Isabel Paterson’s God

God of the Machine

The following is a review of Isabel Paterson’s The God of the Machine, a 1943 book arguing for free market capitalism.  I wrote this for a college course called Modern Political Thought:

The year was 1943.  Hitler’s Germany was in the midst of all-out war with Stalin’s Russia and Franklin Roosevelt’s United States.  Isabel Paterson, a Canadian-American author, published The God of the Machine, which has become one of the more influential libertarian works of the twentieth century.  Paterson was a radical individualist.  Hitler and Stalin were avowed collectivists, and the well-known human suffering in Russia and Germany during their reigns was too great to be ignored.  Roosevelt’s New Deal represented by far the greatest economic intervention in American history.  The tendencies of world powers toward collectivism were Paterson’s main focuses, but societal attitudes also concerned her.  Many believed that the war economy was healthy, and some even believed that Germany and Russia had gotten it right, increasing their powers by collectivization.  John Maynard Keynes’ interventionism was emerging as the new textbook standard for economic theory.  Radical sloganeers were advancing such ideas as “property is theft” and “capitalism means war.”  Paterson addressed all of these developments.  Her book is an overview of the logic and history behind her answer to the great question that still stands before the political actor today: which interest should be the focus of our political attention, society’s or the individual’s?

If not for its analyses of ancient, modern, and contemporary histories, The God of the Machine may have been criticized as a knee-jerk reactionary critique of world leaders’ current collectivist policies; Friedrich Hayek’s The Road to Serfdom was widely brushed aside by the political establishment as reactionary.  While the Nobel Laureate’s criticism of Keynesian economic theory was much more influential, Paterson published hers earlier, and she conveys the same message, that government cannot spend an economy back to health.

The individualist political philosophy was first described by John Locke, and there are clear similarities between Locke’s philosophy and Paterson’s.  Obviously both are individualists.  Both believe that government exists to protect the natural rights of life, liberty and property, and that those rights are gifts to man from God.  With respect to property, there are differences between the two thinkers.  For Locke, ownership of objects in nature is initiated when people mix their labor with those objects.  Paterson, contrarily, claims that ownership exists because of the physical laws of space and time. She explains this in a matter-of-fact manner, stating “two bodies cannot occupy the same space at the same time” (180).  Elaborating upon this obvious statement, which at first sight appears irrelevant to the matter at hand, she points out that no one would farm if his land could be used–without restraint–by anyone who stumbled upon it, nor would any family build a dwelling, if every man were permitted to come in and go out of it as he pleased; the man farms and builds for his own private purposes (180).

David Hume’s legitimate criticism of social contract theory was precisely that it was a theory.  It was based on thought experimentation, and had no historical evidence.  Locke was a social contract theorist, and Paterson accepts his theory, but she is not a social contract theorist; she is a social contract historian.  She makes little reference to an imaginary social contract, as Locke did, because, unlike Locke, she can point to a historical social contract, the United States Constitution.

The modern liberal, socialist, utilitarian, and utopian thinkers came after John Locke.  The father of classical liberalism was long dead before any opportunity to rebuff their arguments presented itself.  In The God of the Machine, Paterson plucks Locke’s intellectual sword from the grave and carries it into battle against the likes of Keynes, Jeremy Bentham, John Stuart Mill, Karl Marx and Pierre-Joseph Proudhon.

