__________________________________________________________________ Carlos Rodríguez Braun Social State and Anti-social Envy With their economic principles weakened , interventionists have ceded somewhat to classical liberal doctrine and sought refuge in a moral trench . Today , criticism of the market economy no longer revolves around efficiency . Instead , supporters of State intervention justify their position on ethical grounds . They claim that the model of a redistributive State is superior to any alternative because it has more moral weight : typically , it displays more humanitarian benevolence . This interventionist claim has met with criticisms . Redistribution , for one , not only discourages investment and job creation , but introduces perverse incentives ( individuals fighting over the redistributive booty instead of focusing on production ; engaging in fraud instead of cooperation ) and stifles values such as the dignity of personal effort . This essay maintains that interventionism is immoral , and highlights the apparent paradox in the fact that the social State generates envy , which is the most anti-social of all passions . 1 Liberty , Economics and Morality Anti-capitalist traditions had a distinct economic bent . Critics of the market argued that it resulted not only in injustice , due to an unequal distribution of income , but also inefficiency ; their critique maintained that capitalism led to poverty , marginalization , exploitation , and an inefficient allocation of resources . There were , therefore , powerful economic reasons for the State to interfere in markets and establish a combination of prices and quantities of goods and services different from that which would occur under unfettered capitalism . It is no coincidence John Maynard Keynes was the most influential economist in the twentieth century . His basic message was : markets work poorly . 1 Hayek , who warned against fostering envy behind the mask of social justice , recommended it be viewed as Mill defined it : “ the most anti-social and pernicious of all passions ” ( Friedrich A . Hayek , Los fundamentos de la libertad [ Madrid : Unión Editorial , 1998 ], p . 129 ). Mill referred to envy in Chapter 4 of On Liberty as “ that most anti-social and odious of all the passions .” In Representative Government , he adds : “ In proportion as success in life is seen or believed to be the fruit of fatality or accident , and not of exer- Anti-Keynesian economists ( helped by an economic reality that combined stagnation , inflation , taxes , and unemployment ) ended up refuting the core ideas of Keynesianism . Intervention in the market did not seem to be the ecotion , in that same ratio does envy develop itself as a point of national character ” ( John Stuart Mill , Essays on politics and society , Vol . 18 of his Collected Works , ed . J . M . Robson [ University of Toronto Press , 1977 ], p . 279 , and Del Gobierno representativo [ Madrid : Tecnos , 2000 ], p . 39 ). Carlos Rodríguez Braun is Professor of History of Economic Thought at the Universidad Complutense , Madrid , Spain . __________________________________________________________________ Laissez-Faire 54

__________________________________________________________________ nomic solution . For its part , the collapse of communism demonstrated , even to many dogmatic leftists , that eliminating the market did not exactly bring with it emancipation and prosperity for the proletariat . Such evidence spurred a rapid rearrangement of the major players . Communists became environmentalists , feminists , squatter supporters , or picked from a variety of other more or less innocuous causes . Many abandoned Marxism and surrendered to the erstwhile despised social democrats , which they considered tepid accomplices to capitalist exploitation . Modern socialists o social democrats had the advantage that the fall of communism , or the so-called real socialism , did not implicate them . Its crisis actually gave them a boost : the collapse proved that the only possible socialism was their brand of it , one that accepted the market but corrected it for social reasons . Socialists quickly buried many of the old economic objections against the market . Tariff protectionism , state-owned companies , and macroeconomic regulations , three classic interventionist economic policies , soon became enemies to overcome . And overcome they were . In Spain and Latin America , for example , those who started the process of privatization and liberalizing of markets — even the labor market — were socialist leaders like Felipe González . This is how we arrive at the contemporary consensus summed up in the phrase : “ the market is good , but … .” The market is viewed not as the free expression of popular preferences , but as some allocating artifact , a mechanism that happens to be more efficient at producing goods and services than State intervention . Interventionism , however , is appropriate ( according to a tradition dating back to Stuart Mill ) not for producing wealth , but for distributing it . Taxation is no longer justifiable when used to subsidize losses incurred by State enterprises , but it is morally admissible and even mandatory in order to redistribute income . Since , under democratic regimes , it is difficult for public expenditure to go much beyond 50 percent of GDP , when that limit is reached interventionists looking to attain or maintain power tend to get stuck in dilemmas of this type : they cannot raise taxes for fear of losing elections , but they cannot lower them either , because that too would be electoral suicide , viewed as conspiring against morally indisputable goals . This leads to political read-my-lips style flip-flopping becoming ever more common in Western democracies . Partial acceptance of the market in no way suggests classical liberalism has won the battle of ideas . On occasion , it is true , socialists give this impression , and they talk about ultra-liberalism or even an imagined powerful libertarian pensée unique that is nowhere to be found . Despite the privatization and deregulation rhetoric of economic policies , a cursory analysis of the main doctrines indicates that their classical liberal component is little more than window dressing most of the time . It all fits together with a remarkable event of such supposed wave of State-shrinking classical liberalism or neo-liberalism : the weight of the State in the economy , measured as the proportion of State spending in GDP , has not diminished markedly anywhere in the world . Nor should we forget the interventionists ’ talent for hoisting one flag while lowering another ; the environment offers an interesting example . The people now defending the urgent need for State control in environmental matters show the same enthusiasm ( they are often the very same people ) as those who up until recently argued that the State should con- __________________________________________________________________ Laissez-Faire 55

