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Karl Popper's Open Society: Our Road To Serfdom Karl Popper's Open Society: Our Road To Serfdom
by Ovi Magazine Guest
2013-11-13 10:19:46
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There are two things we can all agree on: (1) we are unhappy with our current socioeconomic system and (2) we cannot agree on the reasons why. And, logically, we cannot agree on the remedies: the government should do more, the government should do less, someone else should pay more taxes (or at least pay some) while we should pay less (or none at all), we need to invest more in public services, we need to shutdown public services, someone should do something about the bankers, etc. In short, to a greater or lesser degree we all feel that we have become serfs to a system that works for the benefit of other people who are not us and whom we profoundly dislike, such as, depending on our ideological preferences, the politicians, the lobbyists, the multinational corporations, the military industrial complex, the lawyers, the bankers, the public servants, the employers, the employees, the rich foreigners, the poor foreigners, the old, the young, the sick, the healthy, etc.

Of course, we are also unable to agree on what to call our socioeconomic system. Again, depending on the strength of our ideological convictions, we call this mess the free market, capitalism, communism, socialism, state capitalism, mercantilism, corporate dictatorship, etc. But, on this point, we are all probably wrong, because in fact we happen to live in Karl Popper’s Open Society.

Karl Popper (1902-1994), the Austrian-Hungarian philosopher, wrote “The Open Society and its enemies” in 1945. It was a great success and the term Open Society became a powerful intellectual brand. For many it is still synonymous with the best hopes of the humankind for a truly free and peaceful world. However, what has largely gone unmentioned about the Open Society and Popper is that he fully embraced the ideas of his time that advocated for an impossible compromise between political freedom and practically unlimited State interventionism in the market economy. At the time when Popper was writing his book, this compromise was already the cornerstone of political economy in the democratic West and it was perceived as an effectual counter to communism and to other totalitarian ideologies, for it seemed to combine individual liberty with the pursuit of social justice. This compromise remains the cornerstone of our political economy today and is, in fact, at the center of our dissatisfaction.

Popper wrote “The Open Society and its enemies” to fight populist totalitarianisms (Popper called it his “war book”), which, according to him, had their philosophical roots in their idea of “historic determinism”. According to historic determinism, the history of humankind is written beforehand, being governed by inexorable laws, similar to the laws governing the natural sciences. For example, Karl Marx (1818-1883) criticized capitalism as a system of exploitation of the proletariat and proclaimed its inevitable demise at the hands of history. According to Marx, the unjust capitalist system shall be no more (for so have determined the laws of historical progress) and shall be substituted by the utopia of communism (thus the words of Khrushchev: “Whether you like it or not, history is on our side. We will bury you.”) All we can do, according to Marx, is “to shorten and lessen the birth-pangs”.

Popper argued very persuasively that all philosophical systems based on historic determinism are wrong, because there are no such laws determining the fate of humankind, and, worse yet, that they promote morally repugnant behaviors by justifying any means to achieve their utopian ends.

However, Popper did agree with Marx in that the free market is inherently unjust and inhumane (“I believe that the injustice and inhumanity of the unrestrained “capitalist system” described by Marx cannot be questioned”), although (contrary to Marx) Popper believed that its evils can and should be removed through State intervention (this is part of what he called “limited social engineering”, which he differentiated from the “utopian social engineering” of the historic determinism). The essential assumption that Popper made is that in a democracy, political power can and must be controlled, and therefore can be used to remove what he assumed were undesired natural side effects of the free market.

This is the essence of the abovementioned compromise that forms the basis of political economy even today; it is the compromise with the Marxist ideas that was adopted by the majority of those who wanted to defend political freedom (that is, democracy) but did not want to or were incapable of defending the economic freedom (that is, the free market).

First of all, it is important to stress that this compromise and the ideas that follow from it are not at all new or in any way original, quite the contrary: they are so common, extended and accepted that for the immense majority they have become an incontrovertible truth. This is what is taught in schools and universities; this is the intellectual context which no thinker, politician or media professional dares abandon if he or she aspires to be understood by the masses. Secondly, although these ideas are generally presented without any arguments to support them, as if they were a mystically revealed truth, they do not stand the most modest critical analysis.

Thus, Popper starts by mistaking the absence of labor laws in the beginning of the Industrial Revolution for the existence of a free market and consequently blames “unrestrained capitalism” for the terrible situation of the factory workers. He then assumes that the working conditions eventually improved because the State successfully intervened in the market economy through labor laws. For Popper this is an example of where Marx went wrong; Marx believed that the government is unable to overpower the perverse capitalistic incentives that ultimately lead to the enrichment of the few at the expense of the many, yet here – in the success of the labor laws – is the irrefutable evidence that “unrestrained capitalism” is a thing of the past and that instances of “economic exploitation” can be removed through State intervention in the market economy.

There are many objections to the simplistic view taken by Popper and to his assumptions that the predominant economic system until the first half of the XIX century was the free market, that it is unjust and inhumane and that its alleged excesses can be corrected through State intervention. To mention just a few: all governments extensively and intensively intervened in the market economy before and during the Industrial Revolution, as was denounced by the classical economists such as Adam Smith (1723-1790), Jean-Baptiste Say (1767-1832), David Ricardo (1772-1823), or Frederic Bastiat (1801-1850). The terrible conditions of the factory workers were more likely than not the result of an oversupply of labor and this oversupply was, at least partly, precisely the result of State intervention in agriculture, commerce and artisanship (that is, more people were willing to work in the factories partly because, due to legal restrictions, they were unable to exercise other trades). Finally, the conditions of the factory workers improved very substantially and very rapidly long before the labor laws, as a result of the unparalleled generation of wealth and the increasing demand for labor to which it led.

