What the EA community can learn from the rise of the neoliberals

*By Kerry Vaughan* (cross-posted from effec­tivealtru­ism.org)

Note: This post should not be taken as an en­dorse­ment of ne­oliberal ideas or poli­cies. In­stead, the post is in­tended to be a case study of how the ne­oliber­als built an in­fluen­cial in­tel­lec­tual move­ment over a rel­a­tively short pe­rior of time.

John Maynard Keynes

The ideas of economists and poli­ti­cal philoso­phers, both when they are right and when they are wrong, are more pow­er­ful than is com­monly un­der­stood. In­deed the world is ruled by lit­tle else. Prac­ti­cal men, who be­lieve them­selves to be quite ex­empt from any in­tel­lec­tual in­fluence, are usu­ally the slaves of some de­funct economist.

Mad­men in au­thor­ity, who hear voices in the air, are dis­till­ing their frenzy from some aca­demic scrib­bler of a few years back. I am sure that the power of vested in­ter­ests is vastly ex­ag­ger­ated com­pared with the grad­ual en­croach­ment of ideas. Not, in­deed, im­me­di­ately, but af­ter a cer­tain in­ter­val; for in the field of eco­nomic and poli­ti­cal philos­o­phy there are not many who are in­fluenced by new the­o­ries af­ter they are twenty-five or thirty years of age, so that the ideas which civil ser­vants and poli­ti­ci­ans and even ag­i­ta­tors ap­ply to cur­rent events are not likely to be the newest. But, soon or late, it is ideas, not vested in­ter­ests, which are dan­ger­ous for good or evil.

-John May­nard Keynes, The Gen­eral The­ory of Em­ploy­ment, In­ter­est and Money Ch. 24 “Con­clud­ing Notes” p. 383-384

It is pos­si­ble to for­get how marginal­ized non-so­cial­ist economists were just fifty years ago – when they could not pub­lish in main­stream jour­nals, could not ob­tain tenure at ma­jor uni­ver­si­ties, and lacked the re­spect of their aca­demic col­leagues. Part of their as­cen­dancy is due to care­ful and strate­gic plan­ning.

-Sabina Alk­ire and An­gus Ritchie, Win­ning ideas: Les­son from free-mar­ket eco­nomics, OPHI Work­ing Paper Series

Introduction

Ne­oliber­al­ism was an in­tel­lec­tual and so­cial move­ment that emerged among Euro­pean liberal schol­ars in the 1930s as an at­tempt to chart a so-called ‘third way ’ be­tween the con­flict­ing poli­cies of clas­si­cal liber­al­ism and so­cial­ism. Its ad­vo­cates sup­ported [mon­e­tarism](https://​​en.wikipe­dia.org/​​wiki/​​Mone­tarism), dereg­u­la­tion, and mar­ket-based re­forms and sup­ported an ide­ol­ogy based on in­di­vi­d­ual liberty and limited gov­ern­ment that con­nect hu­man free­doms to the ac­tions of the ra­tio­nal, self-in­ter­ested ac­tor in the com­pet­i­tive mar­ket­place.

Ne­oliber­al­ism has two dis­tinct char­ac­ter­is­tics that make it rele­vant for strate­gic move­ment builders in the EA com­mu­nity. First, the move­ment was ex­tremely suc­cess­ful, ris­ing from rel­a­tive out­cast to the dom­i­nant view of eco­nomics over a pe­riod of around 40 years. The move­ment has launched 400 think tanks across 70 coun­tries and di­rectly in­fluenced the poli­cies of the United States (Rea­gan), the UK (Thatcher), and in­fluenced the liber­al­iza­tion of China un­der Deng Xiaop­ing.

Se­cond, the move­ment was strate­gic and self-re­flec­tive. They ap­pear to have iden­ti­fied and ex­e­cuted on a set of non-ob­vi­ous strate­gies and tac­tics to achieve their even­tual suc­cess. This differs from the cir­cum­stances of many other so­cial move­ments which are of­ten cat­alyzed by par­tic­u­lar so­ciopoli­ti­cal events in­stead of be­ing gen­er­ated strate­gi­cally.

It is im­por­tant to treat the his­tory of ne­oliber­al­ism (and the goal of this doc­u­ment) with the ap­pro­pri­ate lev­els of skep­ti­cism. Nearly all suc­cess­ful move­ments and or­ga­ni­za­tions rewrite their his­tory. Some­times this is in­nocu­ous in the sense that they in­clude some rele­vant facts in the his­tory but ex­clude oth­ers that fit the nar­ra­tive less well. Some­times this is more blatant as in the case of Tesla where Elon Musk is widely re­ported to be the founder of the com­pany de­spite only be­com­ing in­volved dur­ing the Series A round. Ad­di­tion­ally, even if the his­tor­i­cal ac­count was perfect, the tac­tics that worked in the 1940s are not nec­es­sar­ily go­ing to work to­day. In­stead I in­tend his­tor­i­cal ac­counts such as this to serve as sources of in­spira­tion and idea gen­er­a­tion—al­though the ideas they in­spire should be ver­ified through ar­gu­men­ta­tion out­side of his­tor­i­cal prece­dent.

This ar­ti­cle pro­ceeds as fol­lows. First, I provide a ba­sic his­tory of ne­oliber­al­ism in­clud­ing some of the key char­ac­ters and their roles. Then, I out­line their strate­gies and tac­tics (which they are gen­er­ally quite ex­plicit about). I fi­nally iden­tify some cau­tion­ary tales from the move­ment. How­ever, for ease of read­ing, I first be­gin with the three most im­por­tant mes­sages that I be­lieve the study of Ne­oliber­al­ism pro­vides for EAs.

