What is neoliberalism, anyway?

by · April 25, 2013

Premature celebration?

Premature celebration?

A few weeks ago the right-wing Australian think-tank the Institute of Public Affairs (IPA) held a gala dinner to celebrate its 70th birthday. The event garnered extra attention thanks to a small but spirited protest outside the venue, which was ritually condemned by police and politicians. While the protesters’ political objectives struck me as diffuse, they reflected a more widespread fear on the Left that society is increasingly manipulated by shadowy cabals of right-wing corporate leaders (Rupert Murdoch and Gina Rinehart attended), politicians (Tony Abbott, Dennis Napthine and Robert Doyle), pundits (Andrew Bolt) and neoliberal intellectuals (the IPA itself). In particular, the IPA’s wish list of 75 policies for an Abbott government and other material by their members is seen by some as his blueprint to implement a neoliberal agenda far more radical than Coalition policy describes.

While Left Flank has previously looked at the contradictions in the libertarian ideology of the IPA, the increased interest in the power of neoliberal elites makes this a subject worth returning to. I want to do this through a review of the groundbreaking 2008 collection edited by Philip Mirowski and Dieter Plehwe, The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (TRFMP). Already this book is considered a classic of intellectual history and the definitive account of the international network of neoliberal thinkers and activists whose prescriptions became economic orthodoxy after the collapse of the post-WWII “Keynesian consensus”.

TRFMP approaches its subject by going to the source, as it were, and looking at the deliberations and debates of the intellectual clique who met from 1947 as the Mont Pèlerin Society (MPS), as well as their practical interventions in policy and government. In doing so it dispels a series of popular myths, some later promoted by MPS leaders themselves.

The constitution of neoliberalism

Firstly, the book shows that neoliberalism is not merely a unitary economic doctrine that sprung from the head of MPS founder Friedrich Hayek, but was developed over many years as the MPS clarified its ideas. Secondly, it outlines the main trends that came together in the development of a neoliberal consensus within the MPS: Early French neoliberalism, British liberalism and its revisions, German “ordoliberalism” with its greater emphasis on a “social” market society, and the rise of the infamous “Chicago School” with Hayek’s participation and the emergence of more US-centric notions of economics, business and market democracy.

Thirdly, and perhaps centrally, TRFMP reveals neoliberalism is not a simple extension of old-style liberalism, which sought to limit state power so that more-or-less automatic market processes could operate unhindered. Instead, neoliberals are clear about the need for strong state action to construct a market society in which “freedom” and “liberty” are maximized for the entrepreneur, even if they must be limited in terms of formal democracy. In New Studies in Philosophy, Politics, Economics and the History of Ideas, Hayek makes clear this distinction, and it is worth quoting at length:

In the struggle for constitutional government in the nineteenth century, the liberal and the democratic movements indeed were often indistinguishable. Yet in the course of time the consequence of the fact that the two doctrines were in the last resort concerned with different issues became more and more apparent. Liberalism is concerned with the functions of government and particularly with the limitation of all its powers. Democracy is concerned with the question of who is to direct government. Liberalism requires that all power, and therefore also that of the majority, be limited. Democracy came to regard current majority opinion as the only criterion of the legitimacy of the powers of government. The difference between the two principles stands out most clearly if we consider their opposites: with democracy it is authoritarian government; with liberalism it is totalitarianism. Neither of the two systems necessarily excludes the opposite of the other: a democracy may well wield totalitarian powers, and it is at least conceivable that an authoritarian government might act on liberal principles. [142-3]

Mirowski stresses the similarity of such views to those of German legal theorist Carl Schmitt, who was willing to justify aspects of Nazi rule and foreign policy. This stands in contradiction to neoliberal claims to be equally opposed to fascist and communist totalitarianisms. But it does clarify that the real objection for them is not the repressive power of the state in general, but when that power is used against (rather than for) markets. While the contributors to TRFMP don’t put it exactly like this, what they make clear again and again is that neoliberalism is an explicitly political project for reshaping society. This is the book’s greatest strength, but it is also related to what I see as its key weakness, which I will discuss below.

Fourthly, TRFMP looks at how the neoliberals worked through some key internal debates: The hardening of their opposition to trade unions, their rejection of the notion that business monopoly is a threat to markets, their elaboration of a market-based agenda for developing economies, and their incorporation of a growing coterie of businesspeople committed to the neoliberal cause — as against ideas that they must be a purely intellectual and academic grouping. These shifts demonstrate their determination to develop theory while applying it to real-world problems and garnering connections with capitalists.

Pinochet meeting with MPS leader Milton Friedman

Pinochet meeting with MPS leader Milton Friedman

Fifthly, the ability of neoliberals to actually shape economic and other institutional policy is laid out in detail using three case studies: The influence of MPS-related intellectuals in reconstructing Chile after Pinochet’s 1973 coup, their work inside international economic institutions around the United Nations, and the way that neoliberal economics shaped the interpretation of the urban property right project in Peru to cloak its disastrous social effects and economic failure behind a veil of market success.

Finally, Mirowski usefully synthesises the findings of the authors in his Postface by defining the neoliberal project under 11 clear headings, fleshing out how neoliberalism is not merely economic but openly poses itself as a set of politics, policies and values, organised around an incredibly narrow view of freedom. Rather than trying to overcome the market-versus-state contradiction that lies at the heart of neoliberal thought, Mirowski points out that this unresolved tension allows the project great flexibility in its prescriptions, and indeed allows neoliberals to claim that market failure can only be solved by more marketisation.

