A version of this paper was collected by the AEI Values and Capitalism program here: The Future of Liberalism. A version was also presented at the Faith and Democracy In America conference at Calvin College. Video of that talk is available here.  You can download a draft from December 2018 here.

It has now become common to note that liberalism has succeeded on a grand scale. Even if we are not at “The End of History” (Fukuyama, 1989), there are few credible movements worldwide seeking to roll back democracy, and market economies continue to grow in scope and scale. Even the socialists these days are democratic socialists. Moreover, ideological battles aside, liberalism has succeeded in fulfilling many of its promises. Democracies have proven to be the most stable and successful governments, and market economies have delivered wealth, high standards of living, and reductions in poverty. This is a historically unique achievement. Nevertheless, the success of liberalism is not perfect. There is a tendency for liberal institutions to push against traditions and practices. As a result, liberalism crowds out illiberal morality. Moral commitments that run counter to individual freedom are difficult to maintain in a liberal social, political and economic system, partly due to a push toward individual mobility and weak commitments, and partly due to a market discipline punishes uncompetitive priorities. The result is an unintended hollowing out of public language and practice, as we all move slowly toward the caricature of the worst stereotypes of the west: amoral, detached, and individualistic.

While arguments of this kind have been made before by many excellent scholars,[1] the focus here will be on the ways in which market economic systems push against certain kinds of moral practices. Moreover, to avoid attacking a strawman, I will focus only on elements of market economies that are important to the success of the market system. Two such elements stand out. First, geographic and vocational mobility can undermine accountability and solidarity. Second, competition can undermine moral norms in production. Both of these elements of the economy exemplify the ethos of the liberal order: individual freedom and initiative aimed toward a productive social end. Both of these elements also push against restrictive moral norms.

Moral commitments that run counter to individual freedom are difficult to maintain in a liberal social, political and economic system, partly due to a push toward individual mobility and weak commitments, and partly due to a market discipline punishes uncompetitive priorities. The result is an unintended hollowing out of public language and practice, as we all move slowly toward the caricature of the worst stereotypes of the west: amoral, detached, and individualistic.

Before proceeding with this argument, it is important to define liberalism, particularly because this term has come to mean different things in different contexts. In this case, liberalism is the social order that includes democratic government, market economics, and culture that celebrates freedom from traditional social boundaries. What each of these elements have in common is a devolution of power to individuals: political power through voting and representative government, economic power to consumers deciding what to purchase and producers deciding what to produce, and finally, the freedom of conscience that grants individuals the power to support, reject, or construct social norms. While there have been times and places in which these three elements of liberalism have been separated. They have a mutually reinforcing tendency that gives the combination a kind of social gravity.

For most citizens of western democracies, liberalism is not an identifiable camp that we agree or disagree with. It is, instead, a description of our entire social world. And yet, we can still identify it as a broad ideology, if only because it is new, historically, and still not entirely universal. Moreover, there have been a host of critics of liberalism, both from the right and the left, that force us to try to step outside of our setting enough to ask questions about our ideological assumptions.[2] However, the literature questioning liberalism tends to fly at 10,000 feet, and rarely engages economic practices in enough detail to satisfy my own demands. This essay should pick up where they have left off, by sketching a description of the economic mechanisms behind some of the pernicious effects of liberalism. Hopefully, the reader will see this essay for what it is: an intentionally provocative reflection from an avowed lover of capitalism and democracy and not a call for some kind of broad revolution.

Liberated from Solidarity

Of all the liberties we celebrate, one of the most fundamental is the freedom to choose your community, your affiliations, and your vocation. The possibility of exiting a relationship, a community that is oppressive, or a job that is unpleasant, is one of the most fundamental freedoms. The possibility and practice of moving, physically or institutionally, is also part of what makes modern market economies work. Job turnover, or “churn” generally increases economic performance, as it encourages workers to move toward more productive matches in the labor market (Lazear & Spletzer, 2012). Mobility is also a cure for economic ills. A central hallmark of market dynamism is that capital and labor are able to move away from communities with few opportunities and toward communities with good opportunities. It is not just that mobility is good for markets, however, markets also encourage mobility. Opening economies to global markets tends to increase wealth, and it also leads to more turnover and volatility at the firm level (Coşar, Guner, & Tybout, 2016). Conversely, employment restrictions, and protections for workers tends to decrease movement in and out of jobs, and increase unemployment (Autor, Kerr, & Kugler, 2007).

