GIOVANNI BIRINDELLI, 14.5.2013
(Original Italian publication, 31.10.2012: L’Indipendenza, Movimento Libertario – Catallaxy Institute)
The concept of the gentleman, a term originally used exclusively in reference to men but which describes qualities any human being may possess, man or woman, was admirably described by Samuel Smiles in 1859: “The true gentleman has a keen sense of honour, scrupulously avoiding mean actions. His standard of probity in word and action is high. He does not shuffle or prevaricate, dodge or skulk; but is honest, upright and straightforward. His law is rectitude – action in right lines. When he says YES, it is a law … Above all, the gentleman is truthful“[1]
In the England of the Industrial Revolution (1700-1850), the Great Britain of 1707 onwards, being a gentleman also served a precise economic function: that of instilling confidence. During that period, economic relationships underwent a process of de-bureaucratisation and as Joel Mokyr writes in his wonderful book The Enlightened Economy, An Economic History of Britain 1700-1850 (2009, Yale University Press) “sealed and formal agreements, which were in widespread use in the seventeenth century, gave way by 1750 to verbal agreements and gentlemanly handshakes“[2]. Thus it is evident that in an extremely dynamic economic system constituted primarily by horizontal relationships between individuals, their being gentlemen (and being perceived as such) became an essential prerequisite that enabled them to work, to exchange goods and services with other economic agents and to get ahead socially and economically (the same principle of reputation we see today on the Internet, for example on sites like eBay, where the free market still resists).
The intensity of horizontal relationships, those between one individual and another (which in Great Britain during the Industrial Revolution was very high), is inversely proportional to the intensity of vertical relationships, those between the individual and the State, and consequently to the dimensions and functions of the State. At that time, the State, though not minimal (on the contrary), was considerably reduced compared to today. Its role in defending the law and imposing sanctions on those who violated it, for example, was performed only in exceptional circumstances and was residual: normally, these functions were performed by civil society, by isolating the offenders for instance (again as on eBay ). If the State had had to intervene, as a rule, to defend the law and impose sanctions on offenders, the economic system which created the foundations of the most prodigious growth in the history of the planet would have collapsed. Mokyr, once again, writes that “The criminal justice system was on the whole a measure of last resort. In the British economy of the age of Enlightenment informal institutions and social norms favouring cooperative behaviour worked, and worked well enough. Had moral codes been less widely respected and cultural beliefs been less cooperative, the worlds of credit and commerce would have disintegrated rapidly. Informal codes of behavior and formal third-party enforcement through the courts should not be regarded as substitutes but as complements. … Without understanding how property rights were increasingly respected and contracts honored (rather than enforced), we will miss something about institutional roots of subsequent economic growth“[3]. In short, one may safely say that without informal institutions (that is, with a more intrusive State than the one that existed at the time) the Industrial Revolution in Great Britain and the staggering economic growth it produced would probably not have happened, or at any rate would have taken place in a much slower and more limited fashion.
In an economic environment in which the State had retreated to the point where defence of the law and punishment of offenders was carried out in the first instance by civil society, the reputation of an individual, his being a gentleman and being perceived as such, was essential if he were to improve his economic and social position. Part of being a gentleman was also providing help, not so much to ‘others’ as to people or interests which were in some way related to his own. This help was not necessarily the product of generosity, but was often part of that signalling system which, with a very reduced State, was essential for communicating to others a self-image that would inspire confidence and thus facilitate voluntary market exchanges: “[at the time of the Industrial Revolution] middle class people participated in and subscribed to these projects to make sure they signaled to others that they were good citizens and thus trustworthy … People wanted to do good, because they wanted to be seen as good, and that was to their advantage“[4].
Consequently, there was significant private production of so-called ‘public goods’ (those that produce positive externalities and for which users cannot be made to buy a ticket – like lighthouses for navigation, let’s say, or improvements to the system of river navigation), of ‘services’ (roads, ports, bridges, etc.) and of volunteer work/philanthropic organizations. In this manner the civil economy, in which the famous ‘services’ are for the most part, and often in the first instance, financed voluntarily by individuals and not through State coercion (taxes), came into being and prospered.