Key Ideas

Aca­demic in­fluence as a source of power

As the quote at the be­gin­ning of this doc­u­ment ex­plains, the ne­oliber­als fo­cused on aca­demic in­fluence as their most im­por­tant mechanism of power. Hayek be­lieved that defend­ing liber­al­ism from the so­cial­ists would only be pos­si­ble by sys­tem­at­i­cally chang­ing the in­tel­lec­tual cli­mate of the time such that their ideas would seem ob­vi­ous decades hence. To this end, they were over­whelm­ingly suc­cess­ful. The ne­oliber­als worked to ex­plic­itly gain im­pres­sive aca­demic bon­afides like the No­bel Prize in Eco­nomics and im­pres­sive aca­demic ap­point­ments. Th­ese ac­com­plish­ments helped es­tab­lish them in aca­demic cir­cles.

For the EA com­mu­nity, it is tempt­ing to fo­cus on clear, tan­gible aims: money, re­cruits, at­ten­tion. Yet, the study of ne­oliber­al­ism shows us that strong in­tel­lec­tual com­mu­ni­ties com­mit­ted to prac­ti­cal, yet rigor­ous schol­ar­ship also have their place to play in the de­vel­op­ment of a suc­cess­ful com­mu­nity.

Utopian nar­ra­tives: for good or ill

Hayek be­lieved that liber­al­ism was los­ing to so­cial­ism be­cause the so­cial­ists had the courage to be Utopian. The so­cial­ists ex­plained the val­ues they were work­ing to at­tain and jus­tified their pro­ject in the con­text of these val­ues. To com­bat the so­cial­ists, Hayek in­sisted on ex­plain­ing the Utopian vi­sion of the ne­oliber­als—a vi­sion he couched in hu­man free­dom with com­pet­i­tive mar­kets as the only way to en­sure this free­dom. As the de­vel­op­ment of the move­ment shows, this fo­cus on Utopian vi­sions is an ex­tremely po­tent weapon.

Yet, it is not with­out its draw­backs. Ne­oliber­al­ism was built on a foun­da­tion of van­quish­ing an en­emy (so­cial­ism) and a nar­row con­cep­tion of free­dom that en­sured the supremacy of mar­kets. As so­cial­ism lost the in­tel­lec­tual war, the bound­less, and some­times ir­ra­tional, faith in mar­kets reigned unchecked. It seems pos­si­ble to draw a con­nec­tion be­tween this utopian faith in mar­kets to a num­ber of ques­tion­able poli­cies es­pe­cially in fi­nan­cial dereg­u­la­tion which may have con­tributed to the 2008 fi­nan­cial crisis.

The EA com­mu­nity has not had the courage to be Utopian so far (c.f. Beth Barnes’ talk). In some sense this is sur­pris­ing given that, to my mind, the Utopian vi­sion for EA is ex­tremely com­pel­ling. It seems plau­si­ble that we should avail our­selves of this tool, but if we do, we should pro­ceed with cau­tion.

While there seem to benefits to this Utopian nar­ra­tive ap­proach, it is also a core com­po­nent of the effec­tive al­tru­ism move­ment to main­tain epistemic hu­mil­ity. This al­lows us to be open to im­por­tant new ideas and makes it eas­ier to limit bi­ases that might pre­vent us from find­ing the most effec­tive ways to do good. Still, if we act with this in mind we still have strong po­ten­tial for pre­sent­ing a com­pel­ling Utopian vi­sion.

Fos­ter­ing in­tel­lec­tual talent

The ne­oliber­als fo­cused from the be­gin­ning on fos­ter­ing in­tel­lec­tual tal­ent. In the early days when ne­oliberal thinkers could not gain tenure they paid for their most promis­ing thinkers to study at places like the Univer­sity of Chicago. To this day, or­ga­ni­za­tions like the Mont Pel­erin So­ciety con­duct es­say con­tests to iden­tify the most promis­ing in­tel­lec­tual in rele­vant fields.

This is some­thing the EA com­mu­nity has done well at, al­though we have tended to fo­cus on tal­ent that cur­rent EA or­ga­ni­za­tion might wish to hire. It may make sense for us to fo­cus on de­vel­op­ing in­tel­lec­tual tal­ent as well.

A Brief His­tory of Neoliberalism

Ne­oliber­al­ism rose from ‘hereti­cal’ ide­ol­ogy to shap­ing the policy agenda of the most pow­er­ful na­tions in the world over a pe­riod of forty years. Below I provide a brief out­line some of the key events on this path­way. How­ever, we should take a mo­ment to ap­pre­ci­ate the speed of the ne­oliberal as­cen­dency into power:

Dur­ing the 1950s and 1960s, when so­cial­ism ruled the UK’s aca­demic in­sti­tu­tions, news me­dia and poli­ti­ci­ans, the [ne­oliberal] pub­li­ca­tions and those of their col­leagues were seen at best as hereti­cal and at worst as fas­cist.

Says Har­ris, ‘We were a scorned, dis­missed, hereti­cal minor­ity. There was a pre­or­dained path for the state to reg­u­late, to plan and to di­rect – as in war, so in peace. If you ques­tioned it, it was like swear­ing in church. At times this over­whelming con­sen­sus in­timi­dated us, and we some­times held back. We of­ten felt like mischievous, naughty lit­tle boys.’[1]

Yet, a mere 20-30 years later, the situ­a­tion had changed dra­mat­i­cally:

John Ranelagh writes of Mar­garet Thatcher’s re­mark at a Con­ser­va­tive Party policy meet­ing in the late 1970′s,” Another col­league had also pre­pared a pa­per ar­gu­ing that the mid­dle way on eco­nomic policy was the prag­matic path for the Con­ser­va­tive party to take. Be­fore he had finished speak­ing to his pa­per, Mar­garet Thatcher reached into her brief­case and took out a book. It was Friedrich von Hayek’s The Con­sti­tu­tion of Liberty. In­ter­rupt­ing the speaker, she held the book up for all of us to see. ‘This’, she said sternly, ‘is what we be­lieve’, and banged Hayek down on the table.[2]

Here I provide an out­line of some of the key events and figures in the move­ment as a brief chron­i­cle of the events that led to their rise to power.

