The Free Market is Less Conservative Than You Think

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Published

April 1, 1999
Washington Monthly

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Turbo-Capitalism: Winners and Losers in the Global Economy by Edward Luttwak
Book Review

The notion of a conservative critique of the market can jar the contemporary mind, a little like a left-wing critique of the state. But that suggests the tenacity of Cold War stereo-types and a media that is conceptually inert. Suspicion of the market is conservative in the most fundamental sense. It can arise from a desire for true economy, as opposed to the wastrel and debt-driven tendencies of the consumer culture. It can express a desire to protect that which is of great value, whether in the social structure or the natural environment, against the machinations of pecuniary gain.

As it sprang from Adam Smith’s mind, the concept of the market was deliberately disruptive–a radical force. It served to rout the residues of feudalism–the traditional bonds of locality and community–and clear the way for the industrial age, with its mathematical logic of production and gain. This was not a conservative undertaking. But soon enough it acquired the respectability of money; and this forced true conservatives into the role of radicals, for opposing the radicalism of money which was now the status quo.

In this century, few names evoke more ire in free market circles than those of John Kenneth Galbraith and Ralph Nader. Yet it would be hard to find two people more devoted to the traditional economic verities of hard work, frugality, practicality and thrift. Galbraith, the son of a Scotch-Canadian farmer, took issue with the inherent wastefulness of the postwar consumer economy. If it took a massive advertising industry (over $200 billion today) to maintain what economists quaintly call “demand”, he wrote, then perhaps that spending wasn’t as urgent as market theory posits. Perhaps the time had come to shift some of those resources to undertakings for which the need is indisputably great–parks, schools, decaying inner cities, and the like.

Nader looked at products the way Henry Ford did–from the standpoint of practicality and sound engineering. He argued that technology such as automobiles should be, first and foremost, functional and safe. (Ford resisted style changes and selling on credit.) But there are grandfather rights in the wars of ideological cliche. Those who claim first the imprimatur of state policy get title to the mantle of “conservative”.

So people like Galbraith and Nader were excoriated as proto-statists, and also as “Puritans” and economic “prudes”, as though the traditional values of our Pilgrim forebears are somehow disreputable when applied to the economic realm.

Among those who identify themselves as conservatives, concern about the market has focused mainly on the social structure. Such writers tend to hold the market in wary and ambiguous embrace. Yes, it provides a channel for invention and enterprise, which are forms of freedom. Yes, it is a bulwark against the state. But it also degrades what it touches and is corrosive of traditional values and mores.

In the 1950s, Russell Kirk sounded these themes gently in his magisterial The Conservative Mind, in which he called the automobile the “mechanical Jacobin” Around the same time, Wilhelm Roepke, a compatriot of Hayek and von Mises, the libertarian icons, wrote a book calledThe Humane Economy which argued the need to keep the market within the bounds of its proper task. “Of what avail is any amount of well-being,” Roepke wrote, “if at the same time, we steadily render the world more vulgar, uglier, noisier, and drearier and if men lose the moral and spiritual foundations of their existence?”

This is a conservative speaking, one year before Galbraith published The Affluent Society. Today, most so-called conservatives are not so forthright. A Dan Quayle strikes heroic postures against easy targets like Murphy Brown, without acknowledging that he is attacking a pure manifestation of the market that he rhapsodizes on other days.

But quietly the more principled conservatism survives, and evidence of this is Turbo Capitalism: Winners and Losers in the Global Economy by Edward Luttwak. Luttwak is a Senior Fellow at the Center for Strategic and International Studies in Washington, D.C., and the affiliation is significant. Unlike the acolytes at Heritage, Cato, and the rest, he is not a secular theologian. He sees the market as a qualified good rather than an absolute one, a means to an end but not an end in itself.

In the past, Luttwak says, a number of forces served to keep the market somewhat within the compass of social good. Government provided both restraint and counterweight, the limits of technology slowed the pace of change, and national boundaries served to ground enterprise somewhat in particular communities and locales. Today these tethers have frayed almost to the breaking point, especially in the United States and England, which spawned the reigning economic doctrine and are its most dutiful adherents. Less government, more technology and mobility, the eradication of national boundaries, commerce at the speed of light–these are the Nirvana of the conventional economic mind, the bliss of Pure Efficiency.

