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Let’s be cheeky and try to understand something about the Austrian School using the ideas of the Frankfurt School. The two are, in any case, now permanently locked-together in a Reichenbachian struggle. At least, the bastard ideological descendants of the Austrian School seem to imagine this. For some reason. So fuck it, let's ignore the fact that this is actually a delusional notion (at least as it is generally meant), and see what happens when they actually fight.

In his 1941 book Fear of Freedom, the Marxist-Freudian Erich Fromm elaborates a dialectical account of human consciousness in late modernity through the prism of a dichotomous conception of the concept of freedom. For Fromm, freedom can be divided into the very dyad of ‘freedom from’ (negative freedom) and ‘freedom to’ (positive freedom) that we have already raised in connection with Hayek. Hayek, the Constant Reader will remember, is (ostensibly) concerned for the most part with ‘freedom from’, that is: absence of coercion. Fromm says that freedom from (hence ‘FF’), while desirable and often fought for, carries dangers within it. It is not a guarantee of happiness. Indeed, it can generate unhappiness, and from thence destruction. (To be clear: Fromm is not offering this view as an apologia for tyranny.) Essentially, Fromm’s idea boils down to saying that the absence of political or social coercion can be deeply unsatisfying because FF, being essentially negative (one does not, for instance, actively experience the absence of a policeman’s boot in the teeth as a pleasure), leaves us without ‘freedom to’ (hence ‘FT’). In capitalist society, we remain alienated.

Fromm goes on, in Marx’s Concept of Man (1961), to describe humanity, alienated in capitalist society, as having a self-orientation which he calls a “marketing orientation”, in which

man experiences himself as a thing to be employed successfully on the market. He does not experience himself as an active agent, as the bearer of human powers. He is alienated from these powers. … His sense of self does not stem from his activity as a loving and thinking individual, but from his socioeconomic role. If things could speak, a typewriter would answer the question “Who are you?” by saying “I am a typewriter,” and an automobile, by saying “I am an automobile,” or more specifically by saying, “I am a Ford,” or “a Buick,” or “a Cadillac.” If you ask a man “Who are you?”, he answers “I am a manufacturer,” “I am a clerk,” “I am a doctor–or “I am a married man,” “I am the father of two kids,” and his answer has pretty much the same meaning as that of the speaking thing would have. That is the way he experiences himself, not as a man, with love, fear, convictions, doubts, but as that abstraction, alienated from his real nature, which fulfills a certain function in the social system. His sense of value depends on his success: on whether he can sell himself favorably, whether he can make more of himself than he started out with, whether he is a success. His body, his mind and his soul are his capital, and his task in life is to invest it favorably, to make a profit of himself. Human qualities like friendliness, courtesy, kindness, are transformed into commodities, into assets of the “personality package,” conducive to a higher price on the personality market. If the individual fails in a profitable investment of himself, he feels that he is a failure; if he succeeds, he is a success. Clearly, his sense of his own value always depends on factors extraneous to himself, on the fickle judgement of the market, which decides about his value as it decides about the value of commodities. He, like all commodities that cannot be sold profitably on the market, is worthless as far as his exchange value is concerned, even though his use value may be considerable.

(I’d like to note in passing that I have some fundamental disagreements with Fromm. He wrongly sees Marx’s concept of man as metaphysical and religious, and is far too reliant on Freud - himself, like Mises, a fin de siècle Austrian who elaborated a radically subjective, religiose, and pseudo-scientific crackpot theory of human behaviour. And I have big issues with the Frankfurt School generally… though they’re not the same ones you tend to find vocalised on YouTube. Even so, like the Frankfurt School, Fromm, while deeply flawed, offers some provocative insights. And I’d even say the same about Freud. Quack he may have been... but quacks can have good days, and Freud had a few.)

According to Fromm, even if all coercion from tyrants and institutions is removed, humanity in capitalism remains anxiously trapped in the corrosively hopeless condition of commodification. Fromm sees humans, thus semi-freed, increasingly afflicted with the malaise of FF, as fleeing to authoritarianism, destructiveness, and conformity. He sees Nazism as, essentially, a response to the predicament of FF.

