In the last half-century of American politics, conservatism has hardened around the defense of economic privilege and rule. Whether it’s the libertarianism of the GOP or the neoliberalism of the Democrats, that defense has enabled an upward redistribution of rights and a downward redistribution of duties. The 1 percent possesses more than wealth and political influence; it wields direct and personal power over men and women. Capital governs labor, telling workers what to say, how to vote and when to pee. It has all the substance of noblesse and none of the style of oblige. That many of its most vocal defenders believe Barack Obama to be their mortal enemy—a socialist, no less—is a testament less to the reality about which they speak than to the resonance of the vocabulary they deploy.The Nobel Prize–winning economist Friedrich Hayek is the leading theoretician of this movement, formulating the most genuinely political theory of capitalism on the right we’ve ever seen. The theory does not imagine a shift from government to the individual, as is often claimed by conservatives; nor does it imagine a simple shift from the state to the market or from society to the atomized self, as is sometimes claimed by the left. Rather, it recasts our understanding of politics and where it might be found. This may explain why the University of Chicago chose to reissue Hayek’s The Constitution of Liberty two years ago after the fiftieth anniversary of its publication. Like The Road to Serfdom (1944), which a swooning Glenn Beck catapulted to the bestseller list in 2010, The Constitution of Liberty is a text, as its publisher says, of “our present moment.”
But to understand that text and its influence, it’s necessary to turn away from contemporary America to fin de siècle Vienna. The seedbed of Hayek’s arguments is the half-century between the “marginal revolution,” which changed the field of economics in the late nineteenth century, and the collapse of the Habsburg monarchy in 1918. It is by now a commonplace of European cultural history that a dying Austro-Hungarian Empire gave birth to modernism, psychoanalysis and fascism. Yet from the vortex of Vienna came not only Wittgenstein, Freud and Hitler but also Hayek, who was born and educated in the city, and the Austrian school of economics.
Friedrich Nietzsche figures critically in this story, less as an influence than a diagnostician. This will strike some as an improbable claim: Wasn’t Nietzsche contemptuous of capitalists, capitalism and economics? Yes, he was, and for all his reading in political economy, he never wrote a treatise on politics or economics. And despite the long shadow he cast over the Viennese avant-garde, he is hardly ever cited by the economists of the Austrian school.
Yet no one understood better than Nietzsche the social and cultural forces that would shape the Austrians: the demise of an ancient ruling class; the raising of the labor question by trade unions and socialist parties; the inability of an ascendant bourgeoisie to crush or contain democracy in the streets; the need for a new ruling class in an age of mass politics. The relationship between Nietzsche and the free-market right—which has been seeking to put labor back in its box since the nineteenth century, and now, with the help of the neoliberal left, has succeeded—is thus one of elective affinity rather than direct influence, at the level of idiom rather than policy.
“One day,” Nietzsche wrote in Ecce Homo, “my name will be associated with the memory of something tremendous, a crisis without equal on earth, the most profound collision of conscience.” It is one of the ironies of intellectual history that the terms of the collision can best be seen in the rise of a discourse that Nietzsche, in all likelihood, would have despised.
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In 1869, Nietzsche was appointed professor of classical philology at Basel University. Like most junior faculty, he was bedeviled by meager wages and bore major responsibilities, such as teaching fourteen hours a week, Monday through Friday, beginning at 7 am. He also sat on multiple committees and covered for senior colleagues who couldn’t make their classes. He lectured to the public on behalf of the university. He dragged himself to dinner parties. Yet within three years he managed to complete The Birth of Tragedy, a minor masterwork of modern literature, which he dedicated to his close friend and “sublime predecessor” Richard Wagner.
One chapter, however, he withheld from publication. In 1872, Nietzsche was invited to spend the Christmas holidays with Wagner and his wife Cosima, but sensing a potential rift with the composer, he begged off and sent a gift instead. He bundled “The Greek State” with four other essays, slapped a title onto a cover page (Five Prefaces to Five Unwritten Books), and mailed the leather-bound text to Cosima as a birthday present. Richard was offended; Cosima, unimpressed. “Prof. Nietzsche’s manuscript does not restore our spirits,” she sniffed in her diary.
Though presented as a sop to a fraying friendship, “The Greek State” reflects the larger European crisis of war and revolution that had begun in 1789 and would come to an end only in 1945. More immediately, it bears the stamp of the Franco-Prussian War, which had broken out in 1870, and the Paris Commune, which was declared the following year.
Initially ambivalent about the war, Nietzsche quickly became a partisan of the German cause. “It’s about our culture!” he wrote to his mother. “And for that no sacrifice is too great! This damned French tiger.” He signed up to serve as a medical orderly; Cosima tried to persuade him to stay put in Basel, recommending that he send cigarettes to the front instead. But Nietzsche was adamant. In August 1870, he left for Bavaria with his sister Elisabeth, riding the rails and singing songs. He got his training, headed to the battlefield, and in no time contracted dysentery and diphtheria. He lasted a month.
The war lasted for six. A half-million soldiers were killed or wounded, as were countless civilians. The preliminary peace treaty, signed in February 1871, favored the Germans and punished the French, particularly the citizens of Paris, who were forced to shoulder the burden of heavy indemnities to the Prussians. Enraged by its impositions—and a quarter-century of simmering discontent and broken promises—workers and radicals in Paris rose up and took over the city in March. Nietzsche was scandalized, his horror at the revolt inversely proportional to his exaltation over the war. Fearing that the Communards had destroyed the Louvre (they hadn’t), he wrote:
The reports of the past few days have been so awful that my state of mind is altogether intolerable. What does it mean to be a scholar in the face of such earthquakes of culture!… It is the worst day of my life.
In the quicksilver transmutation of a conventional war between states into a civil war between classes, Nietzsche saw a terrible alchemy of the future: “Over and above the struggle between nations the object of our terror was that international hydra-head, suddenly and so terrifyingly appearing as a sign of quite different struggles to come.”
