The shock of the neoliberal

Prospect Magazine

Prospect Blog

The shock of the neoliberal


Margaret Thatcher and Ronald Reagan are two of neoliberalism's most important acolytes. How did laissez-faire economics overturn the old consensus? (photo: Robert Huffstutter)

The Great Persuasion: Reinventing Free Markets Since the Depression
by 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.

  1. January 31, 2013

    Francien L

    Great article. Although I haven’t read the books myself (I will do), the key points that I agree with in this article was the power of the PR propaganda and how some key words were used to stoke terror into the hearts of (mostly) Americans, such as ‘socialism’ which thanks in part to McCarthyism, convinced Americans that even socialist governments in western democracies (as oppose to dictatorships), were ‘evil’ and dangerous.

    It therefore wasn’t difficult to persuade people that neo-liberalism was the opposite of socialism and meant ‘freedom’ in the broadest sense. And if neo-liberalism meant freedom, socialism and liberalism (as the Americans call it) meant oppression and tyranny.

    The madness of this, is that the origins of socialism was precisely to create the freedom from the masters, rulers and lords of poverty who who had wealth, authority, control and power over others. If we keep going like this, we are more likely to end up looking like a third world country with the majority of people living below the poverty line, and a minority fighting each other for absolute power.

  2. January 31, 2013

    Gillian Fraser

    “In 2010, the Conservatives won the most votes in the British general election and the Tea Party swept the Congressional elections in the US.”
    Yes but the Conservatives failed to “win” the election and, after 13 years in opposition, that is a significant rejection. Even though the Coalition has pursued a neoliberal agenda, it is reassuring (and equally disturbing) to remember that the Conservatives failed to convince enough people to take power on their own. The voters will no doubt let the Libdems know what they think of them at the next General Election
    There are other signs that neoliberal politics are on the wane. First, the re-election of Obama (I know, I know – but it’s a start) and, secondly, the rise of movements such as Occupy.

  3. February 7, 2013


    Read Cain and Hopkin’s ‘Gentlemanly Capitalism’.

    It’s been going on a lot longer. (They say since 1688, and I don’t know enough about the preceding period to speak up. But their analysis of 1688-post ww2 makes sense.)

    “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.””

    They reckon that happened by 1850 (after the repeal of the Corn Laws in the ’40s – though had been building up after 1815. The ideas pre-dated 1815 but the wars meant they had to wait.)

    1688-c.1850 – City finance in league with the landed interest.
    c.1850-> City finance in league with manufacturing and industry.

    Please read it. (Google is your fr- well, it’s not, but you can get the articles as pdfs if you use a search engine.)

    You’re fighting just one head of the Hydra. The symptoms, not the cause.

    They’ve been doing it for centuries.

    (btw, in case you doubt, this isn’t some Dave Spart nonsense, this is one of the major works on the economics of imperialism. imo, they seem to quite like it ‘cos “our” gentlemanly capitalists were better that “their” gentlemanly capitalists. But by God do they make the high-finance game clear. I used to think the Glorious Rev, C.J. Fox, the Great Reform Act, the People’s Budget etc had made this country better. But we’ve just been manipulated serfs all along.)

    • February 10, 2013


      I agree in general with your assessment here. The current political rot is very deep and very wide in its sources and in the social harms it has done and continues to do.

      In general, two very powerful trends have combined with other factors which are at work: one is the too-little-appreciated inherent logic of modern computer-based networked technology. This is a logic which drives many mutually-complementary social harms–it is infantilizing, it promotes shallow efforts in critical analysis and it places a premium on speedy results which are erroneously thought to be effficient simply because they are produced quickly. What’s actually produced quickly is junk work and junk products, the fruits of silly assumptions and junk reasoning.

      A second important feature of the inherent logic of this kind of technology is its tendency to promote a combination of intolerance, shallow group-think, and a brutal enforcement of censorious authoritarianism. Since these technologies promote those as powerful but denied factors, they virtually school whole populations in a passive acceptance of these habits as “nomal” and reasonable. Our times are characterized by a powerful regimentation of opinion, a narrowing of elbow-room for any unorthodox opinion. Taken together, these and the aforementioned features present an inestimable boon to power centers–to all those in key positions of influence in social, economic and cultural agencies.

      Major actors include virtually all of the top tier in higher education, in finance, in mass-communications media (including of course, public relations and advertising) and in political and military institutions.

      Among other key works which detail and explain this dreadful situation are John Ralston Saul’s Voltaire’s Bastards, Neil Postman’s Technopoly, C. Wright Mills’ essays, Power, Politics and People edited by Irving Louis Horowiz, and, in particular, his essay, “Behemoth,” a laudatory review of the book by the same title Behemoth: the structure and practice of national socialism, written by Franz Neumann. Neumann’s topic, and that of Wright Mills is not Socialism properly understood — a collection of liberating and progressive movements the Left-wing which included people such as Upton Sinclair, E.P. Thompson, Eric Hobsbawm, Bill Haywood, G.Bernard Shaw, George Orwell, Sidney and Beatrice Webb, John Lawrence Hammond and his wife, Barbara Bradby Hammond, or Jean Jaurès–but the National “Socialism” of Hitler’s Germany, in fact, an extreme Right-wing dictatorial regime and about as far removed philosophically from genuine Socialism as it is possible to be.

      Of course, just as in any period of human history, our times are a bewildering mix of complementary and conflicting trends. But the main, the dominating, thrust of our times are in a direction which spells an impoverishment of life –morally, intellectually, economically, politcally and environmentally. The central-nervous system of these currents of impoverishment is our rapacious and blindly brutalizing mass digital technologies in all their forms.

Leave a comment


James McAuley
James McAuley is a Marshall scholar at the University of Oxford 

Most Read