Liberty Matters

Interventionism Is Now the Only Sustainable Politico-Economic Order

The title of my comment might well be read as an announcement that I intend to reject completely Sanford Ikeda’s argument in regard to what he calls “the Misesian Paradox.” But such is not the case. Indeed, I agree with pretty much everything that Ikeda says. Yet I draw an opposite conclusion about the historical sustainability of interventionism because even though the logic of the Misesian argument seems to be unimpeachable, I find that the conditions under which the argument is made are so restrictive that the argument has little “oomph” (to borrow Deirdre McCloskey’s felicitous term) in explaining the nature and destiny of the interventionist order that now prevails in nearly every country -- and soon will, I expect, prevail everywhere, in each country in a form tailored to suit local conditions.
How Mises’s Argument Is Framed
To understand why Mises was both right (in regard to the logic of his argument) and wrong (in regard to the argument’s relevance in explaining the nature and destiny of the real-world interventionist system), we must recall how he framed his argument.
First, Mises fully credited the interventionists’ sincerity. If they said that they wished to bring about a certain change, say, an increase in the supply of low-income housing, and that they believed a certain intervention in the market order would bring about this increase, he took them at their word. He then showed why the policy would not, indeed could not, result in the attainment of the interventionists’ stated goal.
Second, Mises argued that when a particular intervention gave rise, as it must, to unanticipated problems in the relevant policy area or elsewhere in the economy, the policy’s proponents and implementers would resort to further interventions in order to deal with these problems, whereupon they would produce still further unanticipated problems, to be met with further interventions, and so forth on and on until they had produced a tangled, ineffective mass of futile attempts to fix the initially stated problem and the multitude of others they had created in the course of the interventionist dynamics.
Third, Mises worked out the logic of his argument in a strictly economic context. He made no attempt to integrate political or ideological feedback effects into his vision of the systemic dynamics.
Fourth, Mises posed the questions in his analysis as pertaining to the type of overarching economic order that would prevail. In doing so, he personally reflected the great contest that was playing out in many countries during his lifetime between socialism and capitalism, a contest of one pure system versus a completely different pure system. He viewed people’s preferred system as a decision variable in the political contests, rather than seeing any prevailing system as a societal artifact, a product of human action, but not necessarily of human design.
Fifth -- and perhaps most important -- he worked out the logic of his argument in the context of a country at peace with other countries, so that war gave rise to no economic disturbances and imposed no political logic of its own on the interventionist process as he analyzed it.
When one ponders the foregoing restrictions on the Misesian model of interventionist dynamics, one sees that however powerfully it fleshes out the corpus of Austrian economic reasoning, it leaves out so many factors of critical importance in any particular empirical setting that its force in such a context may well be severely limited or even wholly overwhelmed by events and decisions that have no place at all in the Misesian analytical structure. For the economic or policy historian, the Misesian logic contributes a valuable insight, to be sure, yet the historian must necessarily attend not merely to praxeology, but also, indeed, mainly to what Mises called thymology -- the specific configuration of interacting scientific, technical, organizational, political, ideological, and valuational factors at play in a particular empirical situation. Mises never suggested that such factors be ignored in historical analysis; indeed, he urged that they be studied carefully in order to apply the logic of praxeology properly to the specific historical conditions under investigation.
Ideological Constraints in the Modern World
The paradox, as Ikeda well describes it, is that even though Mises argued that interventionism (the “middle way”) was “impossible” as a workable system and “unsuited” to the attainment of the interventionists’ stated goals, still interventionism remains -- as indeed it has remained for centuries -- pretty much the only sustainable game in town. Plenty of time surely has elapsed for actually existing interventionism to reveal that it contains the seeds of its own destruction. Yet it thrives as never before. Whenever a certain interventionist system suffers or dies as a result of its own decision makers’ actions and their consequences, it is replaced -- mirabile dictu -- not by full-fledged socialism or full-fledged capitalism, as Mises insisted it would be, but by a new form of interventionism. And that seemingly perverse course of events is precisely what we should expect under currently prevailing ideological and political conditions.