By May, the Commune had been ruthlessly put down at the cost of tens of thousands of lives—much to the delight of the Parisian aesthete-aristocrat Edmond Goncourt:
All is well. There has been neither compromise nor conciliation. The solution has been brutal, imposed by sheer force of arms. The solution has saved everyone from the dangers of cowardly compromise. The solution has restored its self-confidence to the Army, which has learnt in the blood of the Communards that it was still capable of fighting…a bleeding like that, by killing the rebellious part of a population, postpones the next revolution by a whole conscription.
Of the man who wrote these words and the literary milieu of which he was a part, Nietzsche would later say: “I know these gentlemen inside out, so well that I have really had enough of them already. One has to be more radical: fundamentally they all lack the main thing—‘la force.’ ”
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The clash of these competing worlds of war and work echoes throughout “The Greek State.” Nietzsche begins by announcing that the modern era is dedicated to the “dignity of work.” Committed to “equal rights for all,” democracy elevates the worker and the slave. Their demands for justice threaten to “swamp all other ideas,” to tear “down the walls of culture.” Modernity has made a monster in the working class: a created creator (shades of Marx and Mary Shelley), it has the temerity to see itself and its labor as a work of art. Even worse, it seeks to be recognized and publicly acknowledged as such.
The Greeks, by contrast, saw work as a “disgrace,” because the existence it serves—the finite life that each of us lives—“has no inherent value.” Existence can be redeemed only by art, but art too is premised on work. It is made, and its maker depends on the labor of others; they take care of him and his household, freeing him from the burdens of everyday life. Inevitably, his art bears the taint of their necessity. No matter how beautiful, art cannot escape the pall of its creation. It arouses shame, for in shame “there lurks the unconscious recognition that these conditions” of work “are required for the actual goal” of art to be achieved. For that reason, the Greeks properly kept labor and the laborer hidden from view.
Throughout his writing life, Nietzsche was plagued by the vision of workers massing on the public stage—whether in trade unions, socialist parties or communist leagues. Almost immediately upon his arrival in Basel, the First International descended on the city to hold its fourth congress. Nietzsche was petrified. “There is nothing more terrible,” he wrote in The Birth of Tragedy, “than a class of barbaric slaves who have learned to regard their existence as an injustice, and now prepare to avenge, not only themselves, but all generations.” Several years after the International had left Basel, Nietzsche convinced himself that it was slouching toward Bayreuth in order to ruin Wagner’s festival there. And just weeks before he went mad in 1888 and disappeared forever into his own head, he wrote, “The cause of every stupidity today…lies in the existence of a labour question at all. About certain things one does not ask questions.”
One can hear in the opening passages of “The Greek State” the pounding march not only of European workers on the move but also of black slaves in revolt. Hegel was brooding on Haiti while he worked out the master-slave dialectic in The Phenomenology of Spirit. Though generations of scholars have told us otherwise, perhaps Nietzsche had a similar engagement in mind when he wrote, “Even if it were true that the Greeks were ruined because they kept slaves, the opposite is even more certain, that we will be destroyed because we fail to keep slaves.” What theorist, after all, has ever pressed so urgently—not just in this essay but in later works as well—the claim that “slavery belongs to the essence of a culture”? What theorist ever had to? Before the eighteenth century, bonded labor was an accepted fact. Now it was the subject of a roiling debate, provoking revolutions and emancipations throughout the world. Serfdom had been eliminated in Russia only a decade before—and in some German states, only a generation before Nietzsche’s birth in 1844—while Brazil would soon become the last state in the Americas to abolish slavery. An edifice of the ages had been brought down by a mere century’s vibrations; is it so implausible that Nietzsche, attuned to the vectors and velocity of decay as he was, would pause to record the earthquake and insist on taking the full measure of its effects?
If slavery was one condition of great art, Nietzsche continued in “The Greek State,” war and high politics were another. “Political men par excellence,” the Greeks channeled their agonistic urges into bloody conflicts between cities and less bloody conflicts within them: healthy states were built on the repression and release of these impulses. The arena for conflict created by that regimen gave “society time to germinate and turn green everywhere” and allowed “blossoms of genius” periodically to “sprout forth.” Those blossoms were not only artistic but also political. Warfare sorted society into lower and higher ranks, and from that hierarchy rose “the military genius,” whose artistry was the state itself. The real dignity of man, Nietzsche insisted, lay not in his lowly self but in the artistic and political genius his life was meant to serve and on whose behalf it was to be expended.
Instead of the Greek state, however, Europe had the bourgeois state; instead of aspiring to a work of art, states let markets do their work. Politics, Nietzsche complained, had become “an instrument of the stock exchange” rather than the terrain of heroism and glory. With the “specifically political impulses” of Europe so weakened—even his beloved Franco-Prussian War had not revived the spirit in the way that he had hoped—Nietzsche could only “detect dangerous signs of atrophy in the political sphere, equally worrying for art and society.” The age of aristocratic culture and high politics was at an end. All that remained was the detritus of the lower orders: the disgrace of the laborer, the paper chase of the bourgeoisie, the barreling threat of socialism. “The Paris commune,” Nietzsche would later write in his notebooks, “was perhaps no more than minor indigestion compared to what is coming.”
Nietzsche had little, concretely, to offer as a counter-volley to democracy, whether bourgeois or socialist. Despite his appreciation of the political impulse and his studious attention to political events in Germany—from the Schleswig-Holstein crisis of the early 1860s to the imperial push of the late 1880s—he remained leery of programs, movements and platforms. The best he could muster was a vague principle: that society is “the continuing, painful birth of those exalted men of culture in whose service everything else has to consume itself,” and the state a “means of setting [that] process of society in motion and guaranteeing its unobstructed continuation.” It was left to later generations to figure out what that could mean in practice—and where it might lead. Down one path might lay fascism; down another, the free market.
