Economics and Culture: Cause and/or Effect

In The Conscience of a Liberal, Paul Krugman points out that the United States had one of its best economic periods during the culturally turbulent 1960s. Indeed, for his central thesis to make any headway with readers - that America's widening class gap is the result of political decisions, and not of economic destiny - readers have to accept that politics can act as a cause and economics the effect. Krugman's argument contradicts the received wisdom: like most modern Americans, I usually assume that cultural trends largely track economic ones.

What most modern Americans don't realize is that this outlook began with Marx, and it is his pinning economics and political currents to the material world that is his strongest contribution. I'm a moderate libertarian squarely in the Austrian camp on most economic questions - it's with Marx's normative prescriptions that I take issue. On Marx's expansion of a rational and materialist approach to social sciences, I can agree wholeheartedly with the world's dialecticians. Gibbon disturbed eighteenth century Europeans with his (to us, common-sense; at the time,bold) assertion that the history of the Roman Empire could be explained in material, cause-and-effect terms. Darwin did the same for the material world. That's why one the most interesting statements in this Christopher Hitchens article is that "Marx was a keen admirer of that other great Victorian Charles Darwin, and according to Engels he wanted to do for the economic system what the author of The Origin of Species had done for the natural order: lay bare its objective laws of motion and thus make it possible at last to dispense with subjective and idealist interpretations."

Although it's more of a common-sense position of educated people in Western societies these days, the materialist cause-and-effect relationship that Marx argued for (economics is the cause and everything else is the effect) is, in the United States, better appreciated by those on the political left, not surprisingly. Hence my surprise at Krugman's argument. It's really a chicken-and-egg problem that will not admit of clear theorizing so soon after we've applied clear-headed approaches. An economy is a massive complex system that is one aspect of a culture.

Taking a step back, I perversely find cause for optimism in our economic situation, if only because it's forcing open our discussions, at a time when we don't need mass media to take part in the discussion. We have big problems, we need a fix, and we won't win converts to our arguments by stubbornly refusing to entertain an idea that happens to come with an ideological tag we find distasteful. Of course, figures in mass media and populists will still shout their pre-digested messages to avoid alienating the customer base on which their advertisers are dependent. But it's in the journals and blogs and discussion groups where a paternalistic libertarian-Austrian who recognizes the limits of capitalism (as Schumpeter did) can find space for agreement with an ex-Trotskyist. Both are engaged in the Enlightenment project of a reason-based government that betters the lot of its citizen by material improvement, and in the harsh sunlight of a global recession, both must recognize the shortcomings of staying in an ideological box. One step in the convergent evolution of the left is the recognition of the truly revolutionary nature of capitalist innovation.

In parallel, honest free market proponents are recognizing that we have confused politics and economics. We made the now-falsified assumption that capitalism led inexorably to liberal democracy. Of course, the best counterargument is China: if China isn't capitalist, I don't know what is, and if China is a democracy, than I don't know what democracy is. It was Kant (Marx's philosophical grandfather) who said that trade between nations naturally lowers the likelihood of war - who can doubt that if China wasn't holding so much U.S. debt and the U.S. did not gobble up all China's imports that tensions between the two giants would be higher? Adam Smith had already warned us that businessmen should not be making laws.

In this new sphere there is less concern for rhetorical maneuvering, and more genuine argument. By testing our assumptions, the economic crisis has broken down a lot of old philosophical lines. To some degree, we're being liberated from ideology, and I find it exhilirating. Maybe I'm being over-optimistic, but it seems the age of the public intellectual - the kind that can actually make a contribution to the world - has dawned again.