fbpx

The Inescapable Tragedy of Postliberalism

Postliberalism offers modern society a tragic choice. I don’t mean that as an indictment of postliberalism. Many choices require that one fundamental good be traded off for another fundamental good. What is an indictment of postliberalism, however, is the pretense of some of its advocates that it requires no tradeoffs, that modern society faces no tragic choice in choosing between economic liberalism (or “neoliberalism”) and postliberalism.

Guido Calabresi and Philip Bobbit did not precisely define what makes a choice “tragic” in their classic 1978 book, Tragic Choices: The Conflicts Society Confronts in the Allocation of Tragically Scarce Resources. I would identify three elements as necessary for a social choice to be genuinely tragic: the choice requires a tradeoff between fundamental human goods, the human goods are incommensurable, and the people who benefit from one choice are not the same people who bear the cost for that choice.

While postliberals criticize liberalism along a broad front, a regular feature of their criticism of economic neoliberalism are observations about the impersonalism and anonymity of modern market economies. 

Postliberals like John Milbank and Adrian Pabst in the Politics of Virtue propose to re-humanize economic exchange by reinvigorating local production and re-personalizing market exchange. Setting aside the practical issue of how one moves Western economies wholesale from where they are now, integrated into a global supply chain, to a future where they recreate local production and more-personal markets, one can nonetheless concede the attraction of doing so. I appreciate weekend “farmers’ markets,” and I like knowing the people with whom I trade. In the past, every grocery store was effectively a market of and for local farmers. And everyone knew everyone else, and interacted repeatedly, both socially and economically.

But these experiences are increasingly on the margins in most of our lives. While we may pick up a few pieces of fresh produce at the farmers’ market on Saturday morning, most of us no longer purchase much of our food at the mom-and-pop grocer down the street, even if it has not yet been replaced by a 7-Eleven. Instead we shop at huge, national chain supermarkets. There we are lucky to see the same employees more than once, and nothing in the stores encourages the cultivation of personal relationships.

Neoliberal market exchange, however, is not simply about groceries. It’s about the status economic exchange has in our lives writ large. It shapes not just our work relationships but many other aspects of our public and private life. It’s about the vast majority of our purchases, and the necessary, inevitable anonymity of those who make and sell those goods and services.

My beef with the postliberal criticism of modern economies is not the claim that we have lost something significant in the transition from local, more-intimate and more-personal economies to the large, anonymous economies we have today. While we clearly have enjoyed enormous growth, it came at a steep social and cultural cost. 

What bothers me about the postliberal criticism is the widespread papering over the costs of returning to those economies, as if a broad return to economic localism and personalism would bring only benefits, and impose no great costs. Even more vexing is the suggestion that creating a postliberal economy would actually increase economic prosperity and incomes across the board.

For example, in The Politics of Virtue, Milbank and Pabst argue that “re-localization of the economy” would spur an increase in “real wealth,” that is, in overall economic prosperity. So, too, they claim that increasing the national minimum wage would have only a “small negative impact on employment.” These same increases in minimum wages would instead have a “very large positive impact on the poor,” with “higher household income, lower personal debt, more consumer spending, higher tax revenues and lower spending on in-work benefits.” Indeed, a higher minimum wage “in turn offers scope for tax cuts for low-income families and small businesses.”

Similarly, Milbank and Pabst claim that “paying higher prices for locally produced goods . . . raises real wages in all trades.” Indeed, creation of an Italian-like (!) “civil economy” would even decrease the number and magnitude of business cycles.

Even conceding the significance of the social benefits Milbank and Pabst seek to promote, we should recognize that they do not frame them as tragic choices. Rather, in the best tradition of Madison Avenue, their postliberalism offers it all: social solidarity and a bigger economic pie to boot—not just the proverbial chicken in every pot, but a resurgence of community as well. 

Yet far from promoting greater economic prosperity with only “small negative” impacts on employment, the social benefits they seek to recover can only be had with a huge downward shift in Western, even global, prosperity.