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Around the time—almost to the year—that Nietzsche was launching his revolution of metaphysics and morals, a trio of economists, working separately across three countries, were starting their own. It began with the publication in 1871 of Carl Menger’s Principles of Economics and William Stanley Jevons’s The Theory of Political Economy. Along with Léon Walras’s Elements of Pure Economics, which appeared three years later, these were the European faces—Austrian, English and French-Swiss—of what would come to be called the marginal revolution.
The marginalists focused less on supply and production than on the pulsing demand of consumption. The protagonist was not the landowner or the laborer, working his way through the farm, the factory or the firm; it was the universal man in the market whose signature act was to consume things. That’s how market man increased his utility: by consuming something until he reached the point where consuming one more increment of it gave him so little additional utility that he was better off consuming something else. Of such microscopic calculations at the periphery of our estate was the economy made.
Though the early marginalists helped transform economics from a humanistic branch of the moral sciences into a technical discipline of the social sciences, they were still able to command an audience and an influence all too rare in contemporary economics. Jevons spent his career as an independent scholar and professor in Manchester and London worrying about his lack of readers, but William Gladstone invited him over to discuss his work, and John Stuart Mill praised it on the floor of Parliament. Keynes tells us that “for a period of half a century, practically all elementary students both of Logic and of Political Economy in Great Britain and also in India and the Dominions were brought up on Jevons.”
According to Hayek, the “immediate reception” of Menger’s Principles “can hardly be called encouraging.” Reviewers seemed not to understand it. Two students at the University of Vienna, however, did. One was Friedrich von Wieser, the other Eugen von Böhm-Bawerk, and both became legendary educators and theoreticians. Their students included Hayek; Ludwig von Mises, who attracted a small but devoted following in the United States and elsewhere; and Joseph Schumpeter, dark poet of capitalism’s forces of “creative destruction.” Through Böhm-Bawerk and Wieser, Menger’s text became the groundwork of the Austrian school, whose reach, due in part to the efforts of Mises and Hayek, now extends across the globe.
The contributions of Jevons and Menger were multiple, yet each of them took aim at a central postulate of economics shared by everyone from Adam Smith to the socialist left: the notion that labor is a—if not the—source of value. Though adumbrated in the idiom of prices and exchange, the labor theory of value evinced an almost primitive faith in the metaphysical objectivity of the economic sphere—a faith made all the more surprising by the fact that the objectivity of the rest of the social world (politics, religion and morals) had been subject to increasing scrutiny since the Renaissance. Commodities may have come wrapped in the pretty paper of the market, but inside, many believed, were the brute facts of nature: raw materials from the earth and the physical labor that turned those materials into goods. Because those materials were made useful, hence valuable, only by labor, labor was the source of value. That, and the fact that labor could be measured in some way (usually time), lent the world of work a kind of ontological status—and political authority—that had been increasingly denied to the world of courts and kings, lands and lords, parishes and priests. As the rest of the world melted into air, labor was crystallizing as the one true solid.
By the time the marginalists came on the scene, the most politically threatening version of the labor theory of value was associated with the left. Though Marx would significantly revise and recast it in his mature writings, the simple notion that labor produces value remained associated with his name—and even more so with that of his competitor Ferdinand Lasalle, about whom Nietzsche read a fair amount—as well as with the larger socialist and trade union movements of which he was a part. That association helped set the stage for the marginalists’ critique.
Admittedly, the relationship between marginalism and anti-socialism is complex. On the one hand, there is little evidence to suggest that the first-generation marginalists had heard of, much less read, Marx, at least not at this early stage of their careers. Much more than the threat of socialism underpinned the emergence of marginalist economics, which was as opposed to traditional defenses of the market as it was to the market’s critics. By the twentieth century, moreover, many marginalists were on the left and used their ideas to help construct the institutions of social democracy; even Walras and Alfred Marshall, another early marginalist, were sympathetic to the claims of the left. And on some readings, the mature Marx shares more with the constructivist thrusts of marginalism than he does with the objectivism of the labor theory of value.
On the other hand, Jevons was a tireless polemicist against trade unions, which he identified as “the best example…of the evils and disasters” attending the democratic age. Jevons saw marginalism as a critical antidote to the labor movement and insisted that its teachings be widely transmitted to the working classes. “To avoid such a disaster,” he argued, “we must diffuse knowledge” to the workers—empowered as they were by the vote and the strike—“and the kind of knowledge required is mainly that comprehended in the science of political economy.”
Menger interrupted his abstract reflections on value to make the point that while it may “appear deplorable to a lover of mankind that possession of capital or a piece of land often provides the owner a higher income…than the income received by a laborer,” the “cause of this is not immoral.” It was “simply that the satisfaction of more important human needs depends upon the services of the given amount of capital or piece of land than upon the services of the laborer.” Any attempt to get around that truth, he warned, “would undoubtedly require a complete transformation of our social order.”
Finally, there is no doubt that the marginalists of the Austrian school, who would later prove so influential on the American right, saw their project as primarily anti-Marxist and anti-socialist. “The most momentous consequence of the theory,” declared Wieser in 1891, “is, I take it, that it is false, with the socialists, to impute to labor alone the entire productive return.”
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With its division of intellectual labor, the modern academy often separates economics from ethics and philosophy. Earlier economists and philosophers did not make that separation. Even Nietzsche recognized that economics rested on genuine moral and philosophical premises, many of which he found dubious, and that it had tremendous moral and political effects, all of which he detested. In The Wanderer and His Shadow, Nietzsche criticized “our economists” for having “not yet wearied of scenting a similar unity in the word ‘value’ and of searching after the original root-concept of the word.” In his preliminary outline for the summa he hoped to publish on “the will to power,” he scored the “nihilistic consequences of the ways of thinking in politics and economics.”
