Economic democracy and the history of liberalism

A swollen title, I know, but one demanded by the broad and ambitious article I want to respond to. Elizabeth Anderson has an article in Vox about democratizing the workplace that is excellent political philosophy but flawed intellectual history. That’s fine, because she’s not a professional historian and the history issue is (mostly) peripheral to her argument, but it is worth addressing.

Anderson’s article is a welcome reminder that the democratic socialist left need not abandon the liberal tradition wholesale (her chair is named after John Dewey, after all!). It’s also an illustration of the usefulness of “democracy” as a way to frame the radical changes the left seeks for modern economic institutions. But when it comes to the question of why present-day “classical liberals” have failed to draw the conclusions that Anderson would like us to draw from the work of their intellectual forbearers, I think Anderson comes up a little short.

She makes two broad arguments. Together the story goes something like this. Libertarians and neoliberals have neglected the Industrial Revolution that occurred after the time of Adam Smith and Thomas Paine, and (1) therefore ignored that privately-owned firms are now massive structures of wage slavery instead of the small personal farms or trade shops that Smith and Paine saw as the vehicle for free-market emancipation. Today, because (2) they have become obsessed with economic notions of efficiency, they have lost the political vision necessary to update the insights of Smith and Paine for the modern era and advocate for workplace democratization.

I think this is wrong. First, it is just flat-out inaccurate to say that today’s libertarians and neoliberals have underestimated the impact of the Industrial Revolution. On the contrary, they generally think it was among the greatest events in human history. Hayek edited a book glorifying it; Ayn Rand wrote a book excoriating (primarily environmentalist) critics of its ecological and social impacts; and a variety of well-known libertarians will every once in a while get together to try to figure out how the miracle happened. And they don’t just like it — they see it as a game-changing break with the past as well; people from Steven Pinker to Julian Simon have cited it as the reason why economic growth is possible at all, contra earlier thinkers like Malthus.

The substance of this discussion varies, but the common denominator is a vision of industrial capitalism as driven by what the early 20th century economist Joseph Schumpeter (a figure whose importance for today’s right is massively underestimated) called “creative destruction.” In general, most libertarians and neoliberals are not in thrall to the obsession with efficiency and equilibrium that is often ascribed to them. In fact, they love the Industrial Revolution so much because they think it has freed us from precisely the kind of steady state where what goes up must come down and costs and benefits balance out; that’s the kind of Malthusian thinking our capitalist ingenuity has allowed us to move past. On the contrary, it is the messy (today we’d say “disruptive”), often quite inefficient process of market-based trial-and-error that fuels knowledge growth, innovation, and wealth.

This is the first reason libertarians hate the idea of worker-owned firms: workers would never allow their business to fail for the greater good of the market economy! That wouldn’t just be bad for the economy, but it’d also be bad for the souls of workers. Yes, Hayek conceded, in a market economy, “life and health, beauty and virtue, honor and peace of mind, can often be preserved only at a considerable material cost,” but this is actually a good thing, because it forces us to consider when we’d be willing to sacrifice materially for the sake of those values. If democratic workplaces guaranteed us “peace of mind” without us having to suffer for it in advance, moral corruption would surely be the consequence.

The fact is that the argument in favor of entrepreneurial dictatorship has nothing to do with efficiency, and everything to do with a bite-the-bullet inegalitarian political-moral view of societal progress, where noble risk-taking entrepreneurs make the sacrifices — tolerate the failures — that are necessary to generate wealth in our dynamic economy. Those sacrifices would simply never be made were the hoi polloi given the ability to prioritize their sustained wellbeing at the union ballot box. This actually oughtn’t be surprising: because Anderson is right that control of the workplace is a political question, we should expect to find that the libertarian/neoliberal answer to that question is undergirded by a political vision as well.

The more bloodthirsty version of this vision is Ayn Rand-style social Darwinism, replete with talk of parasites and John Galt, but more common these days is actually a kindler, gentler patrician styling that sees non-entrepreneurs as noble savages instead of economic leeches. To all of the leftists who never bother to read them and so reprimand them for thinking that everyone is perfectly rational they say — exactly! The vast majority of people aren’t rational at all. That’s why no central planner can foresee what they’d want, and we need to rely on free markets, captained by cognitively superior entrepreneurs, to accumulate information on their fundamentally a-rational “preferences.” They can organize the affairs of their household and perhaps even a small-scale, relatively homogenous community well enough (in the last few decades, this is often argued to be because evolution has trained us to be altruistic in these kinds of situations), when the government leaves them alone. But modern-day polities and economic firms are very large, which confuses the poor folk, and they start to think they can understand the big picture — and the good instincts which help them run their private lives free from government turn into bad instincts towards socialism. (Some of them are even so confused by this temptation towards birds-eye thinking as to think they have a thing called a mind instead of a similar collection of small semi-coordinated local parts! The silly devils.)

