In a recent Article in American Affairs, economist Phillip Mirowski presents an interesting and cogent argument that Neo-liberalism is a well organized, well funded, and quasi-coherent vision of political economy. He argues for the existence of what he terms a Neo-liberal Thought Collective (NTC) which only partially overlaps with Neo-Classical Economics. In Mirowski’s view, the existence of the NTC is a bit of a revelation as both its proponents and opponents often argue against the existence of any clearly well defined conscious Neo-Liberal project. In addition, Mirowski argues that even some opponents of Neo-Liberalism, including an unspecified group of Marxists and those he terms less rigorous HisMats (historical materalists) have not taken Neo-Liberalism seriously as a set of ideas: instead, they rely on economic determinism to explain its triumph. Mirowski’s goal, or at least one of them, is to get us to take Neo-Liberalism seriously as an ideology and movement. Mirowski is not sympathetic towards Neo-Liberalism. His argument is that people on the left should know their enemy. Though I suspect I may be one of those less rigorous HisMats that Mirowski refers to, this article is certainly worthy of attention both on its own merits, but also as a jumping off point for a deeper and interesting exploration of the concept and movement. A good place to start is with Mirowski’s previous book, Never Let a Serious Crisis Go to Waste , the Symposium on Mirowski and Neo-Liberalism sponsored by The Institute for New Economic Thinking, as well as some intriguing responses from divergent perspectives at Mainly Macro and The Mises Institute.
As others have observed, the term “Neo-Liberalism” today approaches the status of a swear word. It is identified with a range of policies such as dismantling the welfare state, deregulation and macroeconomic austerity. As Mirowski points out, there is some overlap between Neo-Liberalism and mainstream economics, especially with the Chicago School variant. However, the two are not necessarily synonymous, at least not according to Mirowski. Nor is Neo-Liberalism simply a rehash of Classical Liberalism. Neo-liberalism, in Mirowski’s view, is a much broader, more comprehensive social philosophy that justifies the use of the state to achieve the goal of forcing society into compliance with market efficiency “Liberal” in the political sense of being pro democracy and pro the kinds of rights on associates with Liberalism. Since Reagan and Thatcher, and arguably before, the idealization of the market as the sine qua non of both personal freedom and economic efficiency has dominated policy discussion. And this hegemony has been so extensive that even West European Social Democratic Parties as well as the U.S. Democratic Party have largely bought into it.
As I explain below, I agree with Mirowski’s description of contemporary Neo-Liberalism but I am not so sure that its current manifestation is consistent with the ideals of some of its progenitors. This raises a question as to why one version of Neo-Liberalism triumphed over another, though I will not attempt an answer to that question today but will try to address it in a subsequent post.
Liberalism, as a political philosophy, has deep historical roots, going back at least to John Locke. In the 19th century, Classical Liberalism became identified not just with a defense of individual political liberty but more broadly with the movement towards laissez faire. Notably, I am in complete agreement with Karl Polanyi’s argument as well as with Kari Polanyi Levitt’s argument (see the link to the Symposium above) that laissez faire was a utopian myth. This is for several reasons: instituting laissez faire required conscious, deliberate state action in England, it was not as accepted on the Continent as some might suppose, in cases where policies directly related to arguments in political economy based on the doctrine of laissez faire triumphed, it led to a need for society to protect itself from the dislocation created by laissez faire. Notably, not all the movements to protect society from laissez faire embodied humane principles.
However, starting with the New Deal in the U.S., and arguably with the first Labor Government in Britain, the move towards re-embedding the market through labor unions, social welfare policies, Keynesian macroeconomic policies, international institutions and other mechanisms which followed the Great Depression and WWII led at least temporarily to a more humane version of Capitalism, at least in the Core. The ideas behind this movement can be traced to a number of important theorists including, but not limited to, Karl Polanyi, John Maynard Keynes, Gunnar Myrdal and John Kenneth Galbraith, though it can be argued that like laissez faire, their ideas were never fully realized. The above theorists were in my view, broadly liberal in the sense that they remained committed to democracy and personal freedom while also seeking to expand the definition of freedom: in other words, they were in favor of both negative and positive freedom. On the other hand, with the possible exception of Keynes, they accepted the need for some kind of conscious, coordinated state direction of the economy as well as redistribution of wealth, though to label them as “central planners” as many Austrian economists would, is a gross exaggeration. Their vision was one of democratic, indicative planning. In my estimation, their vision was intended as a “third way” between totalitarian communism and the extreme of laissez faire. On the whole however, though they were not opposed to markets per se, they all did place an emphasis on the need to limit and embed the market in a larger framework of institutions.
