On Liberalism & Capitalism: Comments Delivered on 10 March, 2023 Celebrating the Lee Kong Chian Chair Professorship of Chandran Kukathas

I congratulate Singapore and the faculty and students of Singapore Management University for luring the pre-eminent liberal theorist of our age to the republic of Singapore. If liberalism has any future it will be decided on the shores of the South China Sea. So, while this is undoubtedly a festive personal moment for Dean Kukathas and Professor Henderson, this occasion marks not just a shift toward the region in economic but also in intellectual or, if you wish, ideological terms.

Here, in what follows I take up Chandran’s question near the end of his prepared remarks on the relationship between liberalism and capitalism in three ways. First, I distinguish between two origin stories of liberalism that liberals tell to themselves and that, perhaps even more than any definition, thereby also frame our self-understanding about our program. The first story is centered on mutual toleration. The second story is centered on taming, even domesticating state power. This second story will shape the distinction I offer between two ideal types of capitalism: one in its mercantile guise and one in a more liberal guise in order, third, to articulate two important challenges to liberalism which I claim necessitate a liberal theory of politics and political change.

The first version of the origin story of liberalism presents its origin as a reaction to the European religious wars between Catholics and Protestants. This account generally foregrounds Locke’s advocacy of mutual toleration and sometimes includes Spinoza’s defense of free thinking as originating moments. In America (I learned this from Theresa Bejan) the narrative includes the early colonist, Roger Williams. Many of liberalism’s characteristic institutional forms – the division of powers, the separation between Church and State, and freedom of speech and press freedoms – are interpreted as resulting from the need to accommodate mutual disagreement over religious truth and the highest good. Chandran offers a version of this story in his The Liberal Archipelago. We also find a version of it throughout John Rawls’ writings.

I have never been satisfied with this origin story because, first, such toleration is highly attenuated in Locke and the others. Second, mutual religious toleration is not unique to liberalism; as David Hume implies in The Natural History of Religion there was impressive religious toleration within the Roman empire. Facilitating mutual religious toleration is, in fact, characteristic of governance in many empires.

In an influential 2014 essay, “What is Liberalism?”, Duncan Bell persuasively argued that the narrative centered on mutual toleration is a twentieth century, especially American, construction. I would argue that the story resonated in societies where protestants had to consider the significance of Catholic electoral gains.

Bell’s own tendency is toward nominalism and historical contingency, and intends to unmask any self-presentation by liberals as a mythical backward projection of the needs of a given present. Part of Bell’s argument turns on the idea that the very label ‘liberal’ only originates with the Spanish ‘liberales’ of the 1812 Constitution and is subsequently borrowed as a form of disapprobation in the English context.

Somewhat oddly, Bell didn’t pursue the question why these Spanish ‘liberales’ call themselves ‘liberals.’ They are, in fact, explicitly invoking Adam Smith, whose ideas are debated in The Cortes of Cádiz throughout the arguments that produced the ill-fated 1812 Constitution. In fact, the Spanish ‘liberales’ didn’t just argue for the characteristically Smithian free trade position, and liberalization of the Spanish economy. They also criticized the imperial project of the Spanish crown. By echoing the closing pages of Smith’s (1776) Wealth of Nations and its political-constitutional project of a sovereign Atlantic parliament that could represent the American colonies and the British Isles, they also advocated for an states-general that would do something similar for global Spanish possessions. In Smith this federal parliamentary project is also intended to remove political grievances in Ireland and Scotland.

Now, in Wealth of Nations, Smith appropriated the older use of the term ‘liberal,’ which evokes an Aristocratic even Aristotelian generosity, and applied it to his own system as a political project and, crucially for my present purposes, opposed it to the “illiberal” project of mercantilism. I return to that move shortly.

Thus, the second, more Smithian version of the origin of liberalism understands itself as an ameliorative project in opposition to the aggressive state-sponsored mercantilism of the Westphalian state. Here mercantilism is understood as a socio-economic system, in Chandran’s sense, of state capture by an interested class which uses the state to promote its own economic interests either through so-called rents, conquest (imperialism), slavery, monopolistic trade, debt financing of war, and so on. Smith invents or constructs the very idea of mercantilism in order to engage in what one would call ‘ideology critique’ today.

In this version of its origin story, liberalism takes the modern state for granted and understands itself from the start as a reformist project of it. The key conceptual move is to turn any zero-sum logic into a win-win agenda that promotes, as a political program, a moral vision (the good or open society) that is all about the expansion of individual freedoms (note the plural) and peace. While Chandran doesn’t articulate this story, it’s rather close in spirit to the project in his recent Immigration and Freedom. So, I hope he accepts this story as a friendly suggestion.

The Smithian version of liberalism’s origins relies on a conceptual distinction between two ideal types of capitalism: a hierarchy facilitating mercantile one in which capital and the war-prone state mutually reinforce each other to the benefit of well-connected elites and a more humane and pacific liberal variant in which the fruits of liberty and commerce are widely dispersed under the rule of law. In reality, there are many kinds in between.

