Founding father of the IEA
Wednesday 12 October 2005
The founding fathers of the Institute of Economic Affairs, Arthur Seldon and Ralph Harris, were for long widely regarded as political crackpots. Their advocacy in the 1960s and 1970s of free-market economics and pricing for public services was dismissed even by the Conservative Party. By the early 1980s however, they gradually began to win over the political establishment. It is a remarkable story of the power of ideas.
It was to the IEA that Sir Keith Joseph turned, in his own words, "for an education" in free-market economics, following the Conservative general election defeat in February 1974. Those meetings led to the creation of the Centre for Policy Studies, development of Thatcherism, and the frontal assault on the post-war collectivist consensus.
The great Austrian economist Joseph Schumpeter had warned in 1942 that capitalism would decline because it did not have persuasive defenders. Businessmen lacked charisma and were too busy seeking favours from government in the form of subsidies and restricting competition. The case for the free market and profits paled beside that of planning and social justice. Even as Prime Minister, Margaret Thatcher still complained in private that capitalism was discredited in schools, universities, churches and media. The IEA may have been a voice in the wilderness in the 1960s but, as she often acknowledged, it prepared the path for Thatcherism.
Seldon was born in the East End of London in 1916 and had few advantages. He was orphaned at the age of three (his parents died of Spanish flu) and then adopted by a childless cobbler and his wife. A legacy of that experience was his strong belief in self-help. To the end of his life he complained that the bureaucratically managed welfare state and priceless goods and services, supplied "free" by the Government, discouraged independence and self-esteem among its clients.
He wanted people to receive money and vouchers so that they could choose their own schools and hospital treatment. That would encourage their commitment to self-improvement and independence and break the power of " bossy" bureaucrats and welfare providers. Indeed state welfare actually undermined the traditional forms of self-help, through the community, charities and friendly societies. His Judaism reinforced these beliefs.
Seldon's scholarship to the London School of Economics was decisive for his intellectual development. He embraced the classical liberal economics, taught by Professors Lionel Robbins, Friedrich Hayek and Arnold Plant, rather than the Fabianism found elsewhere in the school. In 1940 Plant headed a small survey research unit at the Ministry of Information and for a time employed the young Seldon to draw up the sampling frame for interviews. After the Second World War, in which he served in the Army in Africa and Italy, Seldon taught evening classes as the LSE, and conducted research for the brewery industry.
Harris was put in by the entrepreneur Anthony Fisher as General Director of the IEA in 1957 and Seldon as part-time editor soon after. They were an unlikely combination. Harris, the front man, was confident, colourful, moustachioed, and often sported a bow tie and bright shirt. Seldon dressed soberly, was short, stocky and studious and cursed with a terrible stammer that limited his public role. The impediment meant that he shone in print not on the platform. At their first meeting Harris wondered how such a retiring person would fare in an entrepreneurial body. Both men kept clear of party politics, though Seldon was a traditional Liberal. But it was the free-market wing of the Conservative Party that was most sympathetic to their ideas.
The first 30 years of the IEA were inseparable from the personalities of Seldon and Harris. It was organised in 1957 as a research and educational trust - today it would be called a think tank. For a time it attracted the support of only the non-Keynesian economists and Conservatives disillusioned with the collectivist drift of the party; at the time both were beleaguered minorities. It promoted and published the work of Milton Friedman and Friedrich Hayek on monetarism and markets. Indeed Seldon regularly edited and polished the work of the latter.
The job of commissioning, reviewing and editing (he ruthlessly excised jargon) over 350 papers and pamphlets was a demanding one. Many young authors owed their first start to Seldon's skills in developing neglected topics and fussily transforming first drafts into polished prose. The pamphlets and seminars were aimed at the informed public in the belief that shaping the climate of opinion was the best way of influencing politicians.