Even if a lack of constraint on movement and contracts is efficient, it also undermines some elements of community health. Robert Putnam, in his provocative book Bowling Alone (2000), documented a broad decline in social connection across the United States. Community participation, club membership, religious participation, volunteering, and even social trust all have decreased over the second half of the 20th century. Civil society, that odd hallmark of American culture, is in decline. The cause of this decline is complicated. Putnam argues that it is partly due to technology, partly due to the way we build communities, partly due to labor market participation, and part demographics.

A case could also be made that the way we work has imposed serious pressure on community involvement. Hours worked per person in the labor market increased in the U.S. since the 1970’s, particularly as women entered the labor force in greater numbers. This was balanced off by a decrease in labor force participation by men.  This militates against community involvement. Those out of the labor force tend to be less involved in the community than those who are employed, and those households that are most likely to engage in the community are increasingly committed to longer work hours and two earners, rather than one.

Social mobility, in which children of poor or middle-class parents enter higher socio-economic status, is unambiguously a good thing. However, in a large national economy it probably does not help create stable engaged communities. In one of the most poignant parts of Deneen’s book, he notes that our elite college system has a way of “strip mining” the rest of the country for talented ambitious young people. By and large, students who leave MN for a Harvard degree don’t return home and become leaders in their hometown. The market rewards the colocation of talent, and right now that talent seems to be drawn into financial and government centers.

In fact, the place we live also seems to matter a lot. There is increasing evidence that the move toward cities is not just a change in preferences. Employment opportunities in rural areas have diminished, and cities are increasingly important clusters of specialized talent and knowledge spillovers (Acs, Audretsch, & Feldman, 1994; Audretsch & Feldman, 1996). In a service economy, the specialization that produces wealth requires population density. This does not mean, however, that the way we organize cities promotes healthy community among people know each other. Residents of large suburban and urban communities are less involved and less trusting. Even relatively rich stable communities, if they are homogenous suburbs, tend to have low levels of civic participation. Putnam notes that increased commutes are strongly tied to decreased community engagement (2000, Chapter 12), in fact, for every ten minutes of daily commute, he observes a 10% decline in involvement in community affairs. The causal mechanism here is probably complicated, but the association is not. People who work far away from where they live are less likely to have an employer that is invested in the community, they are less likely to have coworkers who are living in the same area, and they have less time in the proximity of people that they live near. The result is residential communities where no-one knows or cares much about each other.

Deneen (2018) observes these trends and argues that civil society has been squeezed on two sides by the government and the market.[3] His argument has some plausibility but is difficult to parse in any detail. Certainly, the broad thrust of the labor market pushes against stable communities, and increased government bureaucracy and provision can diminish the degree to which we depend on each other.  I am far more interested in the second half of the argument he makes, though, and that is that as social connection declines, we end up being more dependent on the market and the government. It is worth considering that this decline in community (described by Putnam as a decrease in social capital) diminishes what Catholic thinkers might call solidarity. As people are less connected to each other, the possibility of local efforts to care for each other is reduced.

In mass, we can muster solidarity. State and national governments often vote to provide benefits for the poor. Local communities, in contrast, won’t even let a halfway house or a homeless shelter go up on their side of town.

Many conservatives are concerned with the increasing scope of government action, and worry that the welfare state crowds out community. It is common, for example, to prioritize local care for those in need (Sirico, 2010). This only works, however, if people know each other. Without local connections, there is less local knowledge, and the possibility that private charity could better meet people’s needs becomes less plausible. In mass, we can muster solidarity. State and national governments often vote to provide benefits for the poor. Local communities, in contrast, won’t even let a halfway house or a homeless shelter go up on their side of town. So while this essay might sound like a nostalgic plea for a return to the small-town Mayberry of the Andy Griffith show, strong communities are the only thing preventing us from retreating to national political solutions to local problems, and some of the most basic forces of a market economy are constantly pushing against the kind of long-lasting local relationships that make this kind of local solidarity possible.

