Although our understanding of legitimation processes and issues is still rather incomplete, for the most part this is not for want of social scientific effort. A qualification on effort is necessary because the quantity of research being done varies considerably across the social science disciplines; perhaps unsurprisingly, economists are the least active researchers in this domain. If the New Palgrave Dictionary of Economics is any indication, legitimacy is not even an economic issue. But this is somewhat misleading: The fact that legitimacy is not one of the two thousand or so entries exagerates somewhat economists' neglect of the topic.2 As we shall see below, several prominent economists have paid some attention to questions relating to beliefs about and attitudes toward market capitalist institutions. Of course when compared with the more voluminous and systematic work of other social scientists, these efforts of economists appear insignificant. This relative lack of serious attention is unfortunate--if the persistence of economic institutions depends on their legitimacy, it would seem to follow that a complete theory of market capitalism would have to address issues relating to the beliefs and attitudes people have toward these economic institutions. The problem for economists is that to address such issues properly requires a cultural economics, a theory that deals in a general way with how economic institutions interact with their social, political, and cultural environment. What is needed is a theory that is able to explain inidividual and social learning as well as one able to explain individual and social decision making (Boulding, 1973b). While considerations falling in this domain have long been of concern to a variety of non-mainstream economists (especially those in the radical political economy and institutionalist camps), orthodox economists, however much they have involved themselves in imperialistic adventures of various sorts, have not thus far ventured seriously into this particular area.
In spite of this past neglect, however, there are good reasons to believe that issues in cultural economics in general, and the legitimacy topic in particular, will receive increasing attention from orthodox economists. The main reason for this has to do with recent developments in the field of (orthodox) political economy. Just as the latter emerged as a result of the increasing recognition that economics more narrowly defined could not deal satisfactorily with an increasingly politicized economy, so too a cultural economics will emerge to help make sense out of a wide variety of "cultural" phenomena brought to our attention by political economics. A number of "puzzles" or "anomolies" having to do with the most basic issues, including, significantly, why the economy has become increasingly politicized, and including, as well, why people vote, and why people join large interest groups, etc., suggests that the focus of political economics is also too narrow, and that only a broad ranging cultural economics that treats attitudes and beliefs will be able to handle these puzzles.3 Rather than wait for a plausible cultural economics to emerge in order to deal with legitimacy topics, this paper addresses the latter directly. There are at least four good reasons to believe that it makes sense to do this. First, there is the recognized intellectual challenge. As Kenneth Boulding, one of the few prominent living economists with an active interest in this area, has put it, "one of the most interesting questions in cultural economics is the extent to which any particular system of economic institutions will survive or fail because of change in the cultural matrix which the economic institutions produce (Boulding, 1973, p.54.)." Second, one could make the case that the effort to build a cultural economics should begin with an examination of legitimacy issues. It may well be, again following Boulding, that "the dynamics of legitimacy ultimately dominates all other elements of social systems (1978, p. 197)." Third, and this gives us a place to start, the legitimacy problem is one of the few topics in cultural economics to which economists (both mainstream and otherwise) and other social scientists have given some thought. Finally, and this gives a certain poignancy to the topic, even the most cursory survey of the work done in this area suggests that market capitalism may well face a serious legitimacy problem. A considerable number of economists and other social scientists writing from a variety of perspectives and value orientations suggest a number of reasons why the legitimacy of market capitalism is at best problematic.
By surveying and assessing a rather large sample of the existing literature on these matters, this paper seeks to discover just what, if anything, market capitalism's legitimacy problem is. Although the survey provides examples of each type of argument and although it includes arguments representing most of the major schools of thought, the survey is not intended to be an exhaustive one. For one thing, the emphasis is on arguments found in the economics literature.4 For another, the focus is on arguments that define and analyze the legitimacy problem as it relates specifically to economic institutions; arguments whose primary concern is political legitimacy are not examined here.5 Finally, the survey omits reference to studies of the legitimacy problem that go beyond hypothesizing about public beliefs and opinions to inquire as to whether peoples' beliefs and opinions are well grounded.6
It is hoped that the issues raised and the evidence analyzed will be of some help in suggesting lines of research that would not only better enable us to understand legitimacy issues but would also aid in the construction of a larger theory of the culture of market capitalism. The next part of the paper consists of a literature survey which sketches various formulations of the legitimacy problem. This is followed by a presentation of evidence relevant to the assessment of some of the key hypotheses presented in the survey. The final part of the paper uses the evidence to draw some tentative conclusions about capitalism's legitimacy problem.
According to Boulding, delegitimation occurs because on the one hand people have "strong preferences for integrative relationships" and on the other hand, the exchange institutions of market capitalism fail to develop an integrative matrix (1973, p. 110). Integrative relations, such as doing things for love as opposed to money, have the power to create community, identity, and committment, whereas exchange relationships , in part because they involve so little in the way of sacrifice, and in part because they are almost always confined to two- party relationships, lack such power (p. 28).
