The Great Persuasion: Reinventing Free Markets Since the Depressionby Angus Burgin (Harvard University Press, £22.95)
Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics by Daniel Stedman Jones (Princeton University Press, £24.95)
By now, the phrase “too big to fail” is a household term for arrogant financial institutions. But it also describes the neoliberal economic paradigm that has fuelled that arrogance for decades: the unwavering faith in laissez-faire and the devotion to deregulation. Since the 1970s, such thinking has swayed policymakers on both sides of the Atlantic and on both sides of the political aisle. Ronald Reagan’s famous proclamation that “government is not the solution to our problem; government is the problem” has been accepted in much of Westminster and Washington, even by many liberal politicians.
Although Margaret Thatcher and Ronald Reagan tend to receive the credit for ushering in supply-side economics, Labour prime ministers Harold Wilson and James Callaghan also prioritised the fight against inflation over the fight against unemployment and enacted numerous spending cuts. In the United States, the deregulation of the banking and transportation sectors began with Jimmy Carter, Reagan’s Democratic predecessor. Twenty years later, the Labour prime minister Tony Blair and the Democratic president Bill Clinton devised the “third way”—an attempt at reconciling the efficiency of neoliberal economics with a commitment to social justice.
The fundamental strength of the neoliberal paradigm was confirmed during the financial crisis of 2007-8. Did the apparent failure of neoliberal economics cause its adherents to question their beliefs? Did public opinion in either society call for a change in direction? Hardly. In 2010, the Conservatives won the most votes in the British general election and the Tea Party swept the Congressional elections in the US. Even after self-immolation, it seems, neoliberalism still holds court. Two comprehensive new intellectual histories—Angus Burgin’s The Great Persuasion and Daniel Stedman Jones’s Masters of the Universe—attempt to explain that enduring power.
The primary emphasis of Burgin’s excellent book is the Mont Pèlerin Society, the group of international economists and intellectuals assembled by the neoliberal prophet Friedrich Hayek in Mont Pèlerin, Switzerland in 1947. Hayek had recently published The Road to Serfdom, his 1944 polemic against the totalitarianism he believed to be emerging in decidedly anti-totalitarian Britain and the United States. He considered both British social democracy and American New Deal liberalism to be affronts to individual liberty as dangerous as Nazism or communism. For Hayek, the trend toward socialism in both societies would result in inadvertent “bondage and misery” through a centrally planned economy.
Mont Pèlerin was an attempt to avoid the “road to serfdom” its founder so profoundly feared. The Society’s "Statement of Aims," dated 8th April 1947, reflects that paranoia. “The central values of civilisation are in danger,” it begins. “Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared.”
The Society’s ranks included Karl Popper, Ludwig von Mises, George Stigler and Milton Friedman. As Burgin argues, its transnational composition “complicates the common assumption that the conservative project was parochial in its origins or strategic in its intent.” He also lays to rest the notion that it was based on unified intentions: discussion, dissent and discord were the de facto principles that shaped the Society and, in turn, the subsequent movement it inspired. As Burgin makes clear, when Hayek finally assembled these different intellectuals in one place, “he discovered that he had assembled colleagues who were united in what they opposed but shared little agreement in their attempts to construct an alternative vision.”
That lack of agreement ultimately led to a schism that transformed Hayek’s brainchild into the mouthpiece of the laissez-faire economics associated with the University of Chicago, with which both Milton Friedman and George Stigler were affiliated. How exactly that transformation occurred is a fascinating story Burgin tells exceptionally well: a petty personal squabble emerged along American and European lines over the presence of the irascible Albert Hunold as the Society’s administrator. In the end, Hunold was ousted, and—in Burgin’s words—the subsequent resignations “solidified a transition in the society’s balance of power from Europe to the United States, and from its original leaders to a younger generation of scholars affiliated with the Department of Economics at the University of Chicago.”
Under the leadership of these younger American academics, a society that had begun as an elite, academic outlet for “serious inquiry and foundational debates” was well on its way to becoming an organ of political propaganda. It was through their abandonment of the “moral quandaries and programmatic ambiguities” of the original society that what Burgin calls “the great persuasion” of the neoliberal, free market creed had begun.
In Masters of the Universe, Daniel Stedman Jones tells the story of how that “great persuasion” was packaged and sold to policymakers on both sides of the Atlantic. He has produced an ideal kind of intellectual history—an investigation that shows that the reigning free market paradigm was not the inevitable end of progressive policy developments. It was instead a programme that was actively promoted by a network of intellectuals and institutions, and it depended on external political circumstances for its success.