1938: The Col­loque Walter Lippmann

The Col­loque Walter Lipp­man was a con­fer­ence of in­tel­lec­tu­als or­ga­nizer in Paris is Au­gust of 1938. At the time in­ter­est in clas­si­cal liber­al­ism had de­clined due in part to a de­crease in faith in free mar­kets af­ter the Great De­pres­sion. The aim of the gath­er­ing was to con­struct a new liber­al­ism that could re­ject col­lec­tivism and so­cial­ism. The event was named af­ter Walter Lipp­mann whose 1937 book An En­quiry into the Prin­ci­ples of the Good So­ciety was stud­ied in de­tail at the meet­ing. Par­ti­ci­pants in­cluded Fredrich Hayek and Lud­wig Von Mises who would later be­come ma­jor figures in the ne­oliberal move­ment. At the meet­ing, the term ‘ne­oliberal’ was coined by Alexan­der Rüs­tow.

1944: The Road to Serf­dom is pub­lished

The Road to Serfdom

Between 1940 and 1943, Friedrich Hayek writes The Road to Serf­dom which is later pub­lished in 1944. The book warned of “the dan­ger of tyranny that in­evitably re­sults from gov­ern­ment con­trol of eco­nomic de­ci­sion-mak­ing through cen­tral plan­ning.” The book also challenged the gen­eral view among Bri­tish aca­demics that Na­tional So­cial­ism was a cap­i­tal­ist re­ac­tion against so­cial­ism. In­stead, he ar­gued that fas­cism, Na­tional So­cial­ism, and so­cial­ism all have roots in cen­tral eco­nomic plan­ning and giv­ing the state power over the in­di­vi­d­ual.

The book was very pop­u­lar when pub­lished lead­ing Hayek to call it “that un­ob­tain­able book” al­though this was due in part to wartime pa­per ra­tioning. In 1945 an abridged ver­sion of the book was pub­lished in Reader’s Digest which helped it reach a broad au­di­ence be­yond aca­demics. Ac­cord­ing to those in the ne­oliberal move­ment, the book was:

[T]he open­ing salvo of the at­tack on the ideas of the Fabian So­cial­ists that had taken over think­ing in the UK and on the con­ti­nent.

1947: The Mont Pel­erin Society

The first meeting of the Mont Pelerin Society

In 1947, 36 schol­ars, mostly economists, were in­vited by Hayek to meet and dis­cuss the fate of clas­si­cal liber­al­ism. The so­ciety aimed to “fa­cil­i­tate an ex­change of ideas be­tween like-minded schol­ars in the hope of strength­en­ing the prin­ci­ples and prac­tice of a free so­ciety and to study the work­ings, virtues, and defects of mar­ket-ori­ented eco­nomic sys­tems.” The so­ciety was a schol­arly com­mu­nity ar­gu­ing against col­lec­tivism and so­cial­ism while also en­sur­ing not to en­gage in pub­lic re­la­tions or pro­pa­ganda.

The Mont Pel­erin So­ciety is of­ten cred­ited as set­ting off an in­ter­na­tional Think Tank move­ment in fa­vor of ne­oliberal prin­ci­ples. To­day there are close to 400 ne­oliberal think tanks in more than 70 na­tions across the world.

1950: Hayek leaves LSE for the Univer­sity of Chicago

In 1950 Hayek leaves LSE and takes a po­si­tion at the Univer­sity of Chicago. In­ter­est­ingly, his salary is paid not by the Univer­sity of Chicago it­self but by an out­side foun­da­tion. Over time he worked to es­tab­lish the Chicago school of eco­nomics which be­comes a ma­jor in­tel­lec­tual force in eco­nomics.

1955: The In­sti­tute of Eco­nomic Af­fairs is started

IEA

Without Fisher, no IEA; with­out the IEA and its clones, no Thatcher and quite pos­si­bly no Rea­gan;with­out Rea­gan, no Star Wars; with­out Star Wars, no eco­nomic col­lapse of the Soviet Union. Quite a chain of con­se­quences for a chicken farmer![3]

The In­sti­tute for Eco­nomic Af­fairs is one of the ear­liest and most in­fluen­tial think tanks in the ne­oliberal move­ment. The found­ing of IEA is of­ten sum­ma­rized in nine words:

Hayek ad­vised Fisher;

Fisher re­cruited Har­ris;

Har­ris met Sel­don.

As the story goes, An­thony Fisher was a highly dec­o­rated fighter pi­lot who read Hayek’s *Road to Serf­dom* in *Reader’s Digest*. He trav­eled to Lon­don to seek out Hayek. “What can I do? Should I en­ter poli­tics?” he asks. As a dec­o­rated vet­eran with good looks and a gift for pub­lic speak­ing, this was a live pos­si­bil­ity.

“No.” replied Hayek “So­ciety’s course will be changed only by a change in ideas. First you must reach the in­tel­lec­tu­als, the teach­ers and writ­ers, with rea­soned ar­gu­ment. It will be their in­fluence on so­ciety which will pre­vail, and the poli­ti­ci­ans will fol­low.”

Later in 1949, Ralph Har­ris, a young re­searcher from the Con­ser­va­tive Party gave a lec­ture with An­thony Fisher in the au­di­ence. Fisher loved what he heard and takes Har­ris aside af­ter the talk. He ex­plained his idea for an or­ga­ni­za­tion to make the free mar­ket case to in­tel­lec­tu­als. Har­ris is ex­cited. “If you get any fur­ther” he says, “I’d like to be con­sid­ered as the man to run such a group.”

