Chapter 2





Many authors on the Left have over the past two centuries argued that “capitalism” (a market economy) has fatal flaws.  Among other things, they have called for a broad redistribution – sometimes a total equalizing – of wealth and income.  In my opinion, they have been wrong.  As an economic system based on the personal incentive to prosper, a market economy resulted in a vast middle class as many millions of people joined in the creation of wealth.  Nor was it flawed by its lack of “redistribution.”

          This is one place I differ from the writings that have come from the Left that stress many of the points I will be discussing.  I see the challenges caused by globalization’s opening of the United States and the other advanced economies to competition from a vast pool of low-paid labor and by the technologically-driven rush toward labor-saving processes as relatively recent phenomena that require a rethinking of the economic premises of a free society.  I am not entering the discussion as someone who extends socialist thought on the ground that it has been right all along.  Those who are primarily interested in seeing things from that point of view will do well to read Jeff Gates’ excellent book The Ownership Solution: Toward a Shared Capitalism for the 21st Century (1998).  

          Indeed, the principal significance of the present book is that the author is a long-time opponent of socialism and a philosophical defender of an individualistic society.   It is as such that he has become convinced that world economic conditions have so radically changed that a complete reexamination of free-market theory is needed.  This will not be just another book advocating what the Left has wanted for generations.  It will be an urgent inquiry into how a society centered on individual freedom can bring together a flourishing market and labor-saving technology, on the one hand, and a broad provision of income to an economically displaced population, on the other.


To assess the author’s standing as someone who believes strongly in individual liberty, it will be valuable for readers to have personal information about me.  This will be especially useful to readers who are close to me philosophically and who, accordingly, see themselves variously as free market advocates, classical liberals, conservatives or libertarians.  Such readers need to know that I am a friend – while also knowing that I have for many years called upon supporters of an individualistic free society to think beyond the closed ideological system that has seemed to me to limit them without their realizing it. When I urge them to rethink much of the system of thought that has been second-nature to them (and in large measure to me), it is not to move them away from individual liberty as the central principle of society.  Instead, it is to point toward a more sustainable philosophy of a free society in light of the fact that changing conditions will make destructive many of the ideas they and I have thus far held so dear.

          During all of my adult life I have been a classical liberal (which is not to be confused with what has passed under the name liberalism in the United States for the past century).  Classical liberalism is the philosophy that underlies what most people have called conservatism in the United States since the early twentieth century.  (In recent years, the word “conservative” has become so muddied by fragmentation that it is now of little use.)  Classical liberalism was just called “liberalism” in Europe and the United States during the nineteenth century, and had as its subject-matter “the philosophy of individual liberty.”  Early in the twentieth century, the word was preempted by those who wanted the state to be the prime mover in society and the economy.  Because of that preemption, the word “classical” came to be used as an adjective to designate the original liberalism. 

          Many readers won’t consider themselves classical liberals.  If you are one of them, you won’t start the intellectual odyssey from the same place I do.  Just the same, you will be able to join the discussion soon enough.  It will be worth your while to “stay the course.”


I can best explain classical liberalism in personal terms.  During early boyhood, I lived in Mexico, and from a distance grew up revering the United States and everything I understood it to stand for.  That was the philosophy of individualism, which I didn’t understand as “rugged individualism” (a term long-since pejorative) so much as a civilization based on upright, stand-tall men and women who carved out a life of individual liberty within a Constitutional system that limited, separated and divided the power of government and who relied most essentially upon their own energies within a market economy. 

          No doubt I didn’t understand it in those terms at age eleven, but as I grew older I took on more awareness of the philosophy’s components, including its name.  I especially studied it when I found the philosophy under attack.  When in college most of my professors were deeply alienated against all that I revered, and advocated more or less openly a socialist alternative, I found Ludwig von Mises’ treatise Human Action and studied it until the cover stripped off.  Mises was a leading member of the Austrian School of Economics, which has been the fount of neo-classical economics and since the mid-nineteenth century the most stalwart defender of free-market capitalism.

