Day 102: Liberalism

Within Day 98: The Unholy Trinity we mentioned that the IMF, World Bank and WTO hold a neo-liberal ideology.
Within this blog we are going to have a look at what ‘Liberalism’ (and neo-liberalism) exactly entails.
There are a few components which have been identified as being typical to Liberalism as an ideology, namely:
- Individualism
- Freedom
- Reason
- Equality
- Tolerance
- Authority and Government

Individualism

At the center of Liberalism lies the value of freedom/liberty of the individual. Within Liberalism, the individual is considered to be prior to society, within the reasoning that society is but a collection of individuals.
“The liberal goal is therefore to construct a society within which individuals can flourish and develop, each pursuing, ‘the good’ as he or she defines it, to the best of his or her abilities” [Andrew Heywoods in his book ‘Politics’].

Freedom

Within liberalism it is believed that the individual can only “realise their potential” within being ‘free’. All individuals ought to enjoy equal freedom and within this is implied that people are only free to the extent that their freedom does not infringe that of others. Liberalism also likes to emphasizes freedom in the light of private matters and freedom as the absence of state interference. State intervention is often interpreted as undermining the individual’s liberty, which is why liberals are pro capitalism and proponents of free market economies.

Reason

Just as in current economic thought, within liberalism the individual is seen as seen as a rational being, who can make rational, ‘wise’ decisions for themselves and are able to by themselves settle any disputes and problems

Equality

Apparently, ‘Equality’ is also a very important component of Liberalism, where “each individual is held as being of equal value”. Liberalism however, works with a special kind of equality, namely ‘Abstract Equality’. This means that inside one’s mind, people are ‘regarded as being equal’ – but in practical physical, material terms: this is no longer applicable. This ‘abstract equality’ is justified on the ground that individuals are at variance in the aspects of intelligence, talent, dedication and “the desire to work hard”. Liberalism likes to reward talent and dedication as ‘hard work’. But since we’ve just seen that ‘not everyone is equally talented’ and yet ‘talent merits reward’ – we know that not everyone is going to get rewarded = not everyone is being held as being of equal value. And from hereon, inequality is justified on the grounds that it is simply an outflow of natural differences and that people conduct their lives in different ways ( read = they don’t work as hard).

Which is interesting, because whenever the point of materialistic inequality gets questioned, liberals all the often like to put forth that people are poor ‘because of their own doing, if only they work harder they can be well off too’. Yet, in its basis, liberalism admits that A) not everyone has equal talent, and B) everyone should have equal opportunity, and where it is clearly stated that talent is favoured/rewarded – which in its very essence is unequal treatment.

Very peculiar this ‘Abstract Equality’ – I guess Abstract is just another way of saying it’s not really there since it’s just some principle they like to mention but not apply.

Tolerance

Here tolerance is viewed within the context that since everyone is allowed to do whatever they please, that each one should respect what another wants to do whether they agree with it or not, which somehow leads to individual liberty and social enrichment.
This is more like a comprise where you make a deal of “you don’t question me and I won’t question you” – where each party can do whatever they want whether it’s destructive or not just because each one wants to have that option available to them (to be destructive).

Authority and Government

According to liberals authority should always be exercised through consent and is therefore pro elections and representation (where the authority comes ‘from below’ as the people

and where the government is thus regarded as legitimate). The government is seen as an ‘intrusive power’ against which individuals need protection which is why many liberals are proponents of constitutionalism as a means to limit the power of the government.

People are assumed to have particular rights (life, freedom, property,… -- [I wonder if these are ‘abstract’ too]) and the only purpose of the state should be to protect these and further not meddle itself with the business of individuals.

Liberalism later diffused into two differing schools of thought, namely classical liberalism and modern liberalism.

Within classical liberalism the emphasis continues to lay on the liberty of the individual and the state is seen as a necessary evil where it’s only purpose is to safeguard the rights of individuals.