Before that battle can be understood, however, it is necessary to explore Paterson’s social philosophy.  Paterson uses a metaphor extensively throughout the book, comparing society to an electrical circuit.  She perceives individual free will as the “dynamo” in society; in the metaphor, free association and exchange is the “electricity” of the circuit.  She argues that all progress comes from individual action.  Only individuals can think–groups cannot–and “in human affairs, all that endures is what men think” (18).  Paterson’s high potential energy circuit is closed and circulating maximum energy in a free enterprise system, when men are left to think and act however they wish.  It is static under a totalitarian system, when nearly every action must be commanded or permitted (78).  Government intervention into the market is represented by a “leak” in the otherwise complete high potential energy circuit.  A free enterprise society, then, will gain more and more prosperity and power, while a totalitarian society will tend to lose both.  The society in which government is most limited will be the most powerful society, in production and in war (61). Societies that are more powerful and prosperous become that way because they devise political systems that allow the greatest freedom of human action (13). Their circuits of energy are least broken.
Paterson borrows heavily from Herbert Spencer’s ideas.  She replaces Spencer’s “social organism” with her “high potential energy circuit,” and does so with favorable results.  Spencer laboriously pursues metaphors between government types and various biological organisms, flying over the heads of readers possessing even above average biological understanding.  Paterson clarifies Spencer’s message, by using a metaphor the average person can understand, a simple electrical circuit, and she simplifies his message by condensing it.

Paterson draws her “Society of Contract” and “Society of Status” from Spencer verbatim.  The society of contract recognizes the divinely given freedom and responsibility of each individual.  In the society of contract, “society consists of individuals in voluntary association.  The rights of any person are limited only by the equal rights of another person” (41). The society status, on the other hand, institutes privilege.  In Paterson’s mind, instituting a privileged status for anyone in society will lead to a class division between rulers and subjects.  She believes the society of status works against nature.  “The logic of status,” she says, “ignores physical fact.  The vital functions of a living creature do not wait upon permission; and unless a person is already able to act of his own motion, he cannot obey a command” (42).  Paterson says that her ideal societal relationships are best exemplified in what is called today’s middle class, which is not a class at all, but a classless society of contract (49).

Paterson bolsters her argument with the historical example of ancient Roman civilization.  She claims that Rome failed because it was a society of status, and the bureaucracy, the privileged class, became too big (and I am unqualified to argue this point with her).  Too much energy was diverted from production into the bureaucracy, so that almost no energy was making it all the way around the circuit.  When the productive class could no longer support the bureaucracy, the bureaucracy came down on the productive class and attempted a planned economy.  Prices were fixed and the currency was debased (39).  Roman civilization was torn apart.  Paterson writes, “Men who had formerly been productive escaped to the woods and mountains as outlaws, because they must starve if they went on working” (40).

Paterson says that the founding of the United States was the first and only time a society of contract was ever attempted.  The famous principle of the Declaration of Independence, that all men are endowed by their Creator with the inalienable right to life, had never previously been used as a basis of political structure (41).  The United States was an experiment in liberty.  Paterson points out that in the United States, for the first time, freedom was recognized as an indivisible whole; to speak of various “freedoms” was to revert to European terminology (68). The proof of the society of contract’s worth was the unprecedented power and prosperity of the United States.  Paterson derides European social philosophy as “mechanistic,” saying that it forgets that each individual naturally has freedom and responsibility, and it essentially reduces people to automatons.  She blames this on the arrogance of “academic planners” and the lust for power of self-described humanitarians. (145-147)

Paterson’s objection to “academic planners” returns us to the aforementioned intellectual battle between Paterson and thinkers like Keynes, Bentham, Mill, Marx, and Proudhon.   She says that John Stuart Mill, under the banner of liberty, in fact sacrificed it to society, saying that it was only justifiable insofar as it “served the collective good.” “Then,” writes Paterson, “if a plausible argument can be put forward that it does not–and such an argument will seem plausible because there is no collective good–obviously slavery must be right” (150).

Paterson views Bentham in much the same light, as another prominent philosopher who sold out liberty to the collective good.  Bentham is famous for attempting to devise a political system according to the principle of “the greatest good for the greatest number of people.”  Paterson says that this “is a vicious phrase; for there is no unit of good which by addition or multiplication can make up a sum of good to be divided by the number of persons.  Jeremy Bentham, having adopted the phrase, spent the rest of his life trying to extract some meaning from his own words.  He meandered into almost incredible imbecilities, without ever perceiving why they couldn’t mean anything” (90).

