I must confess to a degree of ignorance about economic theories and the subject’s peculiar parlance. I’m not a total naïf in everyday economics—managing my own superannuation scheme and very small business—but at the macro, theoretical level I have a lot to learn. I need a teacher able to explain matters in a way that conveys the somewhat arcane concepts in an understandable, engaging way.
The Fortunate, Peter Fenwick’s latest book, is an excellent match for people like me. I read it with satisfaction, savouring the writing, absorbing the knowledge and thankful for the introduction to ten shrewd writers.
This review appears in the latest Quadrant.
Click here to subscribe
The chosen ten great writers are drawn from different Western nations over the past three centuries. Two writers lived in the nineteenth century, but most thought and wrote during the twentieth. Some are still living and working, including the Australian scholar Peter Murphy, whose essays appear in Quadrant.
This is from Fenwick’s introduction:
What follows is a collection of essays by some of my favourite writers. Here, you will find Frederic Bastiat wittily demolishing protectionism; Leonard E. Read describing the miracle of the price mechanism; F.A. Hayek analysing sound economic decision-making; Ludwig von Mises explaining how life changes when “the customer becomes king”; Martin Luther King Jr dreaming of a United States in which its founding principles will apply equally regardless of race; Jonathan Haidt, Meg Wheatley and Peter Murphy warning us about disturbing trends in our society; Matt Ridley reviewing 100 years of Communism; and Deirdre McCloskey explaining how the Great Enrichment came about due to a change in rhetoric about liberty and human dignity.
We are the fortunate. We have inherited an extraordinarily rich and free civilisation that grew wealthy because a few crucial factors came together in the last two hundred years. In particular: basic liberties like private property and free enterprise; rule of law and mutual trust among society members; meaningful elections and governments that were relatively small and sufficiently unobtrusive so people could conduct business with ease and confidence. These factors unleashed the energy and creativity of legions of entrepreneurs who generated wealth for themselves and for many people connected—even remotely—with their enterprises. It wasn’t a trickle-down type of wealth sharing; it was more like flood irrigation, with bounty spreading in an indiscriminate, unexpected but enlivening way.
Millions of ordinary people worked—consciously or unconsciously—in accord with the principles that allow wealth to accumulate and flow. They passed the wealth on to us along with the other benefits that came with it: longer life, better health, travel, varied possessions, leisure time and so on. All the things we tend to take for granted.
We are further fortunate because we don’t have to build ports, whole industries, rail and road networks or airports. We don’t need to establish sewerage, water or power systems. Nor do we need to develop virgin land or construct cities with all their amazing facilities. We need to renovate and develop what we’ve inherited, and we have our own projects to complete. But we’re not starting from scratch; far from it. An immense amount of capital has been invested—and difficult work already done—by previous generations. This frees an unbelievable amount of our energy, time and resources. No wonder we’re the richest generation in history. We inherited prosperity and the conditions for more prosperity. I didn’t properly appreciate this aspect of my good fortune before I read this book.
Defending principles that create wealth and liberty is one of the book’s purposes. They need defending and reinforcing because pretentious or malign politicians—thinking they know best—meddle with or dismantle the principles. The results are consistent: citizens have diminished opportunities for betterment and fewer freedoms. Bureaucrats take charge and stifle life.
The first of the featured ten writers is Frédéric Bastiat, a nineteenth-century French politician and writer. Although Bastiat lived two centuries ago his insights and wit are as fresh as this morning. He championed free trade, with each nation maximising use of its natural advantages and then trading with others. Free trade leads to cheaper goods, real wage increases and lower taxes (given sensible rulers). Bastiat opposed protectionism, using absurd humour to ridicule it in his mock “Petition of the Candlemakers”. His petition asked rulers to pass laws forcing all French people to install shutters and blinds to block the sun—a foreigner who saturates the market with free light. This law, claims the petition, will protect candlemakers and help many others. The mercantile sector will prosper because more whale oil will be needed. Farmers will profit because more tallow is required. Metal workers will gain because people will buy many more candlestick holders and lamps. The candlemakers challenged parliament to be consistent:
Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long.
