ECO 4119 POLITICAL ECONOMY

Chapter 5

The Conservative Perspective

Introduction• In the nineteenth century, “conservative” referred to ideas

and theorists defending hierarchy and community against the perceived threats posed by capitalist individualism and democracy.

• At that time, Conservatism was a backward-looking reaction to the disintegration of traditional society caused by industrialization and mass political movements in Europe.

• In the United States, nineteenth-century Conservatism was primarily a southern phenomenon oriented toward defense of traditional ways of life based on the estate system and slavery.

Introduction• By the beginning of the twentieth century, however,

Conservatives concluded that the working class was not a populace intent on attacking all privilege and could be persuaded to support Conservative ideals.

• As Classical Liberalism collapsed in Europe in the 1920s and in the United States a decade later, a rightist coalition emerged with Classical Liberals affirming Conservative ideals of nationalism and tradition while Conservatives yielded to the Classical Liberal priorities of free markets and individual liberty.

• Modern Liberals speeded this ideological realignment by attaching the label “conservative” to Classical Liberals so that Modern Liberalism could lay claim to the tradition of freedom and democracy.

Introduction• The marriage of Classical Liberalism and Conservatism after

World War II was advantageous to both groups. • Most Conservatives were anxious to free themselves of the

stain of fascism and to embrace capitalism and democracy as safeguards against totalitarianism from both the left and the right.

• Classical Liberals, sensing that the tides of history were shifting against them, viewed Conservatives as their most obvious allies in resisting communism and defending the unconstrained rights of private property.

• This rightist coalition was institutionalized in 1946 with the establishment of the Foundation for Economic Education, which assembled U.S. corporate sponsors to fund research and publish papers and books defending liberty and property.

Introduction• The following year, Friedrich Hayek organized the Mont

Pelerin Society, named after the Swiss town where the first conference was held, to provide a supportive organization for intellectuals seeking to reverse the trend toward government power.

• Although Hayek, Milton Friedman, and other Classical Liberal members insisted they were not Conservatives, they made little effort to dispute the Modern Liberal claim to the liberal tradition.

Introduction• Starting in 1955, William F. Buckley Jr. National Review

magazine actively promoted the fusion of Conservative and Classical Liberal perspectives.

• Conservatives would swallow their fear of the market and yield to laissez-faire economic policies, while Classical Liberals would accept the role of government in policing internal opposition and challenging communism around the world.

• Since the 1950s, the political spectrum has been effectively reduced to three camps: conservatives (including Conservatives and Classical Liberals), liberals (meaning Modern Liberals), and Radicals.

Architects of Conservatism

Edmund Burke (1729-1797) •Burke, a member of the British parliament and a distinguished orator, was a reform-minded Whig who opposed royal authority and supported the American quest for independence. •He was not opposed to change in principle, but the bloodshed and anarchy of the French Revolution persuaded him that a vigorous defense of traditional society was needed to prevent revolutionary sentiments from spreading throughout Europe.

Architects of Conservatism • In Reflections on the Revolution in France (1790), Burke

blamed the Revolution on the ideals of the Enlightenment.• The revolutionary goal of total social change is predestined to

failure because society is not a mechanism that can be taken apart and then restructured.

• Society is a fragile organism; its institutions are not products of rational human design, but have evolved over the ages to suit the unique features of particular peoples and countries.

• Values and beliefs should not be changed because they represent the “collective wisdom of the ages.”

• Burke even defended prejudice as a force steering people toward traditional behavior without the need to think about what is right.

Architects of Conservatism • According to Burke, humans are neither autonomous nor

rational. • They are passionate beings who need the institutions,

customs, and rules provided by society to control their desires and form personal identities.

• He viewed isolated individuals, ruled by their passions, as incapable of achieving the fulfillment that comes from virtuous living within an orderly community.

• Fearing that traditional values of respect, duty, and patriotism had been defeated by selfish materialism, Burke declared: “The age of loyalty is gone. That of sophisters, economists, and calculators has succeeded, and the glory of Europe is destroyed forever.”

Architects of Conservatism • Claiming that individuals need moral guidance and

authority, Burke proposed a national church and an aristocratic government.