For von Mises, what has to be explained is more than spontaneous reaction to the market and more than the incapacity of exchange relationships to generate legitimacy; what has to be explained is an anti-capitalist mentality. The root of the anti-capitalist mentality lies ironically in the opportunity market capitalist institutions provide members of society. In capitalism, each is granted "the opportunity to attain the most desirable positions," but since these can only be attained by the few, the individual has always before "his eyes people who have succeeded where he fails (von Mises, 1972, p. 12)." "Everyone is aware of his own defeat and insufficiency (p.13)." In order to restore his self-esteem, each individual searches for a scapegoat. Some are able to release their feelings in slander and defamation, but many others "sublimate their hatred into a philosophy of anti-capitalism (p. 15)" This dislike of capitalism is thus "a mere blind" for envy and hatred of the more successful.
Like Schumpeter, Lane (1981) too argues that market capitalism helps shape human beings in such a way as to lead them to be dissatisfied with market capitalism. For Lane, the market encourages a motive and a belief which the market cannot satisfy or validate. The motive is to be in control, to be the source of outcomes that matter. The market nurtures this motive by discouraging competing motives of dependency, obedience, and conformity, and by rewarding premiums to innovation, enterprise, and self-reliance. The belief the market fosters is that the individual is indeed the agency that controls important outcomes. It fosters this belief by demonstrating the responsiveness to one's own behavior in both factor and product markets. In the labor market working is connected with receiving pay; in the goods market, payment is immediately and clearly connected with the receipt of goods. According to Lane, the problem is that although the market nourishes this set of motivations and beliefs, it simultaneously frustrates fate control in many areas of life: in determining how income is distributed, by allowing or permitting unemployment, by contributing to the creation of the culture of poverty, by permitting a lack of fate control at the workplace, lack of control over the environment, and over such collective goods as equality and community. It is this frustration of fate control that is the source of the public's dissatisfaction with capitalism.
It is useful to begin with a discussion of educational institutions. According to Schumpeter (1950), education, whose vigorous expansion was as inevitable as large scale enterprise, contributed to the hostility toward capitalism primarily by affecting the size and attitudes of intellectuals. In his view, the educated who couldn't find jobs or who were either unsatisfactorily employed or unemployable would enter the ranks of the intellectuals with a "thoroughly discontented frame of mind (p. 153)." This discontent is the source of resentment which in turn would often rationalize itself into social criticism.
Galbraith (1974) also sees the expansion of education under capitalism as more or less inevitable--modern technology and planning in the large corporation require the training it provides. But the educational system does more than supply the technostructure with trained manpower. For one thing, it instills scepticism in students (including those who are the technocrats to be) and in this way ensures "that there will be systematic questioning of the beliefs impressed by the industrial system (1974, p. 364)." Given Galbraith's view of contemporary capitalism, this creates a paradox: "the economy for its success requires organized public bamboozlement. At the same time it nurtures a growing class which feels itself superior to such bamboozlement and deplores it as intellectually corrupt (p. 294)." Moreover, in addition to providing students with a critical orientation, educators also constitute a valuable example of an alternative life style. Thus another parodox: at the same time they train cadres for positions in industry, they "appear to reject the values of the acquisitive society (p. 359)."
Democratic political institutions represent another possible source of values with the potential to challenge economic arrangements. Here there are two types of arguments. One claims that the clash arises because capitalism and democracy are based on different distribution principles. The second suggests that the challenge comes rather from the conflict between the expansion of democratic rights and the property rights of capitalism. The first argument shows how the distribution principle of democracy can be used to criticize the distributive outcomes of capitalism, while the second shows how the rights and decision making procedures of democracy can be used to criticize capitalist decision making processes.
Consider first the clash between the democratic value of equality and the inequality of income and wealth which is part and parcel of market capitalism. Equality is one of the two most honored values in the American democratic tradition: "the notion that all individuals are in some fundamental sense alike, that no person possesses greater intrinsic worth than another, and that all must be prized as members of a common humanity is a major presupposition of democracy (McCloskey and Zaller, p. 62)." The value of equality manifests itself in such fundamental political practices as majority rule on the one hand and respect for minority rights on the other. The coexistence of this political value of equality and the fact of inequality in the economic sphere has been described as the "double standard of a capitalist democracy, professing and pursuing an egalitarian political and social system and simultaneously generating gaping disparities in economic well being (Okun, 1975, p.1)."
A second related source of conflict between the values of democracy and market capitalism stems from the democratic values, practices, and rights associated with popular sovereignty. "The belief that the people must rule themselves is the principal concept legitimizing democratic government (McCloskey and Zaller, 1984, p. 76)." This popular sovereignty principle poses a potential challenge to market capitalist institutions on at least two fronts. First, people who are the products of a democratic culture may insist that the powers economic actors enjoy be subject to greater democratic accountability (McCloskey and Zaller, p. 168-169; Bowles and Gintis, p. 204). Second, since the economy as well as the polity contributes to the development of capacities, preferences, and identities of individuals, a person committed to democracy may prefer economic institutions that promote rather than impede the development of a democratic culture (Bowles and Gintis, p. 204). Considerations such as these lead Bowles and Gintis to opine that the collision between the extension of democratic rights and property rights has been "the fundamental threat facing the capitalist order in the liberal context (p.32)." Political institutions and educational institutions are not alone as loci of values and attitudes which may serve as sources of dissatisfaction with market capitalist institutions. Religion too plays a role. When it comes to religion as a source of value challenge to capitalism, there is first a reinforcing echo of the equality challenge emanating from the secular realm. For many individuals, the principle of equality is ultimately rooted in the religious belief that all God's creatures possess inherent worth and dignity (McClosky and Zaller, p. 164) In addition to reinforcing the challenge of equality, religion also directs critical attention to the motive that permeates market capitalism--the search for profit. A major source of the dislike for a system of organizing economic life through the search for profit is to be found in religion (e.g., Stigler, 1984, p. 150).
