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Chapter 2

THE AUTHORS LONG-TIME CLASSICAL LIBERALISM

Many authors on the Left have over the past two centuries argued that capitalism (amarket economy) has fatal flaws. Among other things, they have called for a broad

redistribution sometimes a total equalizing of wealth and income. In my opinion, they

have been wrong. As an economic system based on the personal incentive to prosper, amarket economy resulted in a vast middle class as many millions of people joined in the

creation of wealth. Nor was it flawed by its lack of redistribution.

This is one place I differ from the writings that have come from the Left that stressmany of the points I will be discussing. I see the challenges caused by globalizations

opening of the United States and the other advanced economies to competition from a vast

pool of low-paid labor and by the technologically-driven rush toward labor-saving processesas relatively recent phenomena that require a rethinking of the economic premises of a free

society. I am not entering the discussion as someone who extends socialist thought on theground that it has been right all along. Those who are primarily interested in seeing things

from that point of view will do well to read Jeff Gates excellent book The Ownership

Solution: Toward a Shared Capitalism for the 21stCentury (1998).

Indeed, the principal significance of the present book is that the author is a long-time

opponent of socialism and a philosophical defender of an individualistic society. It is assuch that he has become convinced that world economic conditions have so radically

changed that a complete reexamination of free-market theory is needed. This will not be

just another book advocating what the Left has wanted for generations. It will be an urgentinquiry into how a society centered on individual freedom can bring together a flourishing

market and labor-saving technology, on the one hand, and a broad provision of income to an

economically displaced population, on the other.

To assess the authors standing as someone who believes strongly in individual liberty, it

will be valuable for readers to have personal information about me. This will be especially

useful to readers who are close to me philosophically and who, accordingly, see themselvesvariously as free market advocates, classical liberals, conservatives or libertarians. Such

readers need to know that I am a friend while also knowing that I have for many years

called upon supporters of an individualistic free society to think beyond the closedideological system that has seemed to me to limit them without their realizing it. When I

urge them to rethink much of the system of thought that has been second-nature to them

(and in large measure to me), it is not to move them away from individual liberty as the

central principle of society. Instead, it is to point toward a more sustainable philosophy of afree society in light of the fact that changing conditions will make destructive many of the

ideas they and I have thus far held so dear.

During all of my adult life I have been a classical liberal (which is not to be confusedwith what has passed under the name liberalism in the United States for the past century).

Classical liberalism is the philosophy that underlies what most people have called

conservatism in the United States since the early twentieth century. (In recent years, theword conservative has become so muddied by fragmentation that it is now of little use.)

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Classical liberalism was just called liberalism in Europe and the United States during the

nineteenth century, and had as its subject-matter the philosophy of individual liberty.

Early in the twentieth century, the word was preempted by those who wanted the state to bethe prime mover in society and the economy. Because of that preemption, the word

classical came to be used as an adjective to designate the original liberalism.

Many readers wont consider themselves classical liberals. If you are one of them,you wont start the intellectual odyssey from the same place I do. Just the same, you will be

able to join the discussion soon enough. It will be worth your while to stay the course.

I can best explain classical liberalism in personal terms. During early boyhood, I lived in

Mexico, and from a distance grew up revering the United States and everything I understood

it to stand for. That was the philosophy of individualism, which I didnt understand as

rugged individualism (a term long-since pejorative) so much as a civilization based onupright, stand-tall men and women who carved out a life of individual liberty within a

Constitutional system that limited, separated and divided the power of government and who

relied most essentially upon their own energies within a market economy.

No doubt I didnt understand it in those terms at age eleven, but as I grew older Itook on more awareness of the philosophys components, including its name. I especially

studied it when I found the philosophy under attack. When in college most of my professorswere deeply alienated against all that I revered, and advocated more or less openly a

socialist alternative, I found Ludwig von Mises treatise Human Action and studied it until

the cover stripped off. Mises was a leading member of the Austrian School of Economics,

which has been the fount of neo-classical economics and since the mid-nineteenth centurythe most stalwart defender of free-market capitalism.

