Well, I would say that, as long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally I prefer a liberal dictator to democratic government lacking liberalism. My personal impression—and this is valid for South America—is that in Chile, for example, we will witness a transition from a dictatorial government to a liberal government. And during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.—F. A. Hayek, interview in El Mercurio, 1981.
Neoliberalism has often been used by left-wing thinkers as a critical term to denigrate a variety of ideas and developments which emerged in the latter half of the twentieth century. The well-known Marxist critic David Harvey has criticized neoliberalism as an ethic which colonizes and destroys traditional ways of life, replacing them with a new dynamic between the state, markets and society. Radical democrats such as Wendy Brown characterize neoliberalism as a “political rationality,” characteristic of exploitative twenty-first century capitalism. And innumerable Foucaultians have pointed out that neoliberal institutions and discourses produce one-dimensional consumeristic personalities, erasing or marginalizing other ways of being in the world. Given that neoliberalism has become such a prominent pejorative, it is perhaps no surprise that many of the writers and policy makers affiliated with neoliberal ideas have rejected this characterization. Many, including F. A. Hayek and Milton Friedman, preferred to style themselves classical liberals instead.
But, as Slobodian notes in his excellent new book, a strange development has occurred recently. More and more institutions and policy makers—from the IMF to the World Bank—have come to embrace the term quite openly. As Slobodian puts it, “‘the movement that dared not speak its own name’ could now be named.” This is because neoliberalism, ascendant since the mid-1970s, has abruptly found itself under attack from all ends of the political spectrum. While neoliberalism has long faced fierce opposition from the political left, it is only recently that it has had to deal with significant challenges from the right. The emergence of right-wing populist movements across the globe—including in Central Europe, the birthplace of neoliberalism in Slobodian’s narrative—now threaten the neoliberal project from a political flank neoliberals have long counted on.
Neoliberalism, Democracy and the Welfare State
Understanding how and why this would be a concern is one of the goals of Slobodian’s historical account of neoliberalism. Often held up first and foremost as an anti-Marxist, pro-liberal democratic movement, Slobodian is keen to show that the reality was much more complex. He observes that Hayek—pretty much the main character in Slobodian’s history given that his life spanned virtually the entire twentieth century—wrote comparatively little about the dangers of Marxism. In fact, the efforts of Hayek and other neoliberals were primarily directed towards mitigating the power of nationalism and the nation state. They wanted to establish a truly global economic order, in which capitalist markets were safely encased from interference by national governments. But this does not mean that the neoliberals were truly anti-statist. While they were keen to prevent or ameliorate state interference in the markets, neoliberals were notably willing to tolerate or even embrace authoritarian governments who were willing to open their countries to global markets and encase their economies from democratic interference. Far from an aberration, Slobodian observes that this antipathy towards democracy—whether nationalist or leftist/egalitarian—was present from the origins of the neoliberal movement.
Slobodian begins his book by recounting the early lives of neoliberal thinkers who came of age in Vienna during the dying days of the Austro-Hungarian Empire. He notes that many of these thinkers, contrary to expectations, were deeply impressed by the structure of the Hapsburg state. It was a cosmopolitan hodgepodge of different peoples, all politically governed by a central authority, which maintained a single large-scale economic market for all. Figures like Ludwig von Mises looked upon the rise of nationalist movements in the early twentieth century with alarm. This is because—though often elected by or at least professing adherence to democratic polities—nationalist leaders would frequently seal their borders through tariff walls, to protect domestic industries and labor from competition.
This was antithetical to the neoliberal world view, which Slobodian argues began to crystalize in the 1920s–1930s. From regarding the economy as an empirically understandable phenomena, which could be interpreted through statistical data, neoliberals gradually began to understand the capitalist economy as a sublime process beyond full human comprehension. It was a global network for information sharing, in which each state economy was but a single interconnected part of a much more complex and holistic process. The neoliberals therefore thought nationalist and leftist efforts to insulate the economy from global pressure were bound to be disastrous. They were based on the arrogant assumption that policy makers, often appealing to the people for moral legitimacy, could direct the capitalist economy in line with their preferences. For Von Mises, Hayek and others, this was the height of hubris. Unfortunately, they were largely unable to make their ideas heard by significant policy makers for many decades. The Great Depression and the Second World War saw the gradual expansion of the state into many new areas of social life. Center left figures like John Maynard Keynes, William Beveridge and John Kenneth Gallbraith had the ear of Western leaders and gradually brought about the creation of the modern welfare state. Neoliberals were obviously horrified by these developments, which occasionally led them to make sensationalist claims about the expansion of the welfare state as a “road to serfdom,” in Hayek’s famous phrase.
Simultaneously, anti-colonial movements generated many new nation states, each concerned to look after its own burgeoning economy first and foremost. As with the economies of Europe in the 1920s and 30s, many of these new states appealed to democratic mores and polities to justify insulating their economies from the global market. For some postcolonial governments, protectionism was necessary to give new national industries a chance to grow before they were forced to compete with well-developed Western industries. For others, they were keen to establish nationalized industries and welfare states, which would provide for the entire polity. Certain neoliberals, notably Willhelm Ropke, were disgusted by these developments for both economic and racial reasons. Slobodian observes that many neoliberals were hardly insulated from the racist attitudes of their day, and even came to nostalgically pine for the days of global European empire. They were convinced that non-whites were intellectually immature, and so would invariably turn to the simplistic attractions of nationalism and/or socialism, rather than embrace global capitalism. Some of these figures, such as Ropke, aligned themselves with neoconservatives like William H Buckley and Russell Kirk. This is because neoconservatives were both pro-capitalist and were more willing to lend a sympathetic ear to racist arguments about the intellectual and economic immaturity of postcolonial states in Africa and Asia. But, on Slobodian’s reading, most neoliberals were not primarily motivated by these racial concerns. They had a mixed response towards anti-colonial movements. One the one hand they appreciated that liberal principles tended to preclude the establishment of global empires based on racist pseudo-science. On the other, neoliberals disliked the tendency of postcolonial states—including democratic ones—to close their economies off from global capitalism or embrace some form of welfare statism. Hence, many neoliberals were willing to tolerate and even praise authoritarian governments, such as those of the Augusto Pinochet, and—most shamefully—the apartheid government of South Africa. Political authoritarianism was sometimes regarded as the price to be paid for ensuring open markets and the dissolution of the welfare state model.
