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The rise of neo-liberalism.

FROM the mid-1970s up to the present day the ideas of the so-called New Right have become crucial to governments in the United States and Europe. In Britain neo-liberal social and political philosophy has represented the dominant ideology of the present, and the last three Conservative governments. There has occurred a break with the post-war period which had seen a large degree of consensus on many social and economic issues concerning the relationship between state and citizen.

In the 1970s a large question mark was raised as to whether the state should provide social rights for its citizens through welfare provision which had been established after the Second World War. Two of the best known and influential advocates of these ideas in modern times are Hayek and Nozick.

The central thesis of liberalism in the economic field is that in order to achieve prosperity the market provides a much superior model compared to state planning. The basic unit in society is the individual, indeed vague concepts like 'society' are often dismissed because it personifies what is merely an abstract concept which cannot have a will outside the individuals that make it up. There is an assumption that the individual is for the most part a rational self-interested actor who is generally best left alone to satisfy his or her needs with the minimum of state intervention.

The view of the state's role in society is that it should merely allow contracts to be made without fear of violence. The state should guarantee such basic rights as liberty and the right to property. It should prevent conflict in society by enforcing these rights and contracts. The vision of a negative state that Adam Smith argued for in his Wealth of Nations is still the model that many Neo-Liberals would consider more or less ideal.

In Smith's view the state should operate only to protect its citizens either, as already stated, from internal break-downs in law and order, or from external threats such as invasion by a hostile neighbour. Smith also allowed for the state to undertake certain tasks relating to the infrastructure of society which will not be profitable for private companies to invest in, for example roads.

Hayek in The Road To Serfdom takes a very similar standpoint. He argues that the extreme ideologies of Communism and Fascism had their roots in a collectivist and statist philosophy. Both are opposed to market economics and liberalism, both tend to satisfy a kind of universal community of some kind based on, in the former case, a fraternity of workers or as in the case of the National Socialists in Germany, an Aryan super race. No deviation from the strict ideological line can be tolerated, thus systems based on these ideas are by their nature highly repressive.

Hayek also suggests that even milder forms of state planning are almost equally dangerous since often plans involve outcomes which cannot be foreseen by the planners; or when the plan is carried out on a state level the individual is violated in some way. The problem with state planning for Hayek, is not so much the aims, welfare for the poverty stricken for example, but the methods. The vast bureaucracies needed to operate state welfare systems are by their nature inefficient and tend towards totalitarianism.

Hayek's concern was raised during the war of 1939-45 when state management was enforced in Europe either on ideological or practical grounds. In The Road To Serfdom and in the work that followed, notably Constitution of Liberty, he attempted a restate of the ideal of liberty which is seen by him to be the cornerstone of the West's development.

According to Hayek liberty consisted of the absence of coercion, where coercion is a personal attribute. In order for someone to be coerced it must involve intention on the part of one or more human beings. Thus it cannot be said that one person's liberty can be affected by the workings of the market for the market carries no moral priorities. It does not discriminate in a normative sense. It is up to individual citizens to succeed or fail according to their abilities to manipulate, to their own advantage, the laws of supply and demand.

Freedom, argues Hayek, is not to be confused with equality in terms of material wealth or power. If the two are linked this leads to statism and serfdom, where true liberty is lost. Freedom then is a negative concept which should be protected by the state through a system of law. The state will start to become coercive if it goes beyond this basic function.

In the Constitution of Liberty Hayek notes three main pressures that are pushing the state into taking further functions upon itself. Firstly those who argue that the state should be invested with more power vis-a-vis its citizens misunderstand the nature of human knowledge.

On the question of knowledge Hayek is influenced by the work of Karl Popper (an ardent defender of individual liberty against any philosopher or political scientist who has advocated collectivist solutions to societal problems). For Hayek (following Popper) knowledge progresses in a confused and haphazard way and we can never be sure that a theory is the definite answer. In short there are limits to man's expertise and abilities since knowledge tends to be distributed across a society; it follows that government should not centralise power but disperse down to a local or individual level. If a government allows this then Hayek argues that a 'Spontaneous Order' would develop.

Order is maintained because people observe certain social norms which have developed through time. It is clear that this shows an element of Conservative thought in Hayek since he believes that traditional institutions should not be tampered with unless one is sure that the alternative is better. It is the rational integration between individuals, guided by tradition and self-interest, under the negative regulation of a strictly limited state which maintains stability in society.

