Friday, December 10, 2010

Gingrich discussing the free market, Reagan, and Thatcher

Two of the most important books on the benefits -- economically as well as for personal liberty -- of free enterprise were F.A. Hayek's The Road to Serfdom, published in 1944, and Milton Friedman's Capitalism and Freedom, 1960. Both men had other very important works, but those were their most influential. Two centuries before, Adam Smith wrote The Theory of Moral Sentiments and The Wealth of Nations. The latter, published the same year as The Declaration of Independence, introduced the concept of the "invisible hand": directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
In a 2001 interview with PBS, Gingrich was asked of the impact of the three on his views:
INTERVIEWER: Philosophically speaking, what was the wellspring of your ideas? Were you influenced by people like Friedman or Hayek?

NEWT GINGRICH: No, I think I was influenced more by Adam Smith and by the founding fathers -- Jefferson, Adams, Madison, Hamilton, Washington -- and to some extent by the Whig historians of the 19th century. I was very much influenced by Goldwater's Conscience of a Conservative and by Reagan's speeches starting with "A Time for Choosing" in October of 1964. I actually came to Hayek backwards through Reagan, rather than the other way. In my mind, at least, what you had was a clear overdevelopment of the state in the 20th century as a vehicle for humans to organize their lives, so you needed a party of freedom that was committed, almost in the British 19th-century liberal tradition, to argue for personal choice for markets, for private property rights, and for taking Bismarck's insurance state and transferring it into a personal insurance system, as we're trying to do now on social security.
INTERVIEWER: Do you make a connection between free markets and personal freedom, personal liberty?

NEWT GINGRICH: Absolutely. In fact, so did all the founding fathers. That goes back to the English Civil War, which is really the wellspring from which the American model of freedom emerges. It is the English Civil War and the effort of people to protect themselves from judges who are instruments of the state, not instruments of justice, to protect themselves from troops in their houses, to protect themselves from the king's right to kill you. And it's out of that English Civil War that you begin to have the rise of what we now call freedom, [the] first truly mass democratic societies in history, even more than the Roman republic. I think it's inextricable if you read Locke, if you read Jefferson, if you read the founding fathers, it is inextricable that if you don't have the right to private property, if you don't have the right to trial by jury, if you don't have the right to vote and fire the people to whom you loan power, you don't have freedom. The idea of a socialist free society in the long run, as Hayek points out, is an impossibility.
NEWT GINGRICH: Start with a simple fact: If you earn resources, you should have the right to spend them. Now how are you going to know what to spend them on without a market? How are you going to know what the prices are without a market? Hayek's great insight, which, interestingly, mathematics only caught up with about 50 years after he wrote, is essentially the understanding of chaos theory. Hayek's intuitive understanding was that the sheer number of decisions made daily by humans is beyond the capacity of any bureaucracy or any computer to organize centrally. We now have in chaos theory, which is the most elegant current form of mathematics, a scientific explanation of Hayek having been intuitively right and of socialist bureaucracies scientifically incapable of exercising that kind of detailed control.
NEWT GINGRICH: I don't think Americans push freedom. I think Americans define what we believe to be a fact much like the Earth is round. We go around the sun. Humans are born with inalienable rights. It is every human's right to live in freedom.
INTERVIEWER: Had [Reagan] internalized people like Hayek?

NEWT GINGRICH: Absolutely. Reagan is the only president to have actually studied The Road to Serfdom and thought about [it]. He knew Hayek personally, [Peter] Diamond, he knew Milton Friedman personally. As governor of California he was deeply into these kinds of conversations. It's a little bit like learning how to cook eggs. Once you learn that there's a stove, there's a pan, there's water, you boil it, you put the egg in, that's a profound thing if you've never done it before. But once you've learned that you don't have to learn 700 permutations, you've learned it. Reagan's technique was for going for the basics -- learning why freedom worked, why military strength worked, why American civic culture worked, and then communicating that over and over from different angles. But he had thought profoundly about the basics of what worked.
INTERVIEWER: You yourself had a dinner with Hayek, didn't you, during the Reagan years?

NEWT GINGRICH: There were a group of us, younger members of Congress, activists around the city. Hayek had come to the city to visit Reagan at the White House and we had the very good fortune -- I think the Heritage Foundation sponsored it -- to have it that evening with us listening to him. And it was intriguing to me to realize that there were men who had by force of intellect, and I would certainly say Hayek and Friedman are two of them, [they] moved the entire debate and began to change what had been for almost 70 years the dominant intellectual assumptions about how the world worked. You could see it happening, and Reagan was in a sense their popularizer. So he was this person who could take these people who were very profound but not very easy to communicate. I don't think you'd ever get Hayek on the Today Show, but you could get Reagan explaining the core of Hayek with better examples and in a more understandable language. It was a great thrill for me as a history professor by background to really see right in front of my eyes that a person could dedicate their life to ideas and have a very deep, very profound impact on history through people of action who read them and studied them.

Here was a man who had intellectually changed the world without really ever leaving the university. It was the power of his books, the power of his ideas as then captured by Ronald Reagan and Margaret Thatcher, that had changed things. And I really did feel like I was having dinner with a historic figure.... He was this very unprepossessing person who was very self-defined as an intellectual and had zero interest in politics, and he had helped change the world.

He came across as low key and pleasant but very self-defined. He knew what he believed. He wasn't particularly interested in worrying about people who were wrong. He was pretty cheerful about being pleasant and saying this is where the world's going. This was still at the peak of the Soviet empire, so it was a remarkable act of optimism on his part to be as confident as he was that freedom would win.
INTERVIEWER: What is your impression of the historical importance of Margaret Thatcher?

NEWT GINGRICH: Margaret Thatcher was the forerunner who made Reagan possible. The 1979 campaign was the direct model from which we took much of the 1980 Republican campaign. Reagan drew great strength from Thatcher, and her courage and toughness in living through that first recession and toughness in the Falklands Wars rallied Americans in a remarkable way.
INTERVIEWER: And her impact around the world?

NEWT GINGRICH: I think Thatcher and Reagan were the duo that defeated the Soviet empire, relaunched the legitimacy of freedom and free markets, and created the intellectual framework for the modern pro-freedom movement. In a lot of ways Tony Blair is Margaret Thatcher's adopted son. He has actually been running a fairly Thatcherite Labor government.
Newt's take on free trade:
Trade increases the likelihood that you and they will engage in win-win activities. The difference between politics and trade is that in politics I may take something from you to give to somebody else, even though you don't want to lose it, so I raise your taxes. I charge you a fee. I confiscate your farm. In a free market you only do the things that make you happy in order for me to get the things that make me happy, and if we're not both happy the trade doesn't occur. So free markets dramatically lower the friction of human relationships and increase the relative pleasure and the relative success of human relationships. The more the Chinese and Americans [sit] down together to create more wealth, the happier they'll be with each other, the less likely we'll have conflict. I've always said that was true in the Palestinian-Israeli conflict, that if you could find a way to launch genuine joint ventures of Palestinian and Israeli entrepreneurs who could only succeed together, you would in a matter of 10 or 15 years have a significant shift in attitudes.

While all Republican candidates will espouse the virtues of the market, how many have the deep knowledge of why it works -- and not just is the popular thing to say in front of Republican primary voters -- that Gingrich possesses.

Craig Shirley, the author of of two books on Ronald Reagan and who will soon publish a biography of Gingrich, put it this way back in 2007: "Among the 2008 GOP aspirants, [Gingrich] is probably the only one who knows the difference between Friedrich Hayek and Salma Hayek."

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