For that reason, Nietzsche saw in labor’s appearance more than an economic theory of goods: he saw a terrible diminution of the good. Morals must be “understood as the doctrine of the relations of supremacy,” he wrote in Beyond Good and Evil; every morality “must be forced to bow…before the order of rank.” But like so many before them, including the Christian slave and the English utilitarian, the economist and the socialist promoted an inferior human type—and an inferior set of values—as the driving agent of the world. Nietzsche saw in this elevation not only a transformation of values but also a loss of value and, potentially, the elimination of value altogether. Conservatives from Edmund Burke to Robert Bork have conflated the transformation of values with the end of value. Nietzsche, on occasion, did too: “What does nihilism mean?” he asked himself in 1887. “That the highest values devaluate themselves.” The nihilism consuming Europe was best understood as a democratic “hatred against the order of rank.”
Part of Nietzsche’s worry was philosophical: How was it possible in a godless world, naturalistically conceived, to deem anything of value? But his concern was also cultural and political. Because of democracy, which was “Christianity made natural,” the aristocracy had lost “its naturalness”—that is, the traditional vindication of its power. How then might a hierarchy of excellence, aesthetic and political, re-establish itself, defend itself against the mass—particularly a mass of workers—and dominate that mass? As Nietzsche wrote in the late 1880s:
A reverse movement is needed—the production of a synthetic, summarizing, justifying man for whose existence this transformation of mankind into a machine is a precondition, as a base on which he can invent his higher form of being.
He needs the opposition of the masses, of the “leveled,” a feeling of distance from them. [He] stands on them, he lives off them. This higher form of aristocracy is that of the future.—Morally speaking, this overall machinery, this solidarity of all gears, represents a maximum of exploitation of man; but it presupposes those on whose account this exploitation has meaning.
Nietzsche’s response to that challenge was not to revert or resort to a more objective notion of value: that was neither possible nor desirable. Instead, he embraced one part of the modern understanding of value—its fabricated nature—and turned it against its democratic and Smithian premises. Value was indeed a human creation, Nietzsche acknowledged, and as such could just as easily be conceived as a gift, an honorific bestowed by one man upon another. “Through esteeming alone is there value,” Nietzsche has Zarathustra declare; “to esteem is to create.” Value was not made with coarse and clumsy hands; it was enacted with an appraising gaze, a nod of the head signifying a matchless abundance of taste. It was, in short, aristocratic.
While slaves had once created value in the form of Christianity, they had achieved that feat not through their labor but through their censure and praise. They had also done it unwittingly, acting upon a deep and unconscious compulsion: a sense of inferiority, a rage against their powerlessness, and a desire for revenge against their betters. That combination of overt impotence and covert drive made them ill-suited to creating values of excellence. Nietzsche explained in Beyond Good and Evil that the self-conscious exercise and enjoyment of power made the noble type a better candidate for the creation of values in the modern world, for these were values that would have to break with the slave morality that had dominated for millennia. Only insofar as “it knows itself to be that which first accords honor to things” can the noble type truly be “value-creating.”
Labor belonged to nature, which is not capable of generating value. Only the man who arrayed himself against nature—the artist, the general, the statesman—could claim that role. He alone had the necessary refinements, wrought by “that pathos of distance which grows out of ingrained difference between strata,” to appreciate and bestow value: upon men, practices and beliefs. Value was not a product of the prole; it was an imposition of peerless taste. In the words of The Gay Science:
Whatever has value in our world now does not have value in itself, according to its nature—nature is always value-less, but has been given value at some time, as a present—and it was we who gave and bestowed it.
That was in 1882. Just a decade earlier, Menger had written: “Value is therefore nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being.” Jevons’s position was identical, and like Nietzsche, both Menger and Jevons thought value was instead a high or low estimation put by a man upon the things of life. But lest that desiring self be reduced to a simple creature of tabulated needs, Menger and Jevons took care to distinguish their positions from traditional theories of utility.
Jevons, for example, was prepared to follow Jeremy Bentham in his definition of utility as “that property in an object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness.” He thought this “perfectly expresses the meaning of the word Economy.” But he also insisted on a critical rider: “provided that the will or inclination of the person concerned is taken as the sole criterion, for the time, of what is good and desirable.” Our expressed desires and aversions are not measures of our objective or underlying good; there is no such thing. Nor can we be assured that those desires or aversions will bring us pleasure or pain. What we want or don’t want is merely a representation, a snapshot of the motions of our will—that black box of preference and partiality that so fascinated Nietzsche precisely because it seemed so groundless and yet so generative. Every mind is inscrutable to itself: we lack, said Jevons, “the means of measuring directly the feelings of the human heart.” The inner life is inaccessible to our inspections; all we can know are its effects, the will it powers and the actions it propels. “The will is our pendulum,” declared Jevons, a representation of forces that cannot be seen but whose effects are nevertheless felt, “and its oscillations are minutely registered in all the price lists of the markets.”
Menger thought the value of any good was connected to our needs, but he was extraordinarily attuned to the complexity—and contingency—of that relationship. Needs, wrote Menger, “at least as concerns their origin, depend upon our wills or on our habits.” Needs are more than the givens of our biology or psyche; they are the desideratum of our volitions and practices, which are idiosyncratic and arbitrary. Only when our needs finally “come into existence”—that is, only when we become aware of them—can we truly say that “there is no further arbitrary element” in the process of value formation.
Even then, needs must pass through a series of checkpoints before they can enter the land of value. Awareness of a need, says Menger, entails a comprehensive knowledge of how the need might be fulfilled by a particular good, how that good might contribute to our lives, and how (and whether) command of that good is necessary for the satisfaction of that need. That last bit of knowledge requires us to look at the external world: to ask how much of that good is available to us, to consider how many sacrifices we must bear—how many satisfactions we are willing to forgo—in order to secure it. Only when we have answered these questions are we ready to speak of value, which Menger reminds us is “the importance we attribute to the satisfaction of our needs.” Value is thus “a judgment” that “economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being.” It “does not exist outside the consciousness of men.” Even though previous economists had insisted on the “objectification of the value of goods,” Menger, like Jevons and Nietzsche, concludes that value “is entirely subjective in nature.”
