Reviving the Invisible Hand

Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-first Century

Deepak Lal
Copyright Date: 2006
Pages: 336
https://www.jstor.org/stable/j.ctt7sjk9
  • Cite this Item
  • Book Info
    Reviving the Invisible Hand
    Book Description:

    Reviving the Invisible Handis an uncompromising call for a global return to a classical liberal economic order, free of interference from governments and international organizations. Arguing for a revival of the invisible hand of free international trade and global capital, eminent economist Deepak Lal vigorously defends the view that statist attempts to ameliorate the impact of markets threaten global economic progress and stability. And in an unusual move, he not only defends globalization economically, but also answers the cultural and moral objections of antiglobalizers.

    Taking a broad cross-cultural and interdisciplinary approach, Lal argues that there are two groups opposed to globalization: cultural nationalists who oppose not capitalism but Westernization, and "new dirigistes" who oppose not Westernization but capitalism. In response, Lal contends that capitalism doesn't have to lead to Westernization, as the examples of Japan, China, and India show, and that "new dirigiste" complaints have more to do with the demoralization of their societies than with the capitalist instruments of prosperity.

    Lal bases his case on a historical account of the rise of capitalism and globalization in the first two liberal international economic orders: the nineteenth-century British, and the post-World War II American.

    Arguing that the "new dirigisme" is the thin edge of a wedge that could return the world to excessive economic intervention by states and international organizations, Lal does not shrink from controversial stands such as advocating the abolishment of these organizations and defending the existence of child labor in the Third World.

    eISBN: 978-1-4008-3744-1
    Subjects: Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-xiv)
    D. Lal
  4. Introduction
    (pp. 1-16)

    This is a book about an ancient process (globalization) and a modern set of economic institutions (capitalism) which are transforming the world. It is best to begin with the new.

    Both economic historians (like Richard Tawney) and sociologists (like Max Weber) have identified the distinctive institutions of capitalism as the midwife of modernity, culminating in the rolling Industrial Revolution. Economists (like Sir John Hicks), however, preferred to talk of the rise of the market economy as the distinctive feature of modernity, in part because of the Marxian connotations of the word “capitalism” and the sundry and unnecessary intellectual baggage it...

  5. 1 Liberal International Economic Orders
    (pp. 17-47)

    Writing of the twilight of the Edwardian era which marked the high watermark of Pax Britannia, John Maynard Keynes wrote in his great book onThe Economic Consequences of the Peace:

    What an extraordinary episode in the economic progress of man that age which came to an end in August 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and...

  6. 2 From Laissez Faire to the Dirigiste Dogma
    (pp. 48-61)

    The twin pillars of the domestic policy of the British Imperium were the classical liberal policies of “laissez faire” and unilateral free trade. For the classical liberals, Adam Smith and David Hume, these were in the country’s national interest, and though free trade would help in promoting understanding between states, they did not believe (as some of their later acolytes like Richard Cobden) that this would lead to international peace. To maintain international order, a balance of power through a network of alliances and treaties is needed.¹ We have seen that the new imperial power—the United States—has instead...

  7. 3 The Changing Fortunes of Free Trade
    (pp. 62-94)

    The shift in economists’ views from the virtues of laissez faire toward dirigisme was mirrored in the numerous arguments they developed against free trade. So, by the end of the Second World War, not only the case for laissez faire but also free trade seemed to have been completely undermined. Planning in its various forms became the vogue among both economists and governments, particularly in the Third World. But, in the 1960s when I was becoming an economist, a backlash against this dirigisme began. It has been labeled the neoclassical resurgence in development economics.¹ One of its centers was the...

  8. 4 Money and Finance
    (pp. 95-126)

    I went to Latin America for the first time in the early 1980s when I was working as the research administrator at the World Bank. I felt that, like Alice in Wonderland, I had walked through the looking glass. In Brazil, each morning I went to a little foreign exchange shop near Copacabana to change my dollars for the day’s spending into cruzerios at the unofficial exchange rate. I had to take a briefcase along to hold the huge wads of notes I got in return for changing about $20. One afternoon I had to visit the director of the...

  9. 5 Poverty and Inequality
    (pp. 127-149)

    In his recent book Joseph Stiglitz, Nobel Prize winner, former vice president of research at the World Bank, and the academic icon of the anti-globalization movement, writes: “A growing divide between the haves and have-nots has left increasing numbers in the Third World in dire poverty, living on less than a dollar a day. Despite repeated promises of poverty reduction made over the last decade of the twentieth century, the actual number of people living in poverty has actuallyincreasedby almost 100 million. This occurred at the same time that total world income actually increased by an average of...

  10. 6 Morality and Capitalism
    (pp. 150-181)

    The arguments I have advanced and the evidence presented in previous chapters will not convince the Western anti-globalizers. For their real case against globalization is that it promotes global capitalism, of which they disapprove. Their disapproval is not merely based on the erroneous belief that global capitalism promotes poverty and inequality, but on an underlying belief in the immorality of capitalism. These are old objections, but not for that reason to be dismissed. Capitalism, it is believed, is based on the power of the economically strong to coerce the weak. It is fueled by that ancient Christian sin of greed....

  11. 7 “Capitalism with a Human Face”
    (pp. 182-204)

    The “new dirigistes” form the second group of anti-globalizers. Unlike the cultural nationalists of the Third World, they are not necessarily against globalization but rather against capitalism and its globalization. Their moral objections against capitalism are based in part on the Romantic critique of its dehumanizing effects but also in a growing “social paternalism.” This in turn has fed what Ken Minogue has called “constitutional mania,” which emphasizes substantive social and economic rights in addition to the well-known liberties—freedom of speech, contract and association—emphasized by classical liberals. The “new dirigisme” seeks to use the law to enforce these...

  12. 8 The Greens and Global Disorder
    (pp. 205-230)

    A myriad of nongovernmental organizations (NGOs) are the storm troopers of the anti-globalization movement. A large number support various environmental causes. They are enemies of global capitalism, which they see as undermining “sustainable development” and endangering Spaceship Earth. They are major purveyors of the “new dirigisme.”

    Who are these “global salvationists”—as David Henderson¹ has aptly labeled them? How have their views come to have such resonance in the West? What are their true aims? Is there any international civil society of which they can be taken to be the spokesmen—or spokespersons in politically correct discourse—as they claim?...

  13. 9 Conclusions
    (pp. 231-236)

    At the end of the second millennium, the world presents a number of paradoxes. One of these is best illustrated by the recent elections in two of the largest democracies in the world—the United States and India. In both election campaigns questions concerning globalization were to the fore. But, paradoxically, in one country—India—globalization was accepted by all the contesting parties, with the party of the cultural nationalists, the BJP, pointedly pinning globalization and economic liberalization to their electoral mast. In the United States, the Democrats made a major election issue of the irrational fears aroused by “outsourcing”...

  14. Notes
    (pp. 237-278)
  15. Bibliography
    (pp. 279-306)
  16. Index
    (pp. 307-320)