For Fromm, this dialectical and circular process repeats through history. He brings up the rise of Protestant theology during the Reformation – particularly the ideas of Luther and Calvin – as examples of the development of ideas which express and respond to increases in FF. (We talked a little bit about this last week, if the Constant Reader will recall.) As the old feudal order crumbled and capital arose, increasingly people felt less constrained by socioeconomic bonds and more aware of themselves as individuals with subjectivity. “Growing individuation means growing isolation, insecurity, and thereby growing doubt concerning one’s role in the universe, the meaning of one’s life, and with all that a growing feeling of one’s own powerlessness and insignificance as an individual.” Freedom – that is FF – grew, and security was sought in beliefs which expressed the greater freedoms and also offered an explanation for feelings of anxiety. As Fromm puts it: “Protestantism and Calvinism, while giving expression to a new feeling of freedom, at the same time constituted an escape from the burden of freedom.” Lutheranism contextualised anxiety in the doctrine of sin, in Luther’s conviction of the essential evil and powerlessness of humanity, and then offered freedom in individual abasement to the ultimate authority of God, even as it expressed the class interests of the rising middle classes against declining and decadent feudal and Catholic authority, with its rejection of Catholic salvation. To quote Fromm:

[In] Luther's picture, [m]an is free from all ties binding him to spiritual authorities, but this very freedom leaves him alone and anxious, overwhelms him with a feeling of his own individual insignificance and powerlessness. This free, isolated individual is crushed by the experience of his individual insignificance. Luther's theology gives expression to this feeling of helplessness and doubt. The picture of man which he draws in religious terms describes the situation of the individual as it was brought about by the current social and economic evolution. The member of the middle class was as helpless in face of the new economic forces as Luther described man to be in his relationship to God.

But Luther did more than bring out the feeling of insignificance which already pervaded the social classes to whom he preached--he offered them a solution. By not only accepting his own insignificance but by humiliating himself to the utmost, by giving up every vestige of individual will, by renouncing and denouncing his individual strength, the individual could hope to be acceptable to God. Luther's relationship to God was one of complete submission. In psychological terms his concept of faith means: if you completely submit, if you accept your individual insignificance, then the all-powerful God may be willing to love you and save you. If you get rid of your individual self with all its shortcomings and doubts by utmost self-effacement, you free yourself from the feeling of your own nothingness and can participate in God's glory. Thus, while Luther freed people from the authority of the Church, he made them submit to a much more tyrannical authority, that of a God who insisted on complete submission of man and annihilation of the individual self as the essential condition to his salvation. Luther's "faith" was the conviction of being loved upon the condition of surrender, a solution which has much in common with the principle of complete submission of the individual to the state and the "leader".

Luther's awe of authority and his love for it appears also in his political convictions. Although he fought against the authority of the Church, although he was filled with indignation against the new moneyed class--part of which was the upper strata of the clerical hierarchy--and although he supported the revolutionary tendencies of the peasants up to a certain point, yet he postulated submission to worldly authorities, the princes, in the most drastic fashion. Even if those in authority are evil or without faith, nevertheless the authority and its power is good and from God, Therefore, where there is power and where it flourishes, there it is and there it remains because God has ordained it.

Similarly, Calvin’s ‘Doctrine of the Elect’, with its teaching that the salvation of a few is preordained, but that one must also strive, both expresses the ascendant feelings of isolation and anxiety while also allaying them with an extreme form of determinism, which then also permits an expression of individualism within the limits of an authoritarian cosmic schema. If the damnation or salvation of each individual is pre-decided and unalterable, all that remains is for each individual to labour as hard as they can to discover their own degree of holiness. An expression of individualism within a comfortingly rigid hierarchy.

These, like Nazism in the C20th, are expressions of Fromm’s thesis that

if the economic, social and political conditions on which the whole process of human individuation depends, do not offer a basis for the realization of individuality … while at the same time people have lost those ties which gave them security, this lag makes freedom an unbearable burden. It becomes identical with doubt, with a kind of life which lacks meaning and direction. Powerful tendencies arise to escape from this kind of freedom into submission or some kind of relationship to man and the world which promises relief from uncertainty, even if it deprives the individual of his freedom.

Now, something rather extraordinary emerges here. The Austrians, for all their ostensible rejection of statism and authoritarianism, begin to look like a heterodox sect of radical Protestantism. This outrageous statement clearly requires some justification, as amusing as it would be to simply leave it there.