The second piece, “I, Pencil”, likewise illuminates while entertaining. Leonard Read, an American businessman and moral philosopher, tells the story of the creation of a simple pencil and how the price mechanism—supply and demand—co-ordinates the widely dispersed and seemingly unrelated activities needed to make it. No individual person could know or do all that’s involved: forestry, chemistry, tool-making and machining, mining, transportation. Nor could anybody effectively control all the activities—located across the globe—needed to manufacture pencils. The lesson is as simple as the pencil is complex: if rulers try to manipulate supply and demand they interrupt the efficiency of the whole process. Their efforts are counter-productive, leading to fewer goods of lower quality and reduced variety.
Friedrich Hayek’s contribution is “The Use of Knowledge in Society”, addressing economic decision-making. He presents three insights, summarised by Fenwick:
First, that not all knowledge is scientific; there is also the knowledge of time and place. Second, that knowledge of time and place is held by millions of individuals. Third, data that is aggregated loses nuance.
Combined, Hayek’s insights promote subsidiarity and disturb the presumptions of central planners. The best decision-makers are local people because they know local conditions. Their knowledge—in combination with the price mechanism—ensures that resources, when scarce, are efficiently used. I read Hayek’s essay with deliberation because, as Fenwick observed, it’s probably the most complex contribution in his book.
Once I’d read these first few chapters I was hooked, confident that The Fortunate would provide enjoyment and valuable knowledge.
Ludwig von Mises, although born in Ukraine, belonged to the Austrian economics school. In 1940 he and his wife left Europe for the US, where he wrote, taught and published books and papers on economics, politics and society until his death in 1973. Mises emphasised the power of the individual customer whose every dollar spent is like a vote cast in favour of a particular product, service or business. Successful businesses receive consistent votes—purchases—and endeavour to keep this patronage. They value their customers and work for them. The ever-shifting preferences of customers mean businesses must be responsive and innovative; in short, dynamic. If they’re not, they fail. This customer-led effervescence is yet another reason why the command economy—state-run—is so useless. It’s doesn’t need to respond to customers; it can afford to be indifferent to both innovation and good service. It doesn’t go out of business. Mises wrote:
Within the shop and factory the owner—or in the corporations, the representative of the shareholders, the president—is the boss. But this mastership is merely apparent and conditional. It is subject to the supremacy of the consumers. The consumer is king, is the real boss, and the manufacturer is done for if he does not outstrip his competitors in best serving customers.
Deirdre McCloskey is a prolific American writer and academic. Her contribution celebrates “innovism” a term she prefers to capitalism because innovative entrepreneurs, given liberty to develop new products and systems, were behind the Great Enrichment of billions of people from 1700 until now. McCloskey, with the other writers gathered in this book, links freedom to prosperity. She writes:
The Great Enrichment was so big, so unprecedented, that it’s impossible to see it as coming out of routine causes, such as trade or exploitation or investment or imperialism … Ideas of human dignity and liberty did the trick, making the inventions and then investments profitable for entrepreneurs and the nation.
Matt Ridley, a contemporary English writer, summarises the disasters of twentieth-century Marxism. He looks at the fate of each nation that embraced Marxism: a catalogue of catastrophe and bloodletting. It’s astonishing that Marx’s ideas—inadequate in theory and vile in practice—continue to find supporters. Even watered down in the form of the welfare state they do harm. Quadrant readers will find nothing surprising in Ridley’s observation:
Communism has killed on average a million people a year for a century, far more than any other ism, let alone what Marxists call “capitalism” and the rest of us call freedom.
Martin Luther King, Jonathan Haidt and Meg Wheatley form a section of The Fortunate more concerned with current trends that are hostile to liberty, prosperity and human flourishing.
King’s famous 1963 speech, “I Have a Dream”, is included because he articulated a vision of society that valued people for their innate dignity, regardless of skin colour. Each person has something worthwhile to contribute. Some people refuse to contribute because they’re scornful or bitter or stoned or lazy. But nobody should be barred from contributing their talents and skills because of race. King emphasised that a person’s character was crucial, not their genetic background.
Jonathan Haidt is an American academic, a social psychologist. He’s alarmed to see universities abandoning their primary purpose of preparing students to be truth-seeking, co-operative and mature adults. This goal has been lost as students and university staff demand emotional protection. Tender feelings are prioritised over truth and evidence, limiting what can be taught. This is bad for everyone:
If our universities teach students that their emotions can be used effectively as weapons … then they are teaching them a kind of hyper-sensitivity that will lead them into countless drawn-out conflicts that will damage their careers and friendships along with their mental health …
If students graduate believing that they can learn nothing from people they dislike or from those with whom they disagree, we will have done them a great intellectual disservice.
