I see more clearly than ever before that even our greatest troubles spring from something that is as admirable and sound as it is dangerous—from our impatience to better the lot of our fellows.
—Karl Popper, The Open Society and Its Enemies (1945)
Aristotle’s philosophy was the intellect’s Declaration of Independence.
—Ayn Rand, For the New Intellectual (1961)
You can watch it in the Bundesarchiv newsreel footage. The crowds cheering along the entire motorcade route, the crowd waving bouquets of flowers; some weep. Others shout until they are hoarse: “Heil Hitler! Heil Hitler!”
It was March 14, 1938, and the Anschluss, the absorption of the nation of Austria into the Third Reich. Without a doubt it was the most popular event in Austria’s history.1 The majority of Austrians were tired of being losers; they wanted to be part of history’s winners. The writer Karl Kraus had once predicted that fin de siècle Vienna would be “the proving ground of world destruction.” The city of Ernst Mach, Sigmund Freud, and the Vienna Circle was also the city where Adolf Hitler had spent his youth as a starving artist, nursing his resentments against those he blamed for his personal and professional failures. Now in the spring of 1938 he was returning to Vienna in triumph, surrounded by chanting, adoring crowds and a sea of arms upthrust in the Nazi salute. Hitler later said that on returning, he met a stream of love such as he had never experienced. “I can only describe him,” said one eyewitness that afternoon, “as being in a state of ecstasy.”2
Hitler began his revenge almost at once. Even as his black limousine rolled onto the Ringstrasse on March 14, his henchman Heinrich Himmler was rounding up more than seventy-five thousand “undesirables” in Vienna, meaning Jews. Days later, hundreds of Jewish men and women were on their hands and knees, set to work cleaning Vienna’s gutters. SS men gathered around, jeering and kicking their helpless prisoners. Crowds of ordinary Viennese joined in. An American eyewitness called it “an orgy of sadism.”3 What began that week in March 1938 would finish at Dachau and Auschwitz.
From our point of view, Germany’s Third Reich was the end product of a Hegelian nation-state taken over by a racialized Nietzschean will to power. The yearning for absolute power to do good had become the tool for doing evil. One by one, the centers of intellectual life in eastern Europe, the new homes of Aristotle, would be devoured by its advance: Vienna and Graz in 1938, Prague in 1939, Warsaw and Lublin the same year. The major figures of Logical Positivism, many of whom were Jews, had sensed what was coming and fled abroad.
One of them was a thirty-six-year-old former high school teacher who had attended several of the circle’s meetings in the heyday of the early thirties. He had found refuge even farther away than the others who moved to America or England, in New Zealand. In fact, he was sitting at his desk in Canterbury University College in Christchurch when news of the Anschluss reached him.
It wasn’t hard for him to visualize the scene. Before he had left Vienna two years earlier, he had seen the groups of swastika-armbanded Nazis wandering the streets. They were young Austrians, drawn to the vision of an Aryan National Socialist state the way young Rousseauians had been drawn to the French Revolution 150 years earlier. Most had been singing Nazi songs and accosting anyone they thought might be a Jew. With a studied brutal hostility, one of them had come up to him and waved a pistol.
Where are you from? Karl Popper asked. Carinthia, the young man replied contemptuously. Popper was about to say something when the young man stuck the pistol under his nose. “What, you want to argue?” he sneered. “I don’t argue, I shoot.”4
Now the memory came back to Popper with a startling power. How could this happen? he asked himself. The hard-won fruits of two thousand years of Western civilization had been reason, tolerance, and individual freedom. It seemed incredible that an entire generation had decided to reject all three, not just in Austria and Nazi Germany, but in Soviet Russia, where Stalin’s purges were building to their bloodstained climax.*
How had civilization gotten so off track? The answer, Karl Popper decided, was that it had been betrayed by its intellectual leadership, both past and present. One of the betrayers was clearly Georg Friedrich Hegel, the progenitor of the all-powerful modern state. Another was Karl Marx. But Popper saw another figure lurking deeper in the shadows to whom the blame for the rise of modern totalitarianism could largely be attached.
That figure was Plato.
Popper knew his conclusion would be shocking to scholars and the public alike. They had been conditioned by centuries of humanist education to consider Plato as the most eloquent and sublime of ancient Greek thinkers and, along with Aristotle, one of the twin pillars of Western thought.
From Popper’s perspective, that was precisely the problem. Plato’s spell was hardly a humanist one. In fact, Popper would assert, it had been Plato in the Republic and the Laws who first encouraged Western man “to see the individual as a pawn, as a somewhat insignificant instrument in the general development” of society toward virtue. It was Plato’s assertion of “the principle of collective unity” and in the Laws that “no one should ever be without a leader” that had spawned the succession of would-be Philosopher Rulers who had bathed history in blood, from Plato’s friend the tyrant Dion of Syracuse to Stalin and Hitler.5
Popper set to work that same day on the book that would eventually bear the title The Open Society and Its Enemies. He spent all of World War II writing it. He confessed to friends that he considered it his “war work,” as important to saving the West as building ships or manufacturing bombs. In his mind, it was a much needed riposte to a century and a half of philosophical doctrines that had attacked the Aristotelian “open society” of democracy, tolerance, pluralism, and free inquiry and celebrated the monistic uniformity, intolerance, and regimentation of the “closed” society for the sake of the ideals of virtue and justice.
Hegel and Marx were Popper’s principal foes.† However, the entire first volume was an extended attack on Plato. Popper targeted more than just his political and social doctrines in the Republic—pretty fair game from a more pluralist perspective, as Aristotle was the first to show. He also hammered at their larger metaphysical basis. At bottom Popper’s thesis was that Plato had passed on to posterity a singularly dangerous vision of history.
