The Economic Debate
It is customary to associate British classical political economists with free-trade policies and a “small government” approach. In many writings, Roncaglia has shown how biased and misleading this characterization is, for example, with respect to Adam Smith’s thought.
In JSM’s case, too, it is more correct to talk about liberal socialism—a position personally shared in broad terms by Roncaglia—than unqualified liberalism, in a traditional sense. In his Autobiography, JSM describes his gradual process of adding qualifications and distancing himself from his father’s thought,8 and attributes a significant shift in his political views to his slowly evolving relationship with Harriet Taylor.9 He describes his, or rather their, ideals toward the end of his life as follows:The social problem of the future we considered to be, how to unite the greatest individual liberty of action with an equal ownership of all in the raw material of the globe and an equal participation of all in the benefits of combined labour. [...] Both these classes [workers and employers] must learn by practice to labour and combine for generous, or at all events for public and social purposes, and not, as hitherto, solely for narrowly interested ones. But the capacity for this has always existed in mankind, and is not, nor is ever likely to be, extinct. Education, habit, and the cultivation of the sentiments will make a common man dig or weave for his country, as readily as fight for his country. (JSM, 1873, 239)
JSM refused to embrace or support several socialist proposals, on account of their foreseeing strong social control over the individual, or “social machinery” that JSM considered inefficacious or impractical. However, he favored the spread of socialist propaganda because the proclamation of such ideals of human society could prompt more efforts to improve society and bring it closer to the ideal (JSM, 1873, 175).
In OL, he is very explicit in ruling out that liberty in the economic field is on a par with the sort of “capital L” liberty—civil, political, of thought, of discussion, of experimental lifestyles—he defends in the essay. Concerning the former, he does advocate a general competitive system, but not on the high moral ground on which he had argued for the latter. In the economic domain, any restraint on individuals’ liberty always affects that part of their conduct that, if need be, society is perfectly competent to restrain. Legitimacy arises because individual action in the economic domain produces effects on other people and on society in general: “trade is a social act” (OL, 293). Thus, restraints to free competition “are wrong solely because they do not really produce the results which it is desired to produce by them” (ibid.).
For example, concerning taxation, JSM considers the case of indirect taxation, stating that “every increase of cost [of a commodity] is a prohibition, to those whose means do not come up to the augmented price; and to those who do, it is a penalty laid on them for gratifying a particular taste” (ibid., 298). However, he immediately adds,
but it must remembered that taxation for fiscal purposes is absolutely inevitable; that in most countries it is necessary that a considerable part of that taxation should be indirect; that the State, therefore, cannot help imposing penalties, which to some persons may be prohibitory, on the use of some articles of consumption. It is hence the duty of the State to consider, in the imposition of taxes, what commodities the consumers can best spare. (Ibid.)
Thus, he lists three cases in which objections to “government interference” are reasonable and the liberal stance should be upheld (ibid., 305). First, the obvious case, is when the private sector can operate a certain activity better than the government. In the second case, though government action may be more efficient or effective, it is nonetheless desirable that a certain activity be delegated to the citizens, “as a means of their own mental education” (ibid.). Again,
these are not questions of liberty [...] they are questions of development.
[...] These things [are] parts of national education; as being, in truth, the peculiar training of a citizen, the practical part of the political education of a free people, taking them out of the narrow circle of personal and family selfishness, and accustoming them to the comprehension of joint interests, the management of joint concerns. (Ibid.)Limitations to government action in the private sphere of the economy, or even in the administration of certain public businesses, are a form of social education, as Tocqueville had already suggested in the case of the jury system in the United States, which in JSM’s view made Americans generally more aware of public concerns through their involvement in the administration of justice. Once again, the centrality of one’s life experience in shaping one’s personal development (and thus motives, passions and interests) emerges as a prime consideration for JSM: “[t]he worth of a State, in the long run, is the worth of the individuals composing it; and a State which postpones the interests of their mental expansion and elevation, to a little more of administrative skill [.] will find that with small men no great thing can really be accomplished” (ibid., 310; emphasis in original).10 Finally, the third case for limiting government power inJSM’s view is the need to prevent the creation of an all-encompassing public administration, which poses a greater threat to social development the more it is efficient and it attracts the ablest individuals. “Under this regime, not only is the outside public ill-qualified, for want of practical experience, to criticize or check the mode of operation of the bureaucracy, but [.] no reform can be effected which is contrary to the interest of the bureaucracy” (ibid., 306-7; emphasis in original).JSM cites the Chinese example of how a perfect administrative machine may reduce citizens’ propensity for self-help, and how bureaucracy degenerates into “pedantocracy”11 Against this risk, he does not propose the administration of public affairs by private, for-profit companies, but rather the extension of federalism and decentralization, creating a sort of geographical pluralism and experimentation within the nation, and even competition among local administrations.
“What the State can usefully do, is to make itself a central depository, and active circulator and diffuser, of the experience resulting from many trials” (ibid., 306).In conclusion, JSM’s liberalism is clearly alien to modern reinterpretations of neoliberalism. He himself explains that acquaintance with French (socialist) literature, especially the St. Simonians, significantly influenced his thinking (JSM, 1873, 175). Indeed, in several of JSM’s writings we find indications of one possible source of the bias in contemporary mainstream economics, namely its strong Anglo-Saxon roots:
In England, from the peculiar circumstances of our political history, [.] there is considerable jealousy of direct interference, by the legislative or the executive power, with private conduct; not so much from any just regard for the independence of the individual, as from the still subsisting habit of looking on the government as representing an opposite interest to the public. [... T]here is a considerable amount of feeling ready to be called forth against any attempt of the law to control individuals in things in which they have not hitherto been accustomed to be controlled by it; and this with very little discrimination as to whether the matter is, or is not, within the legitimate sphere of legal control. (OL, 222-23)
7.