by Richard Ebeling
We are living in a world of the anti-liberal counter-attack against individual liberty, free markets and limited government. Prominent voices for the free society in the 20th century, like the Austrian economists Ludwig von Mises and Friedrich A. Hayek, are among the targets that opponents of free market liberalism are taking aim. In doing so, the anti-liberals distort the facts and twist the historical record. It is necessary to clarify those facts and set the record straight.
For most of the last quarter of a century, many took it for granted that the case for socialism had been defeated. With the fall of the Berlin Wall in 1989, the end of the Soviet Union in 1991, and the shift in several remaining communist countries – China in particular – to market-oriented policies, it was presumed that “socialism” as an economic system was dead. Who seriously wanted to retain or restore comprehensive socialist central planning as an alternative to a relatively free and functioning market economy?
In this sense, the “Austrians” had won, that is to say, the criticisms of socialist central planning made by Ludwig von Mises and Friedrich A. Hayek in the 1920s, the 1930s, and the 1940s, had been shown to be correct. Without private property in the means of production and a competitive market process with a functioning price system, there could not be effective economic calculation for efficient cost-accounting, consumer-directed production decision-making, and ongoing coordination of a complex system of division of labor reflected in the patterns of market supply and demand.
The Persistence of the Socialist Critique of Capitalism
But it is also clear in these early decades of the 21st century that socialism had not passed into the dustbin of history. Instead, it had taken refuge in the ivory towers of academia and related intellectual circles. What had not been abandoned and was still sulking in the corners of society was the socialist critique of market, or capitalist, society. Market outcomes were “unfair,” “unjust” and “unequal.” Private production for profit left the “social needs” of society unfulfilled, such as health care and job security. Capitalism not only mistreated and exploited “the workers,” but various racial and gender, and other social minority groups, as well.
The financial crisis of 2008-2009 and the slow and lopsided recovery for much of the last ten years offered the opening in the door for all the old criticisms of capitalism to once more seem timely and relevant, especially when clothed in the latest fads and fashions of ‘political correctness.”
In some ways, the advocates of socialism are back to where they were more than a century ago before the First World War. This is the case not only with their moral fervor and self-righteous certainty that capitalism and liberalism are evils that must be done away with, but in the practical uncertainty of which of the competing forms of economic collectivism should replace the current market economy. Should it be central planning with nationalized industry? Should it be worker-managed syndicalism? Should it be a form of economic fascism in which not all industry is taken over by the government, but under which the government controls, directs and restricts how private enterprises may go about their business for the “social good”? Or shall it be some peculiar combination of all three?
All the competing socialist visions strongly believe in the need and necessity for greater income and wealth redistribution to bring about social and economic “equality.” There is an unreflective presumption on the part of many of these critics of liberal capitalism that all the social “safety nets,” infrastructure projects, and environmental protections can be funded simply by taxing “the rich” and the large corporations, as if they are self-renewing bottomless wells of money to be extracted in any amount and at any time.
Progressives: Democracy Mystically Good, Neoliberalism Despicably Evil
These critics of capitalism and advocates of some form of government-managed or planned economic systems rhetorically use terms to categorize all that they consider to be “good” and “evil.” These terms, respectively, are: “democracy” and “neoliberalism.” Democracy and “democratic socialism” have become verbal expressions of all that “progressives” consider to be right and just for the world.
Democracy is treated as a hallowed word, a word representing “the masses” of society insisting upon and ready to establish a “better world” through the willpower of a voting majority. Unchecked and unrigged, the new generation of collectivists knows that the democratic process will bring about the progressive and socialist world they long for, dream of, and fight for.
If the electoral process does not produce it, it must be because “the system” is perverted and manipulated. Either “the rich” have used their wealth to bribe people and politicians to preserve the present system of injustice; or fascist-like demagogues have confused too many of the people with hateful references to national greatness or racist sentiments; or the existing electoral procedures prevent the will of the majority from determining who wins high political office because of archaic constitutional rules.
In all of this, “democracy” has taken on a mystical, almost religiously sacred quality to be held in awe and reverence. Democracy is the gateway to an earthly nirvana.
Democracy’s nemesis is neoliberalism. Into this term is poured everything that progressives, socialists and anti-capitalist thinkers in general consider to be wrong with existing society. Neoliberalism is the political ideology of unrestrained capitalism guided by nothing but the self-interested profit motive; it is the camouflage behind which the “rich” and the corporate “powerful” are trying to maintain and extend their exploitation of workers, women, racial and gender minorities, and the physical planet; it is the false consciousness of thinking that “free markets” mean freedom when, in fact, it means control over the many by the few; it represents the use of government to assure the power of “capital” over “labor.”
Economic Liberals as Globalist “Enemies of the People”
Prominent members of the Mont Pelerin Society – an international association of friends of freedom established in 1947 in Mont Pelerin, Switzerland – have been among the targets of such accusations and attacks in works that purport scholarly detachment and archival detail. But a bit of scratching beneath the surface of their texts throws doubt upon the charges and the claims.
One of the recent ones is by Quinn Slobodian, in his book, Globalists: The End of Empire and the Birth of Neoliberalism (2018). His chosen narrative is to demonstrate that neoliberalism emerged out of the wreckage of World War I due to the challenges faced by existing economic elites who had controlled and managed the world for their own benefit through the European Empires starting in the 19th century. In the interwar period of the 1920s and 1930s these empires were facing disintegration, along with the passing of belief and confidence in the old liberalism of laissez-faire and limited government.
A new market-based globalism needed to be rationalized and designed to preserve the existing power structure of “capital” against the democratic wishes of people both in the West and in the awakening colonial areas around the world. Dr. Slobodian, a professor of history at Wellesley College in Massachusetts, argues that the intellectual focal point for the creation of a neoliberal defense to hold back the winds of change and to create a new international system for the existing, though challenged, elite power structure can be found among the faculty and visiting scholars of the Graduate Institute of International Studies in Geneva, Switzerland in the interwar period.
The Geneva Graduate Institute: Liberal Haven for Refugees from Tyranny
Founded in 1927 under the joint directorship of William E. Rappard and Paul Monteux, in the 1930s the Graduate Institute became a haven for market-oriented liberal economists, historians, political scientists, and legal scholars, many of whom were escaping from or threatened by the fascist regimes in Central Europe. These included Ludwig von Mises, Wilhelm Röpke, Michael Heilperin, Guglielmo Ferrero, Hans Kelsen and others. (See my article, “William E. Rappard: An International Man in an Age of Nationalism”.)
In the 1930s, the Graduate Institute was frequently visited by market-oriented academics who delivered guest lectures on liberal economic and political themes. These included Friedrich A. Hayek, Lionel Robbins, Louis Rougier, Gottfried Haberler, Fritz Machlup, Bertil Ohlen, Moritz J. Bonn and many others. A good number of these names should be familiar because several of them were leading members of the Mont Pelerin Society, including