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In their war against socialism, the philosophers of capital faced two challenges. The first was that by the early twentieth century, socialism had cornered the market on morality. As Mises complained in his 1932 preface to the second edition of Socialism, “Any advocate of socialistic measures is looked upon as the friend of the Good, the Noble, and the Moral, as a disinterested pioneer of necessary reforms, in short, as a man who unselfishly serves his own people and all humanity.” Indeed, with the help of kindred notions such as “social justice,” socialism seemed to be the very definition of morality. Nietzsche had long been wise to this insinuation; one source of his discontent with religion was his sense that it had bequeathed to modernity an understanding of what morality entailed (selflessness, universality, equality) such that only socialism and democracy could be said to fulfill it. But where Nietzsche’s response to the equation of socialism and morality was to question the value of morality, at least as it had been customarily understood, economists like Mises and Hayek pursued a different path, one Nietzsche would never have dared to take: they made the market the very expression of morality.
Moralists traditionally viewed the pursuit of money and goods as negative or neutral; the Austrians claimed it embodies our deepest values and commitments. “The provision of material goods,” declared Mises, “serves not only those ends which are usually termed economic, but also many other ends.” All of us have ends or ultimate purposes in life: the cultivation of friendship, the contemplation of beauty, a lover’s companionship. We enter the market for the sake of those ends. Economic action thus “consists firstly in valuation of ends, and then in the valuation of the means leading to these ends. All economic activity depends, therefore, upon the existence of ends. Ends dominate economy and alone give it meaning.” We simply cannot speak, writes Hayek in The Road to Serfdom, of “purely economic ends separate from the other ends of life.”
This claim, however, could just as easily be enlisted as an argument for socialism. In providing men and women with the means of life—housing, food, healthcare—the socialist state frees them to pursue the ends of life: beauty, knowledge, wisdom. The Austrians went further, insisting that the very decision about what constitutes means and ends was itself a judgment of value. Any economic situation confronts us with the necessity of choice, of having to deploy our limited resources—whether time, money or effort—on behalf of some end. In making that choice, we reveal which of our ends matters most to us: which is higher, which is lower. “Every man who, in the course of economic activity, chooses between the satisfaction of two needs, only one of which can be satisfied, makes judgments of value,” says Mises.
For those choices to reveal our ends, our resources must be finite—unlimited time, for example, would obviate the need for choice—and our choice of ends unconstrained by external interference. The best, indeed only, method for guaranteeing such a situation is if money (or its equivalent in material goods) is the currency of choice—and not just of economic choice, but of all of our choices. As Hayek writes in The Road to Serfdom:
So long as we can freely dispose over our income and all our possessions, economic loss will always deprive us only of what we regard as the least important of the desires we were able to satisfy. A “merely” economic loss is thus one whose effect we can still make fall on our less important needs…. Economic changes, in other words, usually affect only the fringe, the “margin,” of our needs. There are many things which are more important than anything which economic gains or losses are likely to affect, which for us stand high above the amenities and even above many of the necessities of life which are affected by the economic ups and downs.
Should the government decide which of our needs are “merely economic,” we would be deprived of the opportunity to decide whether these are higher or lower goods, the marginal or mandatory items of our flourishing. So vast is the gulf between each soul, so separate and unequal are we, that it is impossible to assume anything universal about the sources and conditions of human happiness, a point Nietzsche and Jevons would have found congenial. The judgment of what constitutes a means, what an end, must be left to the individual self. Hayek again:
Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends. And whoever has sole control of the means must also determine which ends are to be served, which values are to be rated higher and which lower—in short what men should believe and strive for.
While the economic is, in one sense readily acknowledged by Hayek, the sphere of our lower needs, it is in another and altogether more important sense the anvil upon which we forge our notion of what is lower and higher in this world, our morality. “Economic values,” he writes, “are less important to us than many things precisely because in economic matters we are free to decide what to us is more, and what less, important.” But we can be free to make those choices only if they are left to us to make—and, paradoxically, if we are forced to make them. If we didn’t have to choose, we’d never have to value anything.
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By imposing this drama of choice, the economy becomes a theater of self-disclosure, the stage upon which we discover and reveal our ultimate ends. It is not in the casual chatter of a seminar or the cloistered pews of a church that we determine our values; it is in the duress—the ordeal—of our lived lives, those moments when we are not only free to choose but forced to choose. “Freedom to order our own conduct in the sphere where material circumstances force a choice upon us,” Hayek wrote, “is the air in which alone moral sense grows and in which moral values are daily re-created.”
While progressives often view this discourse of choice as either dime-store morality or fabricated scarcity, the Austrians saw the economy as the disciplining agent of all ethical action, a moment of—and opportunity for—moral artistry. Freud thought the compressions of the dream world made every man an artist; these other Austrians thought the compulsions of the economy made every man a moralist. It is only when we are navigating its narrow channels—where every decision to expend some quantum of energy requires us to make a calculation about the desirability of its posited end—that we are brought face to face with ourselves and compelled to answer the questions: What do I believe? What do I want in this world? From this life?
While there are precedents for this argument in Menger’s theory of value (the fewer opportunities there are for the satisfaction of our needs, Menger says, the more our choices will reveal which needs we value most), its true and full dimensions can best be understood in relation to Nietzsche. As much as Nietzsche railed against the repressive effect of laws and morals on the highest types, he also appreciated how much “on earth of freedom, subtlety, boldness, dance, and masterly sureness” was owed to these constraints. Confronted with a set of social strictures, the diverse and driving energies of the self were forced to draw upon unknown and untapped reserves of ingenuity—either to overcome these obstacles or to adapt to them with the minimum of sacrifice. The results were novel, value-creating.