Not that the economy of the time was a free market economy (nor, consequently, was the State minimal): mercantilist policies, discrimination against women, gruelling child labour (particularly at the beginning of the Industrial Revolution, later not as much) and many other things prevent us considering the economy of the period a market economy, which is born and dies under the sovereignty of the law understood as abstract and general principle (and hence with a minimal State). However, the tendency was in that direction. Nor is it remotely conceivable that all the people who engaged in economic exchanges were gentlemen, but the gentleman was the reference model: “The question is not whether the preponderance of British economic agents behaved like this [gentlemanly], but as much as whether such ideals affected their behaviour (and the way others expected them to behave) enough to make a market economy feasible without the heavy hand of law enforcement“[5] (Mokyr once again, whose idea of the ‘market economy’ is evidently broader than my own).
Now let’s jump ahead a century and a half (give or take a decade or two). The situation is exactly the opposite. Coercive vertical relations (those between the individual and the State) have replaced voluntary horizontal relations (those between individual and individual) and continue to do so at an accelerating rate. This pyramidal arrangement with a State bureaucrat at the top has contributed to replacing the model of the gentleman with that of the sycophant, the parasite, the lackey, the bag-carrier. It is taken for granted that ‘public goods’ and ‘services’ should and indeed can only be produced by the State and, to paraphrase Frédéric Bastiat, it is assumed that everything dies except that to which State gives life. Once again, the model of the gentleman has been replaced by that of the subject, who – incapable of distinguishing between solidarity and coercion – conceives of helping others only through the State and imposition. The result is the decimation of the civil economy. As Milton Friedman, for example, noted, “The heyday of laissez-faire, the middle and late nineteenth century in Britain and the United States, saw an extraordinary proliferation of private eleemosynary organizations and institutions. One of the major costs of the extension of governmental welfare activities has been the corresponding decline in private charitable activities”[6].
The so-called ‘democratic’ systems (which have nothing to do with democracy as it was originally understood, to the extent that Friedrich von Hayek was forced to invent a completely new noun – demarchy – to distinguish democracy from the obscenity called today by the same name) give the holders of political power not only the possibility but also the incentives to legally buy the votes of electors by using the coercive power of the State to provide more and more ‘services’, that is, to appropriate more and more resources from the private sector and to increasingly distort and destroy the spontaneous order of the free market. To pay for these ‘services’ which must continually increase in order for it to survive, the State has only three possible channels of coercion: taxes, public debt and inflation (the printing of legal tender), none of which can increase to infinity (more than 100% the State cannot tax; beyond a certain point it cannot borrow, otherwise it will lose the capacity to repay its debt and no longer find anyone willing to give it credit; beyond a certain level inflation cannot increase, otherwise the economic system will collapse). We will leave the latter two concepts aside for reasons of space and focus on the first: taxes.
In those countries on the front line of this process of economic and social decay (like Italy), taxes are often close to the limit of 100%, so the State, which can no longer easily finance its burgeoning ‘services’ with new taxes, and obviously refuses to reduce its dimensions and functions, is scraping the bottom of the barrel by targeting tax evasion, that is, the withdrawal of productive resources from parasitic structures (I can imagine the outrage of some readers at this point: for a more detailed discussion of tax evasion, see the following article, in Italian: part 1, part 2) and to this end is carrying out a media and legislative campaign that by plucking the strings of envy and employing the strategy of divide and conquer makes a further contribution to the replacement of what little remains of the figure of the gentleman by that of the informer, the spy, and even the thief (it seems that in Greece the government is seriously considering the idea of permitting customers to steal from people who do not issue receipts, and obviously this has aroused great enthusiasm in Italy, where a survey by the Il Sole 24 Ore newspaper showed roughly 90% of poll respondents in favour of introducing this measure nationally). The result of all this (as well) is the economic catastrophe.
Leaving aside for a moment economics education and knowledge of the economic theories of the Austrian school (conspicuously absent in those who have and have had the responsibility of government in Italy, to cite one example): the idea that replacing voluntary horizontal relations (which presuppose, as a reference model, the capitalist gentleman) by coercive vertical relations (which presuppose instead the model of the sycophant, the parasite, the lackey, the beggar, the informer and the thief) can produce economic growth rather than progressive decay, can only be conceived of by a sick mind, or one in bad faith.
[1] Quoted in Mokyr J., The Enlighted Economy. An Economic History of Britain 1700-1850 (Yale University Press, Yale), p. 371.
[2] Mokyr J., The Enlighted Economy. An Economic History of Britain 1700-1850 (Yale University Press, Yale), p. 372.
[3] Ibid., p. 379 and 372.
[4] Ibid., p. 382.
[5] Ibid., p. 371.
[6] Friedman, M., 2002, Capitalism and Freedom ( Chicago University Press, Chicago), p. 202
catallaxyinstitute.wordpress.com 