For Schumpeter, although the intellectuals play a major role in "stimulating, energizing, verbalizing, and organizing" hostility towards capitalism, they only "secondarily" add to the general hostile atmosphere that surrounds capitalism (p. 153). According to Schumpeter, there are two ways to understand intellectuals' hostility to capitalism. First of all, it is the intellectuals who are the primary carriers of the rational critical mentality that capitalism generates. The reason this mentality manifests itself most clearly in the intellectual class is due in part to their situation of onlookers and in part to the fact that their main chance of asserting themselves is in their "actual or potential nuisance value: intellectuals cannot help nibbling away at the foundations of capitalist society (p. 151)." Secondly, as noted above in the section on education, this general critical tendency is given additional impetus and focus by the vigorous expansion of educational apparatuses (according to Schumpeter, an inevitable development in capitalism) which generates unemployed, underemployed, and unempoyables who enter the ranks of intellectuals filled with resentment which ultimately rationalizes itself into social criticism (p. 152-153).
In addition to Schumpeter, Mises, and Marx, a number of others have also made an effort to understand the intellectual's hostility toward capitalism. There are two main types of explanation. One highlights the role of alienation while the other draws attention to class or group interest as being the source of the hostility. Why should intellectuals be alienated in a market capitalist society and why should that alienation lead to hostility that takes the form of criticism? According to Dolan (1975), intellectuals are alienated from capitalism because they find it meaningless and because they find themselves powerless to do anything about it. The meaninglessness derives from a (mis) perception that the system is irrational, chaotic, and anarchic. (Only a minority of intellectuals, those trained in conventional economics, are exempt from this misperception). Finding the system without meaning, intellectuals would like to change it, but in a market capitalist society, the institutions of private property and free contract provide no lever of power for the intellectual to "move the system onto another track (p.221)." Finding market capitalism meaningless on the one hand and being unable to change it on the other, the intellectual's "only option is to become a professional critic (or revolutionary) (p. 222)." Gouldner (1979) also argues that part of the intellectual's hostility toward captialism stems from alienation. In part the very values of the sub-culture of the intellectuals is such that to participate in it is to participate in a critique of the present and the assumptions it uses. The intellectual is obligated "to examine what had hitherto been taken for granted, to transform givens into problems, resources into problems, to examine the life we lead, rather than just enjoy or suffer it. (p. 59)." Whether and to what extent intellectuals will participate in this culture of critical discourse depends of a variety of considerations including the blockage of opportunity for political and or economic upward mobility (especially important in generating this blockage is the "overproduction of educated manpower") and the experience of status disparity. The latter occurs when the intellectuals' form of capital (cultural capital) brings a lower return in power and wealth than other (moneyed) forms of capital. (p. 65). Since both opportunity blockage and status disparity are likely to obtain, many intellectuals will indeed participate in the culture of critical discourse and capitalism among other institutions can be expected to be subject to relentless criticism.
Gouldner's analysis of intellectuals' hostility toward capitalism is not grounded solely or even primarily on the intellectuals' alienation. Only part of the dissatisfaction is due to this. The other part stems from the interests of the intellectuals. According to Gouldner, their fundamental goals are to increase their share of the national product, to produce and reproduce the conditions that enable them to appropriate larger and larger shares of the product, to control their work settings and to increase their political power. (p. 19-20). To achieve the above means working for a welfare state or a socialist state. (The difference is that in the latter the hegemony of the intellectuals is fuller.) What all this means is that political-economic arrangements that distribute income, power, and prestige on the basis of controlling other kinds of capital, e.g. market capitalism, will be opposed by the intellectuals.8
For yet others, the problem with economic growth as a source of support has to do more with the lack of public understanding. Schumpeter, for example, sees the source of the difficulty in the short run time horizons of most people. The masses are unable to accurately weigh the long term far off benefits of growth with the more short run problems that they face (1950, p. 144-45). Von Mises suggests that the masses tend to see growth as the outcome of extra system determinants such as progess in technology or natural science rather than in the economic system that makes this progress possible (1972, p. 36).
In sum, then, although inequality is a potential source of dissatisfaction with economic institutions for some people at the top and some at the bottom of the distributional ladder, its presence is not a source of dissatisfaction with capitalism for the large middle class. In addition to examining the blame the system hypothesis, it is also useful to attempt to assess the hypotheses that the legitimacy problem inheres in the inevitable conflict between the values implicit in the economic arrangements and those underpinning other societal institutions. Specifically, is there any evidence that supports the notion that there is a conflict between the values of political democracy and those of the economy? McClosky and Zaller's public opinion survey and analysis again turn out to be of some help. Each respondent is given a score reflecting the number of instances in which the individual chooses a pro-capitalist (or pro-democratic) answer to a large set of policy questions. Individuals scoring in the highest one- third of all respondents are classified as high in support for capitalist (or democratic) values.17 Those scoring in the lowest one- third are classified as low in support for capitalist (or democratic) values. Using these indexes, McClosky constructed a table demonstrating the various combinations of attitudes. The relevant portion of the table is reproduced below (p. 163).