In his essay ‘ Nietzsche’s Marginal Children ’, which I directed you to last week, Corey Robin identifies certain profound assumptions on the part of the Austrians (or at least recurrent in the most prominent exemplars of their trend) which relate to their conception of value. Having reiterated that, being among the originators and extremists of marginalism, the Austrians view (economic) value as radically subjective, Robin goes on to point out the deep ways in which they – most particularly Mises and Hayek – make “the market the very expression of morality”. To quote Robin:

Moralists traditionally viewed the pursuit of money and goods as negative or neutral; the Austrians claimed it embodies our deepest values and commitments. “The provision of material goods,” declared Mises, “serves not only those ends which are usually termed economic, but also many other ends.” All of us have ends or ultimate purposes in life: the cultivation of friendship, the contemplation of beauty, a lover’s companionship. We enter the market for the sake of those ends. Economic action thus “consists firstly in valuation of ends, and then in the valuation of the means leading to these ends. All economic activity depends, therefore, upon the existence of ends. Ends dominate economy and alone give it meaning.” We simply cannot speak, writes Hayek in The Road to Serfdom, of “purely economic ends separate from the other ends of life.”

It would be hard, by the way, to encounter a more forceful backhanded admission of the truth of Fromm’s view of human alienation mired in commodification, nor of the Marxist view that ideology arises from underlying economic structures and class position. Indeed, the only such admission more near-suspiciously perfect is the Doctrine of the Elect itself.

Moreover, the development of this viewpoint comes as a result of the Economic Calculation Debate. (Yes, there was a reason I put you through this.) This was, as the Constant Reader will recall, an argument between economists between the world wars which ensued from Mises’ contention that planned economies cannot work because, without a market, and therefore without price signals expressing demand, they can’t rationally allocate resources. Hayek’s contribution was to argue that the sheer number of calculations required of a marketless society makes planned economies prohibitively complex. When Lange et al developed the response of what was effectively the first idea of ‘market socialism’, they were effectively arguing (wrongly, in my humble opinion) that socialism could, essentially, just be capitalism but completely state managed. (At least that is how Marx would view their plan, because Marx saw capitalism's essence being the self-expansion of value via competitive accumulation, which would conspicuously be retained in Lange's model.)

The consequences of such thinking for the liberal capitalist order was what concerned Hayek. Might Western civilisation be convinced to discard what it had been persuaded to see as a needless, extraneous aspect of the system: personal, private interest? Hadn’t that dreadful process already begun?

As Duncan Foley puts it in Adam’s Fallacy:

Hayek saw disaster looming for the liberal cause in this episode. He did not believe that socialist managers could ever mimic capitalist entrepreneurs well enough to make socialist markets function. Thus he was led to shift the focus of this debate in a profound, fateful, and fruitful direction. It is not, according to Hayek, the market form that is critical to organizing the division of labor; it is the content of the market as a clash of personal interests that actually drives things forward. … The antagonistic relations of the market are no longer a necessary evil to be tolerated for the sake of getting our dinner (and a better one) out of the butcher and the baker, nor even an ingenious game we might play to squeeze out potential economic surpluses. In Hayek’s vision the antagonistic relations of the market are the existential core of human existence, the ground from which everything else emerges.

Hayek did not put his point in quite this way. He argued that the real metabolism of the market rests on its ability to force everyone to reveal their private information about needs, technology, and resources, whether they want to or not, and whether they participate in the market enthusiastically, seeking profit, or grudgingly, to defend their conditions of existence. … Hayek puts this informational aspect of the market in the central position. The capitalist market now appears as a critical component of a complex system of information revelation and exchange. The division of labor itself becomes a by-product and side effect of this play of information. The reason the socialist managers cannot mimic the capitalist market is that they have no direct existential interest to defend and assert in making market exchanges. Socialism imagines that economic life is a means to an end, a method of supplying the material needs without which human life and social life cannot function. The conceit of socialism is that supplying this material basis is just a matter of getting necessary productive work done. In fact, according to Hayek’s way of thinking, the central problem is to know what the necessary productive work actually is. Even the best-intentioned and most self-disciplined socialist worker-citizens would find themselves helpless to know where to expend their labor effort, or even to know whether what looks like an obvious social need (building a steel mill) may not be doing more harm than good.

[My emphasis.] (Pardon all these long quotes, by the way.)

