On Early Neoliberalism

The New Statesman published a piece on the early history of neoliberalism by Daniel Stedman Jones, trailing his book Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics. It brings many of the lesser known aspects of the tale of the creation of neoliberalism to public discourse, but also participates in an attempt at ideological white washing of neoliberalism which will permit its continued reproduction. Naturally, I’m not going to dismiss a 424 page book that looks pretty good, so consider this a placeholder of suspicions and potential problems.

First where the piece gets it right and what it contributes. This is two fold. It highlights how neoliberalism was an attempt to re-found liberalism. It also notes that the first neoliberal experiments did not occur in Chile under Pinochet or even in New York, but rather in post-World War II German reconstructon.

However, it participates in basic falsehood with regards to the story it tells. According to Steadman, German neoliberalism was a largely benevolent creation of the likes of Hayek, later transferred over the Atlantic where it was perverted by the Chicago School into ruthless free market fundamentalism. Unfortunately for Steadman, this is simply false. While he correctly identifies the Mont Pelerin Society as a key crucible for neoliberal thinking, he neglects to note that it was precisely a transatlantic institution from the outset, deeply tangled already in the history of the Chicago School. A young Milton Friedman was an attendee of the first meeting of the Mont Pelerin Society in 1947 and took the time to write up his hopes for the society in the business journal Farmand. Frank Knight, Aaron Director and other members of the Chicago School of Economics were also present. The flights for the US based members of the society to fly to Switzaland were partly funded by the Volker Fund, a pro-corporate “benevolent” fund, who had become interested in Hayek’s work The Road To Serfdom and wanted an American themed version to be produced. And where did Hayek intend to out-source the writing of the (never completed) American Road to Serfdom? Members of the Chicago School of Economics and Law. And where did Hayek engineer his own place as a professor? The Chicago School of Economics and Law.

While it is certainly true that the German neoliberals or to give them their correct name “ordo-liberals” made a less hearty embrace of total market purity. Yet both co-determination and adequate welfare provision occurred in spite of the influence of the ordo-liberals on Ludwig Erhard, rather than because of it. Though there was more diversity of opinion on the subject of unions and welfare in the early history of neoliberalism, the economist with the closest proximity to Erhard was Wilhelm Röpke, whose wartime works Erhard described as “water in the desert”. Despite his interest in Catholic Social Teaching, which has consistently endorsed unionisation for worker protection (though with caveats concerning more militant action and the need for paternalist class collaboration), he was opposed to this fundamentally as an example of unthinking mass politics. Indeed, his anti-welfare state arguments are neoliberal commonplaces now - that welfare breeds dependency, that it creates a Servile State and so on.

What is perhaps most insidious about the piece is its failure to remind readers of one of the significant sources of ordo-liberalism’s formula of “strong state, free market” - with the strong state helping along the free market. I doubt you could paint it in such rosy formulations if it was understood that it was influenced by an Actual Out And Out Nazi, Hitler’s crown jurist Carl Schmitt. During the Weimar republic, Schmitt had written his Crisis of Parliamentary Democracy, where the argument was made for the necessity of a strong state standing above the sectional interest group of civil society who could capture the state in their interests. Refracted back through Schmitt, the strong state was the one capable of making the decision that defined the political for him. If this argument seems a little familiar, it is because it is roughly the argument Hayek makes in The Road to Serfdom - a book which while rejecting Schmitt, ends up making a pretty similar argument to him with regard to the state. There is more to say here, but I think I have made my point.

Those who want to better understand the early history of neoliberalism would be well served by the excellent The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective or Building Chicago Economics: New Perspectives on the History of America’s Most Powerful Economics Program, or Constructions of Neoliberal Reason by Jamie Peck. Michel Foucault’s The Birth of Biopolitics. Or if you can read German, Ralf Ptak’s book Vom Ordoliberalismus zur Sozialen Marktwirtschaft. Stationen des Neoliberalismus in Deutschland is the best from a critical stance. Strategies of Economic Order: German Economic Discourse, 1750-1950 by Keith Tribe is excellent, as is Freedom with Responsibility: The Social Market Economy in Germany, 1918-1963 by . On the closeness of Schmitt and Hayek, see Carl Schmitt and Authoritarian Liberalism: Strong State, Free Market by Renato Cristi. The best work on ordo-liberalism from a Marxist perspective is being done by Werner Bonefeld who has a bit of work in the bag forthcoming on these matters.

The ideological import of this is fairly interesting are we beginning to see a discourse something like “we need to return back to the origins of neoliberalism”. The oddness of this is quite frank, after years of neoliberal hegemony we need to get back - to more original neoliberalism!

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