Popper dubbed that vision historicism. Hegel had shared it; Marx had inherited it. During his years in Vienna, Popper had already written a book on the subject, one that grew out of his interest in the philosophy of science.6 Popper defined historicism as the doctrine that history is governed by certain evolutionary laws, the discovery of which allows us to prophesy the destiny of mankind.
Why did Popper think Plato’s historicism was important? First, because it destroys the notion of free will. It wrecks the notion that the future depends on us and the consequences of our own individual actions—the same principle, in fact, that William James had been arguing for on the other side of the Atlantic. Second, it encourages men to think they can use these laws to build a better future for society than if men are left to themselves. They become tempted to set themselves up as a ruling elite of Platonic Philosopher Rulers based on their knowledge of where History with a capital H is going. “The tendencies of historicism appeal to those who feel a call to be active: to interfere, especially with human affairs, refusing to accept the existing state of affairs as inevitable”—or as the result of human nature.7
“The wise shall lead and rule,” Plato had written, “and the ignorant shall follow.” Reading this passage from the Laws in the light of Aristotelian and Enlightenment-based models made it clear that Plato intended to divide society between Those Who Know and Those Who Must Obey.8 “Never,” Popper wrote, “was a man more in earnest in his hostility to the individual” than Plato. Popper pointed to another passage from the Laws, written in the context of military tactics: “The greatest principle is that nobody, whether male or female, should be without a leader.”9 It was this same principle that, Popper argued, the Communist Party in Russia, the Fascist Party in Italy, and the Nazi Party in Germany all embraced and made their own.
Karl Popper (1902–94): He saw in Plato the roots of the totalitarianism that was engulfing the world.
Was Popper right? Certainly the men who led Stalinist Russia, Mussolini’s Italy, and Nazi Germany saw themselves in historicist terms, as the vanguard of the future.10 On the other hand, Popper’s underestimation of the impact of Rousseau and Nietzsche, not to mention the racial doctrines springing from Darwin and his disciples missed half the target. All the same, we don’t have to accept Popper’s assessment of the totalitarian thrust of Plato’s philosophy to agree on one point. The twentieth century’s greatest ideological conflicts do mark the violent unfolding of a Platonist versus Aristotelian view of what it means to be free and how reason and knowledge ultimately fit into our lives.
For Aristotle, the locus of rational planning had always been the individual and his oikos, or household. In the same way, justice, or who deserves what, pertains to the individual person apart from his or her social or economic function. No notion of individual or natural right can take root without it.11
From the very start, Plato had argued the opposite. Justice belongs to the social and economic whole, the community. Indeed, it presupposes it. That community may be perfect (as in the Republic) or imperfect, depending on whether it upholds an absolute standard of virtue or goodness. However, the same basic rule applies. To belong is to submit to a definition of virtue and justice that is common to all, whether Philosopher Ruler or Guardian or Worker, because all are part of the whole. It is those who stand outside the system—the ones Plato dubbed foreigners, or metics—who receive no justice at all. “In a sense, their very existence as the Other undermines it: a point Rousseau picked up when he said that Spartans’ hatred of foreigners sprang from their love and respect for one another.
What had been a theoretical exercise for Plato twenty-four centuries ago, and was obscured for nearly two thousand years by the evolution of Christianity, would become a major exercise in social engineering in the modern age. After Saint Augustine, Plato’s community of justice had been expanded and redefined as Christendom. Its sources of law and order and virtue were otherworldly. They were made softer, more broadly accessible and human, by Neoplatonism, in both its medieval and its Renaissance forms. Saint Bernard’s devotion to a religion of the heart does not make him appealing to the modern humanist. Conversely, Erasmus was deeply devoted to the welfare and advance of Christendom. But no one would ever accuse either one of being a totalitarian.
When that Neoplatonist frame fell away, however, what was left was a commitment to the community of virtue in a starkly secular form. The Other for medieval Christianity had been preeminently outsiders: the Muslim, the Jew, and the infidel. In modern Europe, the Other suddenly appeared from within the community as dangerous parasites to be exposed and removed. The Other became Robespierre’s counterrevolutionaries; then Marx’s class enemies; and finally Hitler’s useless mouths and racial degenerates, including the Jews.
“The first question we ask,” wrote one of Lenin’s minions, “is—to what class does he belong, what are his origins, upbringing, education, profession? These questions define the fate of the accused. This,” he added, “is the essence of the Red Terror.”12 It was not a sentence Plato or Augustine could have written. But Robespierre could, and did. Likewise Lenin and Goebbels. The collapse of Platonized Christianity under the Enlightenment assault, along with the Neoplatonist kingship of Louis XIV, had left certain hostages to fortune. The Romantics rescued some of them. But when men sought absolutes in the political sphere again—as they were bound to do—they found them in a communitarian vision shorn of any compassion or pity.
Karl Popper was a philosopher, not a historian. In Popper’s view, it was Hegel and not Rousseau who was the pivotal figure in turning totalitarian theory into practice. Hegel, after all, had been the original inspirer of both Marx and the celebrants of the Prussian state that Hitler took over and fulfilled. More than anything else, it was Hegel’s belief that history made society a staging ground for the realization of perfection that united the totalitarians of the Left and the Right in 1939 against everyone else.
At the same time, Popper saw Hegel’s role running deeper. The Enlightenment of Voltaire, Hume, and Adam Smith had built its social and political vision, including the role of commerce and free markets, around Aristotle’s idea that human nature is uniform and unchanging. Its belief in natural law and the growth of civil society; in the development of natural religion; in the notion of the unity of mankind running from Aquinas to Las Casas and Humboldt and Darwin; and in Thomas Reid’s conception of a democratic common sense: All presupposed that human beings will react to things the same way at all times and in all places. This also means they want and desire the same things as human beings, above all individual freedom.
