Synopsis: The idea of natural, self-regulating order is one of the key elements underlying contemporary discourse about economic and social organisation . However, what exactly is meant by this is not altogether clear. Most of the time, when people refer to natural order they imply that if people were left to do that which they naturally are inclined to do, their activities will spontaneously be synchronised in the sense that they will all get that which they have reason to expect out of the system. We call such an order synchronic order as it synchronises the activities of individuals. However, there are two other elements which must be explored for such an order to have any meaning. Firstly, there is the question of whether natural synchronisation works with all sorts of human behaviour or that it only works with a particular type of behaviour. If so, is there a natural process which will equip individuals with the kind of behaviour necessary for such synchronisation to work? Secondly, once activities were synchronised, would individuals be content with the process and the outcomes (that which they have reason to expect) to an extent that they would feel the need neither to change their own behaviour nor to change the system? We call both these elements, which are required to support the synchronising ability of a natural order, ‘diachronic order’. We use this term to tell us whether that which co-ordinates individual behaviour is something which is sustainable over time (broadly conceived). Clearly, if there is a natural process which equips individuals with behaviour that will lead, without any intervention, to a co-ordination of their activities and where agents do not find the system as morally unacceptable, we can clearly declare that there is a natural, self-regulated order. In this chapter, we take a somewhat cursory meta-historic perspective on the evolution of the idea of natural order. We begin our journey in ancient times and find surprising similarities between some Chinese and Christian thinking about the idea of natural order. We argue that in both cases natural order is in the end an ideal and that individuals are required to behave in a manner which may not be natural to them so that natural order can lead to a co-ordinated outcome. As that which dictates how individuals should behave is derived from the ideal (and hence, constitutes a moral decree), such a system can be sustainable only if morality prevails and is unchanging. In such a case, there will be both synchronic and diachronic orders, but we must note that human nature is not part of the natural order itself. The Enlightenment in Europe changed all that as it brought to the fore the search for endogenous explanations such that were produced for the world of physics. In the social sciences, this amounts to an effort to emulate the notion of equilibrium in Newtonian Mechanics in the analysis of social interactions. However, now both human actions and the formation of morality become endogenous, which means that for a natural order to become both synchronic and diachronic, we must find a process that not only co-ordinates actions but also produces moral norms that support it. The difficulties are exposed at the outset when we begin by identifying Mandeville’s famous paradox which juxtaposed the necessary conditions for an order to produce plenty with moral principles which are perceived to be natural too. We claim that classical economics responded to this dilemma by creating a system which closely connects the emergence of ethical ideas with the working of the system of natural liberty. This endogenisation of ethics—which I believe to be a logical imperative embedded in the idea of social natural order—allowed thinkers like Adam Smith to conclude that for all the wrong reasons, the system of natural liberty could work and temporarily appear as morally acceptable. However, in the long run, namely diachronically, such an arrangement is not sustainable as it will offend the foundation of our moral reasoning: our conscience. Modern economics chose a different route altogether. It simply chose to divorce itself from ethics. By claiming the economics is ethically neutral, it suggests that the idea of natural liberty in the sphere of economic activities is compatible with all possible social values or ethical principles. This very appealing idea led to the dominance of the modern economic paradigm which culminated in the spread of globalisation . However, even modern economics recognises that the conditions for the natural order to deliver a synchronised outcome, which is also ethically neutral, are not formed naturally. Therefore, the relentless pursuit of competitive decentralisation within economies and globally is more akin to a desire to implement an ideal rather than a plea to allow nature to take its course.
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Perhaps more than any century before it, the twentieth century was a stage for a colossal battle of ideas, the lines of which were clearly drawn in the second half of that century. From the perspective of economic and social organisation one can summarise this as the struggle between two extreme conceptions of economic (and social) order. At the one end stood the idea of a planned and controlled order subjugated to a perceived (usually, metaphysical) collective will as was manifested in the working of the Soviet bloc and China. At the other extreme lay the idea of a self-regulated system, a system of laissez-faire or natural order, an order that emerges naturally as individuals pursue their own natural interest and interact in a natural way (assumed to be competitive) with each other. The complete manifestation of the latter idea may not have fully materialised anywhere—and certainly not at all times—but it has been the clear aspiration and the driving force behind most Anglo-Saxon economies and in particular the USA and the UK.1 The ultimate manifestation of this idea can be seen in the recent spread of globalisation, which is a clear attempt to expand this principle of economic organisation from individual societies to the world in its entirety.2 In between, there were all those economies where an attempt was made to reconcile the two extremes by producing some form of a managed, or corrected, natural order in which the perception of the guiding collective will was neither metaphysical nor timeless.3 Such forms of economic organisation—captured by the general heading of social democracy—could be found in most other Western European economies.