Modern liberalism goes a bit softer on the state since it recognizes that injustice may arise between ‘conflicting freedoms’  and that the state should step in when necessary, this also refers to for instance government intervention in the economy (like bailouts). For a while the welfare role of the government was accepted more within this school of thought, but it was then believed that the state could not handle this (not being able to meet all the demands of everyone) and since then the role/scope of the government has been tried to be ‘rolled back’. This last development in modern liberalism is often referred to as neo-liberalism or contemporary classical liberalism. It is this ideology which the WTO, IMF and World Bank have adapted and promote through their various “aid” programs.

Day 43: Homo Economicus & The Invisible Hand

It is strongly suggested to view the Documentary "The Trap" by Ian Curtis as complementary material to this blog.

Next we will be looking at the 'role' which has been assigned to the human within the economic system.
This is because all models within economics are based upon certain assumptions about human beings and how they operate -- and thus how humans will react to particular situations, based upon this assumption. It is thus important to understand this point as this is one of the re-occurring patterns within economics on which all graphs and models are based on in terms of the various interactions and dynamics at play within the field of economics.
This will become clearer within the blogs to follow.

Within current economics, the Human is viewed from the starting point of being a rational being. This rationality is defined in terms of survival and self-interest -- where it is deemed 'rational' for a human being to act and behave in a way which will always be directed towards achieving maximum benefit for self, within the context of continued survival and self-gratification (as we've already seen that 'wants' are prioritized over 'needs' -- and thus satisfaction/personal gratification plays a role all throughout economics -- see Day 40: What is Economics for context) . Rationality is thus not defined within the context of logic or common sense -- but the ability/tendency to behave and think in an egotistical, self-centered and selfish manner. In terms of economics, this gets translated into human beings always acting and behaving in a way which they believe will maximize profit/wealth accumulation or at least minimize costs / loss. Within this context, the human is often referred to as a 'Homo Economicus'.

[Now imagine, I had been reading many texts and readings on the subject where authors kept on referring to human beings making 'rational decisions' -- where to me the decisions described by the author weren't rational at all -- and where I only later found out that with 'rational' they meant 'self-interested'. So you see, economists don't just do magic tricks with numbers -- they also do magic with words!]

The best way to introduce this point within the context of economics may be to look at the famous quote by Adam Smith (18th Century Scottish economists -- often dubbed the "father of capitalism"), from his book The Wealth of Nations:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages

This quote clearly shows how humans are viewed as essentially self-interested beings -- but where this selfishiness indirectly leads to the 'greater good' of society. This 'movement' from a person being driven by self-interest only and then indirectly through only being considered with their own well-being, supporting society as a whole to be better off -- is often mentioned within the concept of the "Invisible Hand" where it is as though an 'invisible hand' moves everyone in a way that's "best for all".

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. - The Wealth of Nations

What's not being considered here, is that people following their own self-interest does not in fact lead to the 'betterment' of society as a whole -- as the current status within the world clearly demonstrates, where there are more people worse off than there are people well off. This is because no-one has ever been equal or been supported to be within an equal position -- and where those with particular advantages such as skill, access to resources, location, connections etc. -- are able to move more effectively within the system and will 'trample' everyone else within their pursuit of happiness, as a game of survival of the fittest.

What is also interesting to take note of, is that the particular observation of the human  as being essentially self-interested and not caring about anything or anyone else in this world (which is quite accurate, this is what we've accepted and allowed ourselves to become and live out through the current economic system as a reflection/extension of our own nature) -- has never been questioned. Instead of questioning this nature and asking ourselves whether this is something we really want to live by, we took this point for granted and went ahead and built our entire society/economic system upon this point. Where we don't go: "Hmm, us Humans, we are really self-centered egotistical beings who only care about ourselves -- maybe we should do something about this" -- but instead go "Hmm, us Humans, we are really self-centered egotistical beings who only care about ourselves, let's create a society/economic system which uses / harnesses this point to get people to move and create the system in such a way that they are rewarded for self-interested behaviour!"

And so we've created an economic system which is fueled by, and appeals to self-interest to get things done -- instead of human beings re-evaluating their very nature as self-interested beings and committing themselves to changing/transforming themselves as this nature so we may act and behave in a way which is considerate as what is Best for All and be responsible living beings on this planet!