| Index of support for Democratic values | |||||
| Low (LD) | Middle (MD) | High (HD) | |||
| Index of support for capitalist values |
{ | Low (LC) | 20 | 32 | 53 |
| Middle (MC) | 33 | 32 | 26 | ||
| High (HC) | 47 | 36 | 21 | ||
Although not perfect because the category they use only partially overlaps with the intellectuals, McClosky and Zaller's opinion leader data is nevertheless useful. On the one hand it relates to Schumpeter's influence concern, and on the other hand, since the authors use the same set of public opinion questions for this group as they do for the general public, it facilitates comparison of the two groups. In the opinion leader category McClosky includes those who "exert a disproportionate influence on public opinion by virtue of greater political activity or knowledge (p.14)." A variety of elite populations were surveyed, and since the opinions and attitudes of the responsdents tended to differ from those of the general population in essentially the same way, there is reason to believe that the views of those sampled do indeed reflect the views held by opinion leaders. What are the differences? The differences are not great. Approximately the same level of support for capitalism can be found among opinion leaders as obtains in the general public (p. 133). If anything opinion leader attitudes toward socialism are less favorable than among the general population (p. 135). Opinion leaders appear to be somewhat more willing than is the general public to involve government in the economy in some areas (p. 143, p. 147), and they appear to be slightly more egalitarian on some of the distribution issues (p. 91). Finally the negative correlation between the indexes of capitalist and democratic values is even stronger for opinion leaders than it is for the general public (p. 163). If we narrow our focus and consider academics only, the picture changes. A number of surveys of American professorial opinion taken since World War II show that "as a group academics are more likely than any other occupational group to identify their views as left or liberal, to support a wide variety of egalitarian social and economic policies, and to back small leftist third parties and/or vote Democratic (Lipset, 1982 p. 144)". Although this set of findings is certainly in line with what the hypotheses on intellectuals predicted, there is reason to believe that the mechanism generating these attitudes is different from those sketched earlier. The resentment among the less successful academics predicted by von Mises is very much in evidence; it just does not appear to be as widespread or as implicated in anti-capitalist mentality as von Mises thought it would be. Lipset finds that "those who are much more involved in teaching than research, who have published less, and who earn less, are more prone to explain success within their profession in invidious terms, to see the cards stacked unfairly in favor of those at the top (p. 156)," but he also finds that "an overwhleming number of those at lower tier institutions accept the proposition that the successful are also brighter and have done more important research (p. 157)." Even more revealing is his finding that the higher the achievement, the more liberal is the faculty member likely to be (p. 150).19 This last finding is of course just the opposite of what von Mises' hypothesis predicts. To complete this assessment it is useful to look briefly at evidence relating to the claims about religion on the one hand and affluence on the other as ineffective sources of support for market capitalism. On religion, recall there are two claims: one is that Protestantism has the potential to provide legitimacy for capitalism; the second is that capitalism undercuts this possible source of support. Again, evidence from the Ethos study is of relevance. First, respondents "who score high on a summary scale of Calvinsism are more likely to support the principles of capitalism than those who score low (p. 110)". This supports the first claim. Second, and contrary to the second claim, McCloskey and Zaller find that values asociated with the Protestant Ethic are still very much in evidence (p. 110). As for affluence, or a rising standard of living, although the McCloskey and Zaller survey found little evidence that there is a decline in the importance of this as a goal for many people, it did detect some ambivalence toward "the craving for wealth (p. 118)." Other evidence on this makes it very difficult to draw any clear cut conclusion. On one side, there are several studies suggesting that economic growth and/or a high standard of living are losing their appeal. For example, the widely cited study in the 1970's, Work in America, reported that workers rank several aspects of work higher than good pay (Edwards, Reich, and Weisskopf, 1978, p.268). A January, 1989, Gallup Poll on social values reported that 41% of Americans regarded "owning a nice home, a car, and other belongings" as very important. Among the nine goals asked about, material possessions ranked dead last in terms of the percentage of respondents who regarded the goal as very important (Gallup Report, 1989, pp. 35-41). A survey on various aspects of environmental issues found that well over fifty per cent preferred "a society that emphasizes environmental protection over economic growth" (Milbrath, 1986, p. 104).20 Finally, a recent poll of working Americans finds a full three-quarters of those surveyed claiming that they would like to see America turn to a simpler life-style (Harris and Yankelovich, 1989, p. 38). This along with other opinion survey results lead two students of public opinion to conclude that "evidence is piling up that money is changing its meaning even for the moderately affluent (Harris and Yankelovich, 1989, pp. 37-38)." Pointing in the other direction are surveys showing that this is not called the "me generation" or "age of greed" for nothing: for example, recent American Council of Education surveys show a substantial and increasing percentage of college freshmen regarding financial success as a very important goal. In 1987, a record high 75% considered "being very well off financially essential or very important (Astin, 1988)." This ambiguous evidence with regard to attitudes combined with the rather mediocre recent economic growth record makes it difficult to draw any firm conclusions as to the roles of affluence and economic growth in generating support for market capitalist institutions.