Hegel chose to deny this.13 Instead, he insisted human nature was itself created and shaped by historical forces, just as society was. It was history as the unfolding of the Absolute that finally determined what we are and who we want to be. This is why Hegel, the ultimate historical determinist, believed there are no “lessons” to be learned from history. Human beings learn nothing from experience. Instead, experience shapes them, including their wants and desires—however much they seem “natural” at the time.
The Athenian citizen and the medieval Crusader; the Tuareg tribesman and the white explorer; Martin Luther and John Stuart Mill: In the Hegelian view, all see the world from entirely subjective perspectives determined by their historical time and place.‡ They have nothing in common beyond their biological needs. Instead, what they do share is being part of the historical process, moving parts on the ascent to the One, even if they are unaware of it.
In this ultimate Big Picture, the self-interested individual of bourgeois capitalism is a temporary aberration. Hegel’s nation-state could mold him into something better and more edifying than the self-interested Wal-Mart shopper whom Rousseau and the Romantics had excoriated, but around whom Western civil society had built itself. “In the perfection of the state,” Hegel had written, “each and every element … [will reach] its free existence” as each human being is molded to fit into that final perfect community.14
Plato had created his Republic to make men better than they are. The same conceit (it seems) had infected Pythagoras, who attempted to make the citizens of Croton live according to his theory of perfection. They thanked him by driving him from Croton and throwing his works into the sea. The medieval Church inherited the same task, while never assuming it could really change man’s basic sinful nature. In the modern secular era, however, that acceptance of a limitation faded.
Rousseau had taken up the Platonic conceit anew: by suppressing the desire of the individual, human beings can realize their moral redemption. Hegel had given Plato’s idea of statecraft as soulcraft15 a new intellectual varnish—one that drew not only extremists on the political left and right, but more moderate men casting around for an alternative to Marxism on one side, and fascism on the other.
This was true even of America. James Madison had said, “If men were angels, no government would be necessary.” By 1900, however, certain Americans were beginning to think men could become angels, with government helping them to do it.
They called themselves Progressives, and Hegel’s influence was profound. One of them was John Dewey, the creator of modern Progressive education and student of the most prominent neo-Hegelian in America, Johns Hopkins University’s George Sylvester Morris.16 Another was Harvard’s Josiah Royce, fierce opponent of the Pragmatic theories of William James. Still another was Herbert Croly, a former James student until he found headier fodder in the writings of Hegel. Croly’s Promise of American Life, published in 1909, marked the first major breakthrough of Hegel onto the American political scene.17 It also signaled the demise of laissez-faire economics as part of American liberalism.
The time had come, Croly argued, to move away from Thomas Jefferson’s version of America with its concept of “democracy as tantamount to extreme individualism” and of society as a collection of individuals “fundamentally alike in their abilities and deserts.” Such a vision might have worked in the early days of the American Republic, Croly said. However, the advent of industrial capitalism and its large concentration of wealth in the hands of men like Morgan, Rockefeller, and Carnegie, along with masses of foreign immigrants and an industrial working class, meant that such a simple vision of agrarian individualism could no longer work.18
Croly’s solution was to use the power of the federal government to revivify and reshape American democracy. The “intellectual lethargy, superficiality, and insincerity” of American political thinking, he declared, must be swept aside. A new leadership class was needed to remake American institutions based on “the formative idea” that modern democracy must benefit every citizen, not just the rich or economically privileged, and that all citizens loving one another and loving their country forms the true core of a national interest.19
“There is no reason why a democracy cannot trust its interests absolutely to the care of the national interest,” Croly concluded, “and … every reason why the American democracy should become … frankly, unscrupulously, and loyally nationalist.” In this new arrangement, old-fashioned Jeffersonian individualism would fade into history. The power of the individual states, the other half of Madison’s constitutional system, would have to give way, too. The days of Madisonian gridlock would be over. However, “popular interests have nothing to fear from a measure of Federal centralization.”20 Instead, this shift would constitute a new Declaration of Independence: essentially, a new kind of America.21
To be sure, any increase in the power of central government would spell the end of certain aspects of traditional American democracy, in its freewheeling economic life, for example, and its creed of self-reliance. However, “the fault in that case lies with the democratic tradition; and the erroneous and misleading tradition must yield before the march of a constructive national democracy”—a Hegelian turn of phrase if ever there was one. Indeed, Croly even quoted Otto von Bismarck on the need for a nation to see its destiny as a single collective purpose. If such a view seemed a heresy in the eyes of a Jefferson or Madison, it was this heresy “whereby alone the American people can obtain political salvation.”22
That word is significant. Just as Hegel saw the nation-state as our better and higher self, a sublunary version of Augustine’s City of God, so Croly saw the new America in almost evangelical terms. His own choice for its Moses was Theodore Roosevelt, a kind of elected Philosopher Ruler who would embody the New Nationalism and use his presidential powers to concentrate economic power and responsibility in Washington, “for the ultimate purpose of its more efficient exercise and the better distribution of its fruits.”23 In 1912, President Woodrow Wilson would assume the same Hegelian mantle, and exercise his expanded powers in both peace and war with an appropriately messianic fervor.
As a lawyer and then professor of political science, Wilson was so bowled over by reading Hegel that, as he wrote to his future wife, “Hegel used to search for—and in most cases found seems to me—the fundamental psychological facts of society.”24 Wilson’s own work, especially his massive Constitutional Government, was not much more than an iteration of Hegel’s philosophy of the nation-state, in an American guise. Wielding the power of government to mold human nature, and to reform or strip away those institutions that stood in the way of the forward march of history—including even Madison’s delicate system of checks and balances—became Wilson’s central mission as president.
