Karl Polyani noted that “Laissez-faire was planned; planning was not.” Planning was always an ad hoc response to the failures of capitalism and never constituted a single, rational response, but always a piecemeal attempt to correct the failures. Over time, a vast bureaucracy grows up, ever focused on the past failures, and unable to anticipate the next failure. Further, the bureaucracy itself is always under constant thrreat and its powers weakened over time, or co-opted by the very people they are supposed to watch. But at the point of failure, those who were most insistent that the government stay out of the market are the very ones who must insist that they government get back in.

A recent illustration of this principle is a book published last year by Judge Richard Posner. Posner is a Federal Appeals Court judge and has been the most articulate advocate of laissez-faire from the federal bench. He described himself as a libertarian to Reason Magazine, and is a co-blogger with Gary Becker, the Chicago-School economist who is a winner of the pseudo-Nobel prize in economics.

The title of the book will come as a shock to some, but not to others who are familiar with the historical process. The title is A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression. One does not actually need to read the book to grasp its significance; everything you need to know—the title and the author—is on the first page. Part of that significance is the use of the indefinite article, “a” failure rather then “the” failure. That is to say, just a minor glitch and not a substantial and recurring feature of capitalism.

As to the book itself, it is a workman-like appreciation of the crash, similar to many others. But it does have some curious lapses. Throughout the book, the Judge talks of the banks “lending out their deposits,” which means he has not adequately diagnosed the problem. In one sentence late in the book, and in that sentence alone, he concedes that the banks do not lend deposits, but create money by lending it. That is, it is the banks, not the government, that creates money, which the government (and everybody else) must then borrow and pay a tribute to the banks.

The Judge does not hesitate to use the D-word in describing the current situation. But despite that, his “solutions” are tepid indeed. He urges everybody to be “pragmatic” (without of course defining that term) and endorses the combination of monetary and fiscal policies that the administration has been following, only more so. In other words, he wants us to follow Friedman and Keynes simultaneously. Hence, the book is merely an interesting artifact, an illustration of a recurring theme in capitalism, the same theme noted by Belloc and Polanyi: when the crunches come (and they come all the time) the capitalist looks to the government to bail him out.

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  1. You haven’t been paying attention Sabin. Medaille’s project is to undermine the paralyzing lie of the false choice you so reflexively reached for.

  2. Ever since the Republican Party abandoned Reconstruction, and focused as its primary mission on advocating for corporate capitalism, the advocates of laissez faire opportunities for themselves have always expected government both to pave the way and bail them out. There was a certain rationale to this between the presidencies of John Quincy Adams and Abraham Lincoln. Adams saw federal highways (suitable for the time) as tying a scattered country together. Lincoln saw sponsorship of railroads as bringing subsistence farmers like his father in reach of markets for their produce. By the close of the 19th century, railroads were making more money off the free real estate they were given as a bribe to get track laid than off of running trains, albeit they charge exorbitant rates which cancelled out the advantage for farmers like Thomas Lincoln.

    Essentially businesses have been given a franchise to fulfill some policy objective, but then want to be left alone to “bleed the beast” to their own best advantage. GWB turned to Keynes when we were on the verge of Depression, because nobody had a better idea likely to do any good. What we need is libertarian freedom for individuals, without Friedman’s frantic advocacy of laissez faire for the beast of corporate capitalism, which is not a citizen, but either our servant, or the sorcerer’s apprentice run amuck.

    The problem with socialism is, once the means of production are made a state monopoly “in the name of the people,” someone is appointed manager, who starts to act very much like a capitalist. That, however, says nothing good about capitalism.

  3. Since right-libertarianism came close to destroying the world’s economy moving to left-libertarianism, or center-libertarianism, still has to grapple with producing a set of rules to stop the same kind of economic disaster happening again as the following article suggests:-


    Likewise devolving ownership of capital with pluralistic participative democracy in the form of associative democracy still retains the problem of sectional interest, or “workerism,” which again will require developing a set of rules to prevent further economic disruption. There is it would seem no way of avoiding the task of getting the mix of representative and participative democracy carefully formulated and appropriately institutionalized.

  4. There was an original 2008 version of Jim Manzi’s article and in it he writes:-

    “Until the world settles into an endless commercial peace, we must accept some limits on lifestyle and economic freedoms in order to retain the social cohesion necessary to meet inevitable external threats.”

    Retrospectively, I think what he would now be suggesting if he had to write the article again is that there should also be a “War on Financial Terror” to maintain social cohesion and this in a way is more important than the more familiar Islamic Fundamentalist “War on Terror.” This takes him a long way from his conservative libertarianism and the Republic and Democratic parties too! Here is the original article:-


  5. rp,
    Not to be tart but you did accuse me of not “paying attention”…have you ever heard of the term “irony”?

    Whether Socialist of Capitalistic, the people are always left holding the bag and searching in vain for their gouty government to come shoulder the weight of said bag. This is the fate of those who decide monolith is prudent.

    I do like Smith’s quote of Manzi and his “endless commercial peace”. It brings to mind some notion of a halcyon spring day in a Galaxy Class Big Box Outlet. Beam Me Up for the Red Dot Special.