I served two years in the Marine Corps after three years of pre-law, and during those

two years wrote the first draft of my bookEmergent Man, which I rewrote after getting mylaw degree at the University of Denver. The book amounts to a young mans passionate

exploration of the principles of a classical liberal free society.

So I started and have remained a classical liberal (subject to the qualification, if it isone, which I will mention soon). An important additional aspect of my intellectual

orientation can be seen, however, in my experience when I attended the graduate school of

business administration at New York University before I started law school. It was therethat Mises, who had fled a Nazified Austria (via Geneva) in 1940, taught his classes and his

famous Thursday night seminar at Washington Square. While writing the first draft of my

book, I had become concerned that a free society would be destroyed if the market economy

suffered another collapse like the Great Depression of the 1930s or, in general, couldntovercome the cycle of booms and busts. I wanted to know whether free market thinkers had

both theoretical and practical solutions for the trade cycle. In Human Action, Mises

advocated both a gold standard and something he called free banking. Would those besufficient? And, if so, could society be persuaded to adopt them?

As I pursued my studies, I came to believe that they wouldnt suffice because they

would leave in place, with of course some hoped-for mitigation, the booms and busts that Ibelieved so greatly threatened the long-term acceptability of a market system. Instead, what

made most sense to me as creating the needed monetary framework for a stable market

system was Milton Friedmans monetarism, which proposed that an independent central

bank control the quantity of money and increase it gradually in keeping with a legally-set

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rule to match the growth of productivity in the economy. With that it mind, it seemed to me

that capitalism need not have a fatal flaw. This satisfied my most pressing intellectual

question and freed me to pursue my original intention of law school and to make my laterexplorations of other aspects of classical liberal thought.

A significant thing about my brief time in Mises seminar was that although I was

passionately devoted to a free society, I wasnt willing to accept even Mises thinking in theway a disciple does. Even then, an unthinking assimilation of ideas did not seem my idea of

a reasoned process. Alongside all that I found valuable, there were ideas in Mises thinking

that I didnt agree with, and this led me to submit papers to the seminar that were at oddswith what seemed the otherwise unanimous opinions of the splendid people who

participated around the large conference table. Mises was then an elderly man (he was born

in 1881 and it was then 1956 and early 1957), was unfailingly gracious, gentle and

dignified, and treated my heresies without the slightest rancor. Although I was not then andhave never been a disciple of him or the Austrian School, I think of him and those

associated with him in the Austrian School with a well-deserved reverence and affection.

My differences with the doctrine have led me sometimes to think of myself as a

neo-classical liberal, thus further complicating the semantic picture. This is thequalification I mentioned above. For at least forty years, it has seemed to me that free

market thinking is often learned as if by rote, and as a closed system based on axioms. Assuch, it has an answer for everything regardless of otherwise disconcerting facts, just as any

complete theoretical system based on deductive premises does. (The central problem with

such a method, which I will discuss in detail in Chapter 13, is that the premises must be such

as to encompass all the wisdom of the world and all the intricacies of human life, which isclearly impossible.) Although I used an axiomatic method in my first book,Emergent Man,

I later wrote a monograph The Principles of Classical Liberalism and then a book exploring

in detail the philosophys specific ideas, and these works examined several weaknesses andeven fallacies in the theory while at the same time expressing a close identification with the

overwhelming thrust of what it had to say. The neo comes from the fact that I stood outside

the most commonly accepted system of its thought, feeling it needed extension and someamendment.

As I placed it in historical perspective, I saw that classical liberals had been forced

onto the defensive early in the nineteenth century by the rise of the world Left. In thatdefensive posture, they ceased to question their own doctrine and to extend it into subtleties

that had not been thought of by its founders. Had it not been for that insularity, it is likely

that they would have addressed, in ways more compatible with individual choice and the

limitation of government power, the many practical issues that people have faced and thathave long been left by default to the social and economic agenda of the American Left.

Because of all this, the pure doctrine should not, in my opinion, be taken as the final

truth. What was needed was for it to continue to be intellectually alive, refining, extendingand even correcting its thought in response to further thinking and a changing world. It

could and must do this in a way that is true to its core values. A failure to do these things

would be the surest way to serve it poorly.