Friday, April 10, 2009

SCHOOLS OF ECONOMIC THOUGHT

Manchester School

("Classical Liberals")

Newall's Buildings, Manchester; the headquarters of the Anti-Corn-Law League

The "Manchester School" was the term British politician Benjamin Disraeli used to refer to the 19th Century free trade movement in Great Britain. The movement had its roots in the Anti-Corn Law League (ACLL) of Richard Cobden and John Bright, headquartered in Newall's Buildings in Manchester, UK.

The British Corn Laws had been strengthened in 1815 to prohibit the importation of corn (i.e. wheat) until the home price became eighty shillings a quarter. More flexible Corn Laws were instituted in 1828 with a sliding scale of import duties rather than outright prohibition. Although beneficial to landlords, the Corn Laws were detrimental to the populations in the cities, faced with higher food costs, and, consequently, industrial manufacturers, faced with higher wage bills and restricted foreign trade possibilities. The ACLL was thus set up in 1836 by Cobden and Bright and, by 1846, had successfully had them repealed by Parliament.

Since then, the general term "Manchester School" has been used to refer to radical liberalism/libertarianism in economic policy: laissez-faire, free trade, government withdrawal from the economy, and an optimistic stress on the "harmonious" effects of free enterprise capitalism. As a result, the school's nature is largely "political" rather than purely "economic". Its arguments are not necessarily couched in any particular economic theory. Certainly in the early part of the 19th Century, its governing principles were those of the Classical Ricardian School, but even then they did not shy from using intuitive supply-and-demand arguments a la Adam Smith.

As the 19th Century progressed, classical liberalism increased in influence. Although in Britain it never quite dominated academia, it was particularly influential through the medium of famous journals and newspapers such as Walter Bagehot's The Economist. It had counterparts in the French Liberal School, founded by Jean-Baptiste Say, Charles Dunoyer and Frédéric Bastiat and, in America, under Henry C. Carey and Francis Amasa Walker.

The bloodbath of World War I and the subsequent economic crises shook the faith of Europeans in the liberal bourgeois-capitalist order. Liberalism reached its lowest period of influence in the inter-war period, as nation after nation embraced socialist planning and Fascist corporatism as better ways of organizing economy and society. The decline of liberalism continued on after World War II, during the period of the "Keynesian" consensus and the rise of development planning.

Nonetheless, throughout this time, the liberal flame was kept alive in public discourse by popular economists and statesmen such as John Jewkes, Walter Eucken, Wilhelm Röpke, Luigi Einaudi Friedrich A. von Hayek, Milton Friedman, Murray Rothbard, Henry Hazlitt, James Buchanan and organizations such as the Mont Pelerin Society. Things changed considerably in the 1980s, when "neo-liberalism" began to gain sway among policymakers in America and Europe. Since the collapse of the Soviet Union in 1991, the consensus quickly came full circle. With varying degrees of success, liberal policy doctrines have been exported not only to ex-socialist nations of Eastern Europe but have been taken on board by many developing nations. Today, liberalism is at the height of its influence on public policy, having regained much of the ground that it lost since the late 19th Century.

The "Manchester School": British Liberalism

  • Richard Cobden, 1804-1865. (1) (2) (3), (4), (5), (6), (7), (8) Portrait with Bright
    • "Free Trade With All Nations", 1846.
    • Speeches on Questions of Public Policy, 1870.
    • Businessman, politician, pamphleteer and ardent free trader. Founder of the Manchester-based Anti-Corn Law League with John Bright, which was largely responsible for the repeal of the Corn Laws by Peel in 1846. After 1846, Cobden concentrated on a campaign against British imperialism. Cobden was also responsible, with Michel Chevalier, for the 1860 "Cobden-Chevalier" trade treaty with France.
  • Sir Robert Giffen, 1837-1910
    • Economic Inquiries and Studies, 1869-1902.
    • Stock Exchange Securities, 1877.
    • Essays in Finance, 1880.
    • "On Some Bimetallic Fallacies", 1886
    • Growth of Capital, 1889.
    • "A Problem in Money", 1892, Nineteenth Century.
    • "Fancy Monetary Standards", 1892, EJ
    • The Case Against Bimetallism, 1892.
    • Journalist and statistician who wrote on economic and financial subjects mainly, notably on indicators such as wage rates, economic growth, and national product. Fierce supporter of laissez-faire, pro-free trade and anti-bimetallism. Credited by Marshall for suggesting the possibility that, in the case of some inferior goods, the income effects are so strong that the law of demand may be violated. Actual examples of such "Giffen goods" are rare (e.g. the oft-mentioned example is the potato in Ireland).