• He distrusted democracy, arguing that the common person had neither the time nor preference to acquire sufficient knowledge to vote wisely.

• Democracy would only turn the political process into a battle between competing private interests.

• Aristocrats, he believed, were ideally suited to govern because their wealth and leisure freed them from the scramble for personal gain, thereby enabling them to impartially promote the public interest.

Architects of Conservatism • Burke supported private property and a market economy,

but he claimed that self-interest must be controlled by moral considerations.

• He urged businessmen to behave in an honorable and brave manner by placing their duties to society above their quest for maximum profit.

• Burke wanted economic activity to remain relatively free from government intervention, but he also believed that freedom requires structures of authority to restrain the passions of individuals.

• He envisioned a society in which authority would be so embedded in traditional hierarchical structures that it would be largely invisible.

Architects of Conservatism

Vilfredo Pareto (1848-1923) •An Italian economist and sociologist who spent most of his career at the University of Lausanne in Switzerland, Pareto’s fame derives primarily from his book Manual of Political Economy (1906) in which he argued that competitive markets and free trade result in an efficient allocation of resources. •His definition of efficiency, now referred to as “Pareto optimality,” was a situation in which no reallocation can make one person better off without making another person worse off.

Architects of Conservatism • Despite his arguments for the economic advantages of

free markets, Pareto’s Conservatism, exhibited in The Mind and Society (1916), led him to claim that all societies are naturally and inevitably controlled by elites.

• He even developed a mathematical formula, known as “Pareto’s law,” showing the degree of inequality that is natural for any society.

• In addition to defending a natural hierarchy, Pareto argued that power passes back and forth between two fundamentally different elite groups.

Architects of Conservatism • He used the label “foxes” to describe cunning, flexible,

risk-taking elites. • Foxes are likely to be innovative capitalists who thrive in a

dynamic social environment. • Lions, on the other hand, are resistant to change and

willing to use force to defend the status quo. • Lions are found in the aristocracy and in that portion of the

capitalist class that has made its fortune and now lives on property income.

Architects of Conservatism • When foxes control the government, society is dynamic

and markets are relatively free, but foxes will not exert the force necessary to maintain an orderly society.

• In particular, the openness of a fox-controlled government permits non-elites, such as workers and farmers, to gain greater political power.

• In response to political instability, lions will overthrow the fox government in a “circulation of elites.”

• Lions will use whatever force necessary to restore order.• They are likely to suppress free trade and to restrict

democracy, but these actions protect property and profits from the dangers of egalitarian social reforms.

Architects of Conservatism • Pareto believed that both foxes and lions are essential to

society. • Foxes sustain economic prosperity but fail to resist

disorder, while lions defend private property but are likely to cause the economy to stagnate under their heavy-handed tactics.

• When Benito Mussolini and the Italian fascists took power in 1921, they honored Pareto as an intellectual founder and, indeed, the fascists were a classic example of a “lion” government.

• However, the fascists ignored Pareto’s prediction that lions would eventually be overthrown.

Architects of Conservatism

Joseph Schumpeter (1883-1950) •An Austrian native, Schumpeter studied under Wieser and Böhm-Bawerk at the University of Vienna. •Although he is sometimes linked with the Classical Liberalism of the Austrian school, he constructed a unique analysis of capitalism that places him within the Conservative perspective. •After immigrating to the United States in 1931 to escape Nazism, Schumpeter taught for several decades at Harvard. •Along with Keynes, he is widely regarded as one of the most eminent economists of the twentieth century.

Architects of Conservatism • In The Theory of Economic Development (1911),

Schumpeter outlined his vision of capitalism.• The driving force behind the system is the entrepreneur

who, through continual innovation, creates profitable investment opportunities and thereby sustains economic growth.

• However, the essential role of the entrepreneur is also the weak point of capitalism.

Architects of Conservatism • In Capitalism, Socialism and Democracy (1942),

Schumpeter praised successful entrepreneurs for creating huge enterprises with sufficient resources to fund research and innovation.