Competition, Technology, and the Ethical Race-to-the-Bottom

The second broad concern about market economies is that, over time, uncompetitive norms are pushed out and replaced. Freedom is a limited good in and of itself, but the way that freedom gets channeled into productivity and prosperity is through competition that disciplines and encourages innovation. In economic terms, competition is the secret sauce that aligns the incentives of producers with the desires of consumers. Competition consistently motivates people to act in ways that increase profit, sometimes for the better and sometimes for worse. The cases in which market competition drives people to act more ethically are numerous. One of Adam Smith’s most important insights is that markets tend to incentivize the unremarkable feats of faithfulness and productivity that keep households and businesses running.[4] Moreover, a number of recent scholars have done a good job documenting the kinds of virtues that are encouraged by market practice (Kotkin, Hall, & Beaulier, 2010; McCloskey, 2007; Sirico, 2010; Vranceanu, 2007). In short, markets often force people to be faithful, precise, industrious, and to think of others’ preferences.

On the other hand, market competition can drive out some traditions, norms, and virtues, particularly if they constrain people in a direction that is counter to the profit-consciousness that competitive markets demand (Shleifer, 2004). For example, consider pig farms. The competitive pressure in agriculture is strong, and the last 75 years have been brutal for many different kinds of animal farms. Changes in technology, transportation, and biology have forced a dramatic change on an industry that had been dependent on strong traditions and has supported stable communities.

As of 1978, there were over 500,000 farms raising hogs in the U.S. By 2012 that number had declined to around 63000. More than an 87% decline in the number of farms. Moreover, the location of hog farming changed, moving to different parts of the country as firms and slaughterhouses consolidated.  You have probably heard about the “death of the family farm.” This is real. Almost none of the hog farms that existed when I was born are still operating today. Hog farms have become relentlessly efficient, growing much larger. In 1978 3% of farms had more than 5000 pigs, in 2012 83% did (Mercier, 2016). A series of changes made the large industrial farms more profitable, including developments in manufactured feed, increased labor costs, and advances in supply chain management.

What is notable about these new farming systems for our purposes is that efficiency is gained at the expense of the environment, at the expense of agricultural workers, at the expense of agricultural communities, and most dramatically, at the expense of the animals. Pigs are intelligent, highly social, exploratory and territorial animals. In order to control them with minimal labor cost, pigs are in confined barren spaces without a natural environment or interaction with other animals. They are subject to painful procedures well before slaughter. Due to their environment, diet, and breeding, they grow so extraordinarily fast that, even living with almost no movement, many are injured and have lung, bone, and joint problems by the time they are killed at four months to a year old. Even the generally pro-animal agriculture economists Norwood and Lusk estimate that for many pigs, their treatment is bad enough that their lives are probably not worth living (Norwood & Lusk, 2011).  Similar confinement methods are now common for eggs production, broiler chickens, and turkeys as well, with a similar industry dynamic.

These new animal agricultural systems were not embraced by pig farmers for principled reasons; they were embraced because there was no other choice. Given the tight competition and massive turnover in farms, there was no room for farmers to innovate in any direction that did not reduce costs, and there is no room in the market for farmers to adopt higher-welfare methods. Costly ethical norms are driven out of the market in periods of intense competition, just as competition drives out costly unethical norms, and encourages profitable ethical norms. This same dynamic is replicated in theories of racial discrimination – costly discrimination was predicted by Becker to diminish with competition, whereas profitable statistical discrimination may not (Becker, 1971; Guryan & Charles, 2013).