In 1953, Fisher started the Buxted Chicken Co. which brought fac­tory farm­ing to Bri­tain. The com­pany be­gins to show a profit which al­lowed him to re­visit his idea for a free-mar­ket in­sti­tute. Fisher signed the trust deed with two friends and got back in con­tact with Har­ris about run­ning the in­sti­tute. Har­ris agrees and be­come the new gen­eral di­rec­tor on 1 Jan­uary 1957. Har­ris met Arthur Sel­don in 1956 and in 1958, Sel­don joined the or­ga­ni­za­tion. He was ini­tially ap­pointed Edi­to­rial Ad­vi­sor and be­come the Edi­to­rial Direc­tor in 1959.

Thirty years later in 1987, Har­ris be­come Lord Har­ris of High Cross and over­saw an in­sti­tute which boasted 250 ma­jor cor­po­rate sup­port­ers and a bud­get equiv­a­lent to around £1.6M (in 2016 pounds). Sel­don helped pro­duce more than 300 pub­li­ca­tions and nur­tured and de­vel­oped more than 500 au­thors. Fisher founded the At­las Eco­nomic Re­search Foun­da­tion which worked to aid in the cre­ation of new think tanks, cre­at­ing 36 in­sti­tutes in 18 coun­tries all based on the IEA model.

1970s: Stagflation

Between 1973 and 1982 sev­eral ma­jor economies (in­clud­ing the US and the UK) ex­pe­rienced a pro­longed pe­riod dur­ing which both the in­fla­tion rate and the un­em­ploy­ment rate in­creased. This was dubbed “stagfla­tion.”

The cost in hu­man terms of stagfla­tion was great, but stagfla­tion also led to up­heaval in eco­nomic think­ing. In the Key­ne­sian macroe­co­nomic the­ory that dom­i­nated be­tween World War II and the late 1970s, stagfla­tion was sup­posed to be im­pos­si­ble. In­deed, un­em­ploy­ment and in­fla­tion were sup­posed to have an in­verse re­la­tion­ship as de­scribed in the Phillips Curve. This helped to set the stage for al­ter­na­tives to Key­ne­sian the­o­ries to take cen­ter stage.

In Mil­ton Fried­man’s words: “the role of thinkers, I be­lieve, is pri­mar­ily to keep op­tions open, to have available al­ter­na­tives, so when the brute force of events make a change in­evitable, there is an al­ter­na­tive available to change it.”

1971: The col­lapse of Bret­ton Woods

The Bret­ton Woods sys­tem of mon­e­tary man­age­ment es­tab­lished the rules for com­mer­cial fi­nan­cial re­la­tions among the US, Canada, Western Europe, Aus­tralia and Ja­pan be­gin­ning in 1944 and end­ing in 1971.

Bret­ton Woods es­tab­lished a sys­tem ac­cord­ing to which the ex­change rate of var­i­ous cur­ren­cies were pegged to the US Dol­lar which was in turn con­vert­ible into gold at a fixed rate. At the time there was a high level of agree­ment among pow­er­ful na­tions that the failure to co­or­di­nate be­tween WWI and WWII was in part re­spon­si­ble for the eco­nomic and poli­ti­cal ten­sions that set of WWII. The hope was that Bret­ton Woods could help sta­bi­lize global eco­nomic policy. In 1971, the US unilat­er­ally ended the con­vert­ibil­ity of US Dol­lars to gold amid a grow­ing bal­ance of pay­ments prob­lem and in­creas­ing pub­lic debt due to the Viet­nam war and the Great So­ciety Pro­gram.

Many in­ter­preted the failure of Bret­ton Woods as an in­di­ca­tion that Key­ne­sian eco­nomic policy was mis­guided.

1974: Hayek wins the No­bel Prize in Economics

Over the in­ter­ven­ing years, the move­ment made steady progress in es­tab­lish­ing aca­demic cred­i­bil­ity. They re­ceived a nice boost in this en­deavor with Hayek win­ning the No­bel Prize in 1974 and Fried­man win­ning it in 1976.

1979: Volcker be­comes Chair­man of the Fed

In Au­gust of 1979, Paul Volcker is ap­pointed chair­man of the board of gov­er­nors for the Fed­eral Re­serve sys­tem. In­fla­tion peaked in March of 1980 at 14.8 per­cent and fell be­low 3 per­cent when Volcker was reap­pointed in 1983. Volcker made fight­ing in­fla­tion his pri­mary ob­jec­tive and re­stricted the money sup­ply to tame in­fla­tion in the econ­omy. This was broadly in line with the mon­e­tarism school of thought in eco­nomics (and ad­vo­cated for by the ne­oliber­als) which thought of fight­ing in­fla­tion as the pri­mary role of cen­tral bankers.

1979 & 1980: Thatcher and Rea­gan are elected

Mar­garet Thatcher be­came Bri­tish prime minister on May 4 1979 and Ron­ald Rea­gan was elected in 1980. Both gov­ern­ments were broadly mon­e­tarist in their think­ing and were heav­ily in­fluenced by ne­oliberal economists like Mil­ton Fried­man. Mar­ket liber­al­iza­tion was a sig­na­ture fea­ture of both gov­ern­ments but es­pe­cially the Thatcher ad­minis­tra­tion through wide­spread dereg­u­la­tion and pri­va­ti­za­tion.

In some sense, this rep­re­sents the zenith of ne­oliberal power. The ne­oliber­als had in­fluenced the chair­man of the Fed and two of the most pow­er­ful gov­ern­ments on Earth. More strik­ingly, how­ever, they had com­pletely shifted the ground for pub­lic dis­course about eco­nomics. Many of the cri­tiques of so­cial­ism ad­vanced by the ne­oliber­als were now taken for granted by both those on the Right and those on the Left.

Ne­oliberal strate­gies and tactics

The ne­oliber­als are rel­a­tively ex­plicit about the strate­gies and tac­tics they pur­sued to achieve their goals. The key strate­gic thinker ap­pears to be Hayek him­self who pro­vided guidance in a num­ber of ar­ti­cles, in par­tic­u­lar: ‘His­to­ri­ans and the Fu­ture of Europe’ (1944); ‘Open­ing Ad­dress to a Con­fer­ence at Mont Pélerin’ (1947); ‘The In­tel­lec­tu­als and So­cial­ism’ (1949); ‘The Trans­mis­sion of the Ideals of Eco­nomic Free­dom’ (1951); ‘The Dilemma of Spe­cial­i­sa­tion’ (1956).