It is, in fact, very questionable that labor laws could conceivably have an overall beneficial effect. Whenever the State attempts to impose a minimum set of rights and obligations on the parties to a contract (e.g. a minimum wage, maximum working hours, paid vacations, etc., in the case of labor regulations) that differs from the existing market practice (determined by the forces of supply and demand), some market participants will either infringe the law (partaking in what is known as the informal economy) or, particularly if the State is successful in curtailing the informal economy, not enter into the contract at all. Therefore, in the best case scenario labor laws merely recognize the existing market conditions, and in the worst case they prevent those who are willing to work below the minimum standard sought by the government from working.

It is important to point out that these objections are not at all new or original, and although they should not be blindly accepted either, they warranted at least some consideration from Popper.

However, the single most damaging and unwarranted assumption made by Popper and by all those who advocate for State interventionism in the market economy is that, in a democracy, State interventionism can be subjected to the will and the general interest of the people. It is this crucial assumption that underpins the framework under which political economy is thought of, discussed and implemented today, and it is irredeemably wrong.

 

First of all, this assumption places enormous trust in the capacity of a democracy to control the government and subject it to the interests of the governed. To understand how enormous this burden is on the democracy, we have to consider that the only limit that Popper places on the intervention of the State is that the State must not be allowed to completely replace the market and subject us to a central economic plan. At what point does “intervention” become “central planning”? How can we prevent the wealthy from purchasing political power? Or how can we stop populists and demagogues from taking advantage of the complexity of the economic science to hijack our democracy? Popper appears to think of these questions, but all he leaves us are vague warnings, without giving us any concrete criteria. Rather surprisingly, the only recommendation we can find in this regard in “The Open Society and its enemies” is to regulate the electoral propaganda, specifically the size of the fonts used in electoral posters.

 

Secondly, should we be so irrationally optimistic as to assume that the intervention of the State in the economy can be subjected to the will of the people, what guarantees do we have that the decisions in economic matters, for the fact of having the approval of the majority, will be at least rational (not to mention beneficial)? Democratic decisions do not have to be rational or beneficial: the only guarantee of a democratic decision is that at the moment in which it was taken it had the approval of the majority. This is great when all we want is to reach a consensus for the sake of consensus (e.g. decide on the shared starters for a dinner or whether our country should go to war); it is terrible when we want the best technical method of achieving a complex objective (e.g. choose the best way of constructing an airplane or of decreasing poverty).

 

Thirdly, market economy is extremely complex, and the truth is that it is always much more what we do not know about the workings of the market than what we do. We simply do not know how to intervene in the market to achieve the desired result. And even when we attempt to accomplish what seem like very modest or immediate objectives, we do not know the long term consequences of our decisions. To give a very simple example, common sense may tell us that if we establish by law a maximum price on food stuffs, even people with very little money will be able to purchase them. However, the economic theory and practice show us that this is a sure way to starvation, because it discourages the production, distribution and/or sale of food (depending on the stage at which the price control is established). Although now this explanation seems almost common sense to us, we should not forget that it took us literally millennia to figure this out and more than a hundred years to accept it. This is one of the reasons why using the democratic process to agree on general objectives and entrusting a team of economic experts with achieving them quite simply does nоt work. How unfortunate that Karl Popper did not heed the advice of his fellow colleague and friend Friedrich A. Hayek (1899-1992), who time and again warned us of the dangers of the pretense of knowledge and of the impossibility of designing our economic reality!

 

Inevitably, we must conclude that the idea that in a democracy the political power may be controlled, and therefore that the State may successfully intervene in the economy to remedy the supposed evils of capitalism, assigns to the democracy an impossible mission.

 

The worst consequence of the predictable failure of democracy in this mission is that, as it becomes ever more evident, the market economy, democracy and all that they stand for (most notably, the rule of law, the right to private property and the right to a due process) become ever more devalued in the minds of the disappointed and dissatisfied public. And as the angry voices preach to the crowds that the problem is what remains of the market economy and call for (and successfully obtain) greater powers for the State, our democracy is further burdened with tasks and objectives for which it was never meant, and in which it spectacularly fails. Indeed, the greatest enemy of the Open Society is the Open Society itself.

 

The failure to understand that interventionism is at the source of our troubles and the misguided notion that somehow the free market (what free market? where is it?) is to blame for our grievances is leading us ever further down the road to serfdom. And this road is not paved by an excess of greed, or lack of compassion or of humanitarianism, nor is it laid according to the designs of irremediably evil megalomaniacs. It is the work of the well-meaning intellectuals, who tell the rest of us what constitutes progress and truth, and what is good and what is evil, and who allow themselves to get carried away by any nonsensical idea that carries the aura of humanitarian intent.

Popper, the philosopher, did us a great service by identifying and denouncing the evil of historic determinism behind the utopia of Plato’s Republic (clue: it is not actually a Republic) and tracing it to the ideas of Hegel and Marx. Unfortunately, Popper, the intellectual, was not so immune to Marx’s charms and thus gave us the Open Society, from which, paradoxically, there is no easy way out.

 

Igor Kokorev, solicitor


     
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Leah Sellers2013-11-13 22:29:04
Intersting article.
However, I have never Understood why our Questions Answered and Answers Questioned as Hunaity moves forward into the BeComing Future must be all or none of the above. We would all be Better Served by an Intermingling of the Best of All of the Above and More, Dear Igor.


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