The word “crisis” is usually employed to indicate that a person
or even an entire culture has reached a turning-point which demands
decisions: choices that either propel those in crisis towards
renewed growth or condemn them to remorseless decline.
These dynamics of crisis are especially pertinent for much
of contemporary Europe. The continent’s well-documented economic
problems are now forcing governments to decide between confronting
deep-seated problems in their economic culture, or propping up the
entitlement economies that have become unaffordable (and
morally-questionable) relics in today’s global economy.
While some European governments have begun implementing
long-overdue changes in the form of austerity-measures,
welfare-reforms, and labor-market liberalization, the resistance is
loud and fierce, as anyone who has visited France lately will
attest.
No-one should be surprised by this. Such reforms clash
directly with widespread expectations about employment, welfare,
and the state’s economic role that have become profoundly embedded
in many European societies over the past 100 years. Yet it’s also
arguable this is simply the latest bout of an on-going clash of
economic ideas that goes back much further in European history than
most people realize.
Certainly the contemporary controversy partly concerns the
government’s role during recessions. From this standpoint, Europe
(and America) is rehashing the famous dispute between the
economists Friedrich von Hayek and John Maynard Keynes in the 1930s
about how to respond to the Great Depression. Should we, as Hayek
maintained, react by giving markets the flexibility they need to
self-correct? Or do we pump the prime à la
Keynes?
At another level, however, the quarrel about Europe’s
economic future is a reprisal of a far older discussion — one that
predates modern economics’ founder, Adam Smith, by several
centuries. It’s a debate about the place of the values of liberty
and solidarity in economic life.
A major economic feature of medieval Europe was the
presence of guilds in virtually every village and city. Mostly
grouped around particular trades and professions, guilds sought to
embody ideals of mutual assistance and brotherly love. These noble
sentiments, however, often translated into guilds trying to
predetermine who could engage in certain occupations or even
produce particular goods and services (what we today would call
“closed shops”). To enforce their claims, many guilds agitated for
laws that restricted entry to their craft, stipulated maximum
work-hours, and mandated an approximate equality of output and
returns.
This state of affairs, however, did not go unchallenged.
Many medieval bishops and lawyers, for example, insisted that all
guild regulations were subordinate to the demands of natural
justice. The 14th-century jurist Bartolus of Sassoferrato argued
that guilds could not make “a law by which another is prejudiced,
as for instance if they make a law that only certain persons and no
others can exercise that craft.” There were also numerous instances
of city governments limiting guild regulations and even disbanding
guilds to protect consumers’ interests.
In short, the economic culture encouraged by European
guilds ran counter to another way of thinking: one which, as the
distinguished historian Antony Black observes, was present in
Europe as early as the 13th century. This stressed “personal
security in the sense of freedom from the arbitrary passions of
others” and “of private property from arbitrary seizure.” It was
understood, Black adds, that such freedoms could only be maintained
if a credible legal process was successfully enforced. This
facilitated the development of rule of law and growing disapproval
of attempts to use the state to legally endorse monopolies or
privilege any particular economic interest. This overall “complex
of ideas,” as Black describes it, was underpinned by the Christian
emphasis on liberty and its implied limits on state and group
power.
In case all this sounds strangely familiar to our modern
ears, it should. Many of the arguments that have intensified in
Europe since the 2008 recession are basically secularized versions
of this medieval clash.
Of course, the truth is that all human societies require
both liberty and solidarity. Humans are individual and
free by nature. But we are also social creatures who need others.
The real question is how we realize both dimensions of human
existence in the economy in ways that don’t generate political and
institutional confrontations between the two.
One step forward would be for Europeans to disassociate
notions of solidarity from state-interventionism and instead
emphasize that concern for our neighbor should be primarily
expressed through families and the non-state institutions of civil
society. A second move would be to focus the government’s economic
functions upon those which enhance economic liberty: i.e.,
protecting private property, stable money, upholding contracts,
maintaining rule of law (rather legally privileging particular
economic groups), and those minimal welfare functions consistent
with the principle of subsidiarity.
These guidelines may sound rather mundane. Yet even mild
adherence to such prescriptions would upturn the unsustainable
status quo prevailing throughout much of modern Europe, not to
mention reconcile some age-old tensions in European political and
economic culture.
For while important technical aspects of Europe’s current
economic problems need attention, long-term transformation will
only occur if Europeans are willing to rethink the state’s role
vis-à-vis the values of liberty and solidarity and their
institutional expressions in the economy. Without such change, much
of Europe risks turning into an elegant retirement home for an
aging population, or a grandiose museum of a civilization that was
once the envy of the world.