Below I first dis­till Hayek’s strate­gic con­tent into a few spe­cific strate­gic in­sights. I then provide a more gen­eral list of tac­tics and strate­gies em­ployed by the Ne­oliber­als.

Hayek’s key strate­gic insights

Ac­cord­ing to an IEA pub­li­ca­tion, Wag­ing the war of ideas: why there are no short­cuts, Hayek’s ad­vice can be dis­til­led as fol­lows:

The failure of liberalism

So­cial­ism came into as­cen­dancy partly be­cause of the failure of liber­al­ism to be a seem­ingly rele­vant, liv­ing, in­spiring set of ideas. Liber­al­ism needed re­viv­ing and to­ward this end, Hayek viewed his cre­ation in 1947 of the Mont Pélerin So­ciety, an in­ter­na­tional com­mu­nity of clas­si­cal liberal schol­ars and other in­tel­lec­tu­als, as a crit­i­cal first step.

The im­por­tance of history

His­tory plays a ma­jor role in the de­vel­op­ment of peo­ple’s poli­ti­cal philos­o­phy. For Hayek, ‘There is scarcely a poli­ti­cal ideal or con­cept which does not in­volve opinions about a whole se­ries of past events, and there are few his­tor­i­cal mem­o­ries which do not serve as a sym­bol of some poli­ti­cal aim.’

Hayek agreed with an in­sight oth­ers had offered – that more peo­ple get their eco­nomic opinions through the study of his­tory than through the study of eco­nomics. Hayek’s key ex­am­ple in this re­gard is the Ger­man his­tor­i­cal school, which pro­moted the role of the state and was hos­tile to spon­ta­neous or­der. To Hayek, it was very much re­spon­si­ble for cre­at­ing the at­mo­sphere in which Hitler could take power.

Fo­cus on the long-run

Prac­ti­cal peo­ple who con­cern them­selves solely with cur­rent day-to-day prob­lems tend to lose sight of, and there­fore in­fluence on, the long run. This is be­cause of their lack of ideal­ism. In a para­dox­i­cal way the prin­ci­pled, stead­fast ide­ologue has far greater long-term in­fluence than the prac­ti­cal man con­cerned with the minu­tiae of to­day’s prob­lems.

Avoid politics

Hayek ar­gued that the ne­oliberal move­ment should not go into poli­tics where they would be­come im­pris­oned in a slow pro­cess whose out­come was already de­ter­mined decades ago. In­stead, he ar­gued that they should look for lev­er­age in the world of ideas as a scholar, in­tel­lec­tual, or in­tel­lec­tual en­trepreneur.

Fo­cus on the ‘in­tel­lec­tual’

Over the long run, it is a bat­tle of ideas, and it is the in­tel­lec­tual – the jour­nal­ist, nov­el­ist, film­maker and so on, who trans­lates and trans­mits the ideas of the schol­ars to the broader pub­lic – who is crit­i­cally im­por­tant. He is the filter who de­cides what we hear, when we hear it, and how we hear it.

Have the courage to be Utopian

Fi­nally, I quote the whole of the last para­graph of ‘The In­tel­lec­tu­als and So­cial­ism’:

The main les­son which the true liberal must learn from the suc­cess of the so­cial­ists is that it was their courage to be Utopian which gained them the sup­port of the in­tel­lec­tu­als and there­fore an in­fluence on pub­lic opinion which is daily mak­ing pos­si­ble what only re­cently seemed ut­terly re­mote.

Conclusion

To sum­marise Hayek’s mes­sage: Keep liberal thought vibrant and rele­vant; recog­nise the im­por­tance of his­tory; be prin­ci­pled and stead­fast; avoid spe­cial in­ter­ests; es­chew poli­tics and in­stead search for lev­er­age; recog­nise the crit­i­cal role of the in­tel­lec­tual; and be Utopian and be­lieve in the power of ideas.

Ne­oliberal tactics

In this sec­tion, I high­light some spe­cific tac­tics em­ployed by the ne­oliber­als. Many are mir­rored in Hayek’s writ­ing al­though oth­ers are gen­er­ated el­se­where. All origi­nate from writ­ings by the ne­oliber­als them­selves in Wag­ing the War of Ideas or from the ex­cel­lent pa­per Win­ning Ideas.

Vigilant patience

As the story goes, the ne­oliber­als fo­cused on wag­ing a long-term in­tel­lec­tual war against so­cial­ism. They ad­vise against the kinds of ac­tion that might yield gain in the short-term: en­ter­ing poli­tics, cav­ing to spe­cial in­ter­ests or al­ign­ing too closely with suc­cess­ful poli­ti­cal par­ties. In­stead, they pre­fer the slow, steady work of build­ing an in­tel­lec­tual com­mu­nity, care­fully de­vel­op­ing their ideas and gain­ing aca­demic con­sen­sus. It was only af­ter the hard work had been done that they be­gan to achieve wide­spread poli­ti­cal suc­cess.

Yet, the ap­proach was not purely pas­sive. The ne­oliber­als un­der­stood that their goal was to ‘have on hand al­ter­na­tives’ that might be use­ful if the geopoli­ti­cal facts de­manded a new way for­ward.