          I served two years in the Marine Corps after three years of pre-law, and during those two years wrote the first draft of my book Emergent Man, which I rewrote after getting my law degree at the University of Denver.  The book amounts to a young man’s passionate exploration of the principles of a classical liberal free society.

          So I started and have remained a classical liberal (subject to the qualification, if it is one, which I will mention soon).  An important additional aspect of my intellectual orientation can be seen, however, in my experience when I attended the graduate school of business administration at New York University before I started law school.  It was there that Mises, who had fled a Nazified Austria (via Geneva) in 1940, taught his classes and his famous Thursday night seminar at Washington Square. While writing the first draft of my book, I had become concerned that a free society would be destroyed if the market economy suffered another collapse like the Great Depression of the 1930s or, in general, couldn’t overcome the cycle of booms and busts.  I wanted to know whether free market thinkers had both theoretical and practical solutions for the trade cycle.  In Human Action, Mises advocated both a gold standard and something he called “free banking.”  Would those be sufficient?  And, if so, could society be persuaded to adopt them? 

          As I pursued my studies, I came to believe that they wouldn’t suffice because they would leave in place, with of course some hoped-for mitigation, the booms and busts that I believed so greatly threatened the long-term acceptability of a market system.  Instead, what made most sense to me as creating the needed monetary framework for a stable market system was Milton Friedman’s monetarism, which proposed that an independent central bank control the quantity of money and increase it gradually in keeping with a legally-set rule to match the growth of productivity in the economy. With that it mind, it seemed to me that capitalism need not have a fatal flaw.  This satisfied my most pressing intellectual question and freed me to pursue my original intention of law school and to make my later explorations of other aspects of classical liberal thought.

          A significant thing about my brief time in Mises’ seminar was that although I was passionately devoted to a free society, I wasn’t willing to accept even Mises’ thinking in the way a disciple does.  Even then, an unthinking assimilation of ideas did not seem my idea of a reasoned process.  Alongside all that I found valuable, there were ideas in Mises’ thinking that I didn’t agree with, and this led me to submit papers to the seminar that were at odds with what seemed the otherwise unanimous opinions of the splendid people who participated around the large conference table.  Mises was then an elderly man (he was born in 1881 and it was then 1956 and early 1957), was unfailingly gracious, gentle and dignified, and treated my heresies without the slightest rancor.  Although I was not then and have never been a “disciple” of him or the Austrian School, I think of him and those associated with him in the Austrian School with a well-deserved reverence and affection.

          My differences with the doctrine have led me sometimes to think of myself as a “neo-classical liberal,” thus further complicating the semantic picture. This is the qualification I mentioned above.  For at least forty years, it has seemed to me that free market thinking is often learned as if by rote, and as a closed system based on axioms.  As such, it has an answer for everything regardless of otherwise disconcerting facts, just as any complete theoretical system based on deductive premises does. (The central problem with such a method, which I will discuss in detail in Chapter 13, is that the premises must be such as to encompass all the wisdom of the world and all the intricacies of human life, which is clearly impossible.)  Although I used an axiomatic method in my first book, Emergent Man, I later wrote a monograph The Principles of Classical Liberalism and then a book exploring in detail the philosophy’s specific ideas, and these works examined several weaknesses and even fallacies in the theory while at the same time expressing a close identification with the overwhelming thrust of what it had to say.  The neo comes from the fact that I stood outside the most commonly accepted system of its thought, feeling it needed extension and some amendment.

          As I placed it in historical perspective, I saw that classical liberals had been forced onto the defensive early in the nineteenth century by the rise of the world Left.  In that defensive posture, they ceased to question their own doctrine and to extend it into subtleties that had not been thought of by its founders. Had it not been for that insularity, it is likely that they would have addressed, in ways more compatible with individual choice and the limitation of government power, the many practical issues that people have faced and that have long been left by default to the social and economic agenda of the American Left.  

          Because of all this, the pure doctrine should not, in my opinion, be taken as the final truth.  What was needed was for it to continue to be intellectually alive, refining, extending and even correcting its thought in response to further thinking and a changing world.  It could and must do this in a way that is true to its core values.  A failure to do these things would be the surest way to serve it poorly.