Americans' Unceasing Quest for a Moral Economy

Mr. Saunders has a PH.D. in History from the University of Virginia, is Emeritus Professor of History from Christopher Newport University, a Fulbright scholar, and has written books entitled: The Search for Woodrow Wilson and Power, the Presidency and the Preamble.

In this period of economic stress, a big-picture examination of Western economic thoughts and practices can provide insights for the present. Some 2,500 years ago, Aristotle began the quest for a moral economy with a call for the government to establish “just” prices and wages. The Christian church adopted the concept of a “just society” based on the belief that individuals should subordinate their selfish interests for the common good.

The Puritans who came to America in the 1630s attempted to control prices and wages, and even prosecuted a merchant for allegedly making too high a profit. Events, however, trumped the government’s efforts. During the 1630s, a heavy influx of people drove up demand for goods and services, creating a high rate of inflation. In the 1640s, the beginning of the English civil war brought the population influx to a sudden end. The price of land, cattle and other products dropped like a rock. The price of cows, for example, fell on average 75 to 80 percent.

The government in Massachusetts had very little influence over the economy because it had no control over population movements and was a very small cog in the Atlantic trade network. The people in Massachusetts, however, clung to the idea of a moral economy up until the American Revolution and beyond. Extreme inflation in the 1770s led to protests in the streets and attempts of crowds to humiliate merchants for supposedly charging too high prices.

Adam Smith in his 1776 Wealth of Nations stood the concept of a moral economy on its head. Smith argued that selfishness, rather than being the threat to a moral economy, was the key to economic growth. Individuals seeking their own interests would generate more wealth and benefit all according to their role in the economy.

In the nineteenth century, Karl Marx saw the market system as inherently flawed and exploitative. Marx argued that the market system would gyrate from extreme inflation to extreme deflation. In both extremes, the monopolists would become fewer and fewer since the market would eat up all but the strongest. At the same time, workers would become more and more miserable and would eventually rise up and throw the monopolists out and then create a moral economy since everyone would have an equal share of the wealth. Thus, society would become harmonious rather than an all-out struggle to survive.

In the 1930s, many people feared that Marx’s prophesy was on the verge of becoming true and in the process would destroy individual enterprise. To counter Marx, John M. Keynes proposed that the government, through a minimum of interference in the economy, would ensure that the inevitable fluctuations of the market economy would be smoothed out to an acceptable degree. To combat inflation the government would follow deflationary policies with cuts in spending and possible tax increases. To ward off possible depressions, government would spend more and cut taxes if necessary. This would create a moral economy that would provide a just share of the increasing wealth in a stable economy.

The current public frustrations over the perceived injustices in the market system demonstrate that the American people still believe in a moral economy. To reverse the trend toward greater inequality since the 1970s, the government needs to devise policies that approximate the ancient quest for a moral economy.

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Tony Julian - 5/3/2009

Economics are largely governed by cause and effect relationships that are mathematical and or psychological in nature. There is no reason to believe that economic relationships necessarily reconcile themselves to personal concepts of justice. Most often when someone uses the term "moral economy" they are making a reference to a concept of justice that either presupposes the a sort of virtue in either of the following ideas: 1) That there is virtue and certain 'rightness' in people being born with equal assets and therefore a so-called 'moral' quality to the pursuit of equalizing the distribution of income, OR 2) That in the most objective sense, humans are simply born without rights and it is their central task to deal with uncertainty in survival by the most direct means available-the unfettered individual pursuit of one's life without interference. In the later case, lazzie-faire is pursued as a so-called 'moral' end. Both Marx and Smith were hopelessly narrow in their views of governing dynamics so as to appear somewhat childlike today. Those who think that unfettered free markets are the way to go need to take a look at the economic upheaval created by the emotionally fueled elimination of the first and second national banks. When they do, they'll conclude that Alexander Hamilton and Nicholas Biddle were among the very few people who worked hard enough to understand how purely emotional and trite Jefferson's and Jackson's positions were. Those who think that "the unequal distribution of income" is the main woe of the world need to take a look at the Central Bank's role in the great depression and the fact that the US, despite an ever-concentrating distribution of income in the 20th century, realized a completely unprecedented rise in the standard of living for, yes, even its POOREST citizens. They also need to consider the role of incentive. What ever one thinks of justice in economic relationships, it is important to be comfortable that what one thinks is "fair" might not actually work, or that the answer to questions of "fairness" are not just an affirmative or a negative, but are often the "empty set". One may "feel" that 1 plus 1 equaling 2 is "unfair", but it doesn't change the fact in front of us. Here's hoping that history and economics phd's are truly interested in the objectivity they purport to be valuable, and are less interested in marshaling evidence in support of their political positions.

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