The Intellectuals’ Hostility to the Market Economy

Joseph_Schumpeter_ekonomialariaFurther to Joe Salerno’s post on “Hayek and the Intellectuals,” it’s worth adding that Hayek was not alone in thinking of the intellectual class as naturally hostile to the market economy. In particular, there are many similarities between Hayek’s ideas and those found in Schumpeter’s “Sociology of the Intellectuals.”

Schumpeter famously argued in Capitalism, Socialism, and Democracy (1942; three years before Hayek’s essay) that the entrepreneurial economy creates wealth and improves social conditions to such an extent that it eventually undermines itself and is replaced with socialism. Entrepreneurs are so successful that people take them for granted; in fact, people resent entrepreneurship and innovation, because the constant transformation of the economy gives them feelings of instability and uncertainty.

[T]he ever-rising standards of life and particularly the leisure that modern capitalism provides for the fully employed workman…well, there is no need for me to finish the sentence or to elaborate one of the truest, oldest and most stodgy of all arguments which unfortunately is but too true. Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest.

However, this “hostility” to the market economy is insufficient to produce a full-blown transition to socialism. In addition, “For [a revolutionary] atmosphere to develop it is necessary that there be groups to whose interest it is to work up and organize resentment, to nurse it, to voice it and to lead it.” Enter the intellectuals.

The intellectuals are a paradoxical product of the market economy, because “unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates and subsidizes a vested interest in social unrest.” Like Hayek, Schumpeter described intellectuals broadly as “people who wield the power of the spoken and the written word.” More narrowly, “one of the touches that distinguish them from other people who do the same is the absence of direct responsibility for practical affairs.” That is, intellectuals do not participate in the market (at least not in the areas they write about), and do not generally rely on satisfying consumers to earn a living. Add to this their naturally critical attitude—which Schumpeter argues is the product of the essential rationality of the market economy—and it is easy to see why intellectuals would be hostile to the market.

In other words, intellectuals are often out of place in entrepreneurial societies. The growth of the intellectual class is not a response to consumer demand, but to the expansion of higher education. Passing through the higher education system does not necessarily confer valuable skills, but it often does convince graduates that work in the market is beneath them:

The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work. His failure to do so may be due either to lack of natural ability—perfectly compatible with passing academic tests—or to inadequate teaching; and both cases will, absolutely and relatively, occur more frequently as ever larger numbers are drafted into higher education and as the required amount of teaching increases irrespective of how many teachers and scholars nature chooses to turn out.

If higher education takes little or no account of the supply and demand for useful skills, it will produce graduates who naturally gravitate to the intellectual class, bringing with them feelings of estrangement and dissatisfaction:

All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite or in which aptitudes and acquirements of a different order count. They swell the host of intellectuals in the strict sense of the term whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment. And it often rationalizes itself into that social criticism which as we have seen before is in any case the intellectual spectator’s typical attitude toward men, classes and institutions especially in a rationalist and utilitarian civilization.

A swelling intellectual class then molds public opinion, swaying it in favour of socialism. Fortunately though, good ideas can still win out over the protests of the intellectuals, and the socialist future is not inevitable, as Schumpeter thought. But although his grand theory of economic evolution has its quirks, it makes for interesting reading nonetheless. Whatever its faults, it’s a thought-provoking account of how the intellectual class functions, and why it seems so consistently to foment opposition to the institutions of the market economy.

Comments

  1. Good economic ideas usually win out eventually in spite of intellectual’s hostility to the market. Sill, we should do everything we can to further economically sound thinking, which of course will also advance freedom. So, my suggestion, which has the added benefit of improving the fiscal conditions of governing bodies at all levels, is to give all professors at public colleges and universities defined contribution retirement plans. The growth of their retirement funds will be dependent upon the well-being of the economy, i.e. of free enterprise, (as it ultimately is anyway). That will give them something to ponder. For K through 12 teachers, it would also be great at advancing teaching of marketable skills.

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