It's really something now to look back 50 years and remember the "accepted" economic wisdom.
"The man who took on socialism - and won
By Simon Heffer
The Telegraph UK
This afternoon his friends, former colleagues and admirers will gather at a London synagogue to commemorate the life of one of the genuinely great men of the last half-century: Arthur Seldon.
Seldon died last autumn, 48 years after he, Ralph Harris and Antony Fisher founded the Institute of Economic Affairs as a reaction against the socialist, welfarist climate prevailing across British politics. Seldon and Lord Harris, as the theoretical economists, then did more to ensure that Britain could be rescued from its post-war economic decline than almost anyone else.
They encouraged debate about free-market, liberal solutions to economic problems in a way not seen in Britain since the 19th century. They also did more to enlighten thinkers and governments around the world on how to secure freedom and prosperity than any Briton since Adam Smith. It is sadly typical that many people, even in a governing class that likes to claim credit for such material success as this country enjoys, are either ignorant of these massive achievements, or take them for granted.
In 1957 Britain was sunk in the Keynesian post-war consensus, with a deal permanently being brokered between interfering and careless government, weak and craven management and aggressive and manipulative trade unions. As a national economy, we were being left far behind by nations we had defeated in the war, and far behind America.
Seldon, Harris and Fisher put their heads above the corporatist parapet. They argued, for the first time since the liberal heyday of the world before 1914, that the state's role in the lives of individuals should be limited to what was strictly necessary. Growth would best be achieved by encouraging investment in the productive sectors of the economy, which is what individuals when allowed to exercise their free will in the matter tended to do, rather than in the unproductive sectors favoured by the state when it used, or misused, public money.
Furthermore, the productive sectors should be as unregulated as possible, to help maximise profits and aid competition. Essential to this was a regime of low taxes and, therefore, low state spending.
The creed was capitalism, a concept about which Seldon wrote his most distinguished book in 1990, and which had been under sustained assault for much of the 20th century. Seldon's work begins with this typically unapologetic statement: "Capitalism requires not defence but celebration. Its achievement in creating high and rising living standards for the masses without sacrificing personal liberty speaks for itself. Only the deaf will not hear and the blind will not see."
If anything, Seldon understated his point. Not only did capitalism raise living standards without sacrifice of personal liberty: it also guaranteed it. Capitalism has nothing to do with its caricature of oppressed workers enslaved to big bosses and exploited by them. Markets, which are the metaphysical temples in which the creed is practised, bring together buyers and sellers of goods and labour, and allow them the freedom to exercise their will about what, or what not, to buy and sell.
If the point is still not clear, then think of how the alternative system operates: a denial of the right to buy and own private property, labour indentured to the state, the state assuming the role of the private individual and his family and, fundamentally, the borders of such countries sealed to try to prevent the forces of freedom getting in, and the genuinely enslaved people getting out. Perhaps David Cameron, who 10 days ago decided to brand all "isms" (with specific reference to capitalism and communism) as equally extreme now realises how silly, and offensive, he was.
Seldon was born in 1916 into a poor Jewish family in the East End of London. He was a lifelong Liberal, in a clear descent from John Bright and Gladstone. He viewed the neo-socialist Liberal Democrats with despair, and would doubtless have viewed their impending leadership contest as a rare opportunity to put the party back on its atavistic liberal economic line.
He only abandoned his active commitment to the party when he helped found the IEA - which, as a charity, had to be above politics. His economic thought was not, therefore, a de haut en bas pronouncement by a man steeped in affluence of what might be good for those less fortunate than himself. It was based on the hard, first-person understanding that the only way, in the end, that people prosper and improve themselves is when they are encouraged to develop their own talents and faculties, and are freed of the dead hand of welfarism.
In this spirit, and at the start of his book, he quoted his mentor and friend Friedrich von Hayek: "If we ask what men most owe to the moral practices of those who are called capitalists the answer is: their very lives... most of the Western proletariat, and most of the millions of the developing world, owe their existence to opportunities that advanced countries have created for them. Communist countries such as Russia would be starving today if their populations were not kept alive by the Western world."
When Seldon and his friends said this in 1957 they were not merely alone in espousing such a philosophy in Britain: they were pretty much alone in espousing it in the world. Milton Friedman had still not come into view. Hayek, while well-regarded by a liberal economic coterie, was in self-proclaimed exile from the mainstream of his discipline.
In Britain only one serious politician - the Financial Secretary to the Treasury, Enoch Powell - shared this way of thinking. Powell had taught himself economic theory by recourse to Adam Smith, Hayek and the application of sheer logic. It was coincidental that he resigned as a Treasury minister months after the IEA was founded, on the then bizarre grounds that an increase in the supply of money such as the Prime Minister, Harold Macmillan, then wished to see would cause inflation.
Powell resurrected the old liberal economic doctrine that any debauch of the currency was caused by the government, since the Treasury ultimately regulated the supply of money.
Not since before Keynes had any politician wanted to admit this, and Powell was ostracised intellectually for doing so: though not, of course, by Seldon and Harris, who embraced him. During the 1960s, as Powell drifted away from the Tory party, they also cultivated Keith Joseph, who took their ideas and Powell's back to Westminster with him.
He developed them not merely into a critique of controlling taxation and spending but, as a logical consequence of that, into restraining the size and activities of the state and instead encouraging a growth in personal responsibility and personal provision. So Seldon was one of those who most influenced what became known as the Thatcher revolution, and therefore helped modernise - and I use the word in a serious and not a token sense - Britain and the world.
The enemy of the Seldonian creed has always been wrong-headedness, or sentimentality. Harold Macmillan played to the gallery in 1957 when he insisted on what now seems the trivial sum of another £50 million in public spending. Its inflationary consequences were irrelevant to him.
All he knew was that he would have to fight an election in a couple of years, and did not want to rein back on certain welfare benefits and cause unrest among those he regarded as the lower classes.
Ted Heath took a similar view on a larger scale, and presided over an economic disaster in 1974. By 1997, with the advent of a Labour Chancellor who publicly professed his adherence to rigid money supply targets and who, to start with, promised not to raise taxes, what Seldon called the "inevitability of capitalism" had triumphed.
Now, as huge economies like China and India learn the Seldonian lesson, the options that socialists and sentimentalists have for dining à la carte from the menu of capitalism become ever more restricted. There will still be outbursts about a non-existent concept called "market failure", and protests that welfarism liberates people from poverty rather than traps them in it, or that the state must know best. But these are merely tragic harrumphs from the defeated. Seldon has won."
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