Crosscurrents (Vol. 1 No. 2)

Freedom of Contract

As P. S. Atiyah suggests in his extremely important book, The Rise and Fall of Freedom of Contract (Oxford University Press, 1979), there is an interesting connection between economic liberalism and the common lawyers, a connection which may stretch as far back into the past as the time of Sir Edward Coke.

The period Atiyah calls “The Age of Freedom of Contract: 1770–1870” is precisely the heyday of classical liberalism, both in theory and in practice. Although we may not entirely agree with Atiyah’s conclusions on the decline of freedom of contract, we do agree that the decline of classical liberalism and freedom of contract are closely related phenomena. Atiyah also makes a mistake in so quickly dismissing one of the greatest classical liberals of the 19th century, Herbert Spencer. In his The Man Versus the State (1884), especially the essay “From Freedom to Bondage,” and in Principles of Sociology (1876–1896), Spencer uses Sir Henry Maine’s distinction between the régime of contract and the régime of status to demonstrate how the practices of the courts and Parliament were eroding individual liberties, and laying the groundwork for a rigid, oppressive régime of status in the future. Atiyah seems to have little appreciation for Spencer’s insights. Atiyah’s solution for a new theory of contract is certainly suspect; however, his work is an excellent source of historical and legal information. It can be read in conjunction with A. W. B. Simpson’s A History of the Common Law of Contract: The Rise of the Action of Assumpsit (Oxford: Clarendon Press, 1975).

A Wealth of Adam Smith

No liberal needs to be told of the vital importance of Adam Smith in the development of modern economic thought. We must thank Liberty Press/Liberty Classics once again for making a classic of liberal thought cheaply available for the reading public. Liberty Press has acquired the rights to reprint the authoritative Glasgow Edition of the Works and Correspondence of Adam Smith, and has made an excellent beginning with a two-volume edition of An Inquiry into the Nature and Causes of the Wealth of Nations. What is still more remarkable is the price: $11.00 for the two-volume set. We urge you to purchase a copy for your library; even if you already have a copy, this edition is the one to have and to treasure. The other particularly important volume in the series is Smith’s Lectures on Jurisprudence. This volume includes Smith’s university lectures as well as an early draft of the Wealth of Nations; it will appear in mid-April for the very low price of $5.50. It is must reading. Order your copies from Liberty Press/Liberty Classics, 7440 North Shadeland Street, Indianapolis, Indiana 46250.

Antitrust attacked, again

Dominick Armentano, professor of economics at the University of Hartford, is a longtime and biting critic of antitrust legislation. He has expanded and revised his 1972 book, The Myths of Antitrust: Economic Theory and Legal Cases (New Rochelle, N.Y.: Arlington House, 1972). The new edition is entitled Antitrust and Monopoly: Anatomy of a Policy Failure (New York: John Wiley and Sons, 1982) and, as one can gather from the title, he has not mollified his attack. Of particular interest is his use of various Austrian theorists, such as Kirzner, to strengthen his argument against the idea of perfect competition.

The Spirit of Conquest

Benjamin Constant was one of the first classical liberals to understand that the dictatorship of Napoleon was a new political phenonemon (the “usurper who arrives after a revolution made for liberty or in her name has many more means of sustaining himself than any other kind of despot”). Guy H. Dodge has written a new sympathetic study of Constant’s thought, Benjamin Constant’s Philosophy of Liberalism: A Study in Politics and Religion (Chapel Hill: University of North Carolina Press, 1980). In particular, the chapters on “Conquest, Dictatorship and Ancient Liberty” and “Constitutionalism” are important in order to understand Constant’s theory of individual liberty, state power (usurpation), and the rule of law. A recent collection of Constant’s political thought has been published in France in a useful one-volume paperback: De la liberté chez les modernes Écrits politiques, ed., Marcel Gauchet (Paris: Pluriel, Le livre de poche, 1980). It is valuable for including the essay “De l’espirit de conquête et de l’usurpation” and the important “Principes de politique.”

Political Capitalism

An important, but somewhat neglected, area of scholarly activity for modern classical liberals is that of imperialism. We can draw upon the stimulating insights of thinkers from other schools (such as Joseph Schumpeter, “The Sociology of Imperialism” in Two Essays by Joseph Schumpeter, ed. Bert Hoselitz (New York: Meridian Books, 1955); J. A. Hobson, Imperialism: A Study (University of Michigan Press, 1972); Parker T. Moon, Imperialism and World Politics (New York: Macmillan, 1927)), but we must eventually approach the subject from a uniquely liberal perspective. A crucial work which should help to forge such a liberal interpretation is Rudolf Hilferding’s Finance Capital: A Study of the Latest Phase of Capitalist Development, ed. Tom Bottomore, translated by Morris Watnick and Sam Gordon, (London and Boston: Routledge and Kegan Paul, 1981). Long unavailable in English, this work, although flawed, should prove stimulating to classical liberals for several reasons. First, Hilferding understands that the formation of cartels and trusts requires active collaboration between governments and the banks—a view quite similar to the libertarian interpretation of the central role of the State and its central banking system in fostering a privileged business caste. Second, Hilferding’s theory of the periodic crises that afflict the capitalist system is a “disproportionality” theory, and has some similarities to the Austrian theory of the trade cycle. Third, Hilferding attributes the need for tariffs, capital exports, and state guarantees for overseas production and investment, to the politicization of the economy brought about by protection and state-created banking monopolies. Hilferding was a member of the “Austro-Marxist” school, along with Otto Bauer, Max Adler, and Karl Renner. Although they were enemies of the free market, the Austro-Marxists’ analysis of state capitalism is insightful and provocative. However, it must be read with caution. (A useful corrective to the Austro-Marxists’ anti-market bias is Walter E. Grinder and John Hagel III’s “Toward a Theory of State Capitalism: Ultimate Decision-making and Class Structure,” Journal of Libertarian Studies, vol. 1, no. 1, 1977, pp. 59–79.) A handy introduction to Austro-Marxist thought is provided by Tom Bottomore and Patrick Goode in Austro-Marxism (Oxford: Clarendon Press, 1978).

Political Privilege in American History

A difficult and important task for libertarians is to identify exactly who benefits from the economic and political privileges carved out by the State over time. It is not enough to know in theory that such groups exist and live off the hard work of productive and peaceful individuals; one must know who they are, how they reached their privileged position, and how antagonisms (which undoubtedly exist between these groups) can be exploited in order to terminate their free ride at taxpayer expense. Several works have appeared over the years which provide information on the activities of these groups and individuals. Most recently, the works by Philip H. Burch are particularly full of interesting information. Two volumes of his Elites in American History (New York: Holmes and Meier, 1980) have already been published: volume three covers the period from the “New Deal to the Carter Administration” and volume two “The Civil War to the New Deal.” (Burch began publication with volume three.) Burch’s writings provide an encyclopedia of information on the economic interests and family and personal backgrounds of the major cabinet, foreign policy, and supreme court appointments of the various administrations. Since volume three ends with the Carter administration, one must look to the Nixon-Ford chapters to find out about current figures, a surprising number of whom have been “recycled.” Although Burch supplies a wonderful appendix which lists most of the important information in table form, volume three suffers considerably from the lack of a bibliography. Readers seeking more information may consult, along with the Burch volumes, the works of G. William Domhoff, especially Who Rules America (Englewood Cliffs, New Jersey: Prentice Hall, 1967); The Higher Circles: The Governing Class in America (New York: Random House, 1971); and The Powers That Be: Processes of Ruling-Class Domination in America (New York: Random House, 1979). Victor Perlo’s The Empire of High Finance (New York: International Publishers, 1957) is also informative, and is particularly good on the powerful banking families and their economic and political connections. However, the reader should be aware of Perlo’s Marxist bias, which leads him to misunderstand the fundamental difference between the peaceful rewards of the free market and the spoils of economic interventionism.