American Liberalism

  • Henry C. Carey, 1793-1879.
  • Francis Amasa Walker, 1840-1897.

Continental Liberalism

  • Jean-Baptiste Say, 1767-1832.
  • Claude Frédéric Bastiat, 1801-1850.

20th Century Liberalism

  • John Jewkes,
    • Ordeal by Planning, 1948
    • The New Ordeal By Planning: The Experience of The Forties and Sixties, 1968.
    • Manchester School economist who actually taught at the University of Manchester. His 1948 book was one of the few voices that piped up in post-war Britain in opposition to the setting up of the welfare state. Although not averse to J.M. Keynes's theories, he felt that its main message regarded the heroic role of the private businessman as the generator of aggregate demand rather than the government -- a message he believed that zealous Keynesians had distorted.
  • Michael Polanyi, 1891-1976. - (1), (2), (3), (4)
    • U.S.S.R. Economics: Fundamental data, system and spirit, 1936
    • "Reflections on Marxism", 1938
    • Collectivist Planning, 1940
    • The Contempt of Freedom, 1940
    • Principles of Economic Expansion, 1944
    • Full Employment and Free Trade, 1945.
    • Science, Faith and Society, 1946.
    • Soviets and Capitalism, 1948.
    • The Logic of Liberty: Reflections and rejoinders, 1950
    • Personal Knowledge: Towards a post-critical philosophy, 1958
    • The Study of Man, 1959
    • The Tacit Dimension, 1966.
    • Knowing and Being, 1969
    • Scientific Thought and Social Reality, 1974
    • Meaning, with H. Prosch, 1975
    • Chemist and philosopher, the Hungarian-born Michael Polanyi had a more stable career and a different political leaning that his radical older brother, the economic historian Karl Polanyi. After a promising early career as a physical chemist in Berlin, Polanyi was dismissed by the Hitler regime and moved on to the University of Manchester and, later, Oxford. It was here that he began moving away from science and towards economics, politics and philosophy. He followed the development of the Keynesian Revolution and wrote several pieces on Keynesian economics (e.g. 1944, 1945) and on the economics and politics of Soviet planning (e.g. 1935, 1938, 1940, 1948). It is particular noticeable that Polanyi's recommendations on policy are clearly in the Keynesian line -- although however he argued that private investment needed primarily government monetary, not fiscal, stimulus. However much a Keynesian, Polanyi was an implacable opponent of planning in general and the Soviet system in particular. In the post-war era, he moved away from economics and more deeply into his influential libertarian political writings (e.g. 1950) and the philosophy of knowledge (1946, 1958, 1968).
  • Wilhelm Röpke, 1899-1966 - (1),(2) image
    • Die Theorie der Kapitalbildung, 1929.
    • German Commercial Policy, 1934.
    • Crisis and Cycles, 1936.
    • Die Lehre von Wirtschaft, 1937
    • Die Gesselschaftskrisis der Gegenwart, 1942
    • Civitas Humana, 1944
    • Die Deutsche frage, 1945.
    • Internationale Ordnung, 1945.
    • A Humane Economy: the social framework of the free market, 1958.
    • German economist and advisor to the post-war Erhard government; commonly credited with setting up of the post-war German "social-market" economy or, rather, the father of German "neo-liberalism". His opposition to the Nazis led him to exile in Geneva, where he ended up teaching for much of his life.
  • Walter Eucken, 1891-1950. - (1), (2), image
    • Kapitaltheoretische Untersuchungen, 1934.
    • The Foundations of Economics, 1940.
    • German comparative economist trained in the tradition of the German Historical School. Tried to synthesize the their corporatist approach with Neoclassical theory and laissez-faire policy. and tolerant of Neoclassical theory. Although a professor of economics at Freiburg, Eucken is probably better known for his political work after World War II for the Erhard government than his economics.

Resources on the Manchester School and Libertarianism

Posted by Ricardo Valenzuela at 6:05 PM
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