To be sure, even if costs are sizable, the gain might be worth the loss. Wilhelm Röpke emphasizes several times in A Humane Economy that the significance of a social commitment to the teaching that “man does not live by bread alone.” This teaching is what Milbank and Pabst seek to implement in spades. (Not that Röpke should be conflated with Milbank and Pabst. The latter criticize Röpke for being too mild in his policy suggestions.)

The problem, though, is that local production and personal exchange cannot sustain a world of 7.9 billion souls without a significant decrease in living standards.

The problem is that both left-wing and right-wing postliberals make the wrong diagnosis. They blame the market for the anonymity of modern production and exchange when in fact the anonymity of production and exchange is caused by specialization and the division of labor. “Re-embedding” markets in social life—even getting rid of them entirely—can’t eliminate the need for modern levels of specialization and the division of labor, at least at current levels of production and consumption.

This is the upshot of Adam Smith’s famous dictum, “the division of labor is limited by the extent of the market.” We read this and think that Adam Smith argues that thicker markets cause an increase in the division of labor. But “the market” here simply stands in for the number of consumers, whether those consumers live in a market economy or not. Smith’s dictum simply means that a larger number of people who desire a particular good or service provides a platform that allows a greater division of labor. 

This insight is as true for a non-market economy as it is for a market economy. Simply consider any system of production and allocation sufficient to sustain life for all the world’s people. This system can be a market system or a non-market system, or a combination of both. How could the world achieve current levels of production without the level of the division of labor and specialization that we see today?

The implication is clear: if production and exchange of goods and services are going to be re-localized and re-personalized to any significant degree, production necessarily must decline significantly as a result.

Indeed, we need not go that far back in the past to glimpse the magnitude of the tradeoffs necessary to recover earlier levels of economic localism and personalism.

Consider: The 1950s were hardly the heyday of economic localism and personalism in Western nations. If anything, this was the decade that supercharged globally-anonymous production and exchange. Yet according to the OECD study, GDP Per Capita Since 1820, per capita GDP in the U.S. in the 1950s was scarcely one-third of what it was in the 2010s (in constant dollars). 

Or go back just two more decades. Per capita GDP in the U.S. of the 1930s was scarcely one-fifth of what it was in the 2010s. 

Go back a little further to the turn of the century, when the U.S. experienced a much more local and personal economy. Per capita GDP was less than one-seventh of current GDP.

To be sure, these numbers would be altered by the advent of modern technology. But we can’t press that argument too far: even the development of modern technology depends critically on an “extent of the market” that extends across the globe, permitting high levels of specialization and the division of labor. And it is from those features that economic anonymity proceeds.

The point isn’t that associational benefits of economic localism and personalism could never be worth the cost. The point is that achieving those associational benefits to any significant degree isn’t simply a matter of shaving a percentage or two off current per capita GDP. It would require huge decreases in modern living standards.

Hence, the “tragic choice.” We can’t recover both economic localism and personalism to any significant degree and still maintain anything close to modern living standards.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on July 24, 2019 at 12:11:40 pm

YAY—we’re back in Mr. Rogers’ neighborhood! I can hear the piano already….

The thesis of The Politics of Virtue sounds fascinating. The claims sound too good to be true. I suspect they are.

Admittedly, I haven’t read the book so I’m not really in a position to evaluate their arguments. That said, Wikipedia reports that John Milbank has studied modern history, philosophy, and theology. He rejects social science and modernity, and believes theology should not reflect any of social science’s insights. Instead, he embraces “radical orthodoxy.” Adrian Pabst at least studied economics as an undergraduate, before getting his doctorate in political theory and philosophy. These guys are not obvious candidates for generating quantitative assessments of the economic consequences of public policy.

