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April 04, 2007

The Strange Death of NeoLiberalism: The Left like to think that neoliberalism is the dominant ideology of today - William Coleman argues that in fact neoliberalism is dead

Posted by William Coleman

The Left like to argue that neoliberalism is the dominant ideology of our age, that it is a force that is stalking the world. A friend of Neoliberalism, Dr William Coleman - Reader in Economics at the Australian National University and the author of Economics and its Enemies: Two Centuries of Anti-Economics - however believes that regrettably it is dead. Here he explains why.

"Isms" have "lives". They germinate, burgeon, ripen, decay. And finally fall still. Thus passed Fascism and Communism. And, one may now add, neoliberalism. For neoliberalism - the 20th century intellectual formation, fashioned largely by Hayek, Friedman and Buchanan; raised on the Lockean triad of freedom, reason and utility; and impelled by a repulsion to power, force and violence - is "over". It is as dead as Fascism or Communism.

The death of liberalism has been announced before. And rightly so. By the First World War the liberalism of Mill, Constant, Tocqueville was truly finished.

Neither did the later emergence of neoliberalism belie the many death notices of that period. For while the term "neoliberalism" is intended by the Left diminish to neoliberalism - to reduce it to just a rerun of laissez-faire - the liberalism of Hayek, Friedman and Buchanan is in fact a distinct formation from that of the classic liberals.

Neo-liberalism was distinguished from classic liberalism by shift in accent; a shift in accent from utility to freedom. Alternatively, and more speculatively, the difference lay not as much in the neo-liberals' accentuation of freedom, but in a shift in the conception of freedom, from a partly material one of the 19th century to an almost purely political-legal one of the 20th.

For the classic liberals' esteem of freedom was animated and underlain by their esteem of individual "independence" - an independence that was seen to consist of the satisfaction of one's own material needs by one's own labour and thrift. Accordingly, classic liberals were more hostile than neo-liberals to "unearned income" (however freely earned) and hostile to becoming "rich in one's sleep" as Mill put it, in the manner of absentee landlords. (Henry George, it will be recalled, was a sturdy classic liberal). Consistent with that hostility was the classic liberal's possession of a distinct political program, with both negative and positive elements - a hostility to ancien regime structures, and a commitment to constitutionality, along with the rational reform of constitutions that would preserve constitutionality. Neo-liberalism, by contrast is in the large accepting, and rationalising, of its contemporaneous political order.

Thus neoliberalism is not simply a repeat of liberalism. It is not simply defending, re-stating and preserving some older doctrine, but innovating. This innovation is an attribute of any liberalism, be it "neo" or otherwise. For a key feature of liberalism is its attachment to enquiry. Man is ignorant, but may be made less so, by enquiry. It is on account of this attachment that the history of liberalism, more than any other ideology, is less a history of "programmes", parties, states and political strokes, and more the history of thinkers. That intellectual creativity is a vital force, its sign of life.

And its vital signs are dismal.

Consider the French Enlightenment - another movement primarily of thinkers. Its devotees became anxious that it was dying as the years rolled past 1750, because there was no second generation. Montesquieu was born in 1689, Voltaire in 1694, Rousseau 1712. Thereafter: only minor figures.

Can not the same be said of Neoliberalism? Let's register the obvious fact of the birth dates: Hayek, 1899; Friedman 1912; Buchanan 1919. And later? Has there been a second generation? Answered literally, the answer is, yes. For one can, certainly, enumerate names of contributors to neo-liberalism who came to maturity after the Second World War, rather than the First. But it's not the same. They do not constitute a second generation that is genuinely comparable to the first.

And this is one reason why neoliberalism is "over".

