"When Neoliberalism Exploded"

When Neoliberalism Exploded

By Michael W. Clune at Salon

http://www.salon.com/2013/03/09/the_world_according_to_milton_friedman_partner/

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This view is often called “neoliberalism,” a term first used by interwar continental and British economists and philosophers to describe an economic doctrine that favors privatization, deregulation, and unfettered free markets over public institutions and government. These philosophers saw themselves as championing the values of classical liberalism in a mid-20th century world threatened by unchecked state power — a threat vividly embodied in the totalitarian societies of Nazi Germany and Stalinist Russia. Writers like Ludwig von Mises and Karl Popper saw hope in the liberalism of J.S. Mill and Adam Smith. They shared the earlier philosophers’ skepticism about the capacity of human reason to design functional and ethical social orders, and were committed to processes of “liberated” or open exchange to create knowledge and distribute wealth.

The meaning of the prefix has aroused a great deal of debate. For thinkers on the left, “neo” signals a liberalism shorn of many of the features that made classical liberalism plausible and effective. Recent scholarship on Adam Smith, for example, has emphasized the extent to which neoliberal thinkers such as F. A. Hayek focus on Smith’s celebration of self-organizing markets in The Wealth of Nations while neglecting Smith’s argument, in the Theory of Moral Sentiments, for the importance of non-market values in sustaining social orders. Indeed, the neoliberal embrace of the prospect of a social world almost wholly organized by market relations strongly distinguishes this thought from the classical liberal tradition, which fostered a capitalism embedded in the institutions of civil society, the norms of civilized communication, and state regulation of the economy.

There are two popular accounts of how this philosophy of free markets and minimal government came to determine the economic policies of the US and UK. For the right, including the heirs and acolytes of Milton Friedman, the failures of both state socialism and the Keynesian welfare state made the political triumph of neoliberal ideas inevitable. For the left, including figures like the Marxist geographer David Harvey and the activist-journalist Naomi Klein, neoliberal policies were the expression of the interests of capital, which systematically infiltrated government in order to reverse postwar regulations.

In Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics, the economic historian Daniel Stedman Jones persuasively argues that both these popular accounts are wrong. That neoliberalism won out was due neither to the failures of the welfare state nor to a “master plan” pushed by the agents of capital. The story Stedman Jones tells is considerably more nuanced. He shows neoliberalism’s ascendance to be the result of a series of more or less ad hoc moves on the part of politicians, activists, media figures, and economists in response to a series of political and economic shocks that began in the 1970s. The image of a dramatic face-off between neoliberals and proponents of the postwar center-left consensus is largely an artifact of retrospective right-wing propaganda, which the left seems to have accepted in its essential features.

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