Prohibition and the Volstead Act (1920), and the establishment of the Federal Reserve Board and the Federal Trade Commission (1914), were all extensions of Wilson’s progressive vision of using the power of government to enhance individual liberty “rightly understood”—that is to say, within the confines of America’s larger historic mission.§ “These are American principles,” Wilson declared in 1915, “American policies. We stand for no others. They are the principles of mankind and must prevail.”25
It’s historically inaccurate, and intellectually misleading, to brand Wilson’s version of Progressivism as “liberal fascism.” Still, Wilson’s America looks a lot like Hegel’s Germany: a nation whose historical evolution embodies the universal values of the Absolute. “Here is a great people,” he once told an audience, “great with every force that has ever beaten in the lifeblood of mankind.… The United States has the distinction of carrying certain lights for the world that the world has never so distinctly seen before … of liberty, principle, and justice.”
Wilson was speaking in the summer of 1914, just as war was breaking out in Europe. He wanted no part of it; indeed two years later he campaigned for reelection on the slogan, “He Kept Us Out of War.” Yet once the United States did become embroiled in that great cataclysm, it was all too easy for Wilson to see “the war to end all wars” as an opportunity to bring America’s universalizing mission to the rest of humankind.
He got his chance at the peace table at Versailles in 1919.
Fighting World War I cost America almost 117,000 lives and left it the most powerful nation in the world, with the second greatest naval force after Britain. Wilson found himself leader of an industrial power second to none, whose financial and food aid kept the rest of the civilized world alive, including Lenin’s Soviet Union. When he arrived in Paris for the peace conference, adoring crowds treated him almost as their messiah. “Never,” wrote a member of the British delegation, economist John Maynard Keynes, “had a philosopher had such weapons whereupon to bond the Princes of the world.”26
Yet Wilson squandered it all. Another member of the British delegation, Harold Nicolson, started out as an enthusiastic Wilson fan and admirer of the president’s vision of a world government freeing men forever from war and oppression: the League of Nations. “I shared with him a hatred of violence in any form,” Nicolson later wrote, “and a loathing of despotism in any form.” But Nicolson soon realized the college professor’s approach to peacemaking was both “simple” and “mystical”—and completely out of touch with the realities of postwar Europe. Someone gave him a book by Wilson, in which he read, “The new things of the world are the things divorced from force. They are the moral compulsions of the human conscience. No man can turn away from these things without turning away from the hope of all the world.”27
But men did turn away—first at the Versailles Conference and then in his own country, where the Senate rejected joining the new world order of the League of Nations. Wilson’s nationwide campaign to reverse its decision broke his health, his presidency, and ultimately the dream of America as the defender of universal values and last best hope of the Absolute.
Far from being a Philosopher Ruler, Wilson had proved to be a muddled and broken prophet. For two decades his dream was driven from the stage. Meanwhile, a new, violent postdemocratic order took root in Russia and Italy, then began its march across the heart of the continent. It would be made worse, ironically, by another decision Wilson had made back in 1914—and it would take another Viennese philosopher, a few years older than Karl Popper, to point the way out.
In 1914, Herbert Croly and his friend Walter Lippman set up the magazine that would become Progressivism’s mouthpiece, The New Republic. That same year, President Wilson set up the centerpiece of the Hegelianization of the American economy, the Federal Reserve Board.
From now on, it was believed, the federal government would be able to exercise the same kind of farsighted direction over the economy that central banks enjoyed in England, France, and Germany. That egregious product of self-interested capitalism, the business cycle, with its unpredictable investment booms followed by collapse and unemployment, could be coaxed and prodded “secretly, without legislative enactment or control, and without the public knowing and caring”—and without resorting to the iron surgery of full-blown communism or socialism. Indeed, membership in the Federal Reserve Bank system would be voluntary.28
The planned economy was about to become the idée fixe of Western political systems. The searing experience of World War I only speeded up the process, especially in Europe. The electoral successes of Mussolini and Hitler were built on that promise. In the twenties and thirties, John Maynard Keynes and his disciples offered to show the Anglo-Saxon democracies how to do the same thing. Later, economic planners under Franklin Delano Roosevelt would be pleased and delighted that so many of their expert policies geared toward taming the business cycle and bringing “full employment” were actually implemented first by Adolf Hitler in Germany in the thirties, with apparent success.29
There was only one problem. What if the experts guessed wrong? What if the Philosopher Rulers’ assumptions proved fallible, as Peirce and William James had predicted they might?
This was what worried Friedrich August von Hayek. On any given day in 1929, he could be found at his desk or in a Vienna coffeehouse, reading the newspaper with a growing sense of foreboding. It was not the news from Germany or Russia or Italy that disturbed him. It was the news from America.
America’s economy was booming, and had been booming at a growth rate of more than 5 percent for nearly five years. Classical economists since Adam Smith had taught that this would inevitably mean a growing rate of inflation of wages and prices, which in turn would trigger a rise in interest rates and a slowdown in investment and in growth. Boom must inevitably slide into bust.
However, the bankers at the Federal Reserve had kept the money flowing into the American economy at a pitch that held interest rates low and kept expanding business and consumer credit, especially in the stock market. Yet in defiance of all classical economic doctrine, there was no rise in prices.
The business cycle, the dreaded beast of capitalist economies, had finally been tamed—or so it seemed. Economists around the world praised the Federal Reserve. Some even predicted that a “new era” in economics had begun, of continuous prosperity and growth with no threat of crisis or depression.30 Economic growth without growing pains: it seemed a transformative moment worthy of a Georg Friedrich Hegel or even a Saint Augustine.