Seldon actually wrote the first IEA pamphlet in 1957, Pensions in a Free Society. It argued for personal private pensions, something achieved 30 years later. Although he was a generous man and interested in new ideas, the years of derision and indifference from politicians and media left a mark on him. Sympathetic politicians (like the young Geoffrey Howe, Enoch Powell or Sir Keith Joseph in 1964) were treasured as "a friend" or "a supporter". For a time there was something of an "us and them" attitude.
Over time, and particularly after 1979, Seldon and Harris saw many of their supposedly eccentric ideas carried into policy, including privatisation, control of the money supply, creation of an independent university, student loans, trade-union reforms etc. But there were setbacks. He and his wife, Marjorie, were ardent supporters of school vouchers and had high hopes that Sir Keith Joseph, the Secretary of State for Education between 1981 and 1986, would promote the idea. They were disappointed when he accepted the objections of his civil servants and aghast that his education reforms resulted in such central control of schools and universities. Thatcher's NHS reforms also found no place for health vouchers.
Seldon saw little point in curbing the power of the producers, only to increase that of politicians and bureaucrats. The market was more responsive to popular choice than the political process. Genuine reform should empower consumers and customers. Seldon always took the long view and believed that his ideas would win out eventually.
The relationship between Harris and Seldon, although fruitful, was not without its strains. Seldon, overshadowed by his more high-profile partner, was not pleased that Harris was singled out for a peerage in 1979 (he took the title Lord Harris of High Cross). Many in the IEA were embarrassed and regarded it as a slight to Seldon; it seemed invidious to distinguish their contributions. His life was the IEA and he looked askance at Harris's fund-raising on behalf of the Mount Pèlerin Society and the private University of Buckingham. Seldon was bored with Europe, while Harris was a passionate Eurosceptic. Their shared vision and sense of achievement overcame these differences.
Seldon retired as Editorial Director in 1981 but remained as a very active consultant editor until 1988. A year later Harris resigned. They disagreed over the appointment of Harris's successor. Seldon did not regard Graham Mather, who wanted to target the policy makers more directly and tackle wider issues, as the appropriate choice as General Director. Both agreed, however, that the IEA under Mather was becoming too close to John Major. After clashes Mather resigned in 1992.
Arthur Seldon was a remarkable spotter of young authors. He brought politicians and intellectuals together at lunches at the Lord North Street offices, acquired in 1969. He encouraged his contributors to follow their own ideas and "think the unthinkable".
His years as editor held him back from his own writing. But he became productive in his later period and his publications include The Great Pensions Swindle (1970), Charge (1977), Capitalism (1990), The State is Rolling Back (1994: essays spanning 50 years), The Dilemma of Democracy (1998) and The Making of the IEA (2002). His death comes on the eve of the publication of the seventh and final volume of his collected works.
The Seldons had three sons. Anthony, the youngest, is author of acclaimed biographies of John Major and Tony Blair; he inherited much of his father's editorial and networking talents but not his politics.
Arthur and his remarkable wife, Marjorie (whose uncle invented daylight saving), continued to host social and intellectual gatherings at their home ( "The Thatched Cottage") outside Sevenoaks. He liked to call them "parties for non-conformists".
Arthur Seldon was one of the most powerful exponents of classical liberalism in the second half of the 20th century - both as writer and editor, writes Professor Colin Robinson. He was one of the great editors. He was constantly seeking authors who would pursue ideas to their logical conclusion, no matter how radical the ensuing reform proposals. Authors' initial efforts would be peppered with suggestions for change, particularly if the ideas were not clearly expressed without technical jargon and if (the ultimate sin) reform proposals were trimmed to take account of the " politically acceptable".
At the same time he was a prolific author, starting at the age of 21 and producing 28 books and some 230 articles. His work, ranging from long books to short newspaper pieces, has been gathered by Liberty Fund of Indianapolis under the title The Collected Works of Arthur Seldon. The Collected Works is full of original ideas and genuinely accessible to people with no formal training in economics. His analysis, from the late 1950s onwards, of the inherent deficiencies of the welfare state is far ahead of its time. He was also one of the first to perceive the problem of over-government in representative political systems where infrequent elections are insufficient to keep politicians and civil servants in check.