The so-called Mir­a­cle of Chile in the 1970s and 80s is illus­tra­tive. After a coup in Chile in the early 70s, in­fla­tion in the coun­try soared reach­ing heights of 140 per­cent per an­num un­der so­cial­ist Pres­i­dent Sal­vador Allende. After de­pos­ing Allende in a coup, Pino­chet turned to the so-called Chicago Boys, who were Chilean Economists that stud­ied un­der in­fluence ne­oliberal Mil­ton Fried­man at the Univer­sity of Chicago. The Chicago Boys im­ple­mented a num­ber of re­forms in ac­cor­dance with ne­oliberal prin­ci­ples and were ul­ti­mately able to dra­mat­i­cally de­crease in­fla­tion and poverty rates. When op­por­tu­ni­ties pre­sented them­selves, the ne­oliber­als made sure they took ad­van­tage.

Mo­ral nar­ra­tives and Utopian visions

From the early days, Hayek ar­gued that pro­po­nents of liber­al­ism were los­ing to pro­po­nents of so­cial­ism be­cause of their ‘courage to be Utopian.’ They wanted to couch their aims in ideals like free­dom and liberty and to work to claim the moral high ground. This is as op­posed to the usual ten­dency in academia to fo­cus ex­clu­sively on em­piri­cal or eco­nomic as­ser­tions. In­deed, *The Road to Serf­dom* is hardly a work of eco­nomics at all. It makes a few em­piri­cal claims, but most are not about eco­nomic effi­ciency. In­stead, the claims are about the kind of so­ciety that would re­sult from so­cial­ist plan­ning.

Se­cond-hand traders

Hayek drew a dis­tinc­tion be­tween those who gen­er­ated novel in­tel­lec­tual con­tent and those who com­mu­ni­cate that con­tent to a mass au­di­ence (who he dubbed ‘in­tel­lec­tu­als.’) Th­ese in­tel­lec­tu­als/​sec­ond-hand traders in­cluded jour­nal­ists, nov­el­ists, en­trepreneurs, film­mak­ers and even some aca­demics.

Devel­op­ing an in­tel­lec­tual community

When dis­tribut­ing their ideas, the ne­oliber­als fo­cused on sec­ond-hand traders. Yet, when de­vel­op­ing ideas for dis­sem­i­na­tion they cre­ated in­tel­lec­tual com­mu­ni­ties com­mit­ted to ex­cel­lence in schol­ar­ship. It is no ac­ci­dent that some of the ear­liest ac­tion of the ne­oliberal move­ment were to es­tab­lish aca­demic com­mu­ni­ties to im­prove their ideas.

How­ever, even in the de­vel­op­ment of an in­tel­lec­tual com­mu­nity, the goal was not sim­ply to be an ‘ivory tower’—the group aimed to de­velop ideas that could have real in­fluence. They were very clear that they were defend­ing liber­al­ism from so­cial­ist as­sault and that the goal of their in­tel­lec­tual com­mu­ni­ties was to pre­pare the way for the bat­tles to come.

Ad­di­tion­ally, they drew a dis­tinc­tion be­tween the differ­ent mem­bers of the in­tel­lec­tual com­mu­nity. The num­ber of true origi­na­tors of ideas is quite small in ne­oliberal sense. They viewed think tanks, for ex­am­ple, as a par­tic­u­lar type of in­tel­lec­tual com­mu­nity:

Their task is not to origi­nate big ideas – ei­ther off-the-peg or be­spoke – for the benefit of poli­ti­ci­ans. Rather, it is to ap­ply an ex­ist­ing body of ideas – clas­si­cal liberal eco­nomics in the case of the IEA – to con­tem­po­rary prob­lems, in or­der to gain wider un­der­stand­ing of the is­sues and in­sights into pos­si­ble solu­tions. If they are suc­cess­ful, one con­se­quence will be a change in the wider cli­mate of opinion, which in turn stretches the bound­aries of the poli­ti­cally pos­si­ble.

Hav­ing an enemy

The ne­oliber­als had an en­emy from the be­gin­ning—so­cial­ism. Their goal was to avoid the oc­cur­rence of so­cial­ist or col­lec­tivist so­cieties that they feared would erode hu­man free­dom. They made sure to define the val­ues they were pro­mot­ing and to show­case how their op­po­nents were un­able to pro­mote those val­ues. In­deed, it seems difficult to con­cep­tu­al­ize the ne­oliber­als with­out also un­der­stand­ing them as fight­ing against so­cial­ism.

Fos­ter­ing talent

The ne­oliber­als are in­ten­tional about fos­ter­ing tal­ent, es­pe­cially aca­demic tal­ent to sup­port their cause.

Yet in the 1940s, free-mar­ket ideas had not yet per­me­ated the academy, where the next gen­er­a­tion of economists were be­ing taught and ex­am­ined, were tak­ing up teach­ing posts, and build­ing up re­search groups. In an ex­ter­nal en­vi­ron­ment in which free mar­ket economists were marginal­ized from the aca­demic main­stream, they were also un­able to re­cruit the top tal­ent from the younger gen­er­a­tion. What was the an­swer to this im­passe? Money and or­ga­ni­za­tion. Fi­nan­cial re­sources were mar­shalled from in­ter­est groups ex­ter­nal to the academy and di­rected to en­dow chairs in free en­ter­prise across Amer­ica for the se­nior in­tel­lec­tu­als, and di­rect sup­port for the in­com­ing gen­er­a­tion. The amounts of money were vast, but more to the point they were in­vested very strate­gi­cally, so as to fo­cus on the peo­ple.

Creat­ing a nat­u­ral constituency

Fi­nally, the ne­oliber­als were able to foster a nat­u­ral con­stituency with the busi­ness com­mu­nity. The Chicago school in par­tic­u­lar ad­vo­cated for the rel­a­tively harm­less na­ture of mo­nop­o­lies, the pos­i­tive role of large cor­po­ra­tions and wor­ried about the monopoly power of trade unions—all poli­cies fa­vored by the busi­ness com­mu­nity. In the US, busi­ness in­ter­ests were cat­alyzed by op­po­si­tion to the New Deal and be­came sig­nifi­cant fun­ders of the ne­oliberal move­ment. It seems likely that this was cru­cial to ne­oliberal suc­cess in the post­war US.