So the question of “scale” is resolved very differently, and actually in a more sinister fashion, than Anderson imagines. They agree that scale changes everything — but their conclusion is that the massive scale of modernity is precisely why not only economic democracy but also democratic political action in general on a governmental or otherwise societal scale is profoundly mistaken. Hayek again:

“Agreement about a common purpose between a group of known people is clearly an idea that cannot be applied to a large society which includes people who do not know one another. The modern society and the modern economy have grown up through the recognition that this idea — which was fundamental to life in a small group — a face-to-face society, is simply inapplicable to large groups.”

And here’s Victor Ostrom warning of the dangers of the fatal modern cocktail of egalitarianism and large-scale societies:

“The larger the society and the more diverse the country, the greater the propensity for error… Individuals assuming themselves to be like all the rest, no longer look upon themselves as fallible creatures subject to limited comprehension, but as omniscient observers addressing themselves to problems in the society as a whole.”

One common error on the left, among people of a more “communitarian” persuasion, is to tell exactly the same story about modernity and, rather than embrace the libertarians’ despotic modernism, come away pining for the small-scale societies of days past (what Marx called “primitive communism”). But of course, because absent a Mr. Burns, a Post-Electric Play-esque apocalypse, that’s not fodder for a robust present-day political program, that tends to breed scholastic quietism. Anderson doesn’t commit this error — on the contrary, her article provides a number of concrete action items for the left — but I still detect a faint whiff of it in the vaguely nostalgic tone with which she recalls the classical liberals. Such a tone is hardly merited.

As scholars like Nancy Fraser have reminded us, the early bourgeois “private sphere” household that was the site of Smithian “self-employment” was marked by profound gender hierarchy and inequality. And Anderson doesn’t mention colonialism, which expanded the scale of corporations long before the Industrial Revolution and provided the foundation of European political economy in the days of the early classical liberals. She acknowledges slavery, at least. But by valorizing Thomas Paine (generally though not without controversy considered an abolitionist) while never mentioning his friend Thomas Jefferson, she conveniently elides the reality that Paine-Jefferson American classical liberalism could just as readily be deployed in defense of Jeffersonian agrarianism, built on the exploitation of slave labor, as in (often privately expressed) opposition to the “peculiar institution.”

The expansion of the rights of women, the abolition of slavery, and the end of (most) (formal) colonial occupations all therefore had ramifications for economic justice, yes, but it is simply not the case that they were the consequence of the overdue consistent application of classical liberal political philosophy to previously insulated economic realms. As Charles Mills has forcefully argued, “inconsistency” is almost never actually an adequate explanation for the classical liberals’ many failings, and reclaiming liberal insights for radicalism requires a more sweeping reformulation.

In Anderson’s case, I think the problem lies about halfway through the article, when she writes:

Americans are used to complaining about how government regulation restricts our freedom. So we should recognize that such complaints apply, with at least as much force, to private governments of the workplace.

But I don’t think this is right at all — and this is where the history begins to impinge upon the political philosophy. Previous expansions of economic democracy — the examples cited above but also bans on child labor, the introduction of the weekend, collective bargaining, etc. — have almost always been enforced, when not originally compelled, by strong governmental action, following democratic mass movements. In other words, economic democracy requires the repudiation of the anti-government bromides of the classical liberals, and the insistence of their neoliberal successors on the illegitimacy or incoherence of the idea of collective action for a common purpose in modern democracies.

You can’t have it both ways. Either democracies can do the things Anderson advocates — ban noncompete clauses, support unions and unionization, restrict the ability of employers to fire workers, and so on — or you can accept the hostility to modern democratic governance characteristic of the libertarian tradition. The former — which is clearly Anderson’s core commitment — sees political and economic democracy as actually part of the same cloth. But the latter — which is where some of her rhetoric and historical argumentation goes — treats the two as related, maybe branching from the same trunk, but now no longer in interfolded contact. That’s the mistake that a robust understanding of the history of liberalism, and especially recent neoliberalism, can correct.

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