Capitalism is the best guarantee of individual freedom

The rise of Reagan and Thatcher is invariably explained by the practical economic challenges that America and Britain faced in the 1970s – high inflation, rising unemployment, and a slowdown in growth – all of which seemed to be a struggle for Keynesian policymakers. And at the same time, advances in economic theory, including the work of Milton Friedman, seemed to confirm the shaky foundations on which Keynesian interventionism was based.

But what about society? One of the most noticeable aspects of the period which gave rise to neoliberalism was a social revolution. Rapid social change culminated in dramatic changes in the law affecting homosexuals, ethnic minorities and women. Individual liberties were front and centre.

The dip in support for capitalism today has, as in the 1970s, similarly been explained in economic terms – a dissatisfaction with rising inequality and with the after effects of the global financial crisis. If capitalism is to regain its popularity, it must, however, re-find its social roots.

Social and economic freedom go hand in hand

In the words of Jason Hickel and Arsalan Khan:[1. The Culture of Capitalism and the crisis of Critique, Anthropological Quarterly, 2012]

“The hallmark of the [social] revolution of the 1960s was the defence of individual liberty against the constraints of mass conformist society. Resistance to the draft; the defence of free speech; the right to divorce, abortion, contraceptives, and other sexual freedoms all references the desire to make choices for oneself, through one’s own reason and according to one’s own conscience.”

A growing army of students and academics – particularly those involved in the 1960s counter-culture movement – employed the writings of Durkheim and Freud to highlight the potential antagonism between the individual and society. While individuals were fighting for the freedom to be themselves, the political economy of the day was dominated by a heavy-handed state. As a result, anti-authority feelings grew.

This fight for social freedoms paved the way for greater economic freedom. Within little more than a decade, the state interventionism of the 1960s was overhauled. Keynes was out and Milton Friedman was in.

In his book Capitalism and Freedom, Friedman argued that political and economic freedom are inextricably linked; that:

“a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom”.

He understood that society – much like the playground – was not always harmonious and as such there was the risk of conflict between society and the individual. Friedman argued that the market could ease the resultant tension, allowing us to engage – through the market – anonymously, without having to agree with one another. The result was that we could all live side-by-side and meet our daily needs in a way that avoided the enforced conformity that communism would involve. In his own words:

“…a major source of objection to a free economy is precisely [that]… it gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity…Each man can vote, as it were, for the colour of tie he wants and get it; he does not have to see what colour the majority wants and then, if he is in a minority, submit…By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power.”

Winning back support for capitalism means going beyond economics 

In the current climate, dry economic arguments in support of capitalism will persuade some of the merits of free markets, but they will not convince the majority. For many, their lived experience – stagnating wages, inequality, insecure employment – tells a different story. Today’s anti-capitalist feeling is set against a background reminiscent of the 1930s, when, on the face of it, capitalism seems not to have delivered.

Winning back support for capitalism therefore requires its advocates to go beyond economic arguments – to engage at a human level with the tension between the individual and society. That could not be more fitting for the age of Trump and Brexit, a time which has revealed deep social cleavages and disagreements.

The weakness of the hard Left is as much social as it is economic. The rise of neoliberalism, and the long decline of socialism from the 1970s onwards, was not merely as a result of ‘screwing up’ the economy, but a consequence of treating the ‘working class’ as a homogenous whole. In obsessing over class conflict, they ignored all other tensions. They were, in short, happy to sacrifice individual freedom in the name of doing what the socialist state – not the people – thought was best for the majority. The hard Left saw no inherent differences between individuals (other than on the basis of income), they treated everyone as if they were carbon copies, happy to be manipulated so long as the state could in return guarantee food, shelter and clothing.

Individual difference is, if anything, even more celebrated now. People do not want to be pawns in some five-year plan. To quote Hickel and Khan, neoliberals “made the moral case that beneath all acts of regulation lurks hubris and elitism – the desire of technocrats to manipulate the masses”. People want to be free to take charge of their own lives – to, quite simply, do as they please and to be themselves. Individual freedom: that is the true value of free markets – and it’s the argument capitalists need to make.

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Dr Victoria Bateman is Fellow in Economics at Gonville and Caius College, Cambridge. She writes regular economic commentary for Bloomberg View and CapX, and is known for her stance on Brexit and for using art to explore perceptions of the female body.

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