And sophisticated quantitative reasoning skills might help. First, there are many complicated arguments for and against a minimum wage. But the argument that a minimum wage could trigger so much growth as to justify a tax cut is … not obvious. In the US, minimum wages generally benefit those who earn so little as to pay no income taxes, especially with the new standard deduction. So we’d have to expect this surge of government revenues to come from payroll and sales taxes, plus some reduction in social safety net expenditures. But presumably firms paying these higher wages will be reporting LOWER profits due to their increased labor costs—and that should result in them paying LOWER taxes. Higher costs of production would generally trigger higher prices which, all else being equal, should DECREASE economic activity. In short, it’s a pretty complicated analysis for a couple of philosophers publishing without the benefit of an econ journal’s review process.

Beyond the general question about the merits of a minimum wage in general, there’s the question about the merits of a nation-wide minimum wage. The arguments in favor of that policy grow harder as the nation’s economy polarizes. A meaningful minimum wage for San Francisco will almost certainly be inappropriate for Appalachia. The urban clerk who regularly serves 20+ high-paying patrons an hour will justify a higher salary than the rural clerk who serves only four. But that’s not a problem, assuming the rural clerk also has lower living expenses. But that’s precisely the kind of distinctions that a nation-wide minimum wage would ignore. If a merchant cannot legally pay the rural clerk less, he’ll have to let more of those clerks go and switch to more automated check-out systems (and perhaps raise prices to cover the cost of the new systems and the added shoplifting that these systems invite). Again, at the risk of denigrating divine guidance, I suspect a theology degree is not the optimal background for quantifying these dynamics.

Of course, all of these arguments pale in comparison to Rogers’s overarching argument about the benefits of specialization. In the book, how does Pabst reconcile his support of localism with his own employment history, a German teaching in the UK? And if Milbank comes down with a rare cancer, do you suppose he’d seek treatment from his regular doctor—‘cuz, you know, she’s the one he has the closest connection to?

The post-liberal gang (especially those at First Things) are really good at encouraging people to abandon the status quo, along with any sense of perspective. Since Milbank studied modern history, perhaps he’d benefit from reviewing Churchill’s observation about democracy being the worst system ever devised—except for all the others.

read full comment
Image of nobody.really
nobody.really
on July 25, 2019 at 03:23:29 am

Thank you for emphasizing nature of the issue, the economic tradeoffs implicit in the localism movement. Indeed, if consumers were happy to pay higher prices for the familiar clerical faces and local chatting opportunities in a store, it will simply cost more. But when most people have their larger goods delivered from Amazon, perhaps supermarkets and superstores also become obsolete.
Consumer choices drive this choice-system.

When I read your statement of the issue, I hear the loud voice of "WE/US/OUR" with no clear idea how such an entity makes "a choice"?
Quoting from the essay:
"Postliberalism offers modern society a tragic choice. I don’t mean that as an indictment of postliberalism. Many choices require that one fundamental good be traded off for another fundamental good. What is an indictment of postliberalism, however, is the pretense of some of its advocates that it requires no tradeoffs, that modern society faces no tragic choice in choosing between economic liberalism (or 'neoliberalism') and postliberalism."

In the Liberal system, individuals make choices for themselves and their families, etc. A decentralized market with localized information coordinates people, as F.A.Hayek observed.
How does the "Post-Liberal" system make its choices? Majority voting? That is insufficient wishful thinking, considering the millions/billions of choices needing to be made in economics every day. This underscores your main point, about what a localized "postliberal" world would look like (if a Big Brother made the social choice for "US."

read full comment
Image of Joe Cobb
Joe Cobb
on July 25, 2019 at 09:28:46 am

Look, what globalism did was end the Virtuous Local Economy whereby older persons loaned money intergenerationally to young families through local banks to buy homes, cars and start businesses. Now, in its place if you walk into a bank you get a return on your money less than inflation and older persons are compelled to put their money in global stocks to make a decent return. This globalization of banking has eclipsed the local economy. Money no longer circulates locally but globally. Thus, money is vacuumed out of smaller communities to finance global enterprises. Whatever happened to the notion of a mixed, pluralistic economy? Must an economy be one size fits all? If there were a shift to banking through merchant banks and credit unions would more money stay in local communities? This article employs abstractions and intellectualizations that obscure this issue. Can we have both a local and a global economy or is it global and nothing else? And doesn't the globalization of financing end up sort of socializing everything? Isn't that what we have learned from the Mortgage Meltdown? Max Weber, who famously wrote about the Protestant Ethic and the Spirit of Capitalism, pointed out that Capitalism (profit taking) was legitimatized by Protestant religion unintentionally. What are the unintended consequences of global financing? Contra the rationalistic economists, man is not capable of knowing the entire outcome of human actions and economic policies.