Following the young American intellectuals like Milton Friedman and George Stigler from Mont Pèlerin into the heyday of their successful careers, he identifies three distinct phases of neoliberalism and its development. The first, he writes, lasted from the 1920s to the 1950s, when European intellectuals “sought to define the contours of a market-based society.” The second, which lasted from about 1950 until the “free market ascendency of Thatcher and Reagan in the 1980s,” was the phase in which neoliberalism “grew into a recognisable group of ideas, and also into a movement.” Finally, post-Reagan and Thatcher, the third phase—still with us—“was driven by the advance of an agenda of market liberalisation and fiscal discipline into development and trade policy.”
Stedman Jones argues convincingly that essential to the success of the second and third stages of neoliberalism was the realisation among market advocates—most notably, Milton Friedman—that the message conveyed had to be made simpler for a wider audience to find it palatable enough to implement. “This was done,” he writes, “through a transatlantic network of sympathetic business funders and ideological entrepreneurs who ran think tanks, and through the popularisation of neoliberal ideas by journalists and politicians.”
His masterful research in the archives of think tanks such as the Institute of Economic Affairs (IEA) and the American Enterprise Institute (AEI) adds to his argument: by following their formation in the 1950s and 1960s, he shows how that “wider intelligentsia” was strategically and successfully targeted. “A simplification of the message helped neoliberal ideas gain significant purchase in the public debates that accompanied the varying crises of liberalism and social democracy of the 1960s and 1970s,” he writes. This is how a new consensus began to develop around the idea that “social and economic inequality was necessary as a motor for social and economic progress.”
It was helped by the collapse of the old consensus. As Stedman Jones points out, by the mid-1970s Britain and the US had already experienced two oil shocks and the end of the Bretton Woods monetary system—not to mention the upheavals of the Vietnam War, the Watergate scandal, the collapse of Britain’s industrial relations and the failures of policies that were meant to combat inflation in both countries. This essentially created “a policy vacuum into which neoliberal ideas flowed.” Thanks to the strategic planning of neoliberal thinkers, the think tanks they populated, and the simple messages they propagated, there was little competition to fill that vacuum. But had those external events not occurred as they did, economic policy in Britain and the United States might have assumed a radically different character in the last 30 years.
The most significant achievement of these two remarkable books is to confirm that neoliberalism exists in a context, and is bounded by a beginning as well as an end. For now, however, that end is nowhere in sight.
Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics by Daniel Stedman Jones (Princeton University Press, £24.95)
By now, the phrase “too big to fail” is a household term for arrogant financial institutions. But it also describes the neoliberal economic paradigm that has fuelled that arrogance for decades: the unwavering faith in laissez-faire and the devotion to deregulation. Since the 1970s, such thinking has swayed policymakers on both sides of the Atlantic and on both sides of the political aisle. Ronald Reagan’s famous proclamation that “government is not the solution to our problem; government is the problem” has been accepted in much of Westminster and Washington, even by many liberal politicians.
Although Margaret Thatcher and Ronald Reagan tend to receive the credit for ushering in supply-side economics, Labour prime ministers Harold Wilson and James Callaghan also prioritised the fight against inflation over the fight against unemployment and enacted numerous spending cuts. In the United States, the deregulation of the banking and transportation sectors began with Jimmy Carter, Reagan’s Democratic predecessor. Twenty years later, the Labour prime minister Tony Blair and the Democratic president Bill Clinton devised the “third way”—an attempt at reconciling the efficiency of neoliberal economics with a commitment to social justice.
The fundamental strength of the neoliberal paradigm was confirmed during the financial crisis of 2007-8. Did the apparent failure of neoliberal economics cause its adherents to question their beliefs? Did public opinion in either society call for a change in direction? Hardly. In 2010, the Conservatives won the most votes in the British general election and the Tea Party swept the Congressional elections in the US. Even after self-immolation, it seems, neoliberalism still holds court. Two comprehensive new intellectual histories—Angus Burgin’s The Great Persuasion and Daniel Stedman Jones’s Masters of the Universe—attempt to explain that enduring power.
The primary emphasis of Burgin’s excellent book is the Mont Pèlerin Society, the group of international economists and intellectuals assembled by the neoliberal prophet Friedrich Hayek in Mont Pèlerin, Switzerland in 1947. Hayek had recently published The Road to Serfdom, his 1944 polemic against the totalitarianism he believed to be emerging in decidedly anti-totalitarian Britain and the United States. He considered both British social democracy and American New Deal liberalism to be affronts to individual liberty as dangerous as Nazism or communism. For Hayek, the trend toward socialism in both societies would result in inadvertent “bondage and misery” through a centrally planned economy.
