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The Profound Significance of Social Harmony

August 30, 2011

Tags Free MarketsWorld HistoryOther Schools of Thought

In ancient Greek mythology, Eris, the goddess of strife, was often a villain. It was her scheming that led to the Trojan War, which, as Homer said, made "many a hero … prey to dogs and vultures."[1]

In ancient Rome, Concordia, goddess of social harmony, was one of the most dearly loved deities. Often the Romans would dedicate a new shrine to her after a civil strife was ended.

Which goddess has the greatest sway over the doings of men? Which state of affairs is the most natural? Concord or discord? Harmony or strife?

Throughout history, each opposing goddess has had her own votaries among the intellectual set. One long-lived tradition within the "discord" camp holds that adversarial strife is a built-in fact of economic life. According to Ludwig von Mises, the fundamental thesis of this tradition states that

the gain of one man is the damage of another; no man profits but by the loss of others.[2]

Mises called this proposition the "Montaigne dogma," after the French essayist Michel de Montaigne, who did not originate the dogma but gave it a resounding endorsement. Mises said the Montaigne dogma was the "quintessence" of mercantilism, a school of economic thought which advocated beggar-thy-neighbor, protectionist international policies.

But the discord-preaching mercantilists were bravely opposed by the early liberals, who, based on the teachings of the newly developed science of political economy, believed in a fundamental harmony of interests in the market economy. Mises termed this belief the "classical harmony doctrine,"[3] and its propagators the "harmonists."[4]

For example, David Hume, who Mises called "the founder of British Political Economy,"[5] recognized that commerce was not an international "zero-sum game." He concluded one of his hugely popular essays, "On the Jealousy of Trades" by proclaiming that

not only as a man, but as a BRITISH subject, I pray for the flourishing commerce of GERMANY, SPAIN, ITALY, and even FRANCE itself. I am at least certain, that GREAT BRITAIN, and all those nations, would flourish more, did their sovereigns and ministers adopt such enlarged and benevolent sentiments towards each other.[6]

In the contest of ideas, the liberal economists eventually overcame the mercantilists. And so the classical harmony doctrine supplanted the Montaigne dogma in the minds of most leading men in much of the West. This resulted in what Mises called the "age of liberalism," which paved the way for the Industrial Revolution and its unprecedented strides in human welfare. We owe our standard of living, and the very fact that most of us are even alive, to the victory of the classical harmony doctrine over the Montaigne dogma.

Tragically, new antiliberal doctrines began to gain ground in intellectual circles starting in the second half of the 19th century. By the end of World War I, the social philosophy of strife was once again supreme, and it was more thoroughgoing than ever.

The "antiharmonists" on the Right, preeminently represented by the Nazis, preached irreconcilable racial or national conflict. The only path to peace was for the strongest race or nation to completely subjugate or destroy all others.

Mises analyzed this tradition with characteristic precision:

In the philosophy of the antiharmonists, the various schools of nationalism and racism, two different lines of reasoning must be distinguished. One is the doctrine of the irreconcilable antagonism prevailing among various groups, such as nations or races. As the antiharmonists see it, community of interests exists only within the group among its members. The interests of each group and of each of its members are implacably opposed to those of all other groups and of each of their members. So it is "natural" there should be perpetual war among various groups.…

The second dogma of the nationalist and racist philosophies is considered by its supporters a logical conclusion derived from their first dogma. As they see it, human conditions involve forever irreconcilable conflicts, first among the various groups fighting one another, later, after the final victory of the master group, between the latter and the enslaved rest of mankind.

The Marxists were also extreme antiharmonists, after their own fashion. Instead of national and racial conflict, these antiharmonists of the Left preached irreconcilable social class conflict. For them, the only path to peace was for the proletarian class to completely overthrow the bourgeois class.

In practice, these two traditions of antiliberal thought were both compelled by their internal logic toward totalitarianism. And though they are often considered to be diametrically opposed to one another, they are both of the same feather in that they are fundamentally about strife and division. Their lines of division are simply along different axes. As Mises put it, "Nationalist ideology divides society vertically; the socialist ideology divides society horizontally."[7]

"The singular tendency of capitalism is to provide for individuals the satisfaction of their wants according to the extent of their contribution to the satisfaction of the wants of others."

Mises is aptly called "the last knight of liberalism," because in the interwar period, when belief in the market economy's harmony of interests was completely giving way to militarism, protectionism, interventionism, and socialism — and when even those who called themselves "liberals" advocated planning and the welfare state — he held his ground as the last strong voice for the classical harmony doctrine of the original liberals.

The times we live in now are not nearly so ideologically fevered as then. The social philosophy of strife is not so stark as it was then among large swaths of social opinion. But you still see it today, although tempered by a vague sense that the market and peaceful relations are in some way good for something. The social philosophy of conflict rears its ancient head, for example, in the "eat-the-rich" outbursts you hear from panicked progressives reacting to our present deepening economic crisis. And then there is the "clash of civilizations" rhetoric you hear from neoconservatives.

Why did Mises believe in the harmony of interests?

Most fundamentally, he saw a universal common interest that stems from the fact that the ever-present "manifoldness of nature" (the diversity of natural resources and of personal qualities) necessarily makes for the greater productivity of work performed under the division of labor.

Human effort exerted under the principle of the division of labor in social cooperation achieves, other things remaining equal, a greater output per unit of input than the isolated efforts of solitary individuals. Man's reason is capable of recognizing this fact and of adapting his conduct accordingly. Thus social cooperation becomes for almost every man the great means for the attainment of all ends. An eminently human common interest, the preservation and intensification of social bonds, is substituted for pitiless biological competition, the significant mark of animal and plant life.

