Defending Capitalism: The Rise of the Neoliberal Thought Collective (Part 2)

by Dieter Plehwe, Tom Mills

Neoliberal ideas have a complex relationship with political practice which depends on the level of class struggle, the strength of political alliances and the health of capitalism.

First published: 14 March, 2012 | Category: Corporate power, Economy, Employment & Welfare, History, International, Philosophy and Theory, Politics, The Right

Dieter Plehwe is a Senior Fellow at the Social Science Research Centre Berlin and the co-editor with Philip Mirowski of The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective. In the second of a two part interview he spoke to NLP’s Tom Mills about the relationship between neoliberal ideas and its political practice. You can read the first part here.

How distinct is the political practice of neoliberalism from neoliberal ideas?

I think this is quite crucial. The relationship between the intellectual sphere and the political field has always been complicated. You can declare intellectual developments to be rather unimportant reflections of real world political and economic developments.  Or on the other hand you can suggest that political reality pretty much depends on intellectual work. These are the clear cut idealist and (vulgar) materialist approaches. But neither is very Marxist or Gramscian, which would require us to develop a greater understanding of the intellectual field as an element of the material world. The material for Marx, unlike Feuerbach, means social form and cannot be reduced to physical substance. Juxtaposing intellectual and material developments then is basically a misinterpretation of materialism. 

In order to understand the structural transformations of society we consider it necessary to study the intellectual developments at different levels – theoretical and political, including both congruence and tensions. That's where in our research we differed with histories like David Harvey's where neoliberalism essentially becomes the institutional and structural transformation of society with very little about the intellectual efforts and tensions involved in this process. Neoliberalism as a world view can be severely underestimated if it is considered a one-dimensional, single entity. 

We take Gramsci seriously in emphasising the intellectual world as a key element of the material structure.  This requires to do more than study a single book of an author and take that as a representative of the whole, a pars pro toto. This is not how the intellectual world operates across borders, institutions and media. It is appropriate instead to study intellectual networks of organizations, people and ideas. 

So the intellectual world should not be read at a great distance in an idealistic manner – as a history of ideas, or sociology of knowledge, or ideological critique confined to the letters – nor should it be treated simply as a superstructure which is defined by the base and juxtaposed to a ‘real’ world. In fact we considered the study of the Mont Pelerin Society as a contribution to a greater understanding of the transnational, transdisciplinary and transprofessional intermingling of the intellectual world and the concrete world of politics after the Second World War. 

As a group, organised neoliberals were frequently less influential in politics than in the ideational sphere. In the UK, for example, the Institute of Economic Affairs had a great input into the early Thatcher government and the rise of the privatization philosophy. But Thatcher did not break up the bureaucracies and did not attack the National Health Service in any significant way at that time, to the dismay of neoliberals. The political world certainly does not follow the blue prints of its intellectual advisors all the time. 

Yes, Alfred Sherman, who was one of Thatcher’s advisers was completely disillusioned with her not carrying through their project.

Exactly, so there are differences. In the intellectual sphere you can create clarity and coherence, and a longer term vision. In practical political thought though you have to respond to the class struggle and the relation of forces in society and not just the guidance of a self-declared intellectual leadership.

At the same time – and this may be even more important than this tension between the cultural-intellectual leadership and pragmatic politics – we can consider some of the neoliberal visionaries as radical neoliberals, whilst you can consider neoliberalism in practice as a sort of pragmatic neoliberalism. Here you can make an analogy to the revolutionary and reformist perspectives on the left. Everyone will agree that you need to revolutionary perspectives to keep the reformists on track. It is not so different on the right. They are proud of having this revolutionary vision, except that they have this anti-utopian message, a never reachable goal of an individualist society. 

The other very important aspect, which we see now in the US Republican election campaign, is that neoliberals, particularly in the US, built a very solid political alliance with the religious right. This is not the same as the work within the neoliberal networks in terms of the intellectual pluralism of neoliberalism. It is a straightforward political alliance. 