Paterson calls Karl Marx a fool for thinking his utopian idea was an accurate prediction of the future (155).  She says Marx was a “parasitic pedant, shiftless and dishonest, he wanted to put in a claim on ‘society’ solely as a consumer” (96).  His theory of class war, she says, is “utter nonsense.”  Elaborating, she says, “it is physically impossible for ‘labor’ and ‘capital’ to engage in war on each other.  Capital is property; labor is men” (97).  She also criticizes Marx’s dialectical materialism, claiming that it “reduces verbal expression to literal nonsense” (96).  Paterson compares the phrase “dictatorship of the proletariat” to the phrase “roundness of a triangle” (96).

Keynes famously prescribed increasing government employment as a remedy for recessions.  Because recessions come with unemployment and slumping consumer demand, the theory goes that government can augment demand and employment by hiring more people, who will be consumers, multiplying demand.  In criticizing Keynes, Paterson employs reductio ad absurdum.  She brings up the example of paying a man to stand on the beach and throw pebbles into the ocean, arguing, “it would be just the same as if he were in a ‘government job,’ or on the dole; the producers have to supply his subsistence with no return, thus preventing the normal increase of jobs” (192).

Paterson says that Proudhon is responsible for “perhaps the most senseless phrase ever coined even by a collectivist” (179).  She is referring to Proudhon’s famous slogan, “property is theft.”  Clearly this statement is non-sensical, because theft presupposes property (179).  The slogan follows in the footsteps of Jean-Jacques Rousseau, who may well have agreed with its spirit, if not its words.  Both Rousseau and Proudhon saw property as an unnatural institution, and the source of inequality and unfairness.  Paterson contends otherwise, asserting that unfairness and inequality are unavoidable in any system, and that sacrificing property rights for the sake of fairness is foolish (200).  She explains, “The incidental hazard of a free society, which is that of nature, that some individuals may be temporarily unable to command a livelihood, is the permanent condition of every man living in a collective society.  In giving up freedom, the individual gets nothing in return, and gives up every chance or hope of ever getting anything” (200).

Paterson criticizes collectivists by analyzing their language and showing its errors.  She frequently uses “nonsense” as a descriptor of their rhetoric.  There is a tinge of hypocrisy in her critique, because she does not hold herself to the same exacting standards.  Proudhon’s “property is theft” is “senseless” to Paterson, but Paterson herself, in no uncertain terms, asserts that “profit is production,” which is evidently “senseless” to anyone with an understanding of economics (221).

Even accepting Paterson’s political principles and her criticisms of the collectivists, there remains a very important question: What is the alternative?  What political system does Paterson suggest?  Her ideal society is the “the private property, free enterprise society of contract,” but in The God of the Machine, the political apparatus responsible for protecting property and enforcing contracts is difficult to pin down.  The absence of a comprehensive, alternative political system may be the most prominent weakness of her argument.  Paterson thinks the very idea of political “leadership” is a threat to civilization, because every free man must lead his own affairs (80). She echoes classical liberals in saying that, ideally, government is a necessary evil.  Paterson explains, “since human beings will sometimes lie, shirk, break promises, fail to improve their faculties, act imprudently, seize by violence the goods of others, and even kill one another in anger or greed, government might be defined as the police organization” (69). Her ideal system seems to be liberty with a police man, a system that completes her high potential energy circuit for the machine of society, maximizing the creative use of human energy.  It requires equal protection of the laws, with privileged status for no “type” of person, be they impoverished, wealthy, numerous, or within government.  Paterson never even posits a method of determining who will make up the “police organization” that is government.

Some aspects of Paterson’s political system are clear.  She dislikes passports, or any other national identification (45).  She thinks “democracy inevitably lapses into tyranny” (16).  She favors a metal currency, saying the economist who advocates fiat money is “below the mental level of savages” because he has “forgotten how to apply number” (202).  She rejects compulsory public education as “the complete model of the totalitarian state” (258).  She also rejects licensing and regulation, which are impediments to free association (50).  However, Paterson’s political structure remains enigmatic.  As long as every individual is treated equally by the law, their natural rights are protected, and contracts are enforced, it does not concern her who governs, or how they are chosen.