This was the basic insight that led the old liberals to realize the expediency of free, peaceful international trade, since specialization and trade is simply one very effective way of dividing labor.

The mercantilists tried to counter this point by saying that the greater productivity of the division of labor is only present where each party is better at producing something than another party. They argued that it doesn't hold when, for example, one of two parties is better at producing everything than the other party. James Mill and David Ricardo exploded this antiharmonist objection with their "Law of Comparative Costs."

This law demonstrated how even a "Superman" nation (lets call it "Supermania") would find it beneficial to freely trade with a "Jimmy Olsen" nation ("Jimmyland"). The former may be better at producing both A and B than the latter. But if Supermania is better at producing A than it itself is at producing B, it still makes sense for it to let Jimmyland focus on B, while it focuses on A, and then for the two to trade.

This law may seem like a somewhat technical point. But Mises saw the social-cosmic significance of it. It showed how the world need not be sundered in perpetual conflict between the "übermenschen" and the "untermenschen." The Jimmy Olsens of the world need not be always looking around for Kryptonite so as to destroy and expropriate the Supermen of the world in order to survive. And the Supermen need not ignore or lord it over the Jimmy Olsens of the world.

There is a place and a role under the sun for each of them. And they each have a natural interest in creating and preserving social bonds with one another. Because of its profound significance, Mises retitled Mill's and Ricardo's economic theorem as the "law of association."

Mises also believed that the classical harmony doctrine was based on an understanding of the kernel of truth embedded in Thomas Malthus' flawed theory of population.

From Malthus' principle one can deduce that there is, in any given state of the supply of capital goods and knowledge of how to make the best use of natural resources, an optimum size of population. So long as population has not increased beyond this size, the addition of newcomers improves rather than impairs the conditions of those already cooperating.[8]

Malthus overestimated man's propensity to procreate, and underestimated both the fertility of his mind and the richness of the earth. Because of that, he was very pessimistic regarding future living standards.

Were his assumptions true, then man would see most every other man as an adversarial rival for scarce and dwindling means of sustenance. Peaceful and bountiful "social competition" would give way to pitiless and destructive "biological competition." In those conditions, the antiharmonists would be right.

But that would only be true if men acted like beasts; they do not have to. They do not necessarily multiply up to the physical limits of subsistence. Men have other ends besides their animal urges. They are capable of reigning in their urge to procreate for the sake of living with a certain measure of refinement, and for the sake of making it possible for their children to do the same.

Because they do not breed like rabbits, there is no need for them to hate each other like rival packs of hyenas, nor to prey on each other in the economic cannibalism that is war. And because of that, the human race has always been under the "population optimum," assuming the legal framework necessary for unleashing the power of the division of labor. Therefore, every man can see every other man, not as a rival mouth, but as a helpful pair of hands and even, if he chooses, as a dear friend.

The Marxists preached irreconcilable conflict between economic classes. First there was the conflict between "land" and "capital" That conflict culminated in the victory of capital, the end of feudalism, and the rise of capitalism. Next there was the conflict between "capital" and "labor." This, Marx thought, would culminate in the victory of labor, the end of capitalism, and the rise of socialism.

Modern economics showed how this was all nonsense. Eugen von Böhm-Bawerk exploded Marx's exploitation theory by showing the invaluable service capitalists provide for laborers. And modern distribution theory showed how increased capital investment leads to an increase in real wages. Just as trade between nations is not a zero-sum game, neither is cooperation among economic functions.

Furthermore, Marx made the mistake of treating functions as if they were whole people. But "worker," "capitalist," "landowner," and, more generally, "producer" are only single facets of a whole person. Every person is also a consumer. And since production is always for the sake of consumption, how a person fares as a consumer is always the main thing. And William Hutt and Ludwig von Mises showed how the market economy runs under what is essentially "consumer sovereignty."

The singular tendency of capitalism is to provide for individuals the satisfaction of their wants according to the extent of their contribution to the satisfaction of the wants of others. Through the market process, the consumers tend to reward each producer according to his contribution to consumer satisfaction. Capitalism therefore encourages individuals to, in their own interest, ever adjust their choices of roles and actions so as to ever increase their contribution to the satisfaction of human wants.

The relative importance of some consumers' wants are greater than that of others in this process. But the relative importance of any given consumer's wants, insofar as that relative importance has been determined on the market, is a function of how much he contributed to satisfying the wants of other consumers in his role as a producer.

Thus, under capitalism, human choices, through their interplay, coordinate each other so as to provide for human welfare as bountifully as possible.

Mises Academy

Every state intervention into the market nexus — every tax, regulation, redistribution, or expansion of bureaucracy — only slackens the ties linking contribution and income, thereby hampering the instrumentality of the market by making producers less responsive to consumers, and thus leading to reduced consumer satisfaction.  And because, with regard to economic provision, we are all consumers first and foremost and producers only subordinately, reduced consumer satisfaction means reduced public welfare.

We all have a common interest, whether we realize it or not, in preserving and extending capitalism and the liberal order.  There truly is a harmony of interests.  Underneath all the error and violence of millennia, the fair face of concord has been there all along.  It is up to economics and utilitarian liberalism, in the tradition of Ludwig von Mises, to unveil it.

Notes

[1] Homer, The Iliad, Book 1.

[2] Ludwig von Mises, Human Action, Ch. 24, Sec. 1.

[3] Mises, Theory and History, Ch. 2.

[4] Mises, Theory and History, Ch. 3.

[5] Mises, Money, Method, and the Market Process, Ch. 5.

[6] David Hume, On the Jealousy of Trade.

[7] Mises, Socialism, Part 3, Ch. 20.

[8] Mises, Theory and History, Ch. 3.


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