Many of these people were building bridges to the religious right even though their economic policy ideas did not necessarily coincide and they frequently disagreed on issues like abortion or gay rights, for example. Nevertheless, the secret behind the Reagan and George W. Bush administrations was that they managed to build a very strong strategic alliance between the camp of neoliberalism and the camp of the religious right. This is something that still requires a lot of research, but the organisation which is very important in this regard was the Philadelphia Society in the United States. It is a sort of national Mont Pelerin Society, but with much more of an effort to integrate the religious right. 

Right now in the Republican Party we see that the Republicans are experiencing great difficulty in finding a candidate who can rebuild this alliance, which has fallen apart over the last few years. There was a lot of dissatisfaction from parts of the religious right with the foreign policy of the Bush administration and in the libertarian camp Ron Paul is a very strongly against foreign intervention. So there is a great difficulty in uniting the religious right, the military-industrial complex and the libertarian right. 

That's actually a key difference between the election campaign of Ronald Reagan or George W. Bush and the future Republican candidate. I don't see how any of these candidates could be acceptable as a unifying agent. If it is Romney as mainstream business and finance Republican, he has to integrate the constituencies of Ron Paul, Gingrich and Santorum. Ron Paul and Gingrich are representatives of the radical and moderate neoliberal camp and Santorum is of course a representative of the religious right. It is hard to see how the Republicans can again unify the different wings represented in the current slate of competitors. Obama may have a chance of winning for this reason. 

Okay. I want to go back to the origins and growth of neoliberalism. It starts off as a fairly marginal set of ideas and later becomes completely dominant. What would you say explains that growth? And another related question, which comes back to your comments on materialism and idealism, how important was big business in the growth of neoliberalism?

From the origins of neoliberalism to today we are talking about a period of 80 years, so it’s a very long time. 

First of all, people have underestimated the strength of neoliberalism much earlier on in history, like in the German post-war government of Christian Democrats Konrad Adenauer and Ludwig Erhard. Erhard was a member of the Mont Pelerin Society as was Alfred Müller Armack and some of the key advisors to the administration. This group of scholars and politicians in fact invented Germany’s social market economy, which is a neoliberal masterpiece. Many people think that the social market economy was from the beginning a sort of social democratic tool. In fact it was developed against socialist ideas advocated at the time by the competing Social Democratic party and the trade unions in Germany. That is why the original social market economy was on the campaign programme of Margaret Thatcher and why Milton Friedman advised Pinochet to apply the social market economy from Germany. 

That's interesting because I read recently that the Centre for Policy Studies was originally set up to study the social market economy.

Exactly. In the neoliberal camp you find frequent references to the name ‘social market economy’. It is one of their strong weapons because you can oppose the welfare state but say you are in favour of the social market economy as an attractive neoliberal solution. 

In Germany the social market economy was a compromise, but it was a compromise struck under the guidance of neoliberal programmes rather than under the guidance of socialist programmes. Germany was of course a rare case at the time compared with the rest of the world, expect possibly Japan. We don't really know enough about Japan at the time but Albert O. Hirschman suggests that the strengths of neoliberalism in Germany, compared with Keynesianism in France and elsewhere, was due to the military occupation. In Germany and Japan, the United States favoured the right-wing liberal ideas and reinforced local groups. Hirschman’s chapter in Peter Hall’s edited volume on the Political Power of Economic Ideas is not read much, unfortunately. 

In any case, then we have Fordism and the rise of the welfare state and the neoliberals go into crisis. If you read the discussions of the Mont Pelerin Society in the late 1960s and early 1970s, it is seen as a doomsday scenario – the end of entrepreneurship and so on. But they rebuild in the 1970s, which is when they discover and redefine the work of Joseph Schumpeter. Herbert Giersch, Germany’s eminent neoliberal economist and president of the Mont Pelerin Society declared the new age of Schumpeter to replace the age of Keynes. Schumpeter is of course no friend of neoliberalism, and Giersch had to play an intellectual trick: he nominally adopted Schumpeter’s concept of entrepreneurship and dynamism whilst divorcing it from Schumpeter’s commitment to macroeconomic innovation. Giersch’s entrepreneur then is an average guy.  He follows von Mises who declared every person to be an entrepreneur if he or she carries responsibility. In this way, every dependent employee is easily turned into a self employed entrepreneur. You can even redefine an unemployed youth as an entrepreneur, alone and fully responsible for his own fate! 

