In Inventing the Market: Smith, Hegel and Political Theory, Lisa Herzog compares Smith and Hegel's concepts of the market and then initiates a discussion between these views and debates within contemporary political theory. She is motivated to do so because, as she is right to claim, the market remains largely untheorised. This scholarly work distinguishes itself by bringing Hegel's social philosophy into contemporary theoretical debates. This will be welcomed by all who wish that Hegel's philosophy find a place outside Hegel studies and the history of philosophy, and for the normalization of Hegel's thought in contemporary philosophy. This opens the prospects, which Herzog takes advantage of, that Hegel may have a pertinence regarding concrete questions of the day. The range of current debates she incorporates into her study ranges from Quentin Skinner's methodology of the history of ideas through the liberalism communitarianism debate to David Miller's ideas on markets and desert. The policy debates she attends to range from excessive consumerism, the integration of the self in the modern economy and the remedies for poverty. All of this is preceded by her introductory expositions on Smith and Hegel, which are notable for their situating of these two authors’ main works on economics in the context of their other writings on social matters. Much can be learned by her acute handling of this wide breath of material.
However, this review concerns itself primarily with Herzog's reading of Hegel's study of markets within his Philosophy of Right (PR). The general question motivating the review is: what constitutes the ideal market? The investigation proper of the contrasting theories of the market begins in Chapter Two, where Herzog takes up the case of Smith. Strikingly, Smith does have a notion of a market ideal and it is one he expects to find fulfilled in reality. Smith's theory of the market seeks a descriptive truth, one that reveals a rationality immanent within the world of his day, especially if that world were to be nudged toward granting markets their proper place (28). Smith sees the market as the fruit of the union of nature, itself guided by a benevolent deity, and human voluntary action, in particular, the action performed by those virtuous rulers who create the appropriate encompassing institutions. With these two forces at work, one can expect the consequences of the market to be providential. Such a market will entail three key aspects. The first is the political context that insures enforcement of the Lockean rights of life, liberty and property. The second is the market, itself, with its interplay of individual freedom and natural inclination. It is here that the market's hidden hand produces the beneficent results that were never part of the individual participants’ intentions. Supply and demand are coordinated, the national product is maximized and the nation's wealth is distributed efficiently (32-33). Thirdly, the sovereign has a necessary contribution to make. There are the public works to build that facilitate commerce, such as roads, canals and ports, and public welfare measures to implement, such as education and public health.
Turning to Hegel in Chapter Three, Herzog sees there a view of markets, Hegel's system of needs, that is also largely descriptive but without the Smithian beneficence. Like Smith, Hegel begins with the individual pursuing freely chosen interests. According to Herzog, in the Hegelian market, again, as with Smith's, individuals’ relate to each other instrumentally (58). However, according to Hegel the market does not secure the maximization of output or harmony that Smith expects. The market does impose upon individuals the obligation to accommodate the interests of others but without any Smithian guarantee of generalized success (54). Rather, as Herzog states, markets for Hegel are unstable and unpredictable. Civil society is a battlefield (54) and only some of the market's negative consequences can be ameliorated in Herzog's Hegel by Hegel's other economic institutions, the corporation and the police (57). There appears not to be in Hegel a notion of the ideal market.
Addressing the topic of the self in the market, Chapter Four maintains that for both Smith and Hegel market transactions leave the participants in atomistic isolation (62). In fact, for Smith there is a benefit to this. Avoiding self-identification with any one social market setting is expedient, as the individual's maximization of his or her market income depends upon his or her labour flexibility. The two authors do provide modalities by which atomism may be overcome but these modalities lie outside the market. For Smith, one's social identity can come in non-market settings among friends and family. With Hegel, the individual establishes his or her social self in the corporation (75, 78).
Herzog claims in Chapter Five that the only plausible theory of market justice is one that proves that market outcomes are deserved (84). If this were so, an appreciation of Hegel's insights would lead one to the conclusion that the market contains no idea of justice. Rather alarmingly, Herzog claims, indeed, that in this regard Hegel's position is akin to the libertarian's, Hayek's and Nozick's (88). As these latter figures do, Hegel maintains that the normative dimension to the market is found in the liberty of the moment of choice in each market transaction. These take precedence over any normative consequences that might follow. In contradistinction, Smith is more optimistic and believes markets are likely to reward appropriately the bourgeois virtues of hard work and honesty (93). How then do these two theorists deal with the perennial problem of poverty?
Smith again takes the sunnier position and states that while it may not be possible to end poverty, the poor are always better off in a commercial society (104). Assuming the essential turbulence of markets, Hegel holds markets responsible for poverty (105). In his considerations of remedies, Hegel indicates his disapproval of benefits unmediated by work (106, 107, n. 146), arguing against public welfare transfer payments as a remedy to poverty and pointing to the tendency toward overproduction as an argument against economic solutions. It seems one simply has to accept that poverty has an intrinsic place within the modern market economy.
Herzog in Chapter Six turns to the question of freedom and markets. She stresses that for both Smith and Hegel the main contribution of markets in this regard is the addition of another domain for the exercise of negative freedom (120). In effect, there is no ideal ethics specific to markets. The idea of negative freedom simply gets a new content, the particulars of which are not intrinsic to the freedom at issue. However, negative freedom is not sufficient. The individual should develop his or her own autonomy to make the best of the opportunities offered by negative freedom (122). Herzog conceives autonomy in largely subjective terms. For Smith the market is a great school for the appropriate psychological education (122). For Hegel, the individual must look to the corporation for the development of his or her autonomy, otherwise the individual ‘will fall into the inauthentic strife for ever more goods’ (128). Herzog stresses that neither of these routes to market autonomy prescribes ‘any ideal of what “an” autonomous life would look like’ (129).