To Luttwak they are ominous. He sees “accelerated structural change, producing more creation and more destruction, more efficiency and more inequality,” and a growing sense among the populace of being constantly under siege. There is also a growing sense. of helplessness, because the reigning ideology of the market both calls these changes good and “reduces the sphere of democratic control,” and therefore the possibility of addressing them.

Luttwak calls this phenomenon “turbo capitalism”, and the term is a bit unfortunate, suggesting as it does a scholar’s desire to slip into the pop lexicon. The question he raises is basic. Does a society reach a point at which material gains–if gains they are–are no longer worth the price of social tension and individual upheaval? Is a society a mere staging ground for an economy, a supplier of the “human capital” that efficiency requires? Or should an economy serve larger social ends? Economists, Luttwak says–and by this he means the reigning policy mind–“simply ignore the possibility that people might actually prefer to live in a country where the economy is somewhat less efficient than it could be.”

As an example, Luttwak discusses the differences between European and American cities. The former generally have licensing regimes which protect small merchants, and controls on development which make the destruction of old buildings virtually impossible. (In Paris the high rises have been relegated to the outskirts of the city, along with the slums.) Shops generally close early in the evening. It is hard to get approval for big box stores or chains. To free market clerics such measures are heresies and abominations. But then, would you rather live in Paris or Houston? Which would you rather visit?

The licensing restrictions protect small shopkeepers and family businesses–the heart of the urban middle class. The required closing times make it possible to operate a small business and still get home for dinner and help the kids do their homework. The restrictions on development ease the chronic anxiety that American city dwellers feel,that the wrecking balls might show up in their neighborhood any day.Parisians, Romans, and others hardly lead bucolic lives. “But among them one constantly feels that their strong sense of belonging to their cities leaves their happiness far less dependent on the size of their disposable income,” Luttwak observes. American cities are congenial for real estate fortunes. But they are “much less of a home for their inhabitants”

For all the speechifying in the United States about family values,there is little talk about the economic arrangements that make stable family lives possible–and much sanctifying of the economic forces that disrupt them. The market concept can enhance life, but it can be destructive when it becomes life. People cannot move at nanosecond speed like currency speculations. We need stability as well as motion,slowness as well as speed.

Luttwak talks about employment in a similar vein. The Japanese are notorious for employing more people than necessary, especially in retail businesses which are immune to competition from abroad. In department stores shoppers experience a kind of doting attention that is unimaginable in the United States (where there is often no service at all.) Drive into a gas station and a team of attendants appears to clean your windshield and fill your tank. Yes, gas is expensive in Japan, and other products too. But we pay for everything we get one way or another, as the old saying goes. In the United States the gas station crew is standing on a street corner instead, getting into trouble.The gas in the United States is “expensively cheap,” Luttwak observes. The economic efficiency of self-service stations comes at the price of “social inefficiencies” which are apparent daily to most Americans who have eyes to see.

When economists boast that the US has a higher “standard of living,” Luttwak says, they are revealing their myopia. In a nation such as Japan people enjoy “society-wide and personal benefits that may count for much more–even in purely monetary terms.”

The pieties of trade can be myopic too. Cheap imports come at a price: the decimation of factory towns, and the loss of the production jobs that enabled the Chester A. Rileys of postwar America to climb into the middle class. If the goal is family stability, community and traditional values, as social conservatives say, then why conduct the economy as though the sole purpose is to pile up more stuff in the garage?

Most economists will rise up in indignation. Economics is like physics they say, comprised of immutable laws. What was true yesterday must be true forever. Luttwak argues in effect that economics is an historical process, and as needs change policy must change with it. In poor countries free trade might be a boon. In affluent countries, however, there is plenty of stuff but also increasing poverty among the most vulnerable. In such circumstances “it is not necessarily a good idea to enrich the kingdom by replacing three [workers] with one, and leaving the other two sitting still.”

An economy isn’t just a machine for producing stuff and stuff equivalents called “services” Luttwak-points out that it also is a social system. It produces human interaction and social mores; it sends messages to people regarding whether they are useful or just excess baggage. An economy has a social product as well as a material one. Today we live in a hypersaturated consumer economy in which material needs are paltry but social needs are great. Does it still make sense to cannibalize the social product we desperately need, for the sake of a material product that we don’t?