The rule of tender feelings isn’t a new phenomenon. One hundred years ago G.K. Chesterton noticed that young English aesthetes were hyper-sensitive. Common people arguing, yelling and singing—in pubs for example—were too noisily vulgar for the fashionable dandies. Chesterton called the aesthetes “an aristocracy of weak nerves”.
Meg Wheatley writes about the damage to sociability that the internet is fostering. Our use of the internet can encourage feelings and prejudices that eclipse evidence and discernment. Search engine algorithms are designed to reinforce our online preferences, accelerating the truncation of information. Our ability to “like” or “unlike” so many matters creates an environment of hasty judgment, aberrant opinion and fierce partisanship. Twenty-three centuries ago, a Hebrew sage, Ben Sirach, wrote, “Unexamined talk forms the knowledge of the ignorant.” He knew his stuff.
This world of thumbs up or down, the nonstop critiquing of everything has resulted in a culture of instant, careless, meaningless judgment. If it was only the individual, it might be annoying but nothing more serious. But it exacerbates another trend begun several years ago, that of losing the distinction between opinion and fact.
She knows that this trend will be hard to correct because people’s identity becomes enmeshed in their opinion. Challenging their opinion may dismantle their identity, and people resent this painful change. Thankfully, reality will slap down our foolish self, irrespective of our feelings.
Two Australian thinkers conclude The Fortunate. Peter Murphy has published seven books on contemporary political, industrial and economic matters. Like Wheatley, Murphy is concerned that evidence-seeking is losing its primacy. Instead, truth established merely by accusation or determined by strength of feelings, or truth as a narrative of suffering, is accorded validity. But these testimonies are subjective, changeable and manipulable. The controversy around the appointment of Brett Kavanaugh to the US Supreme Court is paradigmatic.
For many people, the rape accusation against Kavanaugh was alone sufficient to establish veracity. The victim is always right, apparently. Corroboration and evidence are secondary. Cross-examination is a hostile action. Murphy explains:
According to this idea an accusation of a certain type does not need to be proved but is inherently true. This may sound strange to anyone brought up in the tradition of Anglo-American law. But the equation of accusation and truth has many modern expressions. These range from moral panics to despotic politics.
Truth by accusation is abetted by another mistake: truth by feelings. Here, truth is uncovered when powerful feelings are vented. This is a Romantic notion.
The Romantic model of truth held that emotional intensity is sufficient to establish that a person is “telling the truth”. If an accuser emotes with conviction, a truth claim thereby acquires credibility.
There’s yet another errant ally: truth by a narrative of suffering. This is akin to truth by feelings. Suffering confers veracity; the greater the suffering the greater the believability. Narrative is everything, says the postmodernist, because all “truths” are based on narratives—stories we tell ourselves and each other. There is no objective truth; that idea is another of the stories we tell ourselves to comfort ourselves against our meaninglessness in a capricious universe. Murphy concludes:
In the handful of things that really matter in life, we need to be able to provide reasons why someone else should believe us. In all serious practical matters, our stories have to correspond with the facts.
The final thinker is Fenwick himself. His judicious selections give the book its thrust and unity. He’s an entrepreneur and a man of letters—the author of three books (the others are The Fragility of Freedom, 2014, and Liberty at Risk, 2016). The Fortunate is a distillation of rich, relevant wisdom. Throughout, there’s nothing dismissive or despairing despite the follies that must be addressed. Fenwick believes in human dignity and this inclines him to kindness. Part of his courtesy is his concision. He’s packed a lot into a slim volume. His book is cleverly arranged to maximise understanding and it’s written in a style that honours the clarity of the original thinkers. Appendices include a series of charts plotting the GDP of various nations to track their progress (or decline) across decades. There’s a recommended reading list to explore further the ideas and writers, together with an extensive bibliography.
We’re blest to have The Fortunate to remind us of all that has accrued—in politics and philosophy, in industry and in our economy—for our good. The wealth and liberties didn’t just happen; they aren’t an accident of history. They came through the careful work and thought of generations of robust, enterprising people.
The Fortunate: Ten Great Writers Highlight How We Created Free and Affluent Societies
by Peter Francis Fenwick
Connor Court, 2022, 190 pages, $29.95
Gary Furnell, a frequent contributor, wrote the story “The Pelicans Descending” in the December issue. He lives on the New South Wales northern coast.