Hayek, however, was not sure. Born in Vienna in 1899, he had grown up in a family of natural scientists. Like Karl Popper, he had a keen interest in the philosophy of science along the lines of the Vienna Circle. When he first began studying at the University of Vienna, he was as fascinated by the ideas of Ernst Mach as everyone else.31 But he was dismayed when they talked about organizing the economy “scientifically,” as if people were mere counters in a physics experiment instead of real-life human beings.
Although they detested communism, the Logical Positivists, like most liberals of their day, endorsed some form of centralized planning: many were even socialists. Hayek was drawn instead to another Austrian named Carl Menger, an economist and admirer of John Stuart Mill but also the long-forgotten original founder of economics, Aristotle himself.
Menger stood at the opposite pole from the centralized planning school. He and his students had spent their lives trying to break classical economists free from rigid, a priori “models.” Menger insisted that the best place to start understanding economics was not David Ricardo’s Principles of Political Economy or even Adam Smith’s Wealth of Nations, but Aristotle’s Ethics, in which the basis of economic life is defined as a process of exchange.32 By going back to Aristotle, Menger said, economists would begin to think again about how real people behaved, and why they bought and sold things in the first place.
This wasn’t easy. Most economists preferred studying reams of statistics and output data, rather than how a store or farmer’s market actually worked. However, Menger argued that a nation’s economy, like Aristotle’s polis or any local farmer’s market, was the product of individual human action, not collective human design. People buy eggs because they want eggs, not (as David Ricardo would have said) to support land rents in the agricultural sector. They get jobs to feed their family, not to redress the balance between capital and labor.
And as Hayek immediately saw in the twenties, the vaunted experts at America’s Federal Reserve Board had somehow forgotten this fact in their understanding of the boom of the Roaring Twenties. By keeping their eye fixed on national prices, the experts had missed the real consequences of injecting huge amounts of money into the economy while keeping interest rates below their natural business level. People had responded by grossly expanding their use of credit to buy things they needed, from farms and office buildings to stocks on Wall Street. Hayek was sure this growing overinvestment would collapse once people realized that paper credit was only that, paper. When that happened and the bottom fell out of the credit market, Hayek said, the result would be a panic and severe depression across America.
Hayek published his first paper criticizing the artificial American boom in 1925. Then in February 1929, he published another paper predicting a coming crisis that would start in the stock and credit markets.33 The experts scoffed. Eight months later, Hayek was proved right. Within a year, the American Depression spread across the Atlantic to Europe. In Germany, France, Great Britain, even Austria, the economies based on centralized expert planning collapsed, one by one.
The failure of the experts was more than just an economic failure; it had catastrophic political consequences. Men and women lost faith in democratic governments that had promised to protect them from disaster. In Germany and Austria, it would clear the way for totalitarian solutions to problems the dictators blamed on “capitalism” but which, as Hayek had shown, were the results of the democratic experts’ own mistakes. In the end, the Federal Reserve Board’s bad policies in one decade had set the stage for the Anschluss in the next.
What had gone wrong? Hayek pointed out, the problem had little to do with production or labor or capital or the other big abstractions economists liked to debate and describe. It had primarily to do with information. The real puzzle about economic decision making was figuring out why “the spontaneous interaction of a number of people, each possessing only bits of knowledge, brings about a state of affairs … which could [only] be brought about by deliberate direction by someone who possessed the combined knowledge of all these individuals”—something that was clearly impossible.34 And yet, Hayek pointed out, this is exactly what happens in the economic marketplace.
Economists and politicians had been wrong about how markets work. They are not places where people pursue their self-interest, rational or otherwise, by buying and selling commodities. They are clearinghouses of information, where individuals discover what is useful or valuable to them and then make their preferences known to others by buying them or, alternately, selling those things that are of lesser value to them but hopefully not to others.
The result is an endless succession of individual transactions, random and meaningless to those who are obsessed with the Big Picture (why would anyone need thirty brands of toothpaste or want fourteen different colors for the same automobile?) but out of which gradually emerges a rational economic order. However, it is an order put together not from the top down, but from the bottom up, purchase by purchase, car by car, egg by egg.
Friedrich von Hayek had given the Aristotelian insight that knowledge is power a new meaning. It now meant the empowerment of individuals through the exchange of knowledge in the marketplace. In short, the market is an enormous grid for distributing information as well as goods and services. Every individual in the process “possesses unique information of which beneficial use might be made,” Hayek would write, based on what they want or need. Prices are one mechanism for communicating that information; the value of money is another. Governments choosing to mess around with one or the other—whether it’s wage and price controls or inflating the money supply—will distort the flow of that information as effectively as scrambling a broadcast signal or crossing out every other word in a letter or e-mail.
This is because “central planning … cannot take direct account of these circumstances of time and place” in which genuine economic decisions are made.35 Hegel had argued that historical change ensures that there is no cumulative fund of information available to the individual. Hayek answered, Yes, there is. It’s called the marketplace. And the freer the markets, the more people have access to that fund. Thus, “we need decentralization because only thus can we ensure that the knowledge of the particular circumstances [of a given transaction] will be promptly” and efficiently used—and human beings will benefit materially from that freedom.