As she concludes her book, Herzog considers the state's role in correcting the market's deficiency. The role of the state Herzog sketches out is one that draws very much on the insights of Hegel (143). On the one hand, because of the market's inadequacy, there arises the need for an authority outside and free of the influence of markets to bring about the true community and substantive universality missing in the market. Only the state can play this role. For only it has the ability to go beyond individual interest and secure, for example, the legal and political preconditions for exercising basic rights and negative liberty. On the other hand, as philosophy cannot supply an ethics specific to the market (157) there is no choice but to turn to political deliberation to come up with the desired economic arrangements. Of course, such political deliberations will want to draw upon the wisdom of Smith and Hegel's insights (145-146).
In a sort of coda, Herzog states that the options that much theory proposes are either some variant of neo-liberal, free markets or the Marxist rejection of markets all together (161). While this is to a large extent true, history provides many examples of third ways, something Herzog does not consider. These economies, for example, the golden ages respectively of Sweden and Taiwan, while not forsaking the market all together, engage in extensive market regulation and intervention, thereby achieving remarkable results with respect to both social justice and commercial viability. The uncovering of the immanent ethical logic of such regimes might be a research project worth undertaking and one complementary to Herzog's book.
Throughout the book, Herzog stresses Hegel's understanding of the tendency of the market toward dissolution. Of course, this is there in his writings. Yet, a strong case can be made that prior to this story there is, in fact, in Hegel's philosophy the ethical ideal of the market. If this were true, then the philosophy of the system of needs would have two phases. In the first, freedom would be shown to be expressed in commodity relations that thereby constitute the ethical community of the market. In the second, it would be argued that the individualism characteristic of the system of needs lacks the capacity to make that idea of market ethics a reality. In fact, every stage in the philosophy of right, up to but not including the state, reveals an inadequacy in securing the reality of its idea of right. There is then nothing unique to this suggested two-stage structure in the system of needs.
Hegel, of course, does not clearly signal in his study of the market that he has a two-phase model in mind. In fact, he proceeds so quickly that textual support of this reading does not come readily to hand. Even so, the following provides a sketch of how this alternative reading of Hegel on markets might look.
Its most elementary component is the commodity transaction. Hegel divides this process or relation into three parts. There is first economic need, second the commodity and then the commodity exchange. If the freedom standard is to be upheld, each of these components must be a moment of self-determination whereby the market is lifted above all givenness and necessity. The solution Hegel offers is that each of these three components will become the products of free willing, and only free willing, when each is the product of a community of free willings. Through the dialectics of the market's social interaction, both economic need and the commodity become matters of opinion. The commodity transaction itself becomes a socially defined moment wherein each participating individual free wills the totality of the transaction including his or her role in it. When there is this mutual congruence of free wills, then the freedoms specific to the market become rights. Consequently, individuals do not relate to the market instrumentally but for its own sake, as it is a mode of freedom. As each element of market right entails the constitutive interaction of a community of wills, there is no atomism either.
The other dimension to this story is the import of the pursuit of particularity that brings the individual to the market. Hegel says that particularity has ‘the right to develop and express itself in all directions’ (PR§ 184). His message is that the individual not only has the freedom to select his or her particular interests, as they are embodied, for example, in economic need. The requirement that that freedom exist, as all freedoms should, entails the right that those interests be satisfied, that is to say, that the ethics of the market entails a right to welfare. Yet, while it is true that the content of this particularity is without a prior determination with respect to either quality or quantity, there is nonetheless one major constraint upon it. The universal rights in the idea of welfare cannot come at the expense of the universal rights present within commodity relations. The ethical market thus arrives when these two poles, the right of markets and the right of welfare, are upheld jointly and equally. In this case, market outcomes become what are due to the individual. For the individual would have determined what the outcome would be, at least as much as the demands of the universality of justice allowed. No third party is required to establish a relation of desert.
However, individuals, the only type of agency available in markets, cannot ensure the combined realization of these two poles. This, of course, is the aspect of markets Herzog stresses. In fact, in the various ways she has looked at markets, it is their centrifugal properties to which she has given most attention. There may be a debate as to whether there is an ideal of the market present in Hegel. Yet, there is no question regarding the centrality in both theory and practice of the market's tendency to undermine equality of social right and cause great damage to both those who are the disadvantaged and to society's ability to deal with major systemic problems from basic infrastructure to ecological collapse. Herzog is correct to give the market's non-ideal properties the pre-eminence in her study they so rightly deserve. Only extra market actors will have the capacity to bring about necessary radical reform and Herzog is again right to give the political moment substantial attention. Furthermore, if political intervention ever takes up the task of fundamental rethinking the role of markets, it will undoubtedly do so in terms of the notions with which Herzog has framed her discussion: the moral well-being of the individual within the market and the market's contribution to social justice and autonomy. Future scholarship in this field, as well as policy-orientated theory, will want to build on both the way she has prioritized the topics in this field and dealt with the individual topics with so much care. Most importantly and perhaps where most benefit can be derived from the book, is its foundation upon those two discoverers of the market, Smith and Hegel. This provides the rest of the book with a distinguished sophistication.