Limits of ideas-centred explanations

The clarity and power of the argument put by TRFMP about the nature of the MPS project is considerable. Yet it is ultimately unsatisfying. Crucially, by focusing on the continuity of the intellectual and practical aspects of the project it cannot explain the sharp turning point in its fortunes from the mid-1970s. In a review of David Harvey’s A Brief History of Neoliberalism (2005), published before TRFMP was released, Mirowski criticises Harvey for deploying “simplistic class analyses” and for downplaying the growing influence of neoliberals in elite circles prior to the 1970s. Yet Harvey makes clear, in a way that TRFMP obscures, that it was the destabilizing effect of capitalist crisis that led ruling elites to scramble about for a way of re-establishing control. In my view Harvey mistakenly sees this in terms of a “restoration of class power” — as if capital was somehow weakened during the post-WWII boom, the greatest and most sustained period of capitalist growth ever — but he does grasp the fact that the capitalist class would not have needed neoliberalism unless it held the potential to solve specific problems that confronted it.

And not just any crisis would do to ensure a neoliberal victory. As Neil Davidson has pointed out in “What was Neoliberalism?” (2010, in Neoliberal Scotland) Suharto’s bloody 1965 coup against a powerful Left in Indonesia did not usher in a neoliberal moment, whereas Pinochet’s in Chile did. It is not enough to suggest, as TRFMP does, that the neoliberals had to teach capitalists what their own interests were. Instead, those interests do not neatly conform to the neoliberal project across the history of capitalism. The chapter on Chile in TRFMP is both illuminating and frustrating: Illuminating because it outlines the twists and turns of the neoliberals in adapting their ideas to the needs of Pinochet’s regime, and frustrating because the actual crisis of Chilean society that preceded the coup is described almost exclusively in terms of the ascension of the left-wing Allende government. The mass workers’ insurgency and instances of workers’ control of industry, the counter-mobilisations of the militant Right, and the crisis of the state are brushed aside — leaving us with a narrative implying that the neoliberals had simply managed to reach critical mass in terms of influence and then the ear of Pinochet. This is intellectual and governmental history almost completely divorced from its social basis, let alone wider political struggles.

What emerges from TRFMP is an ideas-driven account of the power of neoliberalism. This leads to a view of the state as a mere instrument in the hands of a coherent body of thought. Real social relations are effectively treated as subordinate to the sharp intellects and clever manoeuvres of the MPS collective. Damien Cahill has recently pointed to the limits of such ideas-centred accounts of neoliberalisation. By analysing reforms carried out by the Howard government he concludes that rather than neoliberals providing “blueprints” or “programs” for reform, they more played a role in providing “frames” and arguments to justify pro-business policies and counter opposing viewpoints. He concludes that, “the role of ideas can only properly be grasped when considered in the context of the institutions and power relations within which they are enmeshed — when ideas are considered as dialectically related to both institutions and interests.”

A second problem with the ideas-centred approach is that it conflates the popularity of such ideas among elites with their popularity across the whole population: Once neoliberalism is in charge it stays in charge, with no need to make concessions to popular opinion. This leads to a lack of periodization in the progress of neoliberalism-in-practice.

Davidson makes a strong case for seeing neoliberalism in most Western liberal democracies as having two phases: An initial activist phase of direct assault on the working class and the Left, best exemplified by Thatcher in power, and a second phase where incremental neoliberal reform continues, but all-out frontal attack has been exhausted as a viable strategy. I would argue that the current global crisis has led to a further phase as mass resistance to the imperatives of capital clashes with a political system historically weakened by its embrace of neoliberalism. Hence why we see rapid political fragmentation in parts of Europe, with no clear solution in sight for ruling elites. Meanwhile Australia, still spared from the full brunt of that crisis, has to make do with neoliberalism’s political dregs.

TRFMP has a tendency to overstate the usefulness of neoliberalism as an elite capitalist political project for all occasions. The capitalist system has always been based on a synergy between private capital and the capitalist state, precisely because they are both expressions of the same set of fundamental social relations. Because those social relations develop historically, there is no single, eternal relationship between state and capital that works in all periods and places. Indeed, it was autarkic state capitalist intervention — more or less negating private capitalist interests for the greater national good — that successfully pulled many countries out the Great Depression and set the stage for the Long Boom. The question of whether there is any social (and therefore political) basis for the eternal continuation of neoliberalism, let alone for any preferred social order the authors hint at, is never addressed in TRFMP because of the limited nature of its political project. Neoliberalism, by their account, seems to be monolithic and impenetrable — ironically just as its basis in capitalist social relations is proving more fragile than ever.

This is the first in a series of posts on the coming Abbott government and the politics of the Right.

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Discussion1 Comment

  1. Melanie Lazarow says:


    “and perhaps centrally, TRFMP reveals neoliberalism is not a simple extension of old-style liberalism, which sought to limit state power so that more-or-less automatic market processes could operate unhindered. Instead, neoliberals are clear about the need for strong state action to construct a market society in which “freedom” and “liberty” are maximized for the entrepreneur, even if they must be limited in terms of formal democracy”

    there may be very little difference between the intentions of capital ie – to get the maximum exploited profit from workers, pre neoliberalism and now. The difference is manifested partly in the balance of class forces, and the decreasing capacity to give in to working class demands. The market in late capitalism is less able to maintain or support the safety nets of welfare and health, and even education and therefore allows these institutions to be more and more only for the rich. But where the state is more and more essential, is its repressive mechanism, its police force, its surveillance mechanisms and also state terror against protestors and decenters.

    ht is also why capital loves a terrorist attack, reasons to tighten its battalion of force against the working class