The survival of these institutions may rest upon public acceptance that involves little in the way of supportive beliefs. Legitimacy, recall, only becomes an important issue when the institutions of society are seen as conventional. It is possible that as long as social institutions function reasonably well, they will come to be regarded as natural. So regarded they are in no more need of supportive beliefs than is the law of gravity (Berger, 1986, pp. 206-207).21 This suggests there may be much less at stake in interpreting the evidence on the legitimacy hypotheses.
Of course without further specifying what "functioning reasonably well" means, the claim that legitimacy is unnecessary is largley vacuous. In addition, such a claim denies the possibility that a belief in legitimacy is a pre-requisite to functioning reasonably well. Hirsch (1976), for one, argues that although "solutions that work have traditionally dominated solutions that have ethical appeal, the distinction is now blurred: to work it must be ethically defensible (p. 190)." Moreover, even if it is appropriate to question the extent to which the survival of economic institutions rests on their perceived legitimacy, it does not follow that nothing of significance is at stake. As we shall suggest below, public attitudes and beliefs about things economic have signficance that transcend the survival of economic institutions. As it happens, these sentiments have considerable potential significance for reasons that are as much psychological and political as they are economic. With this possibility in mind, then, let us consider the two alternative conclusions one at a time.
One could argue that the evidence presented not only refutes the legitimacy hypotheses, it actually understates the degree of support for and viability of market capitalist institutions. After all, much of the survey data presented refers to the late 1970's, and there is little question that market capitalism's prospects have in the meantime risen considerably. Market capitalism is not only alive and well, but in the late 1980's it seems to be flourishing as never before. How in the face of this could it be maintained that there is a legitimacy problem?
If this were to be our conclusion, that market capitalism faces no serious legitimacy problems, the logical next step would be to provide an account of how the popular support comes about. No such account can be provided here, but it is not difficult to see how it might be done. For example, it is possible to argue that although many of the variables drawn attention to by the various hypotheses sketched above are indeed relevant to the legitimacy question, the effects are considerably different from those hypothesized. Thus market capitalism may well affect how people think, but rather than generating critical thinking as Schumpeter hypothesized, perhaps it generates an uncritical acceptance instead (e.g., Marcuse, 1964); as for intellectuals, rather than their being bearers of the critical mentality, couldn't one see them just as easily as integral participants in the legitimation process (e.g. Gramsci, 1971, for the general case; Wisman (1979) on conventional economists); as for the bourgeosie, rather than seeing them as unwilling and ineffective defenders of the capitalist order, one could see them as bolsterers of the pecuniary values of capitalism who thus serve as a source of legitimacy (e.g. Veblen, 1973, p. 138) 22; as far as democracy is concerned, rather than regard it as a source of challenge, couldn't it just as easily be thought of as providing the ultimate legitimation: participation in the political process (Bendix, 1969); and as for education, rather than seeing it as honing critical thinking skills , isn't it more accurate to to see much of what goes on in educational institutions as being geared toward generating legitimacy? (e.g., North, 198l, p. 54).23
However appealing this particular way of interpreting the evidence may appear, it is not the only way of reading it. It is also possible to conclude that the hypothesized discontent is very real, it is just that it does not manifest itself as claimed. To expect it to manifest itself in withdrawal of support for market capitalist institutions is to presume a degree of sophistication among the general public that is not in evidence. As McClosky and Zaller put it, "it is unrealistic to expect most Americans to understand all the ideas embodied in such terms as capitalism and socialism (p. 137)." We really cannot expect discontent toward the economic system to show up in public opinion polls on abstractions such as capitalism or the free enterprise system; Where it is more likely to surface is in attitudes toward more concrete entities such as business and businessmen. When we look at public opinion survey results on this more concrete level, we find considerable evidence of distrust and discontent. Responses to the few public opinion questions asked at this level are revealing. For example, sixty two per cent agreed with the statement that "The way business is behaving, we need the government to keep an eye on them (p. 147)" A 1976 poll found that 82 per cent of those expressing an opinion complained that big business had too much power in society (pp.133-34). In addition, in one poll big business was the least trusted of twenty-four groups about which the public was questioned (p. 134). In addition to this evidence, there are other grounds for believing that the legitimacy problem is a very real one. There is a fair amount of evidence that the support for market capitalism that exists does not run very deep. For example, and again keeping the focus at the more concrete level, in a period of a few weeks in 1971, support expressed for wage and price controls among influential Republicans increased by forty-five per cent (p. 152)! Equally significant, although spread over a longer period of time, was the fifty five per cent drop (seventy to fifteen) over a decade (1968-1977) in the confidence Americans express in business' willingness to strike a fair balance between profit and the public interest (p.159). In sum then, this way of approaching the issue suggests that the legitimacy problem, although different from the one hypothesized, is no less real. To appreciate the full significance of the difference, it is necessary to briefly spell out some of the implications of