. Hayek believed market societies were based on tradition, writing: ‘Paradoxical as it may appear it is probably true that a successful free society will always be in large measure a tradition-bound society.’
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He failed to notice that free markets work to subvert the bourgeois traditions that underpinned capitalism in the past. Hayek’s attempt to link the defence of free markets with a kind of cultural conservatism ran up against the transgressive energy of the untrammelled market. It was a contradiction that neo-conservatives understood, and were determined to do something about.