New Left Project

Defending Capitalism: The Rise of the Neoliberal Thought Collective (Part 1)

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 first of a two part interview he spoke to NLP’s Tom Mills about the early development of neoliberal ideology and its relationship with conservatism and classical liberalism. You can read the second part of this interview here.

The research you’ve been involved in has discovered a much greater diversity of ideas and policy prescriptions within neoliberalism than is normally assumed in critical writing. What unites neoliberals and does it make sense to think of neoliberalism as one coherent body of thought?

We were concerned that many of the critiques of neoliberalism focused on the straw man of anti-statism, or were directed against the policies of the Thatcher and Reagan governments, or the Washington Consensus for example. We regarded these critiques as slightly problematic because whilst it is true that in public certain neoliberal ideas have been expressed very bluntly and stated more as a political message, in fact such statements often contradict much of the research and writing of key neoliberals. 

So for example in neoliberal writing you don’t really find an argument that the state should be destroyed, which comes from anarcho-libertarians. James Buchanan writes that neoliberals are not in favour of removing the state and establishing a pure market society. He refines the neoliberal critique of the state to suggest that it’s much more important to be clear as to what kind of state you want – which is a state that protects private property and so on. Even the Virginia School people, the public choice school, that theoretically considers ‘state failure’ as the key to understanding the modern state, is not in favour of destroying the state. 

So although in public you have these very simplified attacks on the state, if you look at neoliberal writers then you actually find a quite broad spectrum of reasoning about state policies and state intervention. 

We suggested therefore that it is necessary to focus not only on neoliberalism as a political movement, but also to look more closely at its intellectual history. What we discovered was a relatively large group of intellectuals called the Mont Pelerin Society, which was founded in 1947 by Friedrich Hayek, Wilhelm Röpke and others, including the members of the Chicago School. Looking at the people who were part of this network and who devoted much of their intellectual energy to convening meetings every year in different places (mostly in Europe but later also in the United States and other places) you realise that you are talking about hundreds, actually thousands, of scientists and intellectuals who are not easily reduced to one perspective. And you don’t only find economists, which is another common reduction. In this large network you also find historians, philosophers, political scientists, legal scholars and so on. This is of course a serious strength – you have people who can inform the political reflections of neoliberalism from many different disciplines and a variety of epistemological and philosophical backgrounds. Neoliberalism has also been global from its inception and neoliberals have tried to bridge cultures, to include people from different world regions and to recruit in the global south. That makes neoliberalism much richer than the straw man that is frequently attacked by the left. 

Now if you ask: what unites what is arguably a much more heterogeneous group than is frequently thought?  We discovered that the neoliberals were eager to develop and refine basic norms and principled beliefs – which in social scientific debate have been found to be very important in constituting what are called ‘epistemic communities’. Peter Haas, and many others, emphasise the importance of basic norms and principles in constituting effective policy groups in international arenas. But often people do not bother to explain where such norms come from. We think that by studying this network of neoliberals one can find out when and how neoliberal norms and principled beliefs were generated and developed. 

Neoliberals agreed in their first meeting for example on the need to redefine the functions of state so as to clarify the difference between a totalitarian and a liberal order and to examine the possibility of minimum standards not inimical to the market. The older liberal ideas about society – emphasising individualism, market transactions, ownership, freedom and so on needed new frameworks. 

In a very strong overlap with conservatives, neoliberals also agreed to oppose what they saw as the abuse of history in support of belief systems hostile to their conception of liberty. According to them, philosophical relativism propelled by Enlightenment thinking was a root cause of totalitarian perspectives. So they insisted, like conservatives, on an atemporal value base and on the sacrosanct truth of certain basic beliefs. This was of course an attack on the materialist effort to challenge idealistic conceptions and the progressive understanding that humanity is constantly increasing the capacity to comprehend things and direct developments accordingly (the despised Cartesian rationalism inspiring the Unity of Science movement so vivid in the Vienna Circle). This stance explains the overlap between neoliberalism and religion, which of course would also oppose philosophical relativism and insist on an eternal element of truth in philosophy. But anti-relativism can also be reconciled with a liberal norm of individualism under the banner of human rights, property rights and (religious) freedom, targeting what they perceived as the threat of collectivism emanating both from communism on the left and fascism on the right. 

So we see that neoliberals worked very hard to develop a set of norms and principled beliefs on which everyone more or less agreed and which most would find to be the common sense of the group. These principled beliefs and norms were then taken to certain fields and in time we see that they applied them to different questions – for example the question of liberalism and religion, liberalism and development, liberalism and the European Union. This enabled them, even with a heterogeneous group structure, to communicate very effectively. 

We define this process as developing pluralism within neoliberal confines. The confines are not necessarily very narrow. There were always struggles as to who belongs and who doesn’t and people like Hayek for example were quite a bit more pluralist than the Anglo-Saxon libertarians, who were very closely connected to the business right. But this was a lively debate and nobody had the power to decide unilaterally who is in and who is out. So it was ‘thought collective’ process. 

You mentioned an overlap with conservatism. What did neoliberalism have in common with conservatism and with classic liberalism and how did the ideas and norms developed in the neoliberal thought collective differ from those earlier traditions? I know Hayek considered himself a liberal rather than a conservative.