Nietzsche’s point was primarily aesthetic. Contrary to the romantic notion of art being produced by a process of “letting go,” Nietzsche insisted that the artist “strictly and subtly…obeys thousandfold laws.” The language of invention—whether poetry, music or speech itself—is bound by “the metrical compulsion of rhyme and rhythm.” Such laws are capricious in their origin and tyrannical in their effect. That is the point: from that unforgiving soil of power and whimsy rises the most miraculous increase. Not just in the arts—Goethe, say, or Beethoven—but in politics and ethics as well: Napoleon, Caesar, Nietzsche himself (“Genuine philosophers…are commanders and legislators: they say, ‘thus it shall be!’”).
One school would find expression for these ideas in fascism. Writers like Ernst Jünger and Carl Schmitt imagined political artists of great novelty and originality forcing their way through or past the filtering constraints of everyday life. The leading legal theorist of the Third Reich, Schmitt looked to those extraordinary instances in politics—war, the “decision,” the “exception”—when “the power of real life,” as he put it in Political Theology, “breaks through the crust of a mechanism that has become torpid by repetition.” In that confrontation between mechanism and real life, the man of exception would find or make his moment: by taking an unauthorized decision, ordaining a new regime of law, or founding a political order. In each case, something was “created out of nothingness.”
It was the peculiar—and, in the long run, more significant—genius of the Austrian school to look for these moments and experiences not in the political realm but in the marketplace. Money in a capitalist economy, Hayek came to realize, could best be understood and defended in Nietzschean terms: as “the medium through which a force”—the self’s “desire for power to achieve unspecified ends”—“makes itself felt.”
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The second challenge confronting the philosophers of capital was more daunting. While Nietzsche’s transvaluation of values gave pride of place to the highest types of humanity—values were a gift, the philosopher their greatest source—the political implications of marginalism were more ambidextrous. If on one reading it was the capitalist who gave value to the worker, on another it was the worker—in his capacity as consumer—who gave value to capital. Social democrats pursued the latter argument with great zeal. The result was the welfare state, with its emphasis on high wages and good benefits—as well as unionization—as the driving agent of mass demand and economic prosperity. More than a macroeconomic policy, social democracy (or liberalism, as it was called in America) reflected an ethos of the citizen-worker-consumer as the creator and center of the economy. Long after economists had retired the labor theory of value, the welfare state remained lit by its afterglow. The political economy of the welfare state may have been marginalist, but its moral economy was workerist.
The midcentury right was in desperate need of a response that, squaring Nietzsche’s circle, would clear a path for aristocratic action in the capitalist marketplace. It needed not simply an alternative economics but an answering vision of society. Schumpeter provided one, Hayek another.
Schumpeter’s entrepreneur is one of the more enigmatic characters of modern social theory. He is not inventive, heroic or charismatic. “There is surely no trace of any mystic glamour about him,” Schumpeter writes in Capitalism, Socialism and Democracy. His instincts and impulses are confined to the office and the counting table. Outside those environs, he cannot “say boo to a goose.” Yet it is this nothing, this great inscrutable blank, that will “bend a nation to his will”—not unlike the father figures of a Mann or Musil novel.
What the entrepreneur has—or, better, is—are force and will. As Schumpeter explains in a 1927 essay, the entrepreneur possesses “extraordinary physical and nervous energy.” That energy gives him focus (the maniacal, almost brutal, ability to shut out what is inessential) and stamina. In those late hours when lesser beings have “given way to a state of exhaustion,” he retains his “full force and originality.” By “originality,” Schumpeter means something peculiar: “receptivity to new facts.” It is the entrepreneur’s ability to recognize that sweet spot of novelty and occasion (an untried technology, a new method of production, a different way to market or distribute a product) that enables him to revolutionize the way business gets done. Part opportunist, part fanatic, he is “a leading man,” Schumpeter suggests in Capitalism, Socialism and Democracy, overcoming all resistance in order to create the new modes and orders of everyday life.
Schumpeter is careful to distinguish entrepreneurialism from politics as it is conventionally understood: the entrepreneur’s power “does not readily expand…into the leadership of nations”; “he wants to be left alone and to leave politics alone.” Even so, the entrepreneur is best understood as neither an escape from nor an evasion of politics but as its sublimation, the relocation of politics in the economic sphere.
Rejecting the static models of other economists—equilibrium is death, he says—Schumpeter depicts the economy as a dramatic confrontation between rising and falling empires (firms). Like Machiavelli in The Prince, whose vision Nietzsche described as “perfection in politics,” Schumpeter identifies two types of agents struggling for position and permanence amid great flux: one is dynastic and lawful, the other upstart and intelligent. Both are engaged in a death dance, with the former in the potentially weaker position unless it can innovate and break with routine.
Schumpeter often resorts to political and military metaphors to describe this dance. Production is “a history of revolutions.” Competitors “command” and wield ”pieces of armor.” Competition “strikes” at the “foundations” and “very lives” of firms; entrepreneurs in equilibrium “find themselves in much the same situations as generals would in a society perfectly sure of permanent peace.” In the same way that Schmitt imagines peace as the end of politics, Schumpeter sees equilibrium as the end of economics.
Against this backdrop of dramatic, even lethal, contest, the entrepreneur emerges as a legislator of values and new ways of being. The entrepreneur demonstrates a penchant for breaking with “the routine tasks which everybody understands.” He overcomes the multiple resistances of his world—“from simple refusal either to finance or to buy a new thing, to physical attack on the man who tries to produce it.”
To act with confidence beyond the range of familiar beacons and to overcome that resistance requires aptitudes that are present in only a small fraction of the population and that define the entrepreneurial type.
The entrepreneur, in other words, is a founder. As Schumpeter describes him in The Theory of Economic Development:
There is the dream and the will to found a private kingdom, usually, though not necessarily, also a dynasty. The modern world really does not know any such positions, but what may be attained by industrial and commercial success is still the nearest approach to medieval lordship possible to modern man.
That may be why his inner life is so reminiscent of the Machiavellian prince, that other virtuoso of novelty. All of his energy and will, the entirety of his force and being, is focused outward, on the enterprise of creating a new order.
