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September 04, 2006

Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-First Century - Deepak Lal

Posted by Tim Worstall

Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-First Century
by Deepak Lal
Pp. 320. Princeton University Press, 2006
Hardback, 18.95

Deepak Lal (Professor of International Development at UCLA) has written a stirring defence of the classically liberal world order. That is, a world order that doesn't have large numbers of interfering busybodies stopping people from pursuing their enlightened self-interest and so getting gloriously rich. Targets of his ire include governments (predators upon their populations, to a greater or lesser extent), the World Bank and IMF (bureaucracies in search of a role: abolish them), NGOs (some are well meaning, many are not, most are misguided) and, well, I think a clear picture is developing here, don't you think? When governments do anything but the most basic things, those essential things that only they can do (the litany: property rights, law and order, defence) they inevitably become colonized by those who will use the powers taken for their own, private, benefits.

While such a clear statement of fact is to be welcomed that isn't where the real value of the book lies for me. Rather, in his discussions of specific subjects he shows that the usual complaints are almost entirely misguided. Those who complain about the effect of globalization upon inequality, for example, have got entirely the wrong end of the stick. Both the major periods (the 19th century under Pax Brittanica and since 1980 under Pax Americana) have led to substantial falls in such inequality: both between countries and inside them. If such inequality was therefore one of the problems you worry about you would be arguing for yet more openness to trade which isn't the way the argument usually goes. Using the example of the imposition of Britain's industrial labour laws (the 1881 Factories Act for example) upon the nascent Indian textiles industry (the action essentially killed it), he shows how much of the current agitation for universal rules on wages and hours in sweatshops is simply pure protectionism. Yes, of course we expect unions to protect the interests of their own members but we don't actually have to listen when they propose something so deleterious to the poor.

For those of us who already self-identify as classical liberals there won't be that much that surprises. Free people acting in free markets according to their enlightened self-interest produces the best of possible outcomes: except in those well known and rare situations where they don't. One example examined is in patents, which Lal supports in general, but is vehemently against in the structure of the WTO talks. The TRIPS agreement, forced into the system by the domestic pressures in the US from Hollywood and the pharmaceutical industries has lead to a breach in the walls of the essential citadel which is the WTO. Through that hole a series of entirely irrelevant to trade issues are being introduced - such as environmental and labour laws - with the likely effects as noted above. As he asks:

While patents for drugs may be justifiable, is the use of WTO sanctions to protect the "intellectual" property rights of the Rap singer Snoop Dog justifiable too?
Lal makes a distinction between westernizing and capitalism - between opening up to markets and freedom in economic matters and the loss of specific cultures. Much of the opposition to the benefits of the increased wealth liberal capitalism brings is based on a fear of losing the distinctive cultural and social practices which people rightly hold dear. Lal regards this as deeply unfortunate for there is no doubt in his mind that the two are divisible. Japan is most certainly both a capitalist and consumerist society and yet it is still notably different from anywhere in the "west", still obviously and differently Japanese. Malaysia shows that economic modernization need not (or even does not) mean the loss of Muslim or Islamic culture. Both China and India are remaining recognizably different from any of the developed nations while still taking part in the greatest poverty reduction the world has ever seen through their embracement of markets.

Indeed, Lal is highly defensive of the ability, the right, of people to go on living as they wish, the retainment of their distinctive cultures, he simply wishes that their rulers would understand that by freeing the economies these won't be destroyed, indeed they will be strengthened by removing the misery of poverty.

To my mind a thoroughly enjoyable book, it might also have its uses in trying to convince some of your more right on and Statist friends. Or enemies.

For an introduction to the ideas behind the book Lal did an interesting podcast with Nick Schultz of TCS Daily. For an alternative review, rather more lamenting what Lal did not discuss or prove, try everyone's favourite left libertarian, Chris Dillow.

Tim Worstall graduated from the LSE and immediately went into small business where he has remained for twenty odd years, working in the US, UK and Russia in fields as diverse as newspaper distribution, offshore programming and exotic metals. He is the author of 2005 Blogged: Dispatches from the Blogosphere and blogs at

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