this alternative interpretation. To do this we must ask how the more concretely focussed set of dissatisfactions manifests itself. More specifically , why, if people are so distrustful of business and so concerned about its disproportionate power, haven't these sentiments manifested themselves in a demand for even greater government involvement in the economy? Here the best answer is probably that the distrust of business and businessmen is matched by an equally strongly held set of reservations about public officials and government. This shows up in public opinion polls in a variety of ways. For example, those reporting that they "trust the government in Washington to do what is right just about always or at least most of the time" ranged from a low of twenty-five percent in 1980 to a decade high of 44% in the mid- eighties (Sussman, 1988, p. 54). A 1985 survey found three out of four responsdents agreeing that "to win elections, most candidates for Congress make campaign promises they have no intentions of fulfilling (Sussman, 1988, p. 53)." Or consider an example having to do specifically with government regulation of business: sixty-five per cent of the general public agrees with the statement: the more government regulation there is the less efficiently companies can operate (p. 152). Ralph Nader nicely captures this suspicion toward government in his observation that the American public thinks "the only thing worse than having a car built by General Motors is to have one built by government."24 To acknowledge this offsetting set of dissatisfactions with government is to open up the possibility that there is yet another dimension to the legitimacy problem. It is a much more complicated problem than the hypotheses presented earlier imply. And it is more complicated not just because it shows up at a more concrete level. It is more complicated as well because capitalism's legitimacy is, as Nader's remark suggests, intertwined with the legitimacy of political institutions. It follows that a proper analysis of the legitimacy problem as it relates to market capitalism must necessarily consider the political as well as the economic dimension of the problem. Expanding the scope of the legitimacy issue this way helps us see how the lack of trust in public officials nullifies to some extent the increase in demand for government that might otherwise spring from dissatisfactions and distrust in the economic realm; it also leads us to ask about sources of the distrust and resentment directed at political actors and arrangements.25 And this question, as we shall see, leads us back to the economy: There are good reasons for thinking that some political dimensions of the legitimacy problem have their origins in market capitalist economic arrangements.
The basic problem is that governmental intervention in a market capitalist economy, whether prompted by various dissatisfactions with economic arrangements and outcomes or not, leads invariably to a host of outcomes that are bound to only broaden and deepen the legitimacy problem. Whereas Schumpeter and Polanyi, were they alive to do it, might well interpret the high degree of governmental involvement in the economy as support for their theses, and whereas others might see government intervention as being partially responsible for increasing the support for market capitalist institutions (either by reducing public dissatisfaction with outcomes of the economy, e.g., McCloskey and Zaller, 1986, p. 158, or by enabling the public, via the process of voting, to "broaden [their] identifications beyond the individual and the family, e.g., Dahl and Lindblom, p. 422), the claim here is that this governmental involvement both intensifies and spreads the legitimacy problem and that part of the explanation for this lies in the nature of market capitalist arrangements and values.
The specific way in which this works varies depending on the particular form of goverment involvement, but the general idea is that virtually all forms of governmental intervention in a market capitalist economy have considerable potential for generating disappointments of various kinds. For example, when it comes to macroeconomic regulation, there is the clear and present danger of political business cycles; when it comes to microeconomic regulation, there is the strong likelihood that the regulations forthcoming will sooner or later end up serving the interests of the regulated rather than those of the general public; when it comes to protecting the environment, the mobility of capital, among other factors, places rather severe restrictions on what can be accomplished; etc., etc.26
The resulting disappointments, resentment, and distrust reflect on the one hand, dissatisfaction with outcomes (taxpayers feel they don't get much for their money-- in Lipset's terms government loses support because it is not believed to be efficient) and on the other hand, they reflect dissatisfaction with the process (voters feel that some groups have disproportionate influence). Regardless of the relative significance of these sources, there is little doubt that some aspects of this broadened legitimacy problem have economic origins.27 In part it is the unequally distributed economic resources that gives disproportionate political power to the few; in part it is the mobility of capital that constrains what government can do; in part it is the values (for example, efficiency: government is evaluated as if it were a business) and attitudes (sometimes consumerist--government is viewed as a supermarket; and sometimes financial--political contributions are made with an eye on the rate of return) that market capitalism promotes and that people employ to form their political expectations and to guide their political behavior.28 In part too, and this is an especially revealing possible connection between the legitimacy of the economic and political spheres, whatever the forms legitimacy problems in the economy take, it is likely that they exacerbate the legitimacy problems in the public sector: the greater the role of government in the economy, the more dependent is the functioning of the politicized economy on "some degree of social orientation and social responsibility . . . among both controllers and controlled" . . .and this "micromorality" in turn may well depend upon the perceived "macromorality" of the economy (Hirsch, 1976, p. 128).