Paterson, Isabel (1943). The God of the Machine. New Brunswick, NJ: Transaction Publishers. ISBN: 1560006668

Keynes and the “intellectuals” v. America

Keynes destroys wealth

I wrote an email about John Maynard Keynes a couple of weeks ago that I want to share with you.  It was to my mother.  As a university instructor, she receives emails from intellectual colleagues of all fields, who often know little or nothing of economics, but strongly support Keynesian theories.  Such professors, living comfortably on the fringes of capitalistic prosperity, compare their salaries with the earnings of industrious geniuses around them, and blame free markets for their conditions, because they are too proud to blame themselves.  Mention to them that throughout history, where free markets are absent, famine and misery abound–that government noninterference produced the only society to ever avoid starvation for more than a century–and these intellectuals will not listen, for they are teachers and not learners, and in a planned society they imagine themselves to be the planners, and not the laborers.  But before they can plan, they must destroy the system that feeds everyone but makes them irrelevant: capitalism.  Their destruction is nearing completion, and they hope to take advantage of the ensuing collapse, become planners, and rule over the creative, industrious, and inventive energies within our society.

So backward are these educators’ attitudes, that they confused my educated mother (M.B.A. and J.D.) into thinking Keynes could be right.  I had to set her straight, but I could not blame her for being confused.  Even I thought Keynes was right until I started studying macroeconomics.  In my first college economics class, I answered one of my professor’s questions about recessions by accurately explaining Keynes’ theory of aggregate demand.  His response was, “they’ve got you brainwashed, don’t they?”  His firm criticism encouraged me to begin reading economic theory.  There was a time (in the 1960s and 70s) when almost every economist was Keynesian, but today Keynes’ theories are rarely taught without a healthy dose of skepticism.  This is because much of what happened in the economy of the 1970s and 80s appeared to prove Keynes wrong.  The longer I studied, the more I realized that, in America today, almost every economic barrier an individual encounters has been erected by government.  I realized that while private entities sometimes invest poorly, which hurts the economy, government often invests poorly, negligently, and with impunity, which hurts and may cripple the economy.

For any argument about suitable means to be valuable, parties must agree on suitable ends.  My end is the maximization of individual liberty.  I see this also as the maximization of justice.  I believe that every individual has rights to political and economic liberties, “life, liberty,” etc.  I believe the primary purpose of government is to protect those rights.  If that end cannot be agreed upon, then you will find my argument worthless, but knowing you to possess a liberal mind, I suspect you will gain something from my opinion.  The best economic means toward protecting individual liberty are, in my opinion, minimal taxation, fiscal responsibility, sound money, and government noninterference (peace would also help).  If his goal was to protect our rights (and I strongly suspect it was not), Keynes theory was wrong.  If his goal was to improve stability, Keynes was wrong.  If his goal was to improve justice, Keynes was wrong.  If his goal was to increase the control of the state over the everyday lives of individuals, Keynes was wrong, but successful.

Here is the email I wrote my mom:

“If in the first attempt to create a world of free men we have failed, we must try again.  The guiding principle that a policy of freedom for the individual is the only truly progressive policy remains as true today as it was in the nineteenth century.”
– F.A. Hayek, The Road to Serfdom

After reading The Road to Serfdom, F.A. Hayek’s criticism of J.M. Keynes’ General Theory, Keynes admitted, “morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.”  Keynes was praising a book, morally and philosophically, that championed laissez-faire over his own theory.  It warned that Keynes’ theory would lead to the enslavement of all mankind (save a small governing elite), and Keynes agreed with “virtually the whole of it,” morally and philosophically.

Keynes was a unique figure, brilliant enough to recognize his own wrongs, and proud enough to refuse to set them right.  A supporter of eugenics, he was an arrogant man who always thought himself the most clever person in the room, and on this one point, it is likely that he was always correct.  His mind, however, was poisoned by the Old World belief that there must always be two classes of people, the rulers and the ruled, but Americans believe that these classes are neither natural nor necessary, and that every man is his own ruler.  Keynes knew his theory would be, on a free people, an immoral imposition, and even admitted its ability to increase economic instability (which it has done), but like a contemptible, soul-selling politician, he dismissed an economic system of justice, honesty, and freedom for “light and transient causes,” to become a ruler, gathering fortune and fame while providing the most efficient immediate remedy to those most in need; and while all this rottenness may be crafty politics, it is bad economics.