Mont Pèlerin was an attempt to avoid the “road to serfdom” its founder so profoundly feared. The Society’s "Statement of Aims," dated 8th April 1947, reflects that paranoia. “The central values of civilisation are in danger,” it begins. “Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared.”
The Society’s ranks included Karl Popper, Ludwig von Mises, George Stigler and Milton Friedman. As Burgin argues, its transnational composition “complicates the common assumption that the conservative project was parochial in its origins or strategic in its intent.” He also lays to rest the notion that it was based on unified intentions: discussion, dissent and discord were the de facto principles that shaped the Society and, in turn, the subsequent movement it inspired. As Burgin makes clear, when Hayek finally assembled these different intellectuals in one place, “he discovered that he had assembled colleagues who were united in what they opposed but shared little agreement in their attempts to construct an alternative vision.”
That lack of agreement ultimately led to a schism that transformed Hayek’s brainchild into the mouthpiece of the laissez-faire economics associated with the University of Chicago, with which both Milton Friedman and George Stigler were affiliated. How exactly that transformation occurred is a fascinating story Burgin tells exceptionally well: a petty personal squabble emerged along American and European lines over the presence of the irascible Albert Hunold as the Society’s administrator. In the end, Hunold was ousted, and—in Burgin’s words—the subsequent resignations “solidified a transition in the society’s balance of power from Europe to the United States, and from its original leaders to a younger generation of scholars affiliated with the Department of Economics at the University of Chicago.”
Under the leadership of these younger American academics, a society that had begun as an elite, academic outlet for “serious inquiry and foundational debates” was well on its way to becoming an organ of political propaganda. It was through their abandonment of the “moral quandaries and programmatic ambiguities” of the original society that what Burgin calls “the great persuasion” of the neoliberal, free market creed had begun.
In Masters of the Universe, Daniel Stedman Jones tells the story of how that “great persuasion” was packaged and sold to policymakers on both sides of the Atlantic. He has produced an ideal kind of intellectual history—an investigation that shows that the reigning free market paradigm was not the inevitable end of progressive policy developments. It was instead a programme that was actively promoted by a network of intellectuals and institutions, and it depended on external political circumstances for its success.
Following the young American intellectuals like Milton Friedman and George Stigler from Mont Pèlerin into the heyday of their successful careers, he identifies three distinct phases of neoliberalism and its development. The first, he writes, lasted from the 1920s to the 1950s, when European intellectuals “sought to define the contours of a market-based society.” The second, which lasted from about 1950 until the “free market ascendency of Thatcher and Reagan in the 1980s,” was the phase in which neoliberalism “grew into a recognisable group of ideas, and also into a movement.” Finally, post-Reagan and Thatcher, the third phase—still with us—“was driven by the advance of an agenda of market liberalisation and fiscal discipline into development and trade policy.”
Stedman Jones argues convincingly that essential to the success of the second and third stages of neoliberalism was the realisation among market advocates—most notably, Milton Friedman—that the message conveyed had to be made simpler for a wider audience to find it palatable enough to implement. “This was done,” he writes, “through a transatlantic network of sympathetic business funders and ideological entrepreneurs who ran think tanks, and through the popularisation of neoliberal ideas by journalists and politicians.”
His masterful research in the archives of think tanks such as the Institute of Economic Affairs (IEA) and the American Enterprise Institute (AEI) adds to his argument: by following their formation in the 1950s and 1960s, he shows how that “wider intelligentsia” was strategically and successfully targeted. “A simplification of the message helped neoliberal ideas gain significant purchase in the public debates that accompanied the varying crises of liberalism and social democracy of the 1960s and 1970s,” he writes. This is how a new consensus began to develop around the idea that “social and economic inequality was necessary as a motor for social and economic progress.”
It was helped by the collapse of the old consensus. As Stedman Jones points out, by the mid-1970s Britain and the US had already experienced two oil shocks and the end of the Bretton Woods monetary system—not to mention the upheavals of the Vietnam War, the Watergate scandal, the collapse of Britain’s industrial relations and the failures of policies that were meant to combat inflation in both countries. This essentially created “a policy vacuum into which neoliberal ideas flowed.” Thanks to the strategic planning of neoliberal thinkers, the think tanks they populated, and the simple messages they propagated, there was little competition to fill that vacuum. But had those external events not occurred as they did, economic policy in Britain and the United States might have assumed a radically different character in the last 30 years.
The most significant achievement of these two remarkable books is to confirm that neoliberalism exists in a context, and is bounded by a beginning as well as an end. For now, however, that end is nowhere in sight.
