Saturday, May 29, 2010

The metaphysical orientation of the European neo-liberal movement

In my last post, I commented on the left-leaning politics of the Vienna Circle and noted that (so far as I know) the only classical liberal associated with the group was Louis Rougier. Rougier was also involved in the European neo-liberal movement. I suggested that the two movements were antithetical in certain respects.

I think the key differences are metaphysical, or concerned in a general way with attitudes to religion. It's well known that the logical positivists were anti-metaphysical and overwhelmingly anti-religious. The neo-liberals, on the other hand, though not concerned with either metaphysics or religion in any overt way, were driven in their political and economic views by a powerful belief in human freedom. I suggest that such a belief is metaphysical - even religious.

And, sure enough, when one examines the writings of key figures in the neo-liberal movement, one finds evidence of idealism (in the philosophical sense, i.e. the antithesis of materialism). Ludwig von Mises, for example, said that he did not accept the doctrines of any religion but believed that particular religions imperfectly expressed an essence or core of truth. Louis Rougier, though less forthcoming than his friend Mises, is another who was arguably an idealist at heart. Significantly, one of the papers he wrote for Erkenntnis (the main journal of the Vienna Circle) in the 1930s was on human freedom. In it he defends free will and rejects a materialist approach to human will and action.

I am trying to clarify my own personal views, and it bothers me that most other intelligent physicalists - in the 1930s and today - seem to have had/to have left-leaning views. It also bothers me that most of the defenders of the social and political values I hold dear are either religious or 'mysterian' (like Mises or Rougier).

It bothers me because I have the feeling that I might be missing something!

Sunday, May 23, 2010

The political orientation of the Vienna Circle

I have a particular interest in two (in certain respects antithetical) movements which flourished in Europe in the 1930s. Both had profound effects on subsequent history.

One was logical positivism, which developed in Vienna in the 1920s under the leadership of Moritz Schlick. The goal of the movement was to apply the latest discoveries and methods in physics, mathematics and logic to philosophical questions and, in so doing, to undermine metaphysics by showing its traditional problems to be pseudo-problems which had not been recognized as such by philosophers because of a naive approach to language. Ordinary language was not only vague, its grammar was permeated by metaphysical assumptions. Nietzsche had recognized this, but it was only the development of formal logic by Frege, Russell and others that allowed the deficiencies of ordinary language to be understood and ultimately to be left behind (so far at least as scientific activity was concerned).

The other major movement to which I refer is the European neo-liberal movement which crystallized for the first time at a Paris gathering in 1938, but which did not gain prestige and importance until after the War (notably in the form of the Mont Pelerin Society). This movement brought together economists and others who were convinced of the importance of competitive markets and who were resolutely opposed to totalitarianisms of the left and of the right.

What I find particularly curious is that the logical positivists (with a very few exceptions) were either socialists or social democrats. The only exceptions that I know of were foreign associates: Willard Van Orman Quine, an American in his twenties on a traveling scholarship, was certainly a conservative in his later years; and Louis Rougier, the preeminent French associate of the Vienna Circle, was a liberal conservative and, so far as I know, the only figure to be associated with both logical positivism and the European neo-liberal movement. (Indeed, Rougier played a leading role in the early years of the latter movement, and convened the 1938 Paris meeting.)

Thursday, May 20, 2010

Passing in the night

I live in a quiet residential pocket of inner Melbourne, Australia, and every night I go for a walk along the banks of the Yarra River. Last night, about 10:30, just as I was walking back up the otherwise deserted street to my apartment, I saw a band of people on the sidewalk ahead coming in my direction. I was startled by the extremely hostile and suspicious look of the first man I passed. (This is normally a very friendly neighbourhood.)

Then I passed a man and a woman in expensive tracksuits walking together, the woman talking non-stop. The man I brushed past was the Prime Minister, the automaton-like Kevin Rudd. Then a few burly bodyguards, and, at the rear, two pretty young women, no doubt with guns.

The little bubble of unreality had passed. Soon the PM would be programed for today's events.

The current Labor Party government, by its recently announced resources tax, has done great damage to Australia's reputation as an investment destination, but I didn't think last night an opportune time to raise this issue with the man at the top.