Arthur could be impatient - for instance, with the slow pace of economic reform in Britain in the 1980s and, more generally, with socialism which he saw as a system that is fundamentally misguided and incapable of being mended. But in his personal dealings he was patience itself.
Summarising the contribution of a person of such stature is not easy. But the economic and business worlds in Britain and abroad would be quite different - and much more hostile to enterprise - without the efforts of Arthur Seldon.
May I, as Arthur Seldon's amanuensis for the last decade of his professional life and his successor as Editor of Economic Affairs, add to Dennis Kavanagh's perceptive obituary? writes Martin Anderson.
Professor Kavanagh points to the occasional strains in Arthur's relationship with Ralph Harris, then General Director of the Institute of Economic Affairs, with Harris as the gregarious front man and Seldon the studious and tongue-tied academic (incidentally, he attributed his stammer to the discovery, at the age of eight, that he had been adopted). But it wasn't simply a question of personality: there was also a profound difference in philosophical position, Harris the conservative arguing for a smaller state, Seldon the radical liberal distrusting the very institution of government. These divergent outlooks helped generate a productive tension between the two men, one of the reasons their partnership was so effective.
Arthur thus warmed less to Milton Friedman's "monetary rule", a device for imposing discipline on governments tempted to inflate the currency for political ends, than to Friedrich Hayek's argument (first proposed in Choice in Currency in 1976 and refined in The Denationalisation of Money in 1978 both, naturally, edited by Seldon for the IEA) that the state should not issue money at all; instead, competing currencies could be issued by private financial institutions, secured against a basket of commodities and policed by competition in the marketplace.
At a 1996 meeting of the Mont Pèlerin Society (an association of free-market economists founded by Hayek in 1947), in contrast to the majority of those present who were revelling in the ascendancy of market thinking, Arthur took the floor to complain about the slow pace of reform. His central argument on that occasion "If we wait for government to give us what we want, we'll never get it" was a libertarian call to arms many of his more conformist colleagues would never have dared utter. He saw growing tax evasion as evidence that individuals were already taking matters into their own hands.
One story perfectly captures Arthur Seldon's indifference to the swish of political power. Margaret Thatcher was one of the politicians of all stripes who called in at the IEA for occasional lunches. On one such visit a colleague of ours, pulling no punches, began to criticise her partial privatisation of British Telecom: by allowing only Mercury to compete with BT, and that in a few restricted markets, Thatcher had in truth increased the number of people with an interest in obstructing genuine liberalisation. She was obviously unused to such direct censure and bridled at the attack. Ralph Harris, ever the joiner, tried to pour oil on the waters by calling for "a toast to the best prime minister since Churchill". Arthur gritted his teeth, raised his glass and said, in a stage whisper: "I'll take a sip."
An indication of Seldon's standing among his fellow economists can be seen in the fact that, of the 10 essays in The Unfinished Agenda, the Festschrift I edited for his 70th birthday in 1986, no fewer than four were by Nobel prize-winners. One of them, James Buchanan, wrote, "Arthur Seldon has been able, more than most of us, to combine realism in prediction with continued idealism in vision."
The combination produced some remarkable insights. In the early days of the IEA he warned that government would soon raid National Insurance pension funds to bail themselves out of more immediate political difficulties. In 1979 he foresaw that "Labour as we have known it will not rule again". And in 1981 he predicted both that Soviet Communism would not survive the century and that China would go capitalist. His conviction that the state would eventually wither away as individuals took steps to avoid its intrusions has so far been proven accurate only in part.
What can't be denied is that you have to go a long way these days to find anyone who seriously advocates socialism. And no single individual deserves more credit for that crushing intellectual victory than Arthur Seldon.
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