And yet even as he sketched the broad outline of this legislator of value, Schumpeter sensed that his days were numbered. Innovation was increasingly the work of departments, committees and specialists. The modern corporation “socializes the bourgeois mind.” In the same way that modern regiments had destroyed the “very personal affair” of medieval battle, so did the corporation eliminate the need for “individual leadership acting by virtue of personal force and personal responsibility for success.” The “romance of earlier commercial adventure” was “rapidly wearing away.” With the entrepreneurial function in terminal decline, Schumpeter’s experiment in economics as great politics seemed to be approaching an end.
* * *
Hayek offered an alternative account of the market as the proving ground of aristocratic action. Schumpeter had already hinted at it in a stray passage in Capitalism, Socialism and Democracy. Taking aim at the notion of a rational chooser who knows what he wants, wants what is best (for him, at any rate) and works efficiently to get it, Schumpeter invoked a half-century of social thought—Le Bon, Pareto and Freud—to emphasize not only “the importance of the extra-rational and irrational element in our behavior,” but also the power of capital to shape the preferences of the consumer.
Consumers do not quite live up to the idea that the economic textbooks used to convey. On the one hand, their wants are nothing like as definite, and their actions upon those wants nothing like as rational and prompt. On the other hand, they are so amenable to the influence of advertising and other methods of persuasion that producers often seem to dictate to them instead of being directed by them.
In The Constitution of Liberty, Hayek developed this notion into a full-blown theory of the wealthy and the well-born as an avant-garde of taste, as makers of new horizons of value from which the rest of humanity took its bearings. Instead of the market of consumers dictating the actions of capital, it would be capital that would determine the market of consumption—and beyond that, the deepest beliefs and aspirations of a people.
The distinction that Hayek draws between mass and elite has not received much attention from his critics or his defenders, bewildered or beguiled as they are by his repeated invocations of liberty. Yet a careful reading of Hayek’s argument reveals that liberty for him is neither the highest good nor an intrinsic good. It is a contingent and instrumental good (a consequence of our ignorance and the condition of our progress), the purpose of which is to make possible the emergence of a heroic legislator of value.
Civilization and progress, Hayek argues, depend upon each of us deploying knowledge that is available for our use yet inaccessible to our reason. The computer on which I am typing is a repository of centuries of mathematics, science and engineering. I know how to use it, but I don’t understand it. Most of our knowledge is like that: we know the “how” of things—how to turn on the computer, how to call up our word-processing program and type—without knowing the “that” of things: that electricity is the flow of electrons, that circuits operate through binary choices and so on. Others possess the latter kind of knowledge; not us. That combination of our know-how and their knowledge advances the cause of civilization. Because they have thought through how a computer can be optimally designed, we are free to ignore its transistors and microchips; instead, we can order clothes online, keep up with old friends as if they lived next door, and dive into previously inaccessible libraries and archives in order to produce a novel account of the Crimean War.
We can never know what serendipity of knowledge and know-how will produce the best results, which union of genius and basic ignorance will yield the greatest advance. For that reason, individuals—all individuals—must be free to pursue their ends, to exploit the wisdom of others for their own purposes. Allowing for the uncertainties of progress is the greatest guarantor of progress. Hayek’s argument for freedom rests less on what we know or want to know than on what we don’t know, less on what we are morally entitled to as individuals than on the beneficial consequences of individual freedom for society as a whole.
In fact, Hayek continues, it is not really my freedom that I should be concerned about; nor is it the freedom of my friends and neighbors. It is the freedom of that unknown and untapped figure of invention to whose imagination and ingenuity my friends and I will later owe our greater happiness and flourishing: “What is important is not what freedom I personally would like to exercise but what freedom some person may need in order to do things beneficial to society. This freedom we can assure to the unknown person only by giving it to all.”
Deep inside Hayek’s understanding of freedom, then, is the notion that the freedom of some is worth more than the freedom of others: “The freedom that will be used by only one man in a million may be more important to society and more beneficial to the majority than any freedom that we all use.” Hayek cites approvingly this statement of a nineteenth-century philosopher: “It may be of extreme importance that some should enjoy liberty…although such liberty may be neither possible nor desirable for the great majority.” That we don’t grant freedom only to that individual is due solely to the happenstance of our ignorance: we cannot know in advance who he might be. “If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty.”
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As this reference to “future wants and desires” suggests, Hayek has much more in mind than producers responding to a pre-existing market of demand; he’s talking about men who create new markets—and not just of wants or desires, but of basic tastes and beliefs. The freedom Hayek cares most about is the freedom of those legislators of value who shape and determine our ends.
The overwhelming majority of men and women, Hayek says, are simply not capable of breaking with settled patterns of thought and practice; given a choice, they would never opt for anything new, never do anything better than what they do now.
Action by collective agreement is limited to instances where previous efforts have already created a common view, where opinion about what is desirable has become settled, and where the problem is that of choosing between possibilities already generally recognized, not that of discovering new possibilities.
While some might claim that Hayek’s argument here is driven less by a dim view of ordinary men and women than his dyspepsia about politics, he explicitly excludes “the decision of some governing elite” from the acid baths of his skepticism. Nor does he hide his misgivings about the individual abilities of wage laborers who comprise the great majority. The working stiff is a being of limited horizons. Unlike the employer or the “independent,” both of whom are dedicated to “shaping and reshaping a plan of life,” the worker’s orientation is “largely a matter of fitting himself into a given framework.” He lacks responsibility, initiative, curiosity and ambition. Though some of this is by necessity—the workplace does not countenance “actions which cannot be prescribed or which are not conventional”—Hayek insists that this is “not only the actual but the preferred position of the majority of the population.” The great majority enjoy submitting to the workplace regime because it “gives them what they mainly want: an assured fixed income available for current expenditure, more or less automatic raises, and provision for old age. They are thus relieved of some of the responsibilities of economic life.” Simply put, these are people for whom taking orders from a superior is not only a welcome relief but a prerequisite of their fulfillment: “To do the bidding of others is for the employed the condition of achieving his purpose.”