• He had no doubt that corporate capitalism was far superior to the free-market competition of earlier periods.

• However, with the bureaucratization of innovation and administration, the entrepreneurial function was becoming increasingly obsolete.

• Ironically, the success of capitalism in promoting efficiency was simultaneously destroying the very source of its own dynamism.

Architects of Conservatism • Another trend highlighted by Schumpeter was the

democratizing of the political process.• With special interests struggling against each other to gain

political power, Schumpeter believed that politicians seeking reelection would increasingly pander to narrow interests.

• A democratic government’s tendency to experiment with reform and intervention would gradually undermine the traditional values and hierarchical social structures essential to maintaining the public’s sense of patriotism, loyalty, and morality.

• Without these traditional sentiments to buffer a market economy, the disintegrating effects of competition and rational self-interest would cause the entire system to self-destruct.

Architects of Conservatism • The prosperity created by capitalism gives rise to a class

of intellectuals who, frustrated by their failure to achieve the status and wealth of successful entrepreneurs, seek to turn public opinion against big business and private property.

• The relative power of intellectuals is heightened by the growing passivity of capitalists who, having withdrawn from active participation in production, lose their strong emotional attachment to private property.

• As absentee owners, the capitalists lack the character or energy to resist their enemies.

Architects of Conservatism • Convinced that socialism would replace capitalism,

Schumpeter tried to envision a socialism that would be acceptable to Conservatives.

• He accepted that capitalism was already largely socialized because the dynamic entrepreneur had been replaced by bureaucratic administrators.

• If socialism simply meant that government bureaucrats would replace corporate bureaucrats, there would be little impact on efficiency, and government would gain greater control over the destructive tendencies of the market.

• With government and business working together to maintain a stable, hierarchical society, socialism could be compatible with Conservative goals.

Architects of Conservatism • However, the key to Conservative socialism is

government’s ability to administer the economy without being influenced by popular pressures and the demands of special-interest groups.

• To protect government, Schumpeter opposed active and widespread participation by citizens in the political process.

• As long as the political realm remained sealed from democratic pressures, government administration of the economy might be better suited than capitalism to sustaining Conservative values of stability, order, and hierarchy.

Principles of Conservatism • Human Nature. Humans are driven by strong passions

that can be directed toward either evil or good. The human capacity for reason is limited, with some persons having greater rational powers than others. The manner in which instincts and desires are shaped into a unique personality is a function of the roles played and associations formed with others. In fact, humans cannot develop as persons without the bonds of social organization.

Principles of Conservatism • Society. Society is an organic structure based on a natural

hierarchical order. The quality of society is a fundamental determinant of the interests and behavior of individuals. The good society sustains a stable hierarchy of social relations that enables individuals to discover a unique role and identity for themselves. Without hierarchy, all persons become homogeneous and the formation of individual personality is blocked.

Principles of Conservatism • Government. The purpose of government is to maintain

the natural order of society. During periods of social stability, government can simply uphold tradition and preserve existing institutions by serving as a visible symbol of the unity of the nation and by creating a moral climate conducive to the development of virtuous citizens. Government should not only enforce laws protecting property rights, but should actively nurture those institutions such as the family and neighborhood that provide a social context within which individuals develop.

Principles of Conservatism • Morality. Morality exists independently of individual

opinions of right and wrong, and therefore moral persons must give higher priority to the pursuit of virtue than to the satisfaction of personal desires. Individual reason is an unreliable guide to morality because reason alone is not sufficiently powerful to override human passions. Only the emotional attachments and prejudices that arise from living within a stable and supportive community can guide humans toward virtue. Moral values include civility, loyalty, patriotism, chivalry, obedience, courage, faithfulness, deference to authority, graciousness, and honor.

Principles of Conservatism • Freedom. Freedom exists when individuals are subject

neither to arbitrary power nor their own passions. Freedom does not mean license to do whatever the individual desires. Since isolated individuals cannot gain control of their passions, freedom requires the authority, traditions, and order provided by a stable community.

• Authority. Authority is legitimate when it resides with persons who fill traditional roles of leadership in society and who have knowledge of truth and virtue. Authority is essential for maintaining order and tradition in any social organization from the family to the nation.