Starting in the 1930’s however, in response to the rise of the twin totalitarian movements of Fascism and Communism, and also in part to the New Deal, a loose amalgam of social and political philosophers committed to Liberalism began sowing the seeds of a grand coalition of liberals. In addition, this grand coalition sought to salvage liberalism from the destructiveness of laissez faire as well. One important strand in this coalition was what came to be known as the Ordo Liberals or Social Market tendency, which dominated the Christian Democratic Union in West Germany following WWII. Like Polanyi and Keynes, they understood that in order for the market to work, it would require conscious state action to create and define a market order. Thus originally, the term Neo-Liberalism implied something different from what we think of today. You can get a sense of the flavor of their ideas as well as some of the tensions between the Ordo and other liberals from this article. At least in the 1950’s and 1960’s, the West German model, or Social Market economy was thought of as one possible intermediate path between Communism and Capitalism. Today’s Social Democrats and certainly the Blair-Clinton “third way” are now to the right of Konrad Adenauer on multiple issues.
The version of Neo-Liberalism that has come to dominate policy debate as well as policy discussions, and which receives extensive funding and sponsorship of think tanks and even occasionally economics departments, is much more strongly influenced by Milton Friedman’s Monetarism, more contemporary “New Classical” models, as well as Austrian economics. This is what Mirowski means (or so I gather) by the term “Neo Liberal Thought Collective”. As Mirowski rightly points out, what distinguishes Neo from Classical Liberalism, is the explicit, though not always public, recognition by the progenitors of Neo Liberalism that enacting Neo-Liberal policies requires concerted, conscious, and extensive state action to create markets, or pseudo-markets in almost everything and that Democracy is not necessarily conducive, and may even stand in the way of, achieving the goals of the NTC.
But this does not mean that Neo-Liberalism is rigidly coherent: At noted above, at its founding, the NTC today included divergent strands within its ranks. And in spite of the Chicago School and Austrian influences, much of what Neo-Liberals enact and propose is not really consistent with those schools. I agree with the Austrian argument that the NTC, though influenced by Hayek, is not fully consistent with Austrian economics,as the Austrians would clearly prefer to have significantly less state involvement than is desired by members of the NTC (which is not of course to defend either Austrian economics or the NTC). It should also be noted, that the NTC has not always fully carried the day when it comes to the actual execution of policy. But nevertheless, over the last several decades, Neo-Liberalism has come to define the tone and tenor of policy debates.
All this however, leaves at least two curious puzzles: why did Neo-Liberalism become hegemonic and why did one particular strand of Neo-Liberalism become hegemonic? I agree with Mirowski that it is not sufficient to simply say “Capitalism” and that it is important to engage with the ideas and policies promulgated by the NTC. But while some of the individuals involved in promulgating Neo-Liberalism (e.g. Hayek and Friedman) were both good economists and persuasive public spokespeople for the NTC, it is not the case that they were necessarily more rigorous theoretically or better at rhetoric than others. Nor for that matter is it sufficient to point to the level of funding available to the NTC. None of these factors explains why neo-liberalism specifically as opposed to some other set of ideas became hegemonic by the mid 1980’s and continues to be hegemonic at present. Part of the explanation should in my view account for the appeal of Reagan and Thatcher, whose administrations set the tone and tenor of post 1980’s policy debates. But even here, the question remains as to why the rhetoric and even the policies of Reagan and Thatcher did not arouse stronger popular opposition.
And it is here where I think that a less rigorous HisMat can make a contribution to helping us understand the rise and persistence of Neo-Liberalism. Before I stray into the simplistic formulation of “Capitalism, therefore NTC”, I’ll beg off and leave my thoughts on how a less rigorous Hismat might shed some light on the issue.