It thus should come as no surprise that Hayek believes in an avant-garde of tastemakers, whose power and position give them a vantage from which they can not only see beyond the existing horizon but also catch a glimpse of new ones:
Only from an advanced position does the next range of desires and possibilities become visible, so that the selection of new goals and the effort toward their achievement will begin long before the majority can strive for them.
These horizons include everything from “what we regard as good or beautiful,” to the ambitions, goals and ends we pursue in our everyday lives, to “the propagation of new ideas in politics, morals, and religion.” On all of these fronts, it is the avant-garde that leads the way and sets our parameters.
More interesting is how explicit and insistent Hayek is about linking the legislation of new values to the possession of vast amounts of wealth and capital, even—or especially—wealth that has been inherited. Often, says Hayek, it is only the very rich who can afford new products or tastes. Lavishing money on these boutique items, they give producers the opportunity to experiment with better designs and more efficient methods of production. Thanks to their patronage, producers will find cheaper ways of making and delivering these products—cheap enough, that is, for the majority to enjoy them. What was before a luxury of the idle rich—stockings, automobiles, piano lessons, the university—is now an item of mass consumption.
The most important contribution of great wealth, however, is that it frees its possessor from the pursuit of money so that he can pursue nonmaterial goals. Liberated from the workplace and the rat race, the “idle rich”—a phrase Hayek seeks to reclaim as a positive good—can devote themselves to patronizing the arts, subsidizing worthy causes like abolition or penal reform, founding new philanthropies and cultural institutions. Those born to wealth are especially important: not only are they the beneficiaries of the higher culture and nobler values that have been transmitted across the generations—Hayek insists that we will get a better elite if we allow parents to pass their fortunes on to their children; requiring a ruling class to start fresh with every generation is a recipe for stagnation, for having to reinvent the wheel—but they are immune to the petty lure of money. “The grosser pleasures in which the newly rich often indulge have usually no attraction for those who have inherited wealth.” (How Hayek reconciles this position with the agnosticism about value he expresses in The Road to Serfdom remains unclear.)
The men of capital, in other words, are best understood not as economic magnates but as cultural legislators: “However important the independent owner of property may be for the economic order of a free society, his importance is perhaps even greater in the fields of thought and opinion, of tastes and beliefs.” While this seems to be a universal truth for Hayek, it is especially true in societies where wage labor is the rule. The dominance of paid employment has terrible consequences for the imagination, which are most acutely felt by the producers of that imagination: “There is something seriously lacking in a society in which all the intellectual, moral, and artistic leaders belong to the employed classes…. Yet we are moving everywhere toward such a position.”
When labor becomes the norm, in both senses of the term, culture doesn’t stand a chance.
* * *
In a virtuoso analysis of what he calls “The Intransigent Right,” the British historian Perry Anderson identifies four figures of the twentieth-century conservative canon: Schmitt, Hayek, Michael Oakeshott and Leo Strauss. Strauss and Schmitt come off best (the sharpest, most profound and far-seeing), Oakeshott the worst, and Hayek somewhere in between. This hierarchy of judgment is not completely surprising. Anderson has never taken seriously the political theory produced by a nation of shopkeepers, so the receptivity of the English to Oakeshott and Hayek, who became a British subject in 1938, renders them almost irresistible targets for his critique. Anderson’s cosmopolitan indifference to the indiscreet charms of the Anglo bourgeoisie usually makes him the most sure-footed of guides, but in Hayek’s case it has led him astray. Like many on the left, Anderson is so taken with the bravura and brutality of Strauss’s and Schmitt’s self-styled realism that he can’t grasp the far greater daring and profundity of Hayek’s political theory of shopkeeping—his effort to locate great politics in the economic relations of capitalism.
What distinguishes the theoretical men of the right from their counterparts on the left, Anderson writes, is that their voices were “heard in the chancelleries.” Yet whose voice has been more listened to, across decades and continents, than Hayek’s? Schmitt and Strauss have attracted readers from all points of the political spectrum as writers of dazzling if disturbing genius, but the two projects with which they are most associated—European fascism and American neoconservatism—have never generated the global traction or gathering energy that neoliberalism has now sustained for more than four decades.
It would be a mistake to draw too sharp a line between the marginal children of Nietzsche—with political man on one branch of the family tree, economic man on the other. Hayek, at times, could sound the most Schmittian notes. At the height of Augusto Pinochet’s power in Chile, Hayek told a Chilean interviewer that when any “government is in a situation of rupture, and there are no recognized rules, rules have to be created.” The sort of situation he had in mind was not anarchy or civil war but Allende-style social democracy, where the government pursues “the mirage of social justice” through administrative and increasingly discretionary means. Even in The Constitution of Liberty, an extended paean to the notion of a “spontaneous order” that slowly evolves over time, we get a brief glimpse of “the lawgiver” whose “task” it is “to create conditions in which an orderly arrangement can establish and ever renew itself.” (“Of the modern German writings” on the rule of law, Hayek also says, Schmitt’s “are still among the most learned and perceptive.”) Current events seemed to supply Hayek with an endless parade of candidates. Two years after its publication in 1960, he sent The Constitution of Liberty to Portuguese strongman António Salazar, with a cover note professing his hope that it might assist the dictator “in his endeavour to design a constitution which is proof against the abuses of democracy.” Pinochet’s Constitution of 1980 is named after the 1960 text.
Still, it’s difficult to escape the conclusion that though Nietzschean politics may have fought the battles, Nietzschean economics won the war. Is there any better reminder of that victory than the Detlev-Rohwedder-Haus in Berlin? Built to house the Luftwaffe during World War II, it is now the headquarters of the German Ministry of Finance.
Original Article
Source: thenation.com
Author: Corey Robin
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