This is where the Galbraith of The Affluent Society meets a William Bennett or a Pat Buchanan (though not with enthusiasm on either side one suspects.) On occasion Luttwak musters a delicious Galbraithian barb. “The god of the market-worshippers [who] celebrate the glories turbo-capitalism is Adam Smith,” he writes, “but theirs is a devotion that depends crucially on not reading him” On the whole, he writes with a measured fair-mindedness. He is fully aware of the appeals of market fundamentalism–the innovation, the excitement, the constant change. But he asks, over and over, whether the fruits, such as they are, are always worth the social price.

Perhaps his most suggestive point concerns the political implications of the new economic disorder. In times of economic turmoil, he says, when people feel their lives spinning out of control and the political system provides no channels of redress, they transpose their need to assert control to other areas of life instead. Fascism, Luttwak says, represents the “non-economic expression of economic dissatisfactions” Is it totally accidental that as the US becomes more permissive in the economic arena it becomes correspondingly uptight in regards to other forms of personal behavior? We coddle greed but burn lust at the stake (except when it is enlisted in the service of greed, in advertising for example.) The Right wants to stop abortion and sic the cops on sex. The Left comes down on smoking, deodorants and even Chinese food. Meanwhile the Barmicide feast on Wall Street continues and the gap between rich and poor grows wider by the day. The militias of the Upper Midwest, we might note, consist largely of men whom the new economy has declared useless. Out of control, they try to reassert it; declared useless, they strive to find a role.

“Free markets and less-free societies go hand in hand,” Luttwak says (and one can almost hear the snarls and growls at The Wall Street Journal editorial page). By contrast, nations such as Italy and France which keep the market on a tighter leash, have a more relaxed attitude towards individual behavior. To which a Pat Robertson might say, “Exactly” But the point might be a caution to the Wired magazine cyber-libs who think they can have their cake and eat it too–unfettered cowboy capitalism and out-of-my-face social policy as well.

Luttwak was born in Transylvania during World War II and was raised in Italy. Presumably he is more attuned than most Americans to the social implications of economic disruption. But his European background can be a disadvantage, too. Luttwak focuses almost exclusively on government as counterweight to the market, for example. He might have given more attention to the informal realms of neighborhood and community–such as the way traditional Main Streets serve to leaven commerce with community and civic concerns. This is the basic bulwark in America, and it is no less threatened by the trends against which Luttwak rightly cautions.

I wish too that Luttwak had given more weight to environmental concerns. But if he doesn’t make the environmental case he provides the social complement to it, the other half of the synthesis that is waiting to happen. “While the natural environment is increasingly safeguarded by severe limits on business as well as personal activities,” he writes, “the social environment is increasingly left to the free fire zone of private business” One might question just how “severe” those restrictions really are given the magnitude of the problem.

But he’s basically right. The law is more protective of the quality of the air than of the society that takes place in it. A corporation can incur a big fine if it dumps its atmospheric toxics outside the school. But it can dump its commercial toxics inside the school through vehicles like Channel One, with total impunity.

It is no accident, therefore, that Ralph Nader has joined with such groups as the Family Research Council, until recently the roost of Gary Bauer, and Phyllis Schlafly’s Eagle Forum to oppose Channel One.It is no accident either that those who rose to the defense of Channel One included Grover Norquist, the Rightwing tax cutter, and Ralph Reed, the Republican politico who recently stepped down as head of the Christian Coalition. Much as environmentalists split from Keynesian growth-boosters on the Left in the ’60s and ’70s, so today, genuine social conservatives are splitting from the libertarians and Mammon’s helpers on the Right. Slowly a new politics is emerging, a politics that seeks to re-establish the boundaries of the market in both environmental and social terms. This politics is conservative in the most fundamental sense, but appears radical for opposing the radicalism of money.

It took Nixon to go to China and Clinton to change welfare. Perhaps it will take a conservative to explain this new politics and prod the opinion establishment to acknowledge it. Edward Luttwak has offered a large contribution to this end.

Jonathan Rowe is a senior fellow at Redefining Progress and a contributing editor for The Washington Monthly.

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