From a liberal point of view, when socialists, post-colonialists, and conservatives criticize capitalism, they are describing what Smith calls ‘mercantilism.’ So, while, for example, Marxists will see rent-seeking and class domination as characteristic of capitalism, liberals will see it as its corruption. And when Karl Polanyi sees capitalism as leading to fascism, the German Ordoliberals diagnose, as Foucault discerned, the rise of Nazism as an effect of the growth of monopoly and social planning.

The main problem for the liberal with the distinction between two kinds of capitalism I have offered here, is not that when faced with criticism about ugly political history and reality liberals are tempted to say that ‘real liberalism has never been tried,’ but rather that it masks from liberals two important intellectual challenges. First, the political success of liberalism can always give rise to forces that make possible a renewed or worse form of mercantilism or as Chandran put it, the ‘spirit of monopoly.’ Hobson’s 1902 book Imperialism offers a sober diagnosis of this process. The liberal world order’s implosion in World War I is a rather dramatic example. In Europe and the US it is also very visible during the last decade in the aftermath of the Great financial recession. But, where liberalism retains its pull, this dynamic of liberal praxis generating mercantile effects also induces important intellectual and institutional liberal innovations, including anti-trust (to prevent concentrated market power), the progressive tax rate and inheritance tax (to prevent concentrated economic power), the promotion of meritocracy in government hiring (to undercut a spoils system), the expansion of the franchise (as a counterweight to narrow elites), the development of international law and the rise of functional and regional international cooperation (as a means to resolve disputes without war), the redefinition of marriage (to allow for diversity of human coupling), and so on in an open-ended fashion.

Notice that this version of the origin narrative with a distinction between mercantile and liberal capitalism, implies that sometimes liberals counsel strengthening state institutions and their functioning, attacking (in Sam Bagg’s felicitous phrase) concentrated powers (or, as the radical philosophers would say, 'sinister interests') in the private sphere and sometimes entails strengthening the forces of civil society, including of businesses, foundations, and religions. (Jacob Levy has nicely articulated a sophisticated version of this tactical vacillation in his book Rationalism, Pluralism & Freedom.) At a given time, the ameliorative, mitigating spirit of the different strands of liberalism demands from us imperfect judgments about what the most urgent dangers are and what the right way to respond to them might be. The necessity of such judgment accounts for our many disagreements.

Unfortunately, this dynamic of liberal development in response to the reality that liberal reforms of capitalism can strengthen the mercantile spirit over time, does not guarantee that liberal ideas are self-actualizing. Let me explain, in closing, briefly what I have in mind.

To speak bluntly: many recently influential liberal thinkers have a distaste for politics. Among many so-called classical liberals, politics is near synonymous with rent-seeking. (Ironically, this accepts the Marxist interpretation of capitalism.) The problem is that if you turn your back on politics you end up being tempted to put your faith in transitional enlightened dictators or a technocracy that disguises the sectorial interests they promote behind jargon and the authority of science as a means to silence others. One reason I admire Chandran is that he has never been tempted by any of this.

Now, in The Liberal Archipelago, Chandran does have a theory of politics. It’s a (sociological) elitist theory in which competing elites use the state to shape society while battling over rents. The problem is that it is difficult to see how and why by Chandran’s own lights elites would pursue the ideals he promotes. So, this is an unpromising approach to politics for a liberal.

Sometimes the different strands of liberalism are tempted by three other theories of politics: the first assumes that good normative ideas are automatically implemented by benevolent and truth apt legislators and then executed by a rule following bureaucracy in virtue of being good normative ideas. As George Stigler notes in a 1971 article on rent-seeking that got him the Nobel prize, nobody would assent to holding such a theory explicitly, although deliberative democrats, public reason liberals, and a lot of policy advice assumes it in practice. I view this as magical thinking. 

Second, some Hayekians (echoing Plato) suggest that in politics unreason rules. On this view, politics is simply unpredictable and corrosive to any rational ideals (or both). Politics is just as irrational as the anarchic elements of society it is meant to represent. This is regrettable because it reduces liberal theorizing to a sterile moralizing.

The third attitude toward the political presupposes knowledge of (and now I quote Stigler) "the political forces which confine and direct policy." As Chandran has emphasized in a number of works, social theory and social science supply feasibility constraints on normative projects. So, from this perspective, any program of reform must include a constituency or coalition that can promote the policy effectively. Obviously, the promise here is that this may increase the chances of uptake; it also often makes all liberal proposals much more status-quo friendly. Sometimes the concession to feasibility makes the liberal program appear as a handmaiden to conservatism or common sense morality.

This more promising approach to politics is, in fact, immanent in Chandran’s more recent Immigration and Freedom. For by making visible the wide variety of political, cultural, and economic self-harms that follow from an illiberal policy on immigration, Chandran appeals to the enlightened self-interest of elites and potentially large social coalitions in the service of moral and non-zero sum ends. It is not difficult to see how political agency and successful coalition building can be guided by it and thereby check the dangers of sliding into or remaining stuck in a closed, surveillance society. In that spirit I wish Chandran and SMU a long and fruitful collaboration because the world needs your insights.