A critic of this thesis might in riposte refer to the total discredit of socialism, and the prevalence of a "Washington consensus". But would a neoliberal be elated - or alienated - by what they observe in the concrete "Washington"? Real federal government spending in 2006 was 37 percent higher than the average for the Clinton Presidency; sham deficit-financed "tax cuts"; bilateral trade deals busily proliferating. And this is all justified (thankfully!) not in the name of "liberalism" - a term that was fabulously deformed in its westward passage across the Atlantic - but "conservatism". This conservatism, however, is not the conservatism of financial prudence, an esteem for precedent, a distrust of whatever is not, a nostalgia for the past in preference to an excitement over the future.

Instead it appears to amount to a vision that sees all history as a history of culture wars; a clash of "values", where some cultures are superior to others, and thereby privileged. This vision obviously jars with the internationalism and universalism of neoliberalism. Neoliberalism does not see history as a clash of values; but believes that banal motivations and valuations are preponderant in all societies; and that (as Bentham put it) all human beings are indeed, equal, in their devotion to themselves.

The distance of the neoliberals from history-as-a-clash-of cultures is well illustrated by Hayek's remark in Why I am not a Conservative, where he notes, with disappointment, that,

… the anti-internationalism of conservatism is so frequently associated with imperialism. … the more a person dislikes the strange and thinks his own ways superior, the more he tends to regard it as his mission to "civilize" others - not by the voluntary and unhampered intercourse which the liberal favors, but by bringing them the blessings of efficient government.
But if Washington is alienating to the neoliberal, how profoundly dismaying must be Moscow? There was the scene of the extraordinary victory in 1991, won without a single war. It is now in the grip of a baldly Restorationist regime, that has chosen as its Little Emperor not even a Napoleon but a Fouche, who recently proclaimed the
many glorious pages in … the history of national state security organisations.
Why did Neoliberalism die? We might try to answer by asking, "Why did it ever live?". A seemingly satisfactory answer is that it was begot by 20th century totalitarianism, the nightmarish outcome to the most thorough attempt to abolish 19th century liberal order.

But to explain neo-liberalism in terms of totalitarianism is at best a very incomplete explanation. For in the inter-war period - the time when neo-liberalism germinated - liberalism was distinctly more discredited in the mind of the average intellectual than socialism or communism. The predictable response to the horrors of totalitarian collectivism was not a rejection of collectivism, but a perfectly sincere (if misguided) impulse to secure a truly democratic collectivism. The horrors of totalitarian collectivism would, alone, produce a George Orwell, yes. But not a Hayek.

I wonder if the origins of neo-liberalism lie in the stimulus of a double pressure: on one side the massive threat of totalitarianism, and on the other, doubts - in others or themselves - about the adequacies in liberals' weapons as presently fashioned. Thus for some liberals a necessary part of coping with the threat of collectivism was dealing with the problems of liberalism. Their weapons needed to be forged anew. This was neoliberalism.

Thus Friedman traced the agonies of the Great Depression not to "capitalism" but to the incompetence of the state authority responsible for monetary policy.

Hayek took on the plausible presumption (of scientism and "planning") that reason in the service of utility was antagonistic to freedom. He devoted himself to exposing the spuriousness of that antagonism. And socialism ultimately provided an amazing object lesson in Hayek's vindication of the true congruence of freedom, reason and utility.

Buchanan challenged a false conception of "democracy" that had encouraged collectivism, namely the belief that democracy amounts to the articulation of a General Will by majoritarian institutions. The close kinship between democracy and collectivism implied by this false conception had made democracy problematic for 19th century liberals (and - let it be noted - for F. A. Hayek). But to Buchanan democratic processes were no more than competitive political markets - the political analog of market processes, and their outcome was no more an expression of a mythical General Will than the outcome of ordinary markets was the expression of a non-existent "General Will". Thus Buchanan loosened the tie between democracy and collectivism - and made it easier to be both pro-democratic and anti-collective.

Such reformulations by neo-liberals left a more formidable arsenal against statism than that bequeathed by classic liberalism. Nevertheless, neoliberalism's steady burgeoning in the post–war period was not entirely a matter of intellectual merit. The internationalist, war averse, universalist mood of the post-war period was a sympathetic environment for infant neo-liberalism.

