Customer Reviews

Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-first Century

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Mr. Lal explores the historical and moral roots of Capitalism with an especially acute eye toward the role of globalization in helping to drive the expansion of wealth in modern liberal economies. He is particularly careful about tracing the political and intellectual drivers behind open trading systems as well as the criticisms that developed in response.

Mr. Lal has a keen sense of irony and the unexpected. For example, he shows how the justifications for liberalizing trade in 19th Century England had far less to do with enhancing individual wealth or welfare and more to do with the government's hope that this would enhance its own revenues by giving it a bigger horse to ride. The irony of the fact that globalization led to explosive improvements in personal wealth and welfare is not lost on Mr. Lal either. He explores similar interesting and unexpected outcomes in the areas of labor law, trade protectionism, attempts to liberalize trade (e.g. WTO), and the global financial infrastructure. As the book progresses, he attempts to deal with the entire panoply of criticisms of modern economic liberalism including discussions of poverty and income inequality, labor law and foreign labor, 'sustainable development' and anti-corporatism.

Mr. Lal is a proponent of trade liberalization as he sees in it the seeds of both national and individual economic growth. He is, correspondingly, critical of the rise of reactionary anti-globalists and he marshalls copious evidence that such anti-globalist impulses undercut both wealth creation and international cooperation. For example, few people realize the extent to which the early 20th century backlash against globalization (i.e. the anarchists) led to the first World War. The worry, of course, is that a similar backlash - a toxic brew of Islamic anti-liberal and Western anti-globalization forces - could lead to more conflict in the future (the latter not being a theme of the book but a concern touched upon in the last chapter).

In attempting to cover such a broad range of topics, the analysis is sometimes a bit fragmented or simplistic as "Dr. Steppy" observed. But I disagree with the conclusion that this is endemic to the book at all - it simply isn't true. Indeed, the example put forth by "Dr. Steppy" (the historical development of individualism) is such a tertiary point in the overall theme of the chapter on Morality and Capitalism that it would be a mistake for Mr. Lal to have developed it any further. My sense is that this critique has more to do with Dr. Steppy's political persuasion than with the merits of the work under consideration.

Dr. Lal's writing is straightforward and, while careful and somewhat academic in tone, very accessible to anyone with an interest in the topic and a modicum of intellectual ability. I would recommend it along with Benjamin Friedman's somewhat more challenging work entitled "The Moral Consequences of Economic Growth."

I found the book useful. Deepak Lal gives very good examples to support further liberalisation of trade. The historical analysis contains also a number of interesting points. However a few pages here and there are not well written and you need to read them several times to grasp the meaning. Also especially towards the end of the book it seems that the author has his own political agenda, which is not fully supported by his theory. Also his handling of how we should address the question of limited resources when there is a possibility of a problem of commons seems to be totally inadequate. There are cases where we do benefit from global regulations above those that Lal mentions. Totally dismissing the problem of climate change as harmless and giving the impression that DDT (and I guess other poisonous chemicals as well are implied) should be allowed are very weakly handled and if they should be taken as serious comments, there should have been other opposite examples. In the real world there certainly are things like the ozone layer that we need to take care of jointly. I also would have appreciated some theoretical handling of only reaching the local optima through independent agents in a free market that John Nash pointed out in his research. I hope liberal thinking could have more balanced supporters. This sort of omissions and misleading bylines lessen the case severely. And if these issues really create a problem to the theory, then the theory should be corrected. This requires a more balanced and scientific approach with best examples and arguments from all sides and not this kind of polemical approach. However, I did learn quite much and it is not uncommon in policy kind of books that the analysis part is good and the recommendations follow party lines and arguments are poor.

Lal applies the concepts of Classical Liberalism across historical and cultural boundaries, applying its premises to trade, capital flows, monetary policy and morality. He is certainly an advocate of classical liberalism, but his propositions are presented academically and are backed up with facts and substantive research.

The book can be dry and academic at times, but it remains an interesting and thoughtful read.

Lal's project of reviving Adam Smith's Wealth of Nations approach to economic growth and its necessary prerequisites is certainly a worthy task.Unfortunately,Lal has forgotten and/or overlooked what Smith's system of Natural Liberty(Classical Liberalism )entails.
It is simply a myth that Adam Smith opposed Tariffs in general.The major source of this myth is the economics profession which,unfortunately has not read WN to the end .Smith opposed protectionist tariffs only.Smith favored retaliatory tariffs(See WN,Part IV,Chapter 2,pp.434-435) if there was any probability greater than 0 that the retaliatory tariff would result in the removal of the original tariff imposed by the offending nation .Only if there is a 0 probability of success would Smith forgo retaliation.We know for certain that Smith would view it as gross stupidity for firms/industry to agree to hand over all of their patents and technological knowledge in advance to a foreign country in order to obtain access to its markets,as is the case in present day China.Lal's statements on p.24 and p.48 are simply gross errors.Anyone who has read Part V of WN knows that Smith supported the use of revenue tariffs as a second best mechanism in order to finance public goods and provide universal general and religious education for all citizens(This would be provided free of charge if they could not afford to pay).
Smith had an excellent understanding of the connection between productive investment, savings and economic growth.Smith's economic growth policy is founded on requiring the central bank to maintain low,fixed rates of interest,no more than 5%.Loans were not to be made to prodigals(the upper class) and projectors(speculators).Loans were to be made so that " A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage ".(Smith,p.340;see also pp.338-340).This policy is identical to the low interest rate policy presented by Keynes on pp.375-376 of the General Theory.
Lal appears to think that Smith was a Libertarian.Nothing could be further from the truth.Smith was a conservative.Lal needs to rewrite his book. He can bring out a second edition in order to correct the errors in the present edition.

Lal's book is full of assertions such as the following: "This papal revolution, by promoting love as the basis of marriage and advocating the independence of the young, led to the rise of individualism in the West". Praise be to Gregory the Great, our 6th century benefactor who started the ball rolling. Well, that's that thorny little issue sorted out, isn't it? Now, if you don't think this is ludicrously simplistic and reductionist, you might enjoy this book, considering it to be another sharp little tool in the right-wing intellectual box. If, on the other hand, you would perhaps consider failing a student essay that contained such a statement, you might find this book excruciatingly irritating, superficial and misleading. Perhaps gagging is a bit too lenient, after all.

This book is dim-witted ideas written with complex vocabulary. It's not elaborate ideas for sure.