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Book Review: Capitalism


by Arthur Seldon (New York: Basil Blackwell, 1990) 419 pp; $29.95.

Arthur Seldon has been one of the most influential economists of the post-World War II era. He studied with Friedrich A. Hayek at the London School of Economics in the 1930s.

After the war, he worked as an economic consultant in the private sector. But his impact on economic policy began in 1957 when, together with Ralph (Lord) Harris, he co-founded the Institute of Economic Affairs (IEA). Headquartered in London, IEA has sponsored the research for, and the publishing of, hundreds of pamphlets, monographs and books which make a rigorous case for economic liberty and classical liberalism.

When the Institute began, it was a small and lonely voice in a Britain that was dominated by statist policies and socialist rationales for bigger government. IEA’s goal was to make scholarly and tightly reasoned arguments for capitalism, but in a style which would be accessible to the informed layman. While Lord Harris served as the Institute’s fund-raiser, Arthur Seldon diligently sought out economists in England and elsewhere who were moving in a free-market direction; upon finding them, he provided assistance with the development, and ultimately the publication, of their ideas.

What was the outcome? In less than thirty years, the Institute of Economic Affairs became one of the primary forces which reversed the intellectual tide in Britain, a tide that now has the collectivists on the defensive. For twenty years, I have been reading and learning from the Institute’s publications. Their quality has been superb; their arguments have been iron-tight.

Though Arthur Seldon has written numerous and excellent articles and monographs, his place in the history of the revival of the classical liberal tradition shall be (with no slight intended) his “behind the scenes” role in fostering a new generation of free-market economists. Because of Arthur Seldon, Britain once again has a choir of first-rate advocates of free markets and free trade.

In 1988, he stepped down from his position at the Institute. He has now published a book entitled Capitalism that is partly autobiographical and partly commentary on the political and economic history of the Western world in the 20th century. But more than anything else, the book is an eloquent restatement of why the world has no alternative but to accept the free society.

Seldon admits that, for a long time, the socialists had the advantage. They could point to the reality of a hundred-year history of the market economy, complain about its imperfections and offer a vision of a beautiful socialist paradise for the future. But now the tables are turned. The proponents of capitalism can point to the seventy-year reality of socialism, demonstrate its failure in providing either freedom or prosperity, and offer a vision of a truly free market society for the future, if only the state can be gotten out of the way of enterprising individuals.

For decades, the socialists have claimed that theirs was the truly democratic society. But as Seldon explains, where the state plans or manages most of the economic activity of the society, there must be those who plan and manage, and those who obey the commands and directives. It is under capitalism that the voice of the people is really heard. Each speaks through his choices in the market, choices to which producers in the competitive arena must pay heed and respond if they are to earn a living. Moreover, the market provides a pluralistic democracy in which a wide variety of preferences and desires may be simultaneously satisfied and fulfilled.

Nor is it only goods and services in the usual sense that the market can “democratically” more efficiently and abundantly satisfy than socialism. Seldon argues that welfare and education could be provided at lower costs, and in better quality, if these matters were left to the market as well. Reviewing the disaster of the state’s providing these “socially desirable” services, he explains the ways and means that the market could do them in a superior fashion.

What about the market’s cultural dimensions? Using the arts and sciences as an example, Seldon once again effectively shows the superiority of private support.

And what about the morality of a market economy? Seldon shows how all of the desired values of a “good society” honesty, trustworthiness, respect for others, virtuous living — have been, and are, fostered by the civilizing process of voluntary market exchange. Where men must deal with each other on the basis of mutual consent in an arena of open competition, they must learn and live by the “golden rules” of moral behavior, or suffer the financial and social consequences.

Why don’t we have all these good things already, at least in the West, if what Seldon is arguing is true? Because, as Seldon reminds us, “Even in the United States, the supposedly most capitalist system in the world after Switzerland, the market has been misused, hamstrung and thwarted.” In practice, capitalism has never “had a government set out to make the most of the capitalist system.” Instead, governments have distorted, plundered and perverted the market economy.

It is time, therefore, not only to be done with socialism in the former Soviet bloc nations, but it is time to be done with interventionist and welfare statism in the West as well. It is time for the fulfillment of the capitalist vision: men and markets set free. The world has nothing to lose but its collectivist chains.

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    Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).