The concept of a spontaneous order is a similar one to Smith's own idea of the so-called 'hidden hand' whereby the iron laws of supply and demand would ensure man's needs would be met. Because of the limits of knowledge this spontaneous order must be allowed to develop naturally to ensure diversity of ideas. Hayek rejects state planning precisely because it attempts to interfere with this process by trying to create a made order which complies with a certain set of ideological preconceptions or assumptions about how society should be constructed.

One of these false assumptions is that the state can create social justice by intervening in the economy. Hayek states that the use of the term justice when referring to material wealth is misplaced since justice implies a social actor should have, or should not have performed some action according to some set of rules as to what is desirable. The idea of such rules limiting material wealth is, says Hayek, an attack on the freedom of the individual. Since the operation of the market has no intention of coercing anyone it cannot be argued that it affects their freedom and therefore cannot be called unjust.

Another fundamental danger to freedom in modern liberal democracies that Hayek identifies is the idea that because democracy claims to represent the majority opinion it is justified in having unlimited control over society. It can then, according to this argument, intervene to achieve aims which would be better served by the logic of the market. The temptation is to attempt to create an order rather than let one develop. Hayek can be seen to be wary of the operations of modern democracy. Since modern society is so complex the will of the majority cannot be trusted as a guide to how it should be constructed. Once again Hayek points to the limits of human knowledge and the fallacy of building the state based on an overriding social goal or goals, which are bound to limit freedom.

Clearly then Hayek's vision of the state has crucial implications for the individual citizen as the two are clearly directly related. A state limited in the way that Hayek would like would not have a place for social rights since legislation to enforce them would disrupt the natural inequality which the spontaneous order rests upon.

Robert Nozick shares with Hayek a deep mistrust of state planning and centralised power. Essentially he builds on the ideas of John Locke and in particular his concept of natural rights. These are rights which exist regardless of whether a state exists or not. They consist of the right to life, liberty and property, the last of these being justified largely in terms of the first two in the sense that it helps to maintain them. They should not be violated by individuals or institutions.

The right to property is particularly important to Nozick and the right to the accumulation of property and wealth, protected by natural rights, lies at the centre of his theory of justice. Because of the nature of the difference in ability between people the amount of property one person may own may well be vast. This however is justifiable as long as those who do not own a property are not worse off than if the property had not been claimed and as long as the property was taken justly.

The role of the state should merely be to act as a nightwatch man ensuring peace and security and protecting natural rights. Nozick rejects the notion that the state should preside over a redistribution of wealth. The very idea that the state could achieve equality in society is absurd because the nature of human beings will disrupt any constructed equality. The state would have to become totalitarian in an effort to control closely the actions of individuals preventing charity and private deals. Economic exchange under such a system would rest on compulsion rather than voluntary action which is the source of freedom and of wealth creation.

Nozick rejects 'end result' types of distribution because they will always violate the individual's natural rights. He argues against John Rawl's idea that if everyone in society could be removed from their position in society and asked to decide on a just system of distribution they would allow the state to guarantee a reasonable level of income for everyone. Nozick says that individuals would be just as likely to choose a totally free market and rely on their skill to succeed in it. It is only the laissez faire system which can work effectively because it uses as its motor, man's natural inequality and self-interest.

It follows from the above that the individual should not be forced to pay for a system of social justice, for example a welfare state, through a progressive tax system. Taxes should only be levied for the costs of constructing a minimal state as outlined by Nozick. Nozick is clear that the state should have no role in the moral life of its citizens or in their ethical behaviour. Neither should the state attempt to compel people to help others. Nor should it pursue policies which aim to make citizens act for their own good. These matters should be left solely to voluntary action. Nozick then, like Hayek, starts always with the individual and his central concern is to protect that individual against state power because it is desirable in terms of societal efficiency as well as in terms of morality.

An examination of the work of Hayek and Nozick is essential to an understanding of new liberalism since their ideas are amongst the most well argued and influential on the practical appliance of the ideas. Both theorists make a case for individual incentive as the driving force of progress and rest on a defence of private property.

Their ideas can be criticised in several ways:

The first central problem that needs to be addressed is that, as I argued, such writers take as the basic unit of society the rational self-interested individual. The individual is artificially removed from the cultural and sociological factors which in reality shape and are in turn shaped by the individual.

Historically man is a social being not an egotistical loner. The natural unit has been the community not the individual. Nozick in particular rests his case on a historical vision of the individual who in fact responds to the expectations, needs and fears of the greater society rather than being determined purely by his or her own will. The fact that wealth creation of any significance is itself a collective act is particularly damaging to the new liberal view of human nature.

