Tackling the statism virus is a matter of principle

A few weeks ago, I received an e-mail from Ciaran McKenna, a regular reader, he said, but who never agrees with my "economic libertarianism". Well, that's nice to know. Ciaran challenged the notion of a "virus of statism" I had mentioned in relation to the pensions bond idea. Free marketeers like me conveniently forget that the state, in all its apparatus, is put at the service of capitalism, he says.

He wrote, "the `virus of statism' is essential in any capitalist society for the creation and accumulation of wealth by individuals... From my perspective the `virus of statism' needs to be confronted because it protects those who deny the deleterious social and environmental consequences of ceaseless wealth creation and accumulation. The state is the guarantor of wealth, not a threat to wealth."

Ciaran is a representative of ATTAC Ireland (Action for a Tobin Tax to Assist the Citizen), a subject I'll come back to.

My first answer is that I am no economic libertarian, wishing simply to reduce the state to bare essentials. There is a proper role for the state in vindicating rights, providing security, including some economic security, and delivering public goods.

And it is clear that the accumulation of private - and public - wealth requires the enforcement of law and property rights by the state. But recognising that role doesn't justify a limitless role for the state in economic life, nor does it prove that we are all "statists".

A wider answer was supplied by EU Internal Market Commissioner Frits Bolkestein. In a speech by the Dutchman in charge of completing the single market in the EU set out his view of freedom at the heart of economic and social policy.

Bolkestein said that in post-war Germany, it was accepted that the socio-economic order was to be based "on the free individual rather than the system. "Another important requirement was that this new order should offer the individual security and stability as well as freedom." For the post-War German economic thinkers called "Ordo-liberals," Bolkestein said, an economic order based on free competition was the ideal embodiment of the concept of a free society.

The leading Ordo-liberal, Walter Eucken, "drew no distinction between a free society and a socially just society. They were one and the same thing, as long as the freedom and dignity of the individual remained the prime consideration".

That vision of economic freedom complementary to, rather than conflicting with, social justice, is a most compelling one and the best basis for policy-making in the Republic, too.

Bolkestein continued that while a certain amount of redistribution and social legislation was needed, "the government should keep itself very much in the background, since the stress should remain on free and responsible individuals".

Freedom for individuals also meant that abuse of market positions and monopoly power had to be countered by the state.

The EU Commissioner argued that the four internal market freedoms - of movement of persons, goods, services and capital - gave expression to the central idea of the free individual.

So, no discussion about global capitalism and the role of the state or international organisations can be complete without putting the freedom of the individual at its heart. The bias has to be in favour of that freedom, with the state as guarantor.

We don't hear too many of our political and economic leaders coherently addressing the foundations of their approach to economic and social questions. At best, I think we operate with muffled, amorphous assumptions about the basis for policy, even though some of us like to make these assumptions explicit and argue about the right ones.

There is more than technical economic organisation at stake. Bolkestein argued that economic liberals should not be mute about things that would undermine freedom. "Nowadays the greatest threat facing the liberals is not a totalitarian threat from outside, but a nihilistic threat from within" and the moral relativism of post-modernism.

It is unfamiliar to an Irish audience that an economic leader can move quickly from economic issues to fundamentals about the principles being taught in schools - or, rather, not taught. Bolkestein claimed alarmingly that "the shaping of a liberal Europe of the future is under threat from the way in which the Europeans of the future are being shaped in their schools and universities".

There is something wrong when some of our schools and universities are teaching that there are no ideals of civilisation worth striving for, he said.

Since there are principles worth caring about, policies and practices deserve scrutiny to test if they advance or undermine important principles. That is why the virus of statism, understood as the inappropriate role of the state in what should be areas of freedom, should be challenged even for minor ailments. Oliver O'Connor is editor of the monthly publication, Finance.

E-mail: ooconnor@indigo.ie