Hayek has some points to make about command economies. They're not great. For instance, the managers have no personal interest in efficiently allocating resources, if we take ‘efficient’ to mean ‘best fulfilling the common good’. But, contra Hayek, it is the absence of democracy in a command economy which causes this problem, just as it is the absence of democracy in, say, a corporation, which causes essentially the same problem. The absence of democracy is the most fundamental thing negating the possibility of socialist co-ordination. In a corporation, the undemocratic manager already has self-interest as his goal. In a command economy, self-interest soon appears where the absence of democracy leaves the state manager without orientation. Hence the endemic corruption and inefficiency of such systems. The fact that the Right endlessly go on about this doesn’t make it untrue, and socialism won’t get anywhere sticking its fingers in its ears and pretending. Socialism cannot be about authoritarian statism, not just because authoritarian statism isn't nice, but because it doesn't work - at least not for any purposes which can meaningfully be called socialist. (Social-democratic or reformist, perhaps.)

Robin notes in passing that sentiments such as Mises’ view of wider human needs being satisfied by efficient market provision (see above) can be adapted to Left arguments. As he also notes, it’s worth remembering that several early marginalists viewed their theory as bolstering some left-wing ideas, and that marginalism was put into the theoretical service of welfarism, liberalism, and social democracy in the C20th. Even today there are left-libertarians, and most economists who are liberals or leftists embrace some form or other of marginalism (Keynesianism is marginalist). Similarly, bits of Hayek’s occasionally very pertinent critique of command economies can actually be adapted by anti-authoritarian variants of socialism. (Remember, there were even lefty(ish) currents within the early Austrian School.)

But we’re straying into another subject. Here I want to emphasize the way Hayek’s insights lead him deeper and deeper into an escalating fetishism of private property relations and thus, whatever his protestations (and he does protest), of the market form.

Marginalism’s rejection of any real element to value is taken to an extreme by Hayek, and is part of a wider semi-mystical belief in what Corey Robin calls, in The Reactionary Mind, “an almost hyperactive subjectivity - comparable to Freud’s anarchic id”. (Oh, hello again Sigmund.) It’s true that this is Robin’s description of John Gray’s picture of Hayek, but that picture was endorsed by Hayek himself in glowing terms.

Mises and Hayek are fundamentalist in their rejection of reason and rationality. Hayek sees rational, conscious understanding as being a mere thin layer on top of a vast, submerged well of tacit knowledge. His belief in the free market’s ability to express such mysterious gnosis is religiose. And at the center of it are his chosen caste of divine sensitives, the ‘entrepreneurs’, who he fetishizes as having special qualities, special style and timing and creativity, special abilities to express themselves and thereby remake the world. The horror of state planning is that it will, like repression or oppression, cramp the style of these artistic creatives. In its peculiar way, it’s a deeply Romantic vision. (Rooted in fin de siècle Europe, it might even be possible to describe it as a form of last-minute counter-modernist mechanically-recovered-Romanticism... another respect in which it has some similarities with fascism.) For Hayek, the entrepreneurs, if set free, create the world anew as they express their unique visions. They are capitalists as artists-as-heroes.

According to Robin, the Austrians – with, as I've said, their avowedly and a priori anti-socialist intent – push to the extreme of arguing that, since all decisions about ends and means are value-judgements, and since the essence of economic judgements is deciding on ends and means in the context of finite resources, then economic choices are revelatory of our highest and most fundamental moral values. (They, of course, take it as read that resources will always be scarce because they silently take it for granted that class will always endure, because no society can achieve generalised abundance – a self-fulfilling prophecy that is key to their project.)

The economics of the marketplace – the battleground in which we work out our desires and methods against ourselves, unforgiving nature, and others – is thus where morality comes from. It is where we make our economic choices, which are based on values, which are how we separate our higher and lower ends. The essence of morality, then, is the market. It is not that we achieve our highest ends via our market behaviour, but rather that we separate higher from lower ends via the market’s provision of the lower. Moreover, for Hayek, it is our very freedom to make the lower, economic choices which forces us to make them, and thus which forces value and values into our lives in the first place. As Robin puts it: “While the economic is, in one sense readily acknowledged by Hayek, the sphere of our lower needs, it is in another and altogether more important sense the anvil upon which we forge our notion of what is lower and higher in this world, our morality.” It is the hardscrabble, the suffering, the husbandry, that makes us capable of good. A profoundly (if fragmentarily) Protestant, even Puritan view of human life.

Part 2 Next Week. (You can't wait, can you?)