Hayek’s conclusion was that a centrally planned economic policy was bound to fail. Its organizers, no matter how bright or well trained, can never keep up with the innumerable bits of information that go into actual economic decisions. Like Achilles in his race with the tortoise, no matter how fast the central planner runs or how much data he collects, people in the marketplace will have always crept a step further, rendering the data useless the moment they are collected.‖
The danger is that when the central planners fail, as they must inevitably do, their reaction is bound to be extreme. Instead of admitting their failure or ignorance, Hayek predicted, their impulse will be to exercise even more control, to become more coercive in their use of government power in order to force the economy to behave in the ways in which they, as opposed to real-life consumers, want it to behave. “Predominant concern with the visible short-run effects,” he would later write, “leads to a dirigiste organization of the whole society. Indeed, what will certainly be dead in the long run, if we concentrate on immediate results,” since they are the only ones immediately foreseeable, “is freedom.”36
At this crucial point, Hayek’s analysis and Popper’s converged. The rise of the totalitarian state was revealed to be the direct consequence of the failure of liberalism in its Platonized form. Progressive heirs of Hegel, in trying to forestall the Marxists and Fascists by guiding society to supposedly higher and more just ends, had simply opened the door for them. They had fallen into the same trap of assuming that the more people are alike, that is, in sharing the same ends and needs, the happier they will be. In fact, the pursuit of equality only generates more conflict, much as Aristotle had predicted in the Politics—which requires more direct government action to maintain order. “The passion for ‘the collective satisfaction of our needs,’ ” Hayek wrote, was how “the socialists [meaning believers in a strong centralized state] have so well prepared the way for totalitarianism.” They have done this, Hayek asserted, by “depriving us of [economic] choice, in order to give us what fits best into the plan and at a time determined by the plan.”
He then closed his book with this:
If in the first attempt to create a world of free men we have failed, we must try again. The guiding principle that a policy of freedom for the individual is the only truly progressive policy remains as true today as it was in the nineteenth century.37
The year was 1944, and the book was titled The Road to Serfdom. Hayek was living in London, a city battered by five years of war and under siege from Hitler’s V-2 rockets. On the other side of the world in New Zealand, Karl Popper was writing The Open Society and Its Enemies. (It was his friend Hayek who would find the book its London publisher.) At exactly the same time a third man, Eric Blair, was living in London. In a couple of years, under the pen name George Orwell, he would paint a chilling picture of what Hayek’s dystopia of modern serfs and masters in which all free choice is banished and whatever is not forbidden is made compulsory, might look like: 1984.
In the spring of 1944, however, the place to see the future was not in London but on the south coast of England. The D-day invasion was only weeks away. Plato’s American offspring had once tried to save the world and failed. Arguably, they had made it worse. Now Aristotle’s children were going to take their shot.
In 1944, you found them in places like Richmond, California, and Sparrow Point in Baltimore. These were two of eighteen shipyards building the so-called Liberty ships that in 1941 began sending tons of food, raw materials, and war equipment to embattled Britain and Soviet Russia.
In 1940, none of these yards had even existed. Then buildings, slipways, cranes, and warehouses went up with an explosion of industrial productivity and engineering and managerial skill, from California and Oregon on the West Coast, to Florida, Alabama, and Baltimore on the East Coast. More than 2,700 Liberty ships would be built—and once bombs fell on Pearl Harbor on December 7, 1941, the ten-thousand-ton cargo vessels would also carry and supply American forces fighting in North Africa, Italy, and the south and central Pacific.
The Liberty shipyards were only the leading edge of a massive American wartime production effort that began in 1940 and would continue for the next five years. The old idea that America became “the arsenal of democracy” in World War II because of actions by the federal government is a myth. It was in fact an explosion of productivity by the most capitalist—and Aristotelian—economy on earth.38
In Aristotelian terms, its dyanamis, or potential for change, was stupefying.
In the fifty years after the Civil War, that economy had grown faster, and become larger, than any nation had ever seen.39 Once a net importer of capital, America had become a world financial power equal to Great Britain. After World War I, the automotive, electronics, and chemical industries joined giant corporations like U.S. Steel, Standard Oil, Goodyear, and Eastman Kodak as the driving engines of the most productive economy in the world.
Feared and loathed by the New Nationalists, Progressives, Socialists, and various neo-Hegelians, America’s capitalist sector had been hit by various waves of legislative restrictions and disruptive regulations, including antitrust laws. Yet it still managed to raise living standards and grow the nation’s wealth with cars, radios, washing machines, and other consumer goods in a tsunami of rising industrial output—from 1921 to 1925 by almost 53 percent.
Even the coming of the Great Depression barely slowed it down. The U.S. economy’s growth rate from 1933 to 1941 was still the highest of any other peacetime period, compared to every other industrialized country.40 The Progressive gurus of the New Deal not only failed to lift the country out of economic decline; by 1938 they had deepened it. We now know that it was the coming of war that broke the back of the Great Depression. Few, however, realize that the reason was that war production tapped the pent-up dynamism of American private industry. “Made lean by court battling,” as one chronicler put it shortly afterward, “weakened by depression and recession, and starved for new capital by inordinate tax burdens, [American business] still had the strength and means” to equip and arm not only the country’s own forces but those of its allies as well.41
“Choose any American at random,” Alexis de Tocqueville had written, “and he will be a man of burning desires, enterprising, adventurous, and above all, an innovator.”42 As twelve million Americans went into uniform, millions more—including eight million women and three million African-Americans—poured into factories, shipyards, airplane plants, and offices to join the production effort. Already by the time of Pearl Harbor, American war production was approaching that of Hitler’s Germany. By the end of 1942, it was equal to that of all three Axis powers; by the end of 1943, it surpassed that of all the other major combatants combined.
Hayek had shown that economic growth was about not production but productivity, the release of potential human energy by matching buyers to sellers and means to ends in a chain reaction that rivaled the one scientists would soon be working on for the Manhattan Project. Tocqueville, too, had seen something heroic about the American way of business, and the war brought forward a number of heroic entrepreneurs to match Andrew Carnegie, John D. Rockefeller, and Henry Ford and those who had built the earlier industrial economy.