It is also true that in the post-war period "neoliberalism" was, for some of its lesser figures, just a "new way to be right wing". (Thus after experimenting with a very different ways to be "right wing" in the inter-war period, Bertrand de Jouvenel was a founder member of the Mont Pelerin Society in 1947.) And the fact that neo-liberalism was opposed to socialism allowed it to benefit from the protective shade of larger interests: thus the first British edition of Road to Serfdom was printed on what was, in truth, the Conservative Party's paper ration.

Such occasional good offices were all to the good. But the "semi-official status" that neo-liberalism sometimes achieved in the Cold War was a freak of the epoch. Neo-liberalism, like the market, is fundamentally "friendless". It is hostile to the conceit and arrogance state - and the clamour for economic privilege by wealth. Wealth and power are neo-liberalisms false friends, who will turn to its austere doctrines only in their own weakness.

The moral can be widened. Knowledge, reason and enquiry is never so strong as when power is weak: the Enlightenment is a testament to that. Power only allies itself with knowledge when it is not very powerful. Power is now palpably reinvigorated, and has cast away that crutch. We live in a post-modern, post-ideological, epigonical silver age; and neo-liberalism is one of its fatalities.

Dr William Coleman is Reader in Economics at the Australian National University and the author of Economics and its Enemies: Two Centuries of Anti-Economics, (Palgrave Macmillan, 2002).


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Dr Coleman hs given us another fine, thought-provoking article, and while one can hardly disagree that classical liberalism is going through a rough patch in the West, might we miss the forest for the trees? In other words, might the classical liberals have won so many core arguments that we take their successes for granted?

40 years ago classical liberal thinkers lived on the far intellectual fringes; 30 years ago they were far from mainstream; 25 years ago, the ideaas of the Institute for Economic Affairs, the Adam Smith Institute, the Mont Pelerin Society and a handful of others were far from commonly accepted in most of the places that mattered. Now many (but sadly not yet all) of their ideas are de rigeur in the world's major developmental institutions (i.e World Bank, IMF, UNDP, etc) We might not see so many champions (viz Hayek, Friedman, et. al.) because there are so many thousands of experts whose default position is liberty and free (or freer) markets.

Almost nobody supports a command economy anymore, which might leave Prof Hayek smiling on his cloud somewhere. Hardly anyone doubts Sir Karl Popper's notion that pluralism, permitting many socio-economic experiments, leads to greater choices and better approximations of individual happiness (or satisfaction perhaps). There are rear guard actions launched by various religious fundamentalists, Islamist, Hindu and others, and a handful of South American cranks and despots, but they seem rather unlikely to win even in their own homelands much less worldwide.

While the spread of free trade has slowed with the depressing Doha Round (which President Bush almost understandibly misnamed 'the Darfur Round') the velocity of the moral argument for free trade-as-development grows apace: do many people think that in a decade the world will have re-erected the trade barriers that existed a 20 years ago?

Technology has its role to play, alongside policy. I doubt that any future Prime Minister will reinstate the £200 limit on cash carried abroad by Britons, nor any limit, nor would he find it easy to enforce in days of internet banking.

The suspension of traditional legal rights in Britain, and more largely in America, certainly represents a turning away from classical liberalism as does the growing role of the state. But should we believe these to be anything more than temporary? Many believe that the serious problem of terrorism has been misdefined as a war on terrorism with a resulting but unnecessary reduction in civil liberties under war powers policy. The rapid growth of the state, in terms of purse and of power, may be partly due to this and partly due to the economic bubble in which we live, when half the public seems to believe that in a decade their two-bedroom flats will be worth the GDP of Brazil. This folly will be corrected as all such follies are eventually.

What is diagnosed as death may just be a bad case of the hiccoughs.

Posted by: S J Masty at April 6, 2007 05:07 PM
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