At the heart of Slobodian’s book, in Chapters Six and Seven, he analyzes the emergence of the neoliberal global order from the 1970s to the early 2000s. He begins by observing the mixed admiration of neoliberals for international institutions, such as the United Nations and the European Union. Many neoliberals were disturbed by the nationalist dimensions of the early UN Charter, and were horrified when documents such as the 1948 Universal Declaration of Human Rights and the 1968 International Covenant on Economic, Social and Cultural Rights took steps towards creating a global guarantee of a certain standard of living for all. However, this does not mean the neoliberals were opposed to international institutions, or even that they were opposed to establishing global protections for certain kinds of economic rights. What they wanted to do was use existing international institutions, or create new ones, which would protect a very specific type of economic rights: property rights, rights to the free movement of capital, rights to entry into markets and so on. Neoliberals were keen to entrench these rights in what Slobodian calls a “global constitution,” which would be enforced by “multi-tiered governance … insulated from democratic decision making.”
This did not mean that neoliberals were keen on establishing a world state. They were concerned that this would simply transfer democratic sovereignty to a higher level with more political power and global legitimacy. What they sought to achieve was a delicate balance between state governments, charged with “encasing” markets from local democratic polities, and a global legal order which would enforce neoliberal economic laws behind the scenes. Slobodian observes that, for many neoliberals, the relative invisibility of the global legal order was key to its success. They wanted to insulate it as much as possible from potential political interference by left wing or nationalist actors. The best way to achieve this was to place the global legal order beyond the purview of politics. But, as Slobodian argues, the push to depoliticize the legal order protecting the capitalist economy was very much a conscious political project. Neoliberals like Hayek were aware that capitalist economic arrangements would always be contentious, and their political aim had to be to protect the capitalist system from democratic pressure as much as possible. If this could be done at the state level all the better. If not, then the global legal order would enforce neoliberal laws, even if this went against the wishes of states and their peoples.
The rest of Slobodian’s history is better known. From being relatively marginal figures, through the 50s and 60s neoliberals gradually took control of the global agenda and largely remade the world in their image. Intellectuals like Hayek and political actors such as Margaret Thatcher and Ronald Reagan were so successful in this that later politicians such as Tony Blair and Bill Clinton were unable or unwilling to change course. Thatcher’s dictum that “there is no alternative” to neoliberalism seemed to have won out. Many of the older welfare state programs were undermined or thrown out, income tax rates on the rich plummeted, inequality rose and a host of free trade deals were signed. In the developing world, institutions such as the IMF and the World Bank became more aggressive in demanding developing states engage in structural adjustment programs to eliminate redistributive efforts and open themselves up to world trade. Nationalized industries in the developed and developing worlds were rapidly privatized. With the collapse of Communism in 1989, sustained political challengers disappeared, and even the former Soviet states were quickly integrated into the neoliberal order. These Herculean efforts climaxed with the establishment of the World Trade Organization in 1995, which was charged with monitoring international trade and enforcing economic law. For many neoliberals, the WTO was the culmination of a century of efforts to encase their particular vision of the markets and political order as the global status quo.
Conclusion and Criticisms
Slobodian’s book is one of the most important of our times, and is essential to understanding both the history of the late twentieth century and the populist moment we inhabit now. It is exceptionally readable and very well researched. It is also an eminently fair text. While Slobodian is obviously quite critical of neoliberalism, he is also willing to acknowledge its novelty and even genius. Chapter Seven breaks from the historical outlook briefly, and provides an extensive summary of neoliberal philosophy, which is even handed and accurate. It is hard not to come away impressed by the depth and rigor of neoliberal analytics. Slobodian also does a good job at portraying the rise of neoliberalism as very much a hard fought intellectual and political battle. Countering the characterization of some left-wing critics, he observes that the neoliberals were hardly dogmatic in their belief system. They were continuously willing to revise and rethink their ideas when presented with a new set of problems. Perhaps the most dramatic development was Hayek’s movement away from believing that economics could be made a deterministic science, to arguing that the economy is a sublime object which will always transcend full understanding and control. Moreover, Slobodian observes that the neoliberal view of humanity was more complex than many critics admit. Far from regarding all human beings as little more than pleasure-seeking, rational economic actors, neoliberals recognized that nationalist and egalitarian impulses could be extremely strong. This is why they were so keen to insulate capitalist markets from political pressures. Neoliberals recognized that the way world and human beings are often did not mesh with their beliefs about how they should be. This necessitated an immense push to remake both the world and human beings in the neoliberal mold. In a weird irony, neoliberals took the Rousseauian position that people must be forced to be free.
But Slobodian also observes that there were immense moral problems with the enterprise. The first, as noted, was the persistent willingness of many neoliberals to compromise with brutal and even racist authoritarian regimes to advance their agenda. This was often done in spite of