Principles of Conservatism • Equality. People are equal only in their formal status as

citizens of the community. This equality requires an impartial administration of justice in the protection of their rights and punishment of their crimes.

• Justice. Justice is fulfilled when order is maintained and the law is administered impartially.

• Efficiency. Efficiency means that society functions smoothly in achieving not only material production, but also in attaining nonmaterial goals such as the maintenance of order, culture, cohesive communities, and individual virtue.

An Assessment of Conservatism • Conservatism has evolved over the past two centuries not

so much because of changes in its fundamental principles, but rather because of the evolving nature of the problems confronting modern societies.

• Early Conservatives blamed social disintegration and rootlessness on industrialization and opposed both liberal democracy and laissez-faire capitalism.

• By the end of the nineteenth century, however, a greater threat appeared on the horizon as socialism became an influential political ideal soon to materialize in Russia.

An Assessment of Conservatism • The prospect of socialism gaining a foothold in Western

nations caused Conservatives to suppress their concerns about capitalism.

• After witnessing socialism in Russia and fascism in Germany and Italy, most Conservatives accepted that capitalist democracy was the least evil of all feasible systems.

• Since World War II, Conservatism has been wedded to Classical Liberalism as the two formed a unified opposition to most forms of government intervention.

An Assessment of Conservatism • However, Conservatives continue to believe that social

order ultimately rests on tradition and authority, and the market, with its emphasis on social mobility and “getting ahead,” undermines both.

• Conservatives are respectful of government for its role as the visible representation of social unity, while Classical Liberals often express disrespect for government.

• Conservatives also believe that social order requires some domination of desires either by the individual’s own commitment to virtue, by the social conditioning provided by community values and institutions, or, ultimately, by the threat of punishment from government.

An Assessment of Conservatism • A capitalist market economy, on the other hand, fosters

an ethic legitimizing the uncontrolled pursuit of pleasure.• Conservatives seek to maintain the integrity of national

cultures, while the market breeds cosmopolitan attitudes and lifestyles.

• Finally, Conservatives uphold a morality based on objective values, but the market makes the individual consumer the sole authority of values.

An Assessment of Conservatism • This tension between the market and Conservative ideals

explains why Conservatives and Classical Liberals, despite their common interest in protecting private property and hierarchy, will never be entirely compatible.

• With the dissolution of communism as a major threat to Western nations, the alliance between Conservatives and Classical Liberals can be expected to loosen, and the two perspectives will once again clash over their fundamentally different views of the market and government.

An Assessment of Conservatism • The Conservative critique of modern society highlights some of

the failures of capitalist democracies. • High-material standards of living are accompanied by individual

alienation, declining public virtue, and diminished legitimacy of public institutions.

• Conservatives point to the dominance of anti-social behavior and the number of young people who reject mainstream culture as evidence of an increasingly difficult struggle to find meaning and purpose in an amoral, commercialized society.

• The fact that many Conservative themes such as loss of meaning, alienation, and spiritual emptiness are also found in Radical critiques of capitalism illustrates the commitment shared by both perspectives to a strong and vibrant community life.

An Assessment of Conservatism • However, two major obstacles challenge any significant

renewal of Conservative influence. • First, Conservatism resists the two major trends in modern

civilization: egalitarianism and individualism. • These societal values, deeply embedded in Western culture,

will assure widespread resistance to any proposals for strengthening hierarchical authority.

• Only an economic collapse or the threat of approaching social chaos would open political space for the reassertion of authority.

• Second, Conservatives have, for the most part, been unable to offer concrete proposals for generating cultural renewal without resorting to racism or national chauvinism.

An Assessment of Conservatism • These values conflict with another powerful ideal in

modern life: the brotherhood of mankind. • At a time when barriers between East and West are

crumbling and global economic integration is proceeding, appeals to parochial values and local culture seem antiquated.

• Yet this difficulty may point the way for the future of Conservatism.

• Rather than seeking to shape national or global policy, Conservatives might effectively pursue their ideals by focusing on family, neighborhood, and community revitalization.