__________________________________________________________________ trol or play the leading role in the shipbuilding or steel industries . The idea that “ the free market is good , but… ” guides the economic doctrines of our days . This idea is defended , with a few caveats , by many economists and , with much less caveats , by the overwhelming majority of politicians , journalists , intellectuals , and even some members of the clergy . Widespread understanding of the complex phenomena making up the extended order described by Hayek in The Fatal Conceit 2 is unusual and explains , to a degree , the many interventionist propensities that persist . When the French socialists in times of Mitterrand unveiled their plan to create jobs using public money , newspapers delighted in agreeing that the State should intervene in this area because the market had shown itself unable to generate sufficient employment . They overlooked the fact that the market was not creating employment precisely because of State intervention in the form of taxation and regulation . This same error is the source of the latest interventionist mantra : the need for harmonization to check the supposed dangers of globalization . The fallacy of attributing efficiency to the market but kind feelings to the State is alive and well ; so too is general ignorance about how the State actually operates . In political terms , the fundamental idea of classical liberalism — the limiting of power , Adam Smith ’ s “ obvious and simple system of natural liberty ” devoted to placing limits on sovereigns ’ ability to meddle with their subjects ’ lives and property — has yet to catch on . 3 All this said , classical liberalism has clearly secured its greatest victories in the field of economics . The “ but ” in “ the market is good , but … ” cannot hide this mutation . In short , the market ’ s enemies now claim , albeit reluctantly , that the market is good . Nevertheless , classical liberalism finds itself in a subordinate position mainly because it has failed to convince people of its morality . There remains the widespread belief that life ’ s higher ideals ( neither wealth nor efficiency will ever qualify ) can only be achieved using political power to restrict the free workings of the market . This interventionism , however , does claim to represent genuine ideals like generosity and humanitarianism . At the beginning of the 1950s , in times of the apogee of economic interventionism , Argentina ’ s president General Perón said : “ they speak to me of economic freedom , and I say : when is an economy free ? If the State does not direct it , the monopolies will .” Many interventionists today would disagree with that statement . Instead , they would argue that a free economy is unjust ; that society cannot abandon the poor to the fates of a competitive market and to suffer the humiliation of charity . There is no guarantee that people will spontaneously help one another and display solidarity . The State must intervene and , at the cost of a ( hopefully ) little loss of efficiency and freedom , redistribute income coercively to improve the lives of the most unfortunate among us . Probably taxes will be raised , but it is for a good cause , not a despicably economic one , but an ethical and egalitarian one , in sum , a social cause . 2 F . A . Hayek , The Fatal Conceit : The Errors of Socialism , ed . W . W . Bartley , III ( London : Routledge , 1988 ). 3 Adam Smith , An Inquiry Into the Nature and Causes of the Wealth of Nations , ed . R . H . Campbell and A . S . Skinner ( Oxford : Oxford University Press , 1976 ), IV . ix . 51 , p . 687 . __________________________________________________________________ Laissez-Faire 56

__________________________________________________________________ How to start from equality … It is not obviously true that the population longs for restrictions on liberty . According to surveys , Spaniards , like everyone else , do not want to pay more in taxes . The fiscal burden , however , measured by the proportion of public expenditure over GDP , has doubled over the past 30 years . Politicians and intellectuals ( who might want to think before speaking ) insist that , since Spain is a democracy , “ society ” decided to pay more in taxes . Another trick is what the State says it does and what it actually does . For example , allegedly it cares for the unfortunate . Anyone who takes a cursory look at the budget will see that spending directed toward the underprivileged is quantitatively insignificant ; the majority of the budget is dedicated to massive income transfers among various groups who do not qualify as unfortunate or underprivileged . There are noteworthy complexities in collective choice that are ignored by those who talk about the “ social ” as if society ( no less ) were manifested exclusively and exactly through ballots and politicians . There is a visible gap between the ideal State , selfless , theoretically obsessed with caring for the poor , and the real State , which channels resources taken from citizens to the buying of votes and the seduction or appeasement of myriad special interest groups . It is , however , the moral weight of socialism that keeps its attractive . For this reason , let us take on the interventionists ’ ethical challenge : why is a system that impedes individuals from freely assisting their fellow human beings and , on the contrary , forces them to do so through fiscal coercion deemed to be morally superior ? The interventionist ’ s reply is : because equality is a moral value ; having the State guarantee equality can , therefore , justify the limiting of freedom . This is a fundamental error . The moral value is that of equality before the law . Such is a major achievement of the rule of law , ensuring that no one is discriminated against and mistreated by the powerful or that the powerful can arbitrarily concede privileges to a chosen few by reason of birth ( high or low ) or luck ( good or bad ). And this equality represents a moral value because it is forever associated with liberty and justice — it is no accident she is shown with her eyes blindfolded . It is also linked to individual responsibility and effort , and to the dignity of people in control of their destinies . State-imposed equality , on the other hand , reduces liberty , as it requires the expansion of political power . It eliminates the essential characteristic of justice , asking her to remove the blindfold and treat the unequal unequally . No individual right can stop the State ’ s intervention in pursuit of such a noble purpose . Such forced equality , in the style of an uncomfortable Procrustean bed , inhibits not only economic but also moral progress . … and arrive to envy In the words of Adam Smith in The Theory of Moral Sentiments , envy is a “ disagreeable sentiment ,” an “ odious and detestable passion ,” a ruinous tendency that blocks a pleasant feeling , that of sympathizing with others ’ happiness : “ When there is no envy in the case , we all take pleasure in admiring … the characters which , in many respects , are so very worthy of admiration .” 4 No one is proud 4 Adam Smith , The Theory of Moral Sentiments , ed . D . D . Raphael and A . L . Macfie __________________________________________________________________ Laissez-Faire 57