They were men like Henry Kaiser, wizard of the Richmond and Portland Liberty shipyards and former builder of Hoover Dam as well as the country’s most advanced steel plant in California; Roy Grumman, the aircraft engineer who founded Grumman Aircraft in an abandoned garage and built the U.S. Navy fighters and bombers that would command the skies of the Pacific theater; and Andrew Jackson Higgins, the New Orleans–based boat builder who designed 92 percent of the vessels used by the U.S. Navy in World War II—although most were too small to deserve a name or a christening. Higgins landing craft would carry Marines into battle at Guadalcanal and Tarawa, and soldiers onto the beaches of Normandy on D-day. Supreme Allied Commander Dwight Eisenhower called Higgins “the man who won the war for us.”43
Higgins was hardly alone. By the time of D-day, American factories were building a warplane every five minutes and producing 150 tons of steel every minute. Shipyards were launching eight aircraft carriers a month and fifty merchant ships a day. The country’s railroads were moving 142 million carloads, carrying guns, ammunition, parachutes, helmets, rations, and rubber boats produced in the industrial heartland to both coasts for shipping over-seas—the most massive cargo lift in history.44
And the scientists whom Europe’s totalitarianism had chased to America—Albert Einstein from Germany, Enrico Fermi from Italy, Leó Szilárd, Edward Teller, and John von Neumann from Hungary—turned out to be the arsenal of democracy’s deadliest secret weapon. They would team up with American physicists like Robert Oppenheimer and Arthur Compton, and American engineers from the chemical giants DuPont and Union Carbide, to turn the unimaginable power buried in the heart of the atom into the world’s most destructive device—the atom bombs that would win the world’s most destructive conflict in 1945.
Henry Kaiser and fellow businessmen at Hoover Dam, circa 1932: the capitalist as hero. “He is the great liberator,” Ayn Rand would write, who “has released men from bondage to their physical needs.”
“To American production, without which this war would have been lost”: that was the ceremonial toast of communism’s biggest dictator, Marshal Josef Stalin, at the Tehran summit in 1943. He knew American industry had kept his Red Army on the move with trucks, half-tracks, and fuel, and his people clothed and fed throughout the war—providing almost one-fifth of Soviet GNP. It was also the acknowledgment by Platonism’s most potent political offspring—Marxist communism—that economies and societies built around Aristotle’s empirical system were not only wealthier and more productive but better able to meet the stress of crisis better—even the crisis of total war.
This came as a complete surprise to an entire century of social thinkers. The whole premise on which Lenin had built his revolution was that capitalism was in the last stage of collapse. Max Weber had treated the capitalist businessman as the master of routine, representative of a world drained of magic (the term he coined was charisma) and spontaneity. Werner Sombart had divided the world into “traders” and “heroes,” with only the latter embodying the values of courage, duty, and compassion. “The trader approaches life with the question, what can you give me,” Sombart wrote. “The hero approaches life with the question, what can I give you?”
Now it turned out, the trader could give you victory—as well as wealth beyond people’s imagining. Far from quailing in the face of danger, he had risen to the occasion. Like modern-day Archimedes, American businessmen and engineers had harnessed the forces of science and technology to the service of freedom—just as he harnessed them to the energies of the free market. Thymos, the Platonists’ heroic virtue of spirit or courage, turned out to be much the property of the capitalist entrepreneur as it was of the Homeric warrior.
By contrast, none of this came as a surprise to one writer—an exile from Russian communism, as it happened—living in New York City. As the United States and Soviet Union lurched toward the climactic confrontation of the heirs to Plato and Aristotle in the Cold War, she would turn capitalism’s new heroic face into a full-blown philosophy—and give credit directly to Aristotle for setting it in motion.
Born in St. Petersburg in 1905, she was the child of nonobservant Jewish chemists. The Russian Revolution forced Alisa Rosenbaum to flee into hiding in the Crimea, while her family remained trapped and starving. She managed in 1925 to obtain a visa to the United States. Her first sight of the skyscrapers of Manhattan led her, as she wrote later, to weep “tears of splendor.” She had found her true home, and after changing her name to Ayn Rand, she would spend her life celebrating that home’s explosive dynamis.
The Aristotelian term is appropriate. As a university student in the 1920s, she had read the works of Plato and Aristotle, as well as Nietzsche and the German Romantics, and found that while Plato left her cold and dissatisfied, Aristotle seemed a kindred spirit. When she wrote later that “Aristotle’s philosophy was the intellect’s Declaration of Independence,” and that he “should be given the title of the world’s first intellectual, in the purest and noblest sense of the word,” she was thinking of a far larger historical and philosophical context than simply the United States.
Borrowing from the Enlightenment as well as Nietzsche, she derived her view of premodern societies as dominated by a self-serving priestly class, who used guilt and an ascetic ideal to manipulate the majority to sacrifice their own identities for a false communitarian ideal. Rand refers to them as Witch Doctors, but Plato is their true archetype, along with his followers Plotinus and Saint Augustine.45
Far from serving virtue or God, as they claim, the Witch Doctors’ real ally is the warlord, designated as Attila, whose entire perspective is shaped by his dependence on brute force. Like the Witch Doctor, he produces nothing, creates nothing. He only steals from those actually growing the crops, raising the livestock, forging the implements, and exchanging the produce of their labor with others.
Together this unholy alliance ruled Europe until Thomas Aquinas and the rediscovery of Aristotle. This, not the Renaissance, marks for Rand the true rebirth of Western civilization: the rediscovery of the “basic principles of a rational view of existence … that the task of man’s consciousness is to perceive, not to create reality.” Everything else, for Rand, flows from this realization that there is only one objective reality, the world perceived through the senses. The Renaissance, the scientific revolution, the Enlightenment, and the industrial revolution are for Rand all perched upon Aristotle’s original basic insight.