The ne­oliber­als were care­ful to stay rel­a­tively in­de­pen­dent of such in­ter­ests (or so they claim). They made it clear that dona­tions to ne­oliberal Think Tanks pro­vided no ed­i­to­rial con­trol, and the ne­oliber­als avoided be­com­ing too cozy with any par­tic­u­lar poli­ti­cal party to avoid the fate of the Fabian So­ciety which founded the La­bor Party and thus lost their in­tel­lec­tual in­de­pen­dence. Whether they were suc­cess­ful in the en­deavor to avoid spe­cial in­ter­ests is not en­tirely clear.

Cau­tion­ary tales

De­spite the suc­cess of the ne­oliberal move­ment they also offer some use­ful cau­tion­ary tales for effec­tive al­tru­ists. Below I de­scribe three such les­sons.

The role of luck

While the ne­oliber­als were both suc­cess­ful and strate­gic, it is im­por­tant not to for­get that they were also *lucky*. Had the geopoli­ti­cal events played out differ­ently the world might have looked very differ­ent. Jones makes the point as fol­lows:

The poli­ti­cal, the­o­ret­i­cal, and cul­tural trans­for­ma­tion wrought by ne­oliberal poli­tics af­ter the 1970s brought with it a se­ries of so­cial and eco­nomic con­se­quences… [s]uch a rad­i­cal change in poli­ti­cal cul­ture and pub­lic de­bate from so­cial democ­racy to a mar­ket-driven so­ciety was not planned or mapped out in ad­vance. Luck, op­por­tunism, and a set of con­tin­gent cir­cum­stances played the most cru­cial roles. Above all, it was far from in­evitable.

More speci­fi­cally, a num­ber of events were crit­i­cal to ne­oliberal suc­cess. If the Labour Party had en­tered the 1980s with De­nis Healey as a mod­er­ate leader, or if the Falk­lands War had not hap­pened, Labour might have re­cov­ered to benefit elec­torally from the deep re­ces­sion the Con­ser­va­tive eco­nomic strat­egy had in­duced. If the sec­ond oil shock had not struck be­fore the Ira­nian hostage crisis, Jimmy Carter may not have been un­fairly char­ac­ter­ized by the sense of “malaise.” Luck and his­tor­i­cal con­tin­gency played cen­tral roles.

Cooption

As noted ear­lier, the ne­oliber­als en­gen­dered a nat­u­ral con­stituency by ap­peal­ing to en­trepreneurs and busi­ness elites. While the in­tel­lec­tu­als made a point of at­tempt­ing to keep the ide­ol­ogy pure, it seems plau­si­ble that the ne­oliberal state tended to fa­vor this con­stituency even in cases where do­ing so was in ten­sion with ne­oliberal the­ory.

The clear­est ex­am­ple of this is the ten­sion be­tween the dereg­u­la­tion of the fi­nan­cial sys­tem and the im­plicit (and of­ten ex­plicit) guaran­tee of the in­tegrity and solvency of the fi­nan­cial in­sti­tu­tions. As Har­vey puts it:

But the habit of in­ter­ven­ing in the mar­ket­place and bailing out fi­nan­cial in­sti­tu­tions when they get into trou­ble can­not be rec­on­ciled with ne­oliberal the­ory. Reck­less in­vest­ments should be pun­ished by losses to the lender, but the state makes lenders largely im­mune to losses. Bor­row­ers have to pay up in­stead, no mat­ter what the so­cial cost. Ne­oliberal thought should warn ‘Len­der be­ware,’ but the prac­tice is ‘Bor­rower, be­ware.’

Ex­am­ples of this prac­tice are easy to find. In­ter­na­tion­ally, the IMF is de­signed to pro­tect the world’s main fi­nan­cial in­sti­tu­tions from de­fault, yet, what this amounts to is that the IMF cov­ers lenders to un­sta­ble coun­tries from de­fault as it has done for the lenders of 41 coun­tries around the world. The US gov­ern­ment pro­vided bailouts dur­ing the sav­ings and loan crisis of 87-8, the Long Term Cap­i­tal Man­age­ment crisis of 97-8, and, most re­cently, the 2008 fi­nan­cial crisis.

Similarly, there is a strong ten­sion be­tween the ne­oliberal’s pro­claimed defense of in­di­vi­d­ual liberty and their sup­port of un­demo­cratic regimes re­spon­si­ble for mas­sive hu­man rights abuses, such as Pino­chet’s. This sup­port has caused in­calcu­la­ble rep­u­ta­tional dam­age to the ne­oliberal move­ment.

Give me liberty or give me death

All of us might miss the con­se­quences of push­ing the ide­olog­i­cal case too far.

-Ge­offrey Howe, in­ter­view, 2007.

As I men­tion above, a cen­ter­piece of the ne­oliberal strat­egy was the courage to be utopian. As they saw it, the dis­agree­ment be­tween so­cial­ists and pro­po­nents of free mar­kets was not a ques­tion of op­ti­mal re­source al­lo­ca­tion. It was a ques­tion of free­dom ver­sus serf­dom; liberty ver­sus sub­or­di­na­tion. Taken to the ex­treme, the view that mar­kets pro­mote free­dom and that free­dom is the ul­ti­mate value en­tails that the ne­oliber­als are es­sen­tially im­mune from crit­i­cism. In some sense it mat­ters not whether mar­kets work be­cause ei­ther way, they are the only path­way to pro­mot­ing hu­man free­dom.

The ne­oliber­als were rel­a­tively ex­plicit about this view. Two illus­tra­tive quotes come from John Blun­dell. the leader of the in­fluen­tial In­sti­tute for Eco­nomic Af­fairs:

Ba­sic to the strug­gle to pro­mote per­sonal liberty is the task of per­suad­ing our fel­low men not only that free mar­ket al­lo­ca­tion of goods and ser­vices is eco­nom­i­cally effi­cient and wealth-en­hanc­ing but also, and much more im­por­tantly, that mar­ket al­lo­ca­tion is morally su­pe­rior to other meth­ods of ex­change. (Wag­ing the War of Ideas)

Or, to put an even finer point on it:

If pros­per­ity cor­re­lated highly with so­cial­ism I would still be for free­dom and so would Antony have been. Free­dom is a good in and of it­self and the fact that free­dom hap­pens to bring pros­per­ity in its wake is a happy bonus.