A good economist considers not only a strategy’s short-term effects on interested groups, but its short- and long-term effects on all groups.  To joke that “in the long run we’re all dead,” as Keynes did, is an assault on posterity, and indicates his intent to rob their liberties and fortunes for the sake of temporary splurging.  We know individuals that live beyond their means are destined to live beneath them, and this is no less true of nations.  Until now, U.S. production and national wealth have increased in spite of government, because capitalism is still operating to some extent, and because by luck, a slow waitress is handling the bill for all this “aggregate demand”.  I don’t expect the Department of Treasury will leave her a tip.

There is a lot of bad economics abroad, being taught in universities, being preached in the halls of Washington, and being recorded for wiser generations to lampoon.  As Louis XIV had his divine right, Paul Krugman has his Nobel Prize.  Bad economics tells us that the government must make us better off (limit our choices), inflate the currency (steal our savings), save the X industry (kill the Y industry, and harm everyone not closely related to the X industry), increase the minimum wage (increase prices), protect our industry with tariffs (limit choices and increase prices) increase credit (increase debt), increase public works (increase taxes), create more jobs (impossible), stop technology from stealing jobs (lose opportunity for increased standard of living), achieve “full employment” (instead of full production), bail out unions (tax all others), stop foreclosures (undermine the price mechanism that guarantees short recessions), increase the velocity of money (tempt hyperinflation), and give away “free” pensions, healthcare, houses, food, and money (remove all incentives for production).  But one thing we must never, ever do, under any circumstances (according to this “economics”), is save.  There is no rhyme to bad economics.  It cherishes credit, and although savings is the only true source of credit, savings is, in their muddled minds, the bane of all good society; the only use of savings is as actual wealth that, in the absence of a gold standard, the government can steal through inflation.

The economic ideas I prefer are what Barack Obama calls “the stale political arguments which have consumed us for so long,” which “no longer apply.”  By the context of this quote in his inaugural speech, it appears Obama is attacking arguments in favor of individualism, the philosophy of John Locke, upon which the United States was founded and became prosperous.  John Locke died over three hundred years ago, so–though collectivism is much older–individualism may now be called a “stale” argument, but this is totally irrelevant.  It matters not whether an idea is new or old, but whether it is right or wrong.  I believe that collectivism is wrong and individualism is right, and as it is better to repair a wrong than persist in it, I will halt discussion of contemporary leaders to return to the informative purpose of my writing you.

Bad economics insults reason, starving and torturing the mind, and causing anxiety; but good economics informs reason, satisfying the mind’s natural appetite.  I may feed that appetite with my own words, but others have prepared portions so tasteful as to make my own attempts bland.  Morsels to follow:

  • “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” – Adam Smith
  • “Dying industries absorb labor and capital that should be released for the growing industries.  It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other.  These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits and costs.  They are solved by this system incomparably better than any group of bureaucrats could solve them.  For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day; whereas bureaucrats would try to solve it by having made for the consumers not what the consumers themselves wanted, but what the bureaucrats decided was good for them.  Yet, though the bureaucrats do not understand the quasi-automatic system of the market, they are always disturbed by it.  They are always trying to improve it or correct it, usually in the interests of some wailing pressure group.” – Henry Hazlitt
  • “It may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve.” – Henry David Thoreau
  • “The evil is inflation.  Its weapon of defense is an invisible vapor, the effect of which is to cause people to become economic alcoholics, afflicted with the delusion that they can get rich by destroying the value of money.” – Garet Garrett
  • “A government that has arrived at the ultimate goal of total power may dispense with inflation.  The power to command obedience enables it to achieve directly what formerly it could only achieve indirectly by inflation.  The consuming delusion is that because of what Americans were, this may not or cannot happen.” – Garrett
  • “Wealth brings with it its own checks and balances.  The basis of political economy is non-interference.  The only safe rule is found in the self-adjusting meter of demand and supply.  Do not legislate.  Meddle, and you snap the sinews with your sumptuary laws.  Give no bounties, make equal laws, secure life and property, and you need give no alms.  Open the doors of opportunity to talent and virtue and they will do themselves justice, and property will not be in bad hands.  In a free and just commonwealth, property rushes from the idle and imbecile to the industrious, brave and persevering.” – Ralph Waldo Emerson
  • “Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development.” – Hayek
  • “The money rate can, indeed, be kept artificially low only by continuous new injections of currency or bank credit in place of real savings.  This can create the illusion of more capital just as the addition of water can create the illusion of more milk.  But it is a policy of continuous inflation.  It obviously is a process involving cumulative danger.  The money rate will rise and a crisis will develop if the inflation is reversed, or merely brought to a halt, or even continued at a diminished rate.” – Hazlitt
  • “Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise.  They force the general taxpayer to subsidize the bad risks and to defray the losses.  They encourage people to ‘buy’ houses that they cannot afford.  They tend eventually to bring about an oversupply of houses as compared with other things.  They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion.  In brief, in the long run they do not increase overall national production but encourage malinvestment.” – Hazlitt (1946, if heeded, we may have avoided current recession)
  • “There is no subtler, no surer means of overturning the existing basis of society than to debauch its currency.  By a continuing process of inflation, governments can confiscate secretly and unobserved an important part of the wealth of their citizens.  By this means they not only confiscate, but confiscate arbitrarily, and while the process impoverishes many it actually enriches some.” – Keynes
  • “As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power.  There can be no such power in a republican government: the people have no freedom, and property no security where this practice can be acted: and the committee who shall bring in a report for this purpose, or the member who moves for it, and he who seconds it merits impeachment, and sooner or later may expect it.” – Thomas Paine
  • “Deficit spending is simply a scheme for the confiscation of wealth.  Gold stands in the way of this insidious process.  It stands as a protector of property rights.  If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” – Alan Greenspan
  • What is called economic power, while it can be used as an instrument of coercion, is, in the hands of private individuals, never exclusive or complete power, never power over the whole life of a person. But centralized as an instrument of political power it creates a degree of dependence scarcely distinguishable from slavery.” – Hayek
  • “You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less.  You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services he is capable of rendering.  In brief, for a low wage you substitute unemployment.  You do harm all around, with no comparable compensation.” – Hazlitt
  • “The question is not whether we wish to see everybody as well off as as possible.  Among men of good will such an aim can be taken for granted.  The real question concerns the proper means of achieving it.  And in trying to answer this we must never lose sight of a few elementary truisms.  We cannot distribute more wealth than is created.  We cannot in the long run pay labor as a whole more than it produces.  The best way to raise wages, therefore, is to raise marginal labor productivity.  This can be done by many methods: by an increase in capital accumulation–i.e., by an increase in the machines with which the workers are aided; by new inventions and improvements; by more efficient management on the part of employers; by more industriousness and efficiency on the part of workers; by better education and training.  The more the individual worker produces, the more he increases the wealth of the whole community.  The more he produces, the more his services are worth to consumers, and hence to employers.  And the more he is worth to employers, the more he will be paid.  Real wages come out of production, not out of government decrees.  So government policy should be directed, not to imposing more burdensome requirements on employers, but to following policies that encourage profits, that encourage employers to expand, to invest in newer and better machines to increase the productivity of workers–in brief, to encourage capital accumulation, instead of discouraging it–and to increase both employment and wage rates.” – Hazlitt
  • “‘Adequate’ relief will cause some men not to seek work at all, and will cause others to consider that they are in effect being asked to work not for the wage offered, but only for the difference between the wage and the relief payment.” – Hazlitt

“A malady… once known is half cured.” – Jefferson