    Another interesting statement in Manzi’s cited article is “if we alienate the affections of our own society, we will be unable to defend ourselves”.

    Trust, easy to squander, very hard to reclaim.

  6. After my previous posts it seems reasonable to pull their themes together into some kind of coherence, to make an attempt to describe a form of Cohesive Politics.

    Jim Manzi as a right/center libertarian has had the courage to admit that for human beings to live in association with each other will require experimenting with rules some of which will restrict individual rights to chose particular courses of action and accordingly are coercive in the name of the common good. Clearly, if the experiments are successful they will become norms. So, for example, in the history of human societies replacing the divine right of monarchy to rule by elected representatives seems to have been accepted as a better method for determining the common good. Nevertheless, as Jim has correctly stated human societies need to be constantly aware of the need to be flexible and adapt their rules, or norms. Here then we have acceptance from libertarianism by implication, if not in words, that policing the norms requires institutions. Jim uses the term “states as laboratories of democracy” to indicate the governmental form of institution. However, under a truly pluralistic form of democracy center libertarians would wish to use both representative and participative democracy across a wide range of human institutions, or associations, not just governmental using the principle of subsidiarity.

    All politics, therefore, can be described as the attempt to hold power for the purpose of coercively imposing norms. Current norms are being challenged by philosophers like Alasdair MacIntyre who argues from both a Marxist and Catholic perspective that the political system we live under in the United States is not a liberal democracy despite elected representatives. He argues that it is an oligarchical system because we have failed to understand that capitalism, which in theory is par excellence for adaption to meet human need, also allows vast concentration of wealth which then “buys” the political process to further increase the wealth of the oligarchic few. The common good is then determined by the few under the banner of the “free” market. It is this understanding that drives individuals like Matt Taibbi of Rolling Stone Magazine to describe the investment bank Goldman Sachs as the number one Vampire Squid because it has such “purchase” over government that it effectively determines much of the common good. MacIntyre makes long and detailed arguments as to why historically we have reached this point but in essence argues that we need to replace Oligarchic Politics with Virtue Politics. He is against liberalism because it is incapable of defining virtue, seeing one person’s viewpoint as good as another persons, and thereby producing a neutralized society which is exploited by the oligarchy. MacIntyre is all for devolution of power to all manner of human associations much in the way I have described it above for pluralistic center libertarians if you can still call them that. Certainly, MacIntyre would not call them Socialists or Neoliberals.

    However, Mac Intyre’s Virtue Politics which is based loosely around the ancient Greek concept of the polis whilst laudable has for me a question mark. If the Greek polis was such an effective vehicle for defining the common good why was it unable to adapt to prevent capitalism becoming oligarchic and thereby continue effectively down the centuries? The answer I think stares us in the face and lies in biology. Human beings suffer from genetic maladaption. They suffer from Anti-Social Disorders which can range from persistent narcissism to aggressive sociopathy and recent research suggests that this is due to malformation of “wiring” in the brain exacerbated in some cases by poor nurture. Psychologists estimate that one percent of the US population is sociopathic and whilst only a few of them may become rapists and murderers some will come to occupy high level positions of power. In traditional hunter-gatherer societies sociopaths would be fewer in number because of the dependency need for their society and the socialization accompanying this. Indeed their lack of ability to empathize may have had its uses for killing animals and members of other tribes who posed a threat or offered a resource. If their behavior, however, proved a serious nuisance to the tribe they would be killed. The Inuit, for example, disposed of their sociopaths by quietly pushing them off the ice. The implication of this knowledge is that Anti-Social Disorders may predominant among an oligarchy and be a primary cause for their dominance. If this is so it seems prudent that the pursuit of Virtue Politics is always cognizant of the fact that even with the best intentions the process is liable to be rendered ineffective by persons with ASD’s and the creation of checks and balances to avoid abuse of power is critical. Small scale abuse of power is inevitable amongst human beings but MacIntyre is right to protest the large scale “purchase” of a political system under current oligarchic capitalist arrangements. Perhaps combining Virtue Politics with checks and balances on ASD’s we might one day create a Cohesive Politics.

    For those not familiar with MacIntyre’s political philosophy it is laid out by Ted Clayton in the following Internet Encyclopedia article:-


    For a short primer on sociopathy see Barbara Oakley’s article:-


  7. Hence perhaps the chief problem with polar ice cap retreat, the reduction of available ice to push the sociopath off. There is always the pesky distinctions of the sociopather and sociopathee as well.

    “Virtue Politics” does make me want to reach for my knife though…the virtuecrats always busy distilling all virtue out of the body politic, leaving a rotgut wine ready to fill with all manner of artificial flavorings.

    Perhaps the best Check and Balance to the Virtuists is more of a concentration on our depravity so that we might retain a clear idea….not a popular idea but a clear idea in humility….. of what virtue really is.

    Man’s perfectibility remains one of the oldest satires we possess. Hence the need for wide latitudes of opportunity chastened by clear reckonings of our manifest sins.

    Though sin does seem to have become a tad deflated these days as armed camps of sinners against sinners squawk away into a future where the idea of an “underpants bomber” will work its many charms.

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