It may be that Blun­dell’s ab­solute be­lief in the moral su­pe­ri­or­ity of mar­kets is par­tic­u­lar to him, al­though I doubt it. In­deed, the origi­nal “state­ment of aims” of the Mont Pel­erin So­ciety is similar in tone to Blun­dell:

Over large stretches of the Earth’s sur­face the es­sen­tial con­di­tions of hu­man dig­nity and free­dom have already dis­ap­peared. In oth­ers they are un­der con­stant men­ace from the de­vel­op­ment of cur­rent ten­den­cies of policy. The po­si­tion of the in­di­vi­d­ual and the vol­un­tary group are pro­gres­sively un­der­mined by ex­ten­sions of ar­bi­trary power. Even that most pre­cious pos­ses­sion of Western Man, free­dom of thought and ex­pres­sion, is threat­ened by the spread of creeds which, claiming the priv­ilege of tol­er­ance when in the po­si­tion of a minor­ity, seek only to es­tab­lish a po­si­tion of power in which they can sup­press and obliter­ate all views but their own.

The tone in these quotes is per­haps un­sur­pris­ing given the ex­plicit com­mit­ment of the ne­oliber­als to be­ing utopian. How­ever, the utopian fer­vor was not with­out its con­se­quences. In Masters of the Uni­verse, Jones makes the fol­low­ing case about the ul­ti­mate legacy of ne­oliber­al­ism:

The apotheo­sis of the ne­oliberal faith in mar­kets came with the fi­nan­cial crisis of 2007-8. The crisis was the di­rect re­sult of a cul­ture that had en­dowed the free mar­ket with a di­v­ine sta­tus it has never mer­ited.… It was a calamity that graph­i­cally illus­trated the limits of what the jour­nal­ist John Cas­sidy has called “Utopian eco­nomics,” the un­think­ing and un­crit­i­cal ac­cep­tance of the logic of the free mar­ket.

The ne­oliberal faith in free mar­kets opened the door for wide­spread fi­nan­cial dereg­u­la­tion in­clud­ing the Garn-St. Ger­main De­pos­i­tory In­sti­tu­tions Act un­der Rea­gan, Thatcher’s “Big Bang” dereg­u­la­tion of the City of Lon­don, the re­peal of Glass-Stea­gal un­der Clin­ton, and the de­ci­sion not to reg­u­late the emerg­ing deriva­tives mar­ket as sug­gested by the chair of the Com­mod­ity Fu­ture Trad­ing Com­mis­sion.

That ne­oliberal poli­tics was able to effect so much was in­dica­tive of the sim­ple power of a firm faith in mar­kets as the best means of al­lo­cat­ing re­sources. But this com­mit­ment to mar­kets was rarely sub­jected to de­tailed em­piri­cal ex­am­i­na­tion and crit­i­cism. The skep­ti­cism of main­stream pro­fes­sional economists to­wards the claims of gen­eral equil­ibrium the­ory or ra­tio­nal ex­pec­ta­tions, for ex­am­ple, was largely ig­nored.… They found it in­creas­ingly im­pos­si­ble to think differ­ently about econ­omy and so­ciety.

Of course we should not ap­proach the utopian procla­ma­tions of the ne­oliber­als or their im­pli­ca­tion in the 2008 fi­nan­cial crisis un­crit­i­cally. The ne­oliber­als may well have un­der­stood the differ­ence be­tween the Utopian procla­ma­tion they made in pub­lic and the ac­tual ev­i­dence in fa­vor of free mar­ket re­forms. The fact that many economists as­so­ci­ated with the ne­oliber­als won the No­bel Prize in Eco­nomics sug­gests that their pro­ject was more than mere procla­ma­tions. And, we should look be skep­ti­cal at any at­tempt to ex­plain a wide­spread and un­fore­seen fi­nan­cial crisis in terms of a sin­gu­lar policy agenda.

Yet, the ba­sic story—that utopian nar­ra­tives are pow­er­ful but po­ten­tially dan­ger­ous—seems per­sua­sive. When ideas are war, mod­er­a­tion is trea­son. If the ne­oliberal move­ment be­came di­vorced from the ev­i­dence it would hardly be sur­pris­ing. In­deed, if we take them en­tirely at their word, we are faced with the trou­bling pos­si­bil­ity that the be­guil­ing be­lief in mar­kets and the col­lapse that re­sulted is a *fea­ture* and not a *bug* of ne­oliber­al­ism.

Nev­er­the­less, given the epistemic val­ues of the EA com­mu­nity we should see the ne­oliber­als as both a source of in­spira­tion and of cau­tion.

[1]: Blun­dell, J. (2001) “Wag­ing the War of Ideas,” In­sti­tute of Eco­nomic Af­fairs, p.20. https://​​iea.org.uk/​​wp-con­tent/​​up­loads/​​2016/​​07/​​up­ld­book404pdf.pdf

[2]: Miller, E. F. (2010) “Hayek’s *The Con­sti­tu­tion of Libery*: An ac­count of its ar­gu­ment,” In­sti­tute of Eco­nomic Af­fairs, P.12-13. http://​​iea.org.uk/​​sites/​​de­fault/​​files/​​pub­li­ca­tions/​​files/​​Hayek’s%20Con­sti­tu­tion%20of%20Liberty.pdf

[3]: At­las Net­work. “At­las Net­work” re­trieved on Novem­ber 23, 2016 from https://​​www.at­las­net­work.org/​​about/​​our-story