The Market Ethic
A technical theory of how stuff works can be falsified, but the market mythos is a different kind of truth. That may explain why it survived the financial cataclysm.
In the classic essay “When virtue loses all her loveliness,” Irving Kristol said:
[C]apitalism, during the first hundred years or so of its existence, did lay claim to being a just social order, in the meaning later given to that concept by Paul Elmer More: “… Such a distribution of power and privilege, and of property as the symbol and instrument of these, as at once will satisfy the distinctions of reason among the superior, and will not outrage the feelings of the inferior.” As a matter of fact, capitalism at its apogee saw itself as the most just social order the world has ever witnessed, because it replaced all arbitrary (e.g., inherited) distributions of power, privilege, and property with a distribution that was directly and intimately linked to personal merit—this latter term being inclusive of both personal abilities and personal virtues.
My reading of history is that, in the same way as men [sic] cannot for long tolerate a sense of spiritual meaninglessness in their individual lives, so they cannot for long accept a society in which power, privilege, and property are not distributed according to some morally meaningful criteria. Nor is equality itself any more acceptable than inequality—neither is more “natural” than the other—if equality is merely a brute fact rather than a consequence of an ideology or social philosophy. [....] [P]eople’s notions of equality or inequality have extraordinarily little to do with arithmetic and almost everything to do with political philosophy.
I believe that what holds for equality also holds for liberty. People feel free when they subscribe to a prevailing social philosophy; they feel unfree when the prevailing social philosophy is unpersuasive; and the existence of constitutions or laws or judiciaries have precious little to do with these basic feelings.
Kristol concluded “that men [sic] cannot accept the historical accidents of the marketplace—seen merely as accidents—as the basis for an enduring and legitimate entitlement to power, privilege, and property.” Three years later, Kristol addressed the Mont Pélerin Society. Kristol described the Society, which admitted members by invitation only, as “a loose assembly of scholars, businessmen, and statesmen devoted to the defense of individual liberty in the modern world. Its ‘founding father’ was Friedrich A. Hayek; its president, at the time of this lecture, was Milton Friedman.” The Society’s purpose was to create a meaningful defense of modern capitalism that would discredit both socialism and social democracy.
What father Hayek founded was a political movement to reinvent classical liberalism. In the wake of the Great Depression and two World Wars, the grandiose project of laissez-faire had been disgraced. So, the members of the Mont Pélerin Society began with a bitter concession. There would be no spontaneous regeneration of some obvious and simple system of “natural liberty.” The market society could only be reconstructed through collective action. (The origins and convoluted development of this political movement can be found in The Road from Mont Pélerin: The Making of the Neoliberal Thought Collective.)
The movement has re-enchanted the competitive market. In their worldview, market competition disciplines economic actors and induces their greatest efforts. Moreover, and this belief is crucial, markets are glorified as the ultimate solution to knowledge problems, as the best of all possible information processors. In short, markets know better than any benighted human.
Certainly, markets have their uses. Markets coordinate the behavior of buyers and sellers through movements in relative prices. When conditions change, prices can adapt quickly, to the extent that a market is self-operating. What makes them flexible, however, is also a source of their perversity: markets operate according to their own logic. Markets are said to “fail” when they neglect some costs or benefits that we believe should be priced in. All technologies have their uses and abuses, but these distinctions are thwarted when mystagogues recast them as ends in themselves.
Yet even in commerce and industry, markets aren’t everything. The private sector, for example, consists of pricing mechanisms and corporate planning. But marketspeak, as John Kenneth Galbraith said, “removes from the corporation all power to do wrong and leaves with it only the power to do right.”
What market liberalism lacks in accuracy, it makes up for in legitimacy. It once displaced, but never destroyed, the technocratic ethic. Back in 1970, Kristol said:
This is the most prevalent justification of corporate capitalism today, and finds expression in an insistence on “performance.” Those who occupy the seats of corporate power, and enjoy the prerogatives and privileges thereof, are said to acquire legitimacy by their superior ability to achieve superior “performance”—in economic growth, managerial efficiency, technological innovation. In a sense, what is claimed is that these men [sic] are accomplishing social tasks, and fulfilling social responsibilities, in an especially efficacious way.
[...] [However,] if one defines “performance” in a strictly limited and measurable sense, then one is applying a test that any ruling class is bound, on fairly frequent occasions, to fail. Life has its ups and downs; so do history and economics; and men [sic] who can only claim legitimacy via performance are going to have to spend an awful lot of time and energy explaining why things are not going as well as they ought to. Such repeated, defensive apologias, in the end, will be hollow and unconvincing. Indeed, the very concept of “legitimacy,” in its historical usages, is supposed to take account of and make allowances for all those rough passages a society will have to navigate. If the landed gentry of Britain during those centuries of its dominance, or the business class in the United States during the first century and a half of our national history, had insisted that it be judged by performance alone, it would have flunked out of history. So would every other ruling class that ever existed.
No modern economy can do without any technical expertise, but it’s a fragile authority that appeals to competence for competence’s sake. Market liberals seem to appreciate both realities. As Philip Mirowski explained in The Road from Mont Pélerin, their project invokes “spontaneous order,” but it entails the market state. It requires a “double truth” which has long been a source of conflicting tendencies. (According to Mirowski, some in the Society even feared a schism between Hayekian romantics and the Friedmanite technocrats.)
The purpose of this movement has been less to wither than to reengineer the state. The state is both a means to their ends and a threat to their project. Members of the Mont Pélerin Society were fond of Benjamin Constant’s adage: “The government, beyond its proper sphere ought not to have any power; within its sphere, it cannot have enough of it.” A market state must lay the foundations, while marketspeak provides the “morally meaningful criteria” for the distribution of power, privilege, and property.
If strained by further crises (perhaps it has already happened), I expect the market ethic is more likely to mutate than to die off. Two contemporary variants are possible examples: a renewed Spencerian ethic of “Social Darwinism,” as advanced by Matt Ridley, or a revitalized technocratic ethic, perhaps best epitomized by Bill Gates.