Man not only lives in communities he also makes associations, forms companies etc. The idea of the individual producer would not only be unproductive it would be impossible without reference to the other. The new liberals are convinced that the individual is the best unit for a progressive wealth creating society but in any large scale production some form of association will be needed, and this in turn will result in a loss of autonomy for the individual. Because of the influence of such easily identifiable societal realities such as class, gender, and race, the individual's chances to join a successful association will not be equal despite the abilities that individual might possess. Therefore a spontaneous order based on natural inequalities of skill cannot exist in reality.

The logical conclusion to be drawn from the idea that the individual should be free from restraint to develop their talents would be to undermine these unjust barriers which prevent the 'best specimens' from succeeding. Nozick himself seems to recognise this when he talks about allowing for a temporary state which would have a much greater role than his ideal nightwatch-man state would. This state would try to rectify past injustices which he acknowledges has impaired the natural order.

The fact that Nozick is forced to attempt this when he actually looks at a real society (he was observing his native America) undermines his theories in a serious way. Nozick may be right in his view that to attempt to create equality by state intervention would be impossible but surely just as economic inequality would reassert itself so would inequality based on prejudice, class etc. It is therefore hard to see how the increased role for the state would be reduced unless more extensive action could be taken to isolate the individual's life chances to ensure that only the most able succeed. Thus legislation would have to be taken to remove property that was unfairly acquired (by force, legal tricks, etc.) and such laws would have to forbid, or at least limit, inherited wealth since this too would seem to be just as damaging to the natural order as the welfare system since it makes the family more important than the individual. Also any other privilege based on class would have to be removed where wealth and power bear no relationship to skill or talent.

When examined in a social and historical context it seems that the idea of a spontaneous order is extremely spurious. In human society power groups have invariably institutionalised their influence and thus sectional interest develops which limits the individual's freedom.

Hayek's view of freedom as not being related in any way to wealth or the actual ability of someone to make use of this negative liberty also seems to be weak when examined in the light of social reality. Hayek states that freedom cannot be limited by the action of market forces because the outcome of these cannot be foreseen and do not intend harm to individuals. However the fact that Hayek advocates a market system as the best guarantee of freedom implies some knowledge of its results and outcome. Therefore Hayek's argument that markets cannot coerce because they do not intend to is contradictory. It is clear that in a modern industrial nation where macro-economic policy is carefully monitored governments and other bodies do have access to a large body of knowledge which allows for predictions of the general outcome of policies, or at least the affects can be noted after a policy has been implemented. Hayek, as he does with the individual, makes an abstraction of the market without reference to real historical instances.

Hayek and Nozick do not only argue that their concept of a limited state is best for the individual they also state that it would be best for all human kind. The workings of an unfettered market would provide society's needs and stability would result. One can question however whether their view of the role of the state is practical or desirable as it ignores or dismisses the other possible functions in a modern state. To take one example, internal law and order and the protection of the right to property would be under massive strain because of the divisive nature of vast, visible inequalities.

In such a system large scale social disorder would result. If one turns again to an actual society, for example modern America, where laissez faire economics operate more freely than anywhere in the world, indicators of social conflict are higher than in European countries where greater social welfare exists. Instances of crime, drug addiction and public disorder are much higher.

Many commentators, for example Robert Merton, have linked this to the nature of American society in which a state of anomie has been reached. He argues that there exists an imbalance between expectations, which are fuelled by the mass media and education, and opportunities, which are blocked for many groups and individuals for a number of sociological reasons such as racial prejudice. In a society which places its value emphasis on material wealth the discontentment of those who cannot obtain these goals will be a major problem. In America this has manifested itself in large-scale marginalisation of inner city areas and high levels of organised crime. In many cases the citizen has become almost totally estranged from the state.

In a society which fulfils Nozick's vision it is highly likely that any money the individual saves from paying tax on welfare for the poor, will be taken up instead in vast expenditure on the maintenance of law and order. Once again the way social structures can influence and/or distort the individual's perception of, for example, social justice is ignored by the Neo-Liberals.

The fact that we do not all fit the 'ideal' version of individuality that the Neo-Liberals envisage has been a large problem to political parties who have tried to implement the philosophy of people like Hayek and Nozick in real states with real histories and diverse citizens. Thus those societies, like Britain, which have adopted aspects of the Neo-Liberal philosophy have seen an increase in social conflict, such as increasing crime rates and urban disorder. In my opinion this has been due in no small measure to a mistaken view of the most suitable relationship between the state and the citizen.
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Author:Faulks, Keith
Publication:Contemporary Review
Date:Apr 1, 1993
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