Tomasz Gil © 2005

The American political ideology is based on the ideas of liberal capitalism. Surprisingly this term is unknown in America where it is replaced by another - the "free-enterprise system". This is a fine term, but still it is hard to understand why "liberal capitalism" sounds like an oxymoron in the States being an excellent term proposed by British thinkers and promoted by the illustrious British-Austrian economist F. A. von Hayek. The liberal economics camp has been supplying ideological material to such leaders as Margaret Thatcher and Ronald Reagan, but its language is hard to accept in America because this country's politics has configured itself in two broad coalitions espousing contradictory ideologies. Each of these coalitions speaks in its own peculiarly contrived manner, while subject to a kind of deadlock within itself.

Liberal capitalism rests on a theory holding that the best social organization is one in which the individual actions are coordinated by decisions made by individuals entering into voluntary transactions with each other or with corporations. This is a sound ideology that aims to promote social peace, individual liberty and economic and technological growth through competition. The idea of liberal capitalism is diametrically opposed to propositions that take the community as the object and goal of economic actions. Communities operate on the principle that individuals are supposed to make sacrifices in order to contribute to the goals of the community as set by the current leadership. Hayek explains that this is related to the system of planning where individual resources must be subordinated to the common goal. In a liberal economy individuals are not asked or required to make sacrifices they allocate their own resources themselves - resources such as skills, time, energy for work, family, wealth, political influence (be it a single vote) - and use them within a market economy according to their own decisions. The responsibility of the government is the set up the markets and their rules so that individual actions result most of the time in a common good. While a liberal government has an idea of a common good - it stops at the point where it is might start building and supporting communities - defining their goals and forcing individuals to support them. Communities might be created by freely operating individuals - most commonly these will have economic or profit goal and are then called corporations. Such entities are to obtain the benefit of protection from the government, but not support specifically tailored to needs of a group or type of organization.

Herein lies the seed of a problem since the government will be subject to combined political pressures from individual voters and complex pressures from corporations causing the ideal of liberal capitalism to become quite significantly distorted. I am going to focus here on the curious constellation of the American political scene with two mutually opposed groupings each of which tries to merge the most incongruous aspects of the American ideology. I am talking about the Democrats and Republicans who alternately call themselves, or are called, liberals and conservatives.

The Democrats are called liberals. They tend to advocate the use of government resources, often disguised as application of rules, to benefit particular groups of voters. They rely more on direct support of individual voters for getting elected than on support of corporations. This kind of support is most efficiently obtained by courting large social groups perceiving themselves to be powerless. These would be labor unions, large minorities, women (50% of population, but still enjoying the status of victim). The support for the disadvantaged, even slightly or seemingly so, leads the liberal Democrat to two things. One is the direct expenditure of government resources, or the government mandating the use of everyone's resources directly, to supply certain benefits to the disadvantaged, and the other is surprisingly a direct interest in the defense of individual liberties when they are endangered. The latter is an attitude consistent with liberal capitalism ideology while the former is a pursuit of planned society characteristic of socialist systems. The advocacy of individual liberties may be considered the principal merit of liberal capitalism, one that takes precedence over even the most morally worthy social goals. Appallingly these same people espouse support for government policies closely related to planning and socialism. The term liberal is probably applied here as a synonym of permissive or generous.

The Republicans are called conservatives. Their main advocacy is of the government non-intervention in the workings of a society organized spontaneously on the principles of liberal capitalism whose main tenet is voluntary transactions leading to competition. The most obvious manifestation of the effects of liberal capitalism is growth of business activity and proliferation of corporate entities. Some of the corporate entities can be very large and rich and have a large influence on society and the political process. Operating in a free-enterprise environment a corporation nevertheless tends to be organized internally as a command-economy system. Whereas the entrepreneur is enjoying the benefits of liberal capitalism, a corporation in which he is shareholder will try to impose a non-liberal command system on its employees. It would also like to have customers with uniform, or suitably fragmented, tastes and no right to appeal the quality of the product or service. In short, the tendency of a corporation is to own its worker and its customer. The growth of corporations and of their influence on government leads to policies that attempt to constrain individual liberties in order to shape the individual to be a suitable worker and consumer for the benefit of corporations. This is the mechanism by which socialist ideas creep into the party espousing free-enterprise principles. Corporations grow thanks to a system protecting competition and free enterprise, but then they wish to protect themselves by promoting a system of rules that will affect disproportionately the consumer and worker. This time, however, the socialist ideas are not those of making people dependent on government sponsored benefits but the control of their minds and rights. This is precisely what creates the welcoming ground for the religious agenda in the Republican camp that further tends to spawn individual morality legislation, the drug war, restrictions on art and freedom of expression, and other draconian rules of criminal process and the recent mindless copyright protection measures.

This peculiar American deadlock - resulting from mésalliance or mismatch - is truly amazing: the free-enterprise camp combining with religious zealotry, while the populist socialist camp pushing to embrace the defense of individual liberties. Each side is holding its opponent hostage to ideas they are only prepared to support halfway and halfway attack the opponent for such support.

What is a possible resolution? Return to the roots of liberal capitalism which should hopefully happen before the corporations overpower democratic government and before communities overload it with demands for support. We ought to propagate the idea that the government has a role to play that is independent from the market and from any economic and social entities. The government takes cognizance of the general common good, long term stability of the nation and society, observes the common notions of justice and sets up markets and rules - in a word - the law. In the resulting situation individuals and their private organizations can produce and exchange goods and services without being forced in their choices and can also consume or invest the fruits of their work in a manner unrestrained by the government. This is basically the ideology promoted now by the Libertarian party - quite rightly claiming heritage of the liberal capitalism.

Last modified July 16, 2005