In today’s world, only a small minority either among the elites or the general public seeks full-fledged socialism with total state ownership and management of the major means of production cum central planning of all major resource and income flows. On the opposite end of the ideological spectrum, only a tiny minority seeks a full-fledged free-market order with complete private ownership of all major means of production, totally decentralized, private planning of resource use, complete absence of government intervention in the determination of prices and incomes, and no significant government involvement beyond that of the night-watchman state -- that is, definition and enforcement of private property rights and enforcement of private contracts and other voluntary cooperative arrangements, protecting all parties equally against fraud and unlawful force and violence whether the perpetrators be domestic or foreign. Why are both ends of the systemic spectrum -- the two alternatives that Mises declared to be the only sustainable possibilities -- almost equally rejected by people all over the world?
In regard to the socialist option, nearly everyone now recognizes that full-fledged socialism is a recipe for societal poverty and stagnation, if not economic retrogression. The experiments in Communist China, North Korea, Cuba, Vietnam, the USSR and its satellite countries, and elsewhere have shown as clearly as anything can be shown by historical experience that socialism “doesn’t work.” Most people want much more prosperity and economic progress than socialism can deliver -- and a great many people now recognize socialism’s incapacity to deliver the goods. However, relatively few recognize that the inherent incapacities of piecemeal intervention are essentially the same as those of full-fledged socialism, only somewhat more limited in their reach and hence in their capacity for wreaking economic destruction.
On the free-market end of the systemic spectrum, relatively few people are prepared, and even fewer are eager, to accept the degree of individual responsibility for one’s own economic well-being that must be accepted if a full-fledged free-market order is to operate successfully. Nearly everyone believes that the free market is wonderful, but in certain areas it “fails” or brings about unacceptable outcomes (for example, too unequal distributions of income and wealth) and therefore should not be left unhampered. In practice, the number of such “market failure” or “unacceptable outcome” exceptions has long since become extremely large, so large that when seized by opportunistic state actors and their principal cronies the entire free-market system has been transformed into the rampant interventionism that Mises and F. A. Hayek recognized as economic chaos.
So, with the great majority of people in today’s world unwilling to bear the individual burdens and responsibilities of living in a situation of “creative destruction” -- emphasis in their minds being laid on the “destruction” part -- and so many prepared to simultaneously reject full-fledged socialism and embrace piecemeal interventionism, any particular country’s political process has no place to go but the great middle, the very venue that Mises insisted would not and could not support a successful economic order. How does it manage to do so?
The genius of modern participatory fascism -- my preferred name (borrowed long ago from Charlotte Twight) for the dominant interventionist system in today’s world -- is its kingpins’ recognition that it is unwise for them to kill all the geese that lay the golden eggs. So, despite their rampant, ad hoc, opportunistic interventions, the political and governmental leaders do not attempt to take over ownership and control of all major resources. They do not attempt to wipe out all private property rights. Indeed, they leave enough substance in the structure of private property rights that entrepreneurs still find it possible to get rich in a great variety of ways. Therefore the entrepreneurs’ ongoing innovation keeps the level of living from falling and in many places propels it to all-time highs. In the world as a whole, people have become much better off in recent decades on average, owing to the somewhat greater latitude permitted to private entrepreneurs in certain countries, especially in the most heavily populated, previously very poor countries China and India.
Where We Stand
Of course, the world would be immensely more prosperous if the interventionists simply gave up their ships. They are not going to do so, however. The rent-seekers never sleep. The ideologically misguided rarely learn any sound economics. And the way in which major states engaged in huge wars during the past century allowed opportunists both inside and outside the state apparatus to gain many personal prizes of power and pelf and to entrench themselves at strategic positions in the politico-economic order. At the same time, as I have argued and documented at great length during the past 30 years, these crisis-driven historical dynamics altered the dominant ideology in the direction of much greater support for participatory fascism. Most people want creature comforts, ceaseless entertainment, and the illusion of state-provided security -- both against foreign devils and against economic and health-related vagaries -- and the interventionist state has shown that it can give the masses enough of these things to placate them while enriching the rent-seekers and opportunists with undreamed of wealth at public expense. Meanwhile the system leaves private entrepreneurs enough room to maneuver for them to innovate, invest, and thereby elevate the general level of living. Such a system, though lamentable on many grounds, is plenty sustainable. Indeed, under current ideological and political conditions, it is impossible for me to imagine how any alternative politico-economic order stands much chance as a competitor.