Just as the economy in general has become increasingly politicized, so too has the economy's legitimacy problem. Just as one can no longer give a complete account of business cycles without bringing in political variables, neither can one adequately analyze market capitalism's legitimacy problem without bringing in government. The significance of this interdependency cannot be overstated. In some cases, bringing government into the picture means the legitimacy processes may work in ways exactly the reverse of those found in the arguments summarized in Part I. For one example, rather than an anti- capitalist mentality blaming the economic system for undesirable outcomes having non-economic system determinants (as von Mises would have it), people end up blaming non-system entities for outcomes that have economic system determinants. As students of presidential popularity and presidential elections have found, voters apparently make their evaluations in part on the basis of macroeconomic performance.29 Thus capitalism takes less of the blame than it otherwise might, not only because people are not given to thinking on such an abstract plane, but also because blame for undesirable economic outcomes is often displaced from the economic system to political actors.30 For another example, rather than citizens drawing upon the reservoir of participatory and egalitarian values attached to democratic political institutions to find fault with capitalism (as Bowles and Gintis would have it),31 we find consumers and investors employing market capitalist motivations and values to guide their political behavior and to evaluate political outcomes; the result is that on the one hand both processes and outcomes reflect economic inequality, and on the other hand, and in part as a result of this inequality, many people choose to withdraw from meaningful political participation.32
The legitimacy problem of capitalism is thus both narrower and broader than it was assumed to be in the arguments surveyed in Part I. It is narrower in that the hostility is often focussed on specific economic (and political) actors and entities rather than on the entire economic system and it is broader because dissatisfactions with economic outcomes together with an economic orienatation to politics may well contribute to legitimacy problems for political actors and processes. It follows that the best way to view the legitimacy problem of market capitalism is to see it as a multi-dimensional set of problems. Even the first plausible interpretation of the public opinion data we examined above, the one holding that market capitalism faces no legitimacy problem, has something to offer to this way of looking at things. For to the extent that this conclusion rests on the reported finding that many people blame themselves rather than the system for undesirable outcomes, the legitimacy problem doesn't disappear, it simply shows up in yet another form. If I blame myself for undesired outcomes, the system is O.K, but all of a sudden, I'm not. Recall that von Mises argued that in a system of opportunity, it would be psychologically devastating for an individual to accept responsibility for his or her inferior position. Indeed it was for this reason that he hypothesized an anti-market mentality that would displace the blame to the economic system. If such system blame doesn't occur, there is reason to believe that the psychological consequences will occur instead. 33 To conclude, although the evidence presented in the assessment above suggests there are flaws with many characterizations of market capitalism's legitimacy problem, this does not imply that there is no legitimacy problem. A better conclusion is that there are several (overlapping) dimensions to capitalism's legitmacy problem. Only one of these has to do with dissatisfaction with market capitalist institutions per se; this dimension appears to be mainly relevant for only the subset of the population that includes some fraction of intellectuals and some (probably smaller) fraction of those located at the top and bottom of the income distribution. A second dimension has to do with the much more widespread negative public attitudes toward the more concrete economic actors and entities of businessmen and corporations. A third dimension has to do with dissatisfactions, distrust, and resentment in the political realm. And a final dimension involves problems of self-legitimacy. Of course identification of these dimensions is only a first step in understanding these matters. A more complete understanding requires, among other things, more insight into what we might call the political economy of blame. The rather considerable ongoing discussion of various social responsibility issues needs to be complemented by an effort to understand how people come to blame themselves, other economic and political actors, as well as economic and political arrangements for various outcomes that occur. We need to know, for example, why some people hold public officials accountable for high levels of unemployment in the economy and why others blame themselves for their being unemployed. Perhaps by investigating specific ways people come to understand and evaluate such concrete economic outcomes we will gain a better understanding of the interconnected legitimacy problems sketched above. Perhaps too, such an investigation will generate some general ideas about individual and social learning processes that would contribute significantly to the emerging field of cultural economics.
| 1. | For example, Peter Berger, a conservative sociologist, writes, it is a "central and rarely disputed fact of human social life--that a society is not held together simply by practical needs and interests but by beliefs that explain and justify its particular institutional arrangements (Berger, 1987, p. 194)." Similarly, although necessarily using different language, Howard Sherman, a radical political economist, affirms that "no system can survive without its own ideological apology being dominant (Sherman, 1987, p. 53)." |
| 2. | The thirty-six page index does contain the entry "legitimation; Weber on." The entry on ideology does not discuss legitimacy issues. On the other hand, the entry on Capitalism does include a discussion of related issues. |
| 3. | Some orthodox economists have already moved in the direction of explicitly introducing attitudes and beliefs into their analyses. In the field of economic history, see North (1981). On the specific question of the rise of Big Government, see Higgs (1987). |
| 4. | Works of non-economists are included if their focus is specifically the legitimacy of economic institutions and if they help flesh out (or provide interesting variants of) arguments made by economists. |
| 5. | As it happens, the paper concludes by arguing that a proper treatment of market capitalism's legitimacy problem requires an examination of the political sphere. Readers interested in pursuing political legitimacy issues may wish to consult the collection of essays in Connolly (1984) and the brief survey of neo-Marxist writings on the topic in O'Connor (1987, Chapter 3). |
| 6. | For examples of this approach see the essays by Habermas (1984) and Schaar (1984) in Connolly (1984). |