read full comment
Image of Wayne Lusvardi
Wayne Lusvardi
on July 25, 2019 at 11:31:09 am

It really makes no clear sense when you write: "Money no longer circulates locally but globally."
"Money" is not a "Thing" like coins were (it is a credit relationship between local buyers and sellers, or between local buyers and out-of-town sellers.) It "circulates" locally already because local workers spend part of their incomes on local services and local products.

"Money" is another name for a quantified credit relationship, with bankers' ledgers helping sellers and buyers manage their transactions. Unlike old gold and silver coins, "circulation" is only a metaphor and it is neither "local" nor "abroad" in any manner different from how individuals contact and make agreements with others.

read full comment
Image of Joe Cobb
Joe Cobb
on July 26, 2019 at 17:41:24 pm

"For example, in The Politics of Virtue, Milbank and Pabst argue that “re-localization of the economy” would spur an increase in “real wealth,” that is, in overall economic prosperity."

But that is not true. Real wealth comes from capital formation and you can't do that if you make people poorer by forcing them to pay more for consumption. Countries that trade the most and have the least economic meddling tend to be the wealthiest.

"So, too, they claim that increasing the national minimum wage would have only a “small negative impact on employment.” These same increases in minimum wages would instead have a “very large positive impact on the poor,” with “higher household income, lower personal debt, more consumer spending, higher tax revenues and lower spending on in-work benefits.” Indeed, a higher minimum wage “in turn offers scope for tax cuts for low-income families and small businesses.”"

But that is wrong. Minimum wage legislation has its origin in protectionism and racism. In US, the Davis-Bacon Act is a relic of the Jim Crow era. The writers of the Act were clear that they wrote it to prevent non-unionized blacks and immigrants from competing with unionized white workers. The discriminatory effects continue today as minorities tend to be vastly under-represented in the unionized skilled trades while being overrepresented in the pool of unskilled workers. Among the unskilled, richer mostly white and Asian kids tend to have no trouble finding jobs while poor black and Hispanic kids find themselves worth too little to merit being hired.

We note the irony. The supporters of Davis-Bacon were not just racists but also anti-capitalist. They argued that the Act was needed to FORCE contractors who used cheap labour imported from the South to submit bids that were based on the ‘prevailing wage scale.’ Since the imported labour was slightly less productive, forcing their employers to pay the union wage meant that blacks were shut out of the market and free-market capitalism was no longer the rule.

It is not virtuous to assume some utopian notion about how the field of economics works and base arguments on false assumptions and goals that are not realistic.

"Go back a little further to the turn of the century, when the U.S. experienced a much more local and personal economy. Per capita GDP was less than one-seventh of current GDP."

This is a fake argument. While localism tends to reduce productivity and the standard of living, we cannot ignore the fact that the standard of living will go up as productive capital accumulates as it has. There are plenty of good arguments against the promotion of protectionism and localism. We don't need any bad ones to muddy the waters.

read full comment
Image of Vangel Vesovski
Vangel Vesovski
on July 26, 2019 at 17:49:34 pm

"Now, in its place if you walk into a bank you get a return on your money less than inflation and older persons are compelled to put their money in global stocks to make a decent return"

That has nothing to do with globalism. The banking system is a centralized cartel that has nothing to do with free markets.

read full comment
Image of Vangel Vesovski
Vangel Vesovski
on February 04, 2020 at 12:59:21 pm

[…] for these benefits, recognizing that antiliberalism necessarily posits there are fundamental, even tragic, tradeoffs at […]

read full comment
Image of McCloskey’s Brief Against Antiliberalism
McCloskey’s Brief Against Antiliberalism

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.