This is another subject of great confusion. Hayek certainly referred to himself as a liberal. In his famous article, ‘Why I Am Not a Conservative,’ he says that conservatism is ill-suited to guide the transformation that is going on in society – the constant process of change. Basically there is an ever recurring tension between a dynamic economic order, capitalism, and the relative stability of the social sphere, the legal organisation and institutions. Hayek very clearly distances himself from conservative ideas which emphasise continuity and stability and calls for a perspective which articulates the demands of liberalism, which after all has historically been a force for change. 

So neoliberals on the one hand want to be the party of progress, like the classical liberals who were of course fighting against feudalism and guiding the transformation of society, but on the other hand neoliberals are against the socialist transformation of society, which makes them a very strong force in the conservative camp. 

So there’s a huge contradiction and clearly neoliberalism cannot be understood without understanding this double feature: the connection to liberalism through emphasising progress and individualism, and on the other hand being a part of conservatism against socialism. 

Neoliberals have been closely connected to right-wing parties of different colours: Christian Social Democrats, right-wing Tories in the UK, Republicans in the US and even military dictatorships, which are absolutely committed to preventing changes sought by social movements. Theoretically they can be on the other side of the conservatives in terms of basic philosophy. But politically they are strong allies of a whole range of conservatives. Whatever it takes to prevent socialism from winning, that's what Hayek explicitly said in Chile – that sometimes you have to make sacrifices in order to preserve the greater good. 

That does rather suggest that neoliberalism is conservative or reactionary in so far as it is a reaction against socialism and collectivism.

People who emphasise this aspect are absolutely correct but it depends on circumstances and places and the situation of class struggle and so on. The neoliberals can, like in Germany or Switzerland after the war, become strong allies with reformist trade unions in order to build a private sector bulwark against the expansion of welfare state institutions. Whilst in the United States they can be very strong allies of the business right against trade unions. 

The alliances made by neoliberals depend on the local and historical political and institutional context. In Chile and Argentina they allied with fascist dictatorships to advance neoliberalism, seriously undermining their stated commitment to freedom. Latin Americans therefore tend to believe that neoliberalism and dictatorship are identical. But you cannot reduce Hayek to being just an adviser to Pinochet. He was also advising Thatcher and Ludwig Erhard for example, as was Friedman (Pinochet and Friedman by the way died just three weeks apart in 2006 but there was no mention of their relationship in the obituaries). When confronted with his record in Chile, Friedman would of course point out that they also advised the communist government in China. So you cannot reduce neoliberals to a single place and context, they were a global network and were partners and communicators to a whole range of people. 

In order to explain neoliberalism I think it is crucial to understand its duel character as being both reactionary and progressive. At the time of the 1920s liberalism was the party of yesterday. It had turned into an orthodoxy, like Stalinism would become in the Soviet Union, and it was totally incapable of addressing the grave problems of capitalism at the time. It had this notion that you should not intervene, that you should have no economic policies and so on. The neoliberals understood that liberalism had failed to remain the party of guiding change. Neoliberalism only emerged in the 1930s when liberals started to confront the failures of classical liberalism and redevelop the progressive elements in an ‘unorthodox’ fashion so as to direct social change. That's basically why they are not simply reactionary in terms of preventing socialism. It’s important to not underestimate the progressive element of neoliberalism in its strategic function of guiding social change. 

In that it wants to seize the initiative?

Exactly. 

So in terms of its relationship with classical liberalism, what are the key features that distinguish neoliberalism? What makes it new?

These days you read a lot that suggests that there is continuity in the history of liberalism and that there is no neoliberalism because the present state is basically classic liberalism. People making such claims haven’t read the documents of the 1930s and ‘40s. You have to look at the time when neoliberalism was born. 

Modern neoliberalism was first conceived in the 1930s, in particular at a conference in Paris called the Colloque Walter Lippmann, which was organised by a group of French neoliberals. They invited many of the people who later became key members of the Mont Pelerin Society including Friedrich Hayek and Ludwig von Mises. At this meeting in Paris in 1938, they discussed the crisis of liberalism, which was seen as totally ill-equipped to address the Great Depression and the rise of collectivism. They clearly understood that classical liberalism had no answer. This was very strongly expressed. If you read the documents you can clearly see that neoliberals not only levelled great criticisms against Marxists, but also against their liberal predecessors. They understood the fallacy of the naturalistic understanding of capitalism in classical liberalism and recognised the limitations of seeing the state and the economy as two separate worlds. 

They accepted that they didn't have all the answers needed to protect capitalism and society and committed themselves to working to find a new direction.  That new direction was called neoliberalism, although they had other names circling around including social liberalism interestingly enough. In the 1930s neoliberals were quite a bit more left-wing than they were under welfare state capitalism, although their principle competition in the Keynesian camp was much further to the left, of course. 

Why do you think that was?

Because one of the great problems at the time of the 1930s was the social question. Capitalism was in mortal danger because it could not supply work and could not supply the means to integrate the working class. So of course if your project is to preserve capitalism, and that is the neoliberal project, then in times of social crisis you become a social politician. In times of wealth and well-being the welfare state is seen as a luxury that keeps people from working.  But if your first goal is to preserve capitalism and you have a big social crisis, then you have to adapt. You can see now how after a few years of the global financial crisis, neoliberals have become advocates of state intervention and can now find sympathy for the suffering of people. This is confusing to people who do not fully understand the larger rationale of the neoliberal enterprise. 

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.

About this article

Published on 12 March, 2012
By Dieter Plehwe, Tom Mills