| 7. | This is the standard interpretation of Marx. Waisman (1982) offers an alternative reading that stresses the importance of the disappearance of the division of labor between manual and intellectual labor. In this interpretation, an increasingly automated economy makes it evident to the "worker-scientists", who are actually in control of production, that the capitalists claim for control of the surplus is not based on their contribution to production. Revolutionary consciousness is the result not of hardship but of automation (pp. 95-96). |
| 8. | A variant of this interest theory has been put forward by Kristol (1975). He argues that it is in the interest of intellectuals to be opposed to a market capitalist economy. They prefer a system with a larger political component because they have a great deal more influence in politics. Through politics they are able to exercise direct and immediate influence on the shape of society and the direction of national affairs. See also Berger, 1986, pp. 199-202. |
| 9. | Berger claims the legitimation of the social order by religion "has been the principal social function of religion from archaic times to the present (p. 20l)." |
| 10. | Lipset (1984) sees economic growth as a key factor in generating legitimacy for modern democracies: it helps relieve perceived injustices and thus dampens the struggle over income shares. See his essay in Connolly (1984). |
| 11. | For a more recent version of this see Koch, 1975, p. 15. |
| 12. | This is not to say that socialist movements have not at times shown some strengh and influence. On several occasions the Socialist party managed to garner towards a million votes. However, this performance still falls considerably short of even coming close to capturing political power Gurley (1983, pp. 48-49). |
| 13. | As Parkin (1984) has shown, even working class people in class- conscious England accept capitalism. |
| 14. | See Gurley (1983, pp. 31-59) for a good discussion of why socialism failed in the U.S. and in Western Europe. |
| 15. | This is from a 1958 survey. The item as reported was not included in the 1977 survey. However other items that attempt to get at public attitudes toward government in the economy were included in the later survery. Thus, fifty nine per cent think that "a lumber company that spends millions for a piece of forest land, should, nevertheless, by limited by law in the number of trees it can cut down." (Only twenty five per cent thought it "has the right to cut down enough trees to protect its investment"). (p. 155). |
| 16. | In the Middletown follow up study, done in 1974 (fifty years after the initial study) nearly half those surveyed agree with a strong version of the responsibility belief. Forty six percent agreee with the statement: It is entirely the fault of the man himself if he cannot succeed. This percentage was the same as it was in 1924! (p. 126). |
| 17. | As McClosky and Zaller are careful to point out, since these scales contain few items that express strong opposition to either capitalism or democracy, respondents scoring low on capitalism, for example, could be anything from a socialist to someone favoring welfare state capitalism. |
| 18. | Here note on other related evidence. |
| 19. | Lipset also finds that "those who identify themselves as left of center are more likely than other scholars to try to influence public policy (p. 153). |
| 20. | Cotgrove's study of environmentalists led him to conclude that "at the level of ideology, the majority reject the ideology of market capitalism . . . [their] rejection . . . of the overriding goal of economic growth and of economic criteria is a challenge to the hegemonic ideology which legitimates the institutions and politics of industrial capitalism (1982, pp. 95-96). |
| 21. | Berger (1986) interprets Adam Smith's understanding of market capitalism along these lines: Believing that the system was the natural ordering of society, it did not require legitimation. In contemporary social science, Lipset (1964) seems to be making a similar point when he distinguishes two sources of support for a regime: a belief in its legitimacy and a belief in its efficiency. In Lipset's account though, it turns out that legitimacy is the really crucial variable in accounting for long run stability in democratic countries. On this, see the discussion of Lipset in Barry (1970, pp. 63-74). |
| 22. | Stabile remarks that Veblen not only "establishes that the income of the leisure class (that is, capitalists) depended on their predatory activities and not their personal production efforts . . . [but also] . . . establishes the crucial function of the leisure class in modern society: Legitimation of the institutional framework of capitalism (p. 198)." |
| 23. | See Bowles and Gintis (1976) for an examination of American education along these lines. |
| 24. | Cited Lipset and Schneider (1978). |
| 25. | The question remains as to how the legitimacy problem does manifest itself. One possible answer is that it shows up in a variety of underground economy activities, in workplace crime (Nonini, 1988), and in consumer boycotts (Saran, 1989). |
| 26. | These dangers, and a host of others as well, are predictable from any number of theoretical perspectives ranging from Marxist theories of the state to orthodox (i.e.,public choice) political economics. A rather considerable neo-Marxist literature exists spelling out how these and other outcomes and processes contribute to a (political) legitimacy crisis. See O'Conner, (1987, Chapter 3) for an overview. |
| 27. | Needless to say, not all political legitimacy problems stem from economic institutions. In the first place, and this is a major theme in Habermas (1984), government involvement in many areas serves to amplify the legitimacy problem if only because its involvement makes the conventional character of existing institutions even more transparent. In the second place, some frustrations with politics originate in the type of good government provides. For example, as goverment provides positional goods (e.g., education) to more people, the perceived value of those goods is lowered (Hirsch (1976). |
| 28. | Landy and Plotkin (1982) argue that to the extent that government itself employs markets and quasi markets to achieve various goals it not only contributes to the prominance of economic values, it also undermines citizenship values. |
| 29. | See Frey (1982), for a brief survey of politico-eocnomic models and some empirical evidence. |
| 30. | See Lipset and Schneider (1987). They find that public opinion holds that we have a "good system run by bad or inadequate people (p. 391)." |
| 31. | This is not to deny the possibility that democratic values have economic significance. Demands to involve workers more in firm level decision making no doubt reflect these values. There are any number of reasons why participatory and egalitarian values haven't served as bases for widespread discontent with economic arrangements. Political socialization is one possibility: Litt (1963) found that civics textbooks used in working class communities convey a notion of politics that emphasizes passivity. |
| 32. | Note how approaching the particpation issue from a cultural economics perspective changes the way the issue is posed. For orthodox political economics the puzzle is why so many people vote: abstention is rational; a cultural economics tries to explain non-participation. |
| 33. | See, for example, Lindgren, 1980, pp. 66-69, 87-89. 45 |