The subsequent rise of neoliberalism as a hegemonic constellation is very much linked to the crisis of social liberalism and Fordism in the 1970s. Many of the real world contradictions of the social liberal era provide a lot of room for manoeuvre – the contradictions of the welfare state, the failures of state intervention, the failure of import substitution in the Global South. 

You can argue that the crisis of social liberalism was attacked by the right-wing liberals in some adequate ways. The neoliberals did address some of the problems of the self-interest of politicians theoretically, for example, which was not the case in welfare economics. 

Marxism was also critical of the contradictions of the time, but arguably less effectively. Consider monopoly theory for example. The left considered monopoly as a stable form, whereas the neoliberals advocated a perspective of dynamic competition even between monopolies. Then in the real world we had the failure of national monopolies because of increasing international competition. So in some ways the neoliberal perspectives on the dynamic of competition was closer to reality than the Marxist vision of ever-growing monopolies. That was also of course due to the crisis of Fordism and the break-up of the national varieties of capitalism, the increasing dynamics generated by the class struggles at home and the unleashing of globalisation by various rounds of the General Agreement on Trade in Services (GATS) and so on. 

As for the role of business, it was under pressure at the time from trade unions and increasing demands on social integration. They became radical, turned away from the existing compromise and found natural allies in neoliberal groups. Although the neoliberals had always had pretty strong contacts with the business world, they were largely outsiders in the business world in the ‘50s and ‘60s, except for in Germany. Then increasingly in the 1970s the business community found the ideas of the neoliberals much more attractive. 

How has the current crisis affected the neoliberal thought collective?  Do you have a sense that they have gone into crisis or are they not threatened by the current situation?

That's a very good question. On the one hand because of the strong support of the business community we have a much, much more entrenched camp of neoliberalism today in all societies. As I’ve said, there was always some support from business in the 1950s and ‘60s, but the support grew stronger and stronger in the 1970s and ‘80s. As a result many more people can now make careers on a neoliberal educational background than they could in the 1960s. 

They have much more money to fund think-tanks and much more money to put people educated in the neoliberal spirit into government positions and the higher ranks of the civil service. There are think-tanks everywhere, many more positions for neoliberals in universities and even whole universities in some countries. That makes the crisis of neoliberalism today comparable with the crisis for social liberalism in the 1970s. That did not blow them away immediately; they had many positions which they could defend. 

Intellectually it is very interesting. I think an honest neoliberal would suggest that we have to lead a new discussion in search for a new version of neoliberalism. The social liberals thrived on market failure theory, which was very appropriate for the 1930s, ‘40s, and ‘50s, but did not look carefully at the contradictions of state intervention. Neoliberals turned that upside down and suggested that state failure, not market failure, was the problem and that we had to address the problems of the state rather than the problems of the market. So market failure theory is followed by state failure theory and the neoliberal reforms are guided by that perspective. 

I would suggest that in theoretical terms neoliberals are in mortal danger of sticking closely to the dominant theories and the intellectual endeavours of the 1970s and ‘80s and that if they don't overcome the intellectual legacy of that time they will find themselves unable to address the present crisis. After the financial crisis we have a very clear picture of an intertwined market and neoliberal state failure at a global level.  The market failure resulted from the emphasis on deregulation and the failure to build necessary regulatory frameworks for globalised financial markets and the new instruments developed by the private sector.  You can try to shift attention away from this, as we have seen, but you cannot disconnect the market failure that occurred from state failure. 

In general, they are attempting to defend the status quo before the crisis, but the smarter ones among them will not be happy doing just that, because it will not be enough to keep them in the driver’s seat. But we will see. They have managed to turn attention away again from the crisis of financial market actors and have so far been successful in bringing back the notion of a fiscal crisis of the state. But it's undecided at this point and we have very strong social struggles in many countries, requiring a greater emphasis on social integration once again. We are still very close to these processes, so it is very hard to judge where it is heading. 

Tom Mills is a freelance investigative researcher based in London, a PhD candidate at the University of Bath and a co-editor of the New Left project.

All comments are moderated, and should be respectful of other voices in the discussion. Comments may be edited or deleted at the moderator's discretion.

Remember my personal information

Notify me of follow-up comments?