Monday, May 17, 2010

Niall Ferguson on the end of Western supremacy

The Harvard historian Niall Ferguson, in a presentation at a conference in Christchurch, New Zealand, has made a number of points which support and give added substance to the line I have been taking in recent posts.

  • We might, he claimed, be witnessing an extraordinary event: the end of Western supremacy.

  • The current plight of the US is evident in the flow of interest payments. In the next 4 or 5 years the US will be spending more on debt servicing than defense. It is predicted that by 2040 interest payments will amount to 20% of GDP.

  • The only time a government has reduced large scale debt by slashing expenditure, tax rates and other prudent fiscal means was in Britain in the aftermath of the Napoleonic wars. The hard decisions were facilitated by the fact that Britain was only a partial democracy at the time, and much of the heavy lifting was courtesy of the Industrial Revolution.

  • The most recent historical precedent for such high levels of debt as we now face was the US and European debt after World War 2. It took three decades of growth - and inflation - to fall.

  • Inflation is coming. Bonds are as safe a haven as Pearl Harbor in World War 2.

  • In response to a question from the audience, Prof. Ferguson said that the resurgence of Keynesian policies was "sowing the seeds of the next crisis." He predicted an eventual return to favor of the theories of the Chicago School.

Tuesday, May 11, 2010

The decline of the West: some more numbers.

The broader context of the fiscal and political problems of Europe and the US is long-term economic decline.

For more than a thousand years until the early 19th century, Asia's share of the world economy was well above that of Europe. At the beginning of the 19th century - as the West began to benefit from its development of science and technology - Asia's share of global GDP plummeted.

Asia finally began to recover in the mid-20th century. Measured at purchasing-power parity Asia's share of global GDP was 18% in 1980, 27% in 1995 and 34% in 2009. Currently Western Europe and the US are in precipitous relative decline and Asia is on the rise - to the extent that The Economist has suggested (Feb. 27, 2010, pp. 71-2) that Asia's economy will probably exceed the combined sum of America's and Europe's within four years.

Yes, everybody knows about the rise of Asia and the relative decline of Europe and America, but the extent and speed of these changes and their profound implications (largely unpredictable of course) are generally not appreciated.

I remember thinking during the Asian financial crisis of 1998, when Europe and America seemed so stable and strong, that predictions of Asian dominance were premature. How things have changed in 12 years!

I hope to say a few things about the implications of these changes in future posts.

Tuesday, May 4, 2010

Populism and fiscal policy

Fiscal populism is always dangerous but the populism engaged in by the left is more dangerous than the center-right variety. Typically center-right governments simply bribe the middle class by offering 'free' services, subsidies and other benefits in return for votes. Left-of-center governments tend to bring into play not just greed but envy and resentment, demonizing big business and the rich.

Often they are driven by ideology in this, and are signalling to their core constituencies - radical elements and organized labor - that they have not been forgotten despite the compromises that being in power usually requires.

Recent verbal attacks by the Obama administration and various European governments on banks and bankers are examples of this kind of populism, as are this week's rhetorical assaults on mining companies by Australia's big-spending, left-wing government, and their announcement of a 40% 'resource super-profits tax'. (Already announcements have been made by mining companies that various Australian projects are not to proceed or are being reviewed.)

Does democracy inevitably lead to such populism and ultimately to government indebtedness and lower living standards? Or can voters take the long view?*

It remains to be seen if the tea-party movement and other advocates of smaller government in the US will have any real success. I suspect that the US debt is just too large and the measures required to fix it will be too painful to be carried through. Similarly I suspect that the Conservatives in the UK will provoke huge amounts of public anger if indeed they have the courage to tackle the UK's budget problems. [Added later: I guessed (wrongly) that the Conservatives would get an absolute majority. The hung parliament - and the prospect of another election within a year or two - makes the UK situation even more dire.]

A recent poll in Australia suggests that the fiscally responsible conservative coalition which was in power from 1996 to 2007 has a chance of winning an election to be held later this year, as the current Labor Party government seems to be losing credibility after introducing a string of ill thought-out programs and policies culminating in the new resource rent tax.

*It's worth noting in the current context that many of the European neo-liberals who advocated a return to market principles in the 1930s and again - with rather more success - after World War 2 were decidedly wary about majoritarian democracy, seeing it as posing a very real threat to responsible long-term thinking and decision-making on the part of political leaders.