Towards the end of the twentieth century, with the collapse of the Soviet bloc and the adoption of some form of State Capitalism by China, it seemed that the battle had reached a conclusion. The winner, no doubt, has been the idea of natural, self-regulated order. But as the ideological battle lines had to be redrawn, an inevitable shift occurred even among those who were committed, as it were, to the middle ground. The political left in Western Europe, to some degree, had to redefine its opposition to the idea of natural order. In the past, the political battle lines seemed to have been drawn between those with total commitment to natural and spontaneous order and those who sought to limit it. The former saw no domain in the economy which could not be best dealt with by markets (perceived as the ultimate manifestation of the natural order). The latter argued that the market should be limited and that there are areas in the economy which would be best dealt with through government provisions which are more akin to the idea of planning and control—subject to a collective will—than to any notion of natural or spontaneous order. However, much of this has changed since the end of the war of ideas. Now, there remains a difference about whether there are areas in the economy for which markets may not be the right institutional framework, but instead of thinking of genuine institutional alternatives, the view seemed to have changed into public institutions that emulate the markets.4 Namely, yes, there are areas where greater public involvement is required but such involvement should not be judged by other criteria than those we use to judge market performance. The extent to which this change took roots in different countries may be different but with the onslaught of globalisation—which is in itself a mark of the success of the natural order paradigm—it has become almost impossible to politically commit to any idea which is not market based or consistent with the rule of the markets. When a French president committed himself to increase the marginal tax rate for redistributional purposes, his critics argued that this will drive away all the entrepreneurial talent, which is exactly the reason why the UK government refuses to follow suit and which led a French economist to call for a global tax on capital.5
What were the exact reasons for the collapse of the Soviet bloc—and the victory of self-regulation—is not a simple question to answer and I have no intention of dealing with this here. There was evident economic decline in those countries, but it is not clear whether this decline and the prevailing general disaffection were due to the failure of the economic paradigm behind such systems or the fact that they seemed to have been coupled with extreme centralisation that is a necessity for tyranny. Be this as it may, we should focus our attention on the winning paradigm and here there are three immediate questions which follow from the success of the natural order doctrine: (a) What is actually the meaning of this idea of a self-regulated system or natural order paradigm? (b) What is the secret of its broad and apparently, almost universal, appeal? (c) What is the relationship between the principles of economic organisation and the principles of social organisation? Put differently, can any form of social organisation—which inevitably contains broader issues than, say, wealth creation—be consistent with the narrower concept of an economic natural order? This third question is really part of what this book is all about and I will therefore defer dealing with it until later. At this stage, however, I would like to dwell a bit longer on the significance and appeal of the paradigmatic core behind the economic notion of self-regulated systems or, as it is sometimes referred to, the idea of natural liberty.6
1.1 Early Conceptions: A Conditioned Order
The idea of a natural order itself is not altogether new.7 But what exactly is meant by natural order can sometimes be misleading. Lao-Tzu, who wrote the Daodejing and is considered one of the founder of Taoism (and was a contemporary of Confucius in the sixth century BC), argued that the way (the meaning of Dao) to a fulfilled life (happiness, or rather, contentment) is through a concept called Wu-Wei, which may literally translate as non-action but actually means acting in harmony with nature, being part, as it were, of the flow of reality. In Taoist philosophy, nature is, in essence, a balanced self-regulated system which through constant flows between opposites corrects and mends whatever needs to be brought back to harmony. So, the idea of a self-generating order is embedded in nature. By being one with nature individuals, as well as communities as a whole, would become part of this self-regulated and balanced system. In other words, the actual working of nature—that self-regulated natural order—constitutes both a reality and an ideal. As humans endeavour to become part of t...