This was the vision, Rand declared, that had set civilization on its great ascent. “Everything that makes us civilized beings,” she wrote, “every rational value that we possess—including the birth of science, the industrial revolution, the creation of America, even the [logical] structure of our language, is the result of Aristotle’s influence.”46 Her novels like The Fountainhead and Atlas Shrugged are much more than a Romantic celebration of laissez-faire capitalism and entrepreneurs like Kaiser and Grumman. They are allegories of how our practical reason can turn us into active producers rather than passive recipients of life’s deepest truths.
For Rand, the final product of this burst of Aristotelian enlightenment was the modern free market entrepreneur. He is the field marshal of the army of freedom, Rand insisted in 1960, and his “lieutenant commander-in-chief is the scientist.” The businessman turns science’s discoveries “into material products that fill men’s physical needs and expand the comforts of man’s existence.” The free market becomes a mass market, where millions of people of every income level are able to get the products they want cheaper, faster, and more efficiently.
Aristotle’s great-souled man becomes Rand’s great-souled entrepreneur:
By using machines, he increases the productivity of human labor.… By organizing human effort into productive enterprises, he creates employment for men of countless professions. He is the great liberator who, in the short span of a century and a half, has released men from bondage to their physical needs … and released them from famine, from pestilence, from stagnant hopelessness and terror.47
For a refugee from Lenin’s revolution, the term terror had a special significance. Soviet communism, like its Hegelian predecessors, hoped to remold human nature with the same confidence and ease as it would build new factories and hydroelectric dams. The State itself, which Hegel saw as the last stage of human progress, would wither away once everyone understood that “to each according to his need; from each according to his means” was the only just pathway of justice. Law, one Soviet theorist enthusiastically predicted, would be replaced by Plan—including the first Soviet Five-Year Plan in 1928.48
But the New Soviet Man never appeared, except in propaganda posters and films.
The first gulags appeared only months after Lenin and Trotsky seized power. Under their successor Stalin, they would swell to the point that at the start of the Cold War in 1948 some twelve million people were in Soviet labor camps. Millions of others had been shot, starved to death, or fled the Communist regime—while tens of millions more were being forced to the same system from East Germany and Poland to Vietnam and China.49
Aristotle had been proven right, and Plato and Hegel wrong. What ultimately killed communism—and ended the Cold War—wasn’t a great military crusade or a nuclear apocalypse, as so many feared, including many of the inventors of the atomic bomb. It was a triumph of ordinary human nature, backed by Rand’s triad of science, technical engineering, and free market productivity. Free creative minds—embodiments of what Aristotle called energeia or an impulse toward action—made the mountains of vinyl records and blue jeans that revolutionized youth culture in the fifties and sixties, including the youth of Soviet Russia and Eastern Europe. They formed a military-industrial complex that would shrug off defeat in Vietnam and produce advanced military miracles like the Stealth fighter and the Strategic Defense Initiative. (The Soviet military-industrial complex, by contrast, would produce nuclear submarine meltdowns and Chernobyl.)
Finally, that same creative power spawned a computer industry that would reconnect the world via satellite, fax, television, and the Internet—and enable dissidents in Iron Curtain Europe to defy their Communist masters and rejoin the West.
By 1980, they knew what that Western legacy meant—and what it didn’t. Their heroes were very different from the ones whose portraits studded government walls and adorned public squares: Lenin, Stalin, Marx. Most had contraband copies of Popper and Hayek. One leading Czech dissident, Rita Klimova, wrote her officially banned articles on free market economies under the pen name “Adam Kovarc,” the Czech for Adam Smith. Another, Václav Havel, actually studied with American free market economist Milton Friedman. And when Russian dissident Alexander Solzhenitsyn told an audience at Harvard in 1975 that Americans had died in Vietnam fighting for freedom, he sent shock waves across Cambridge—but spoke for a generation of Eastern Europeans who knew where the road to serfdom really led and what closed societies really were.
Ayn Rand didn’t live long enough to see the fall of the Berlin Wall. But Karl Popper did and sensed that the fall of communism hadn’t cleared away all of Plato’s political disciples, the avowed enemies of the open society. “Communism is dead,” he would point out, but “it’s left the hatred of capitalism still alive and well.”
Meanwhile, in a snug little house in Freiburg-im-Breisgau in Germany, a frail white-haired man watched the TV images of crowds smashing the Berlin Wall, and other images of crowds in Prague proclaiming what Rita Klimova had dubbed the Velvet Revolution, the peaceful overthrow of Communist Czechoslovakia.
He was Friedrich von Hayek, now ninety years of age and in poor health. He had almost lost the power of speech. But on that day, his son remembered, Hayek was beaming. He turned away from the television for a moment with a smile on his face, and said:
“I told you so.”
So had Aristotle.50
* Archives show that in 1937 and 1938 alone, Stalin’s secret police arrested more than 1.75 million persons. Of those, more than 85 percent would be sentenced to the Gulag; more than half of those would be executed.
† Curiously, Popper gives Rousseau little mention. The main reason may have been that the iconoclast from Geneva was an intellectual lightweight compared with the other two. In addition, his influence on German thought, including that of Kant, was never as manifestly malign as Plato’s modern successors Hegel and Marx.
‡ Or latterly, by their class or race or gender. Hegel stands as the original mentor of multiculturalism as well as deconstruction—that is, the idea that all meaning, like human nature, is relativized.
§ That was one reason Wilson was untroubled with passing legislation enforcing segregation against blacks. Like many other Progressives, he believed history was on the side of the white race, not its colored inferiors—an attitude he would later express by supporting national self-determination at the Versailles conferences for whites, but not nonwhites, in Europe’s colonies.
‖ Useless, that is, from the point of view of exercising control. From the point of view of providing data that help individuals make their own forecasts of what to do next, Hegel recognized that number crunching in economics can be extremely useful.