The mechanisms here are not a mystery. In the face of a market push towards a different business model, those who resist the change for ethical reasons are the first to go out of business, or at least fail to grow while their competitors do. Once the change has taken hold, potential entrants to the industry only choose to enter if they are willing to follow the industry trends. Finally, even those who might resist and stay in business find that the new production methods could be imposed on them through a contract with their vertically integrated patrons (i.e. Smithfield) looking for uniformity and predictability in their supply chain. By attrition, selection, and imposition, traditions of animal husbandry and care for the land have, for pig farming at least, been replaced by a very different ethic and culture.[5]

Note that this story about rapid change in animal agriculture could be told as a victory of market economics.  Everything worked the way we hope it does when we teach principles of economics to first-year students. Technology and innovation changed quickly. Producers, with little individual market power, were forced to rapidly adopt the most efficient methods. Prices steadily fell as these gains were passed on to consumers at the grocery store. In short, this is a story of freedom, channeled by appropriate institutions, serving the public good. And yet, these same changes undermine the norms that connect farmers to their animals, the norms that encouraged farmers to care for the environment in their communities (Lobao & Stofferahn, 2008; The Pew Environment Group, 2013), and the norms that supported family traditions of commerce and vocation. I tend to disagree with Wendell Berry whenever he starts talking about economics (Berry, 2001), and yet there is a reason why people who love what Berry loves might be suspicious of markets.

It is worth attending closely to the demise of the family hog farm not in order to turn everyone into vegetarians, but because it forces us to confront a very real conflict. The need for government regulation grows as moral norms and moral practices break down. And yet those practices and the communities that sustain them are sometimes undermined by the very same competitive market that improves productivity and wealth. In the face of devastating creative destruction, like we have seen in animal agriculture, community norms cannot stand. The industries in question have long proven that they are unwilling to adopt binding codes for animal welfare and environmental care.  Just as Deneen predicts, the only option left is a stronger, more activist, government. There are no middle institutions left.

Is Liberalism Neutral?

The conclusion that this all leads to is that market economies are not morally neutral. Because they create a whole landscape in which people live and act, markets economics subtly and dramatically change the way we live, often for the better and sometimes for worse. The direction of change is predictable. Markets thrive on innovation, productive work, clear communication, carefully defined property protections, and mobile individuals. Markets are also constantly in conflict with traditional sources of religious authority, long commitments to stable communities, and uncompetitive norms. Because market economies don’t coercively prohibit these norms, it is easy to ignore the conflict. Markets don’t change culture by coercion. Instead, they alter the economic landscape, making some  traditions more costly, and commitments to a kind of amoral individualism easier, and then people make “free” choices.

Over time, as a result, some of our communal norms limiting markets have slowly broken down. I am thinking about expanded markets for pornography and diminished norms against excessive credit. These norms used to exist in communities where people could hold each other accountable, but today such communities are hard to find, and producers can easily locate elsewhere. If the critics of liberalism are correct and if markets do slowly undermine the kind of community necessary for solidarity and accountability, then we have replaced one set of institutions that encouraged a high moral standard for a different set that have no moral center beyond freedom. That change is not a change for the better.

As a final note, it is worth reiterating that this is not a call to scrap market economies. There is no credible debate about whether we should embrace liberalism. The only question is what kind of democracy and what kind of capitalism we will create. The challenge of the future of liberalism is whether we can figure out how to institute some kind of moral authority right in the center of society, something to counter the amoral individualism that currently has the center of gravity.

References

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Audretsch, D. B., & Feldman, M. P. (1996). R&D Spillovers and the Geography of Innovation and Production. The American Economic Review, 86(3), 630–640.

Autor, D. H., Kerr, W. R., & Kugler, A. D. (2007). Does Employment Protection Reduce Productivity? Evidence From US States*. The Economic Journal, 117(521), F189–F217. https://doi.org/10.1111/j.1468-0297.2007.02055.x

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[1] These kinds of arguments feature heavily in Polanyi (1980) and Hirschman (1982). Similar or related arguments show up in Sandel (2013) and MacIntyre (2007). For an efficient summary of much of this literature see Fourcade and Healy (2007).

[2] It is the conservative critics of liberalism that will most likely appreciate the argument here. In addition to those already mentioned, some important examples include scholars such as Deneen (2018), Dreher (2017), Goudzwaard (1979) and a portion of the authors in the volume collected by Bandow and Schindler (2003).

[3] Interestingly, the market and the government are both mostly ruled out by Putnam as reasonable explanations for the change he observes.

[4] There are many good summaries of Smith’s work, but I particularly like the chapter on Smith in Halteman and Noell (2012).

[5] Note that this closely follows Deneen’s observation that liberalism often contains a technocratic resistance to natural limits (2018, Chapter 4).