The Road to . . . Fascism?

The always diligent Sam Gregg (unlike the not particularly diligent Andrew Stuttaford) read Joseph Stiglitz’s new book, The Road to Freedom: Economics and the Good Society, and, writing in Law & Liberty, reported on what he found. Let’s just say that he’s not impressed.

It seems that, with tiresome predictability, Stiglitz has turned his attention to, among other targets, “neoliberalism”: that wicked, shape-shifting ideology that the left has used as a boogeyman for a long time now. What’s new, Gregg observes, is that the leftists who have been denouncing neoliberalism for years have now been joined by fellow big-government activists on what Gregg generously refers to as the “new” right, although there’s not much that’s new about it.

Neoliberalism has become one of those words or phrases — such as “stakeholder,” “sustainability,” or “late capitalism” — that are reliable heralds of nonsense and deceit. “It functions,” writes Gregg, “as an epithet . . . to stigmatize people and ideas.” It is the hallmark of a polemic, and that, he says, is what Stiglitz’s book amounts to.

Under the circumstances, it’s no great surprise to read Stiglitz’s claim that Hayek believed in unfettered markets — the old “free-market fundamentalist” jibe. In fact, that is very far from the case. The real division between interventionists and free-marketeers, argues Gregg, is not whether markets should be regulated but over the form that regulation should take:

Is it through a combination of macroeconomic policies, specific interventions into particular economic sectors, the application of wide-ranging regulatory codes to economic transactions, and ongoing wealth redistributions through large welfare states and progressive taxation? Or: are markets better regulated through protections of property rights, adherence to rule of law, contract enforcement, commonsense health and safety regulations, a basic safety net, stable money, and the dynamic competition that promotes consumer sovereignty over and against vested interests like established businesses and their political allies?

Spoiler: The right answer is the latter.

Stiglitz argues that the “free and unfettered markets advocated by Hayek and Friedman and so many on the Right have set us on the road of fascism.” But one thing that the different varieties of fascist (or fascist-adjacent) economies — from Mussolini’s to Xi’s — have in common is, as Gregg puts it (although I don’t know for sure if he would describe the Chinese economy in that way), “widespread regulation, endless interventionism, and corporatism: in short, the opposite of free market economies.”

But what about that road to fascism? Were, to quote Gregg summarizing Stiglitz, the “economic conditions preceding regimes like Nazi Germany . . . characterized by too little intervention?” Nope. In Argentina, for example, the shift away from (already flawed) free markets preceded Peronist rule by some years. As for Germany, the Bismarckian economy — shaped by political instinct as well as the influence of theorists such as, notably (and posthumously), Friedrich List, a German-American economist — was interventionist: the engine of a nation-building project.

That engine may have been recalibrated after the kaiser had been pushed out, but, Gregg relates, Weimar’s constitution set out rights that “no one would describe as reflecting a classical liberal view of life.” Moreover, “many such rights were given subsequent expression in policies ranging from expansions of social security to legislating worker co-determination arrangements.” So much for free-market economics as a path to fascism.

Gregg describes Stiglitz’s prescriptions for something “along the lines of a rejuvenated European social democracy or a new American Progressive Capitalism, a twenty-first-century version of social democracy or of the Scandinavian welfare state.” However, to Gregg this looks (understandably enough) a lot like what we have already, including:

“Regulation,” “corrective taxation,” “government investment,” “industrial policies,” “financial regulations, both macro . . . and micro,” “public investments,” “disclosure requirements,” “regulations (consumer, financial, labor),” “liability laws making firms accountable,” “social insurance/protection,” “safety net programs,” “unemployment insurance,” “retirement programs,” “health insurance,” “income contingent loans,” “small business loans,” “green bank financing,” “antitrust policies” that “restrict mergers,” “abusive practices restrictions,” “minimum wages,” “supportive labor legislation,” “redistribution through taxes,” and “public expenditure programs” on things like education and health care.

Not only that, many of Stiglitz’s ideas

mirror those of prominent New Right thinkers. Not only do they support many of the same policies; but they also echo Stiglitz’s anti-neoliberal rhetoric and critical view of Hayek and Friedman. Therein lies a fracture that increasingly characterizes American politics: one in which Stiglitz’s Old Left economic preferences line up with those of some on the Right against whom his book inveighs.

Awkward.

Gregg then turns Stiglitz’s argument on its head by examining the challenges to liberty posed by a social-democratic (loosely defined) state. In time, they are real enough. For that matter, the Listian/Bismarckian model is not too distant from the vision of some on the “new” right. And nor is it best seen as a bastion of liberty.

Gregg’s final paragraph includes the following:

Yes, free people will make errors. But their mistakes will not be as devastating to society as those made by dirigistes, ranging from Keynes to Stiglitz, who believe that they can re-engineer a better world from the top down and want the power to do so. Nor are such “men of system,” as Adam Smith called them, inclined to admit the failure of their ideas and policies, let alone correct them.

Indeed they are not, as we can see from the mounting disaster that is the bribed and coerced transition to electric vehicles, itself a microcosm of the catastrophe that is the “race” to net zero (greenhouse-gas emissions).

Climate concerns have provided a significant part of the foundations for the drive toward a post-democratic corporatism represented by the toxic combination of ESG and stakeholder capitalism, a threat that these days, following growing public unease over this duo, not infrequently comes clothed in camouflage such as sustainable investing. Of course.

But ESG and stakeholder capitalism are not going to be enough to get the world to net zero by 2050. The implications of that for economic and other freedoms are grim. In the most recent Capital Letter, I sketched out some signs that the race to net zero is heading in the direction of a command economy.

Well, here’s another warning light (via Bloomberg today):

Governments and companies need to spend an extra $34 trillion on the clean energy transition between now and 2050 to reach net-zero emissions, according to BloombergNEF.

The research group’s 250-page New Energy Outlook report, which crunches 18 million datapoints, says that amount is 19% more than what’s expected in its base case scenario. The finding indicates that sectors from electric vehicles and renewable energy to power grids and carbon capture need extra support.

Eighteen million data points! Across the world, central-planners read that number and shudder with delight. We’re on top of things! We know it all!

A bit more:

Renewable project developers have come up against higher interest rates and inflation, making the potential return on investments less attractive.

On some calculations, interest rates in the past decade reached 4,000-year lows. Even if that’s a stretch, they were undeniably very low. That they moved up fairly sharply ought not to have been a surprise. And nor should the return of inflation.

The race to net zero by 2050 is not only the wrong approach to a changing climate, it is also going to be lost. But the “men of system” will forge on deeper into disaster, like British generals during the second month of the Battle of the Somme, convinced that they are on the right path and that all success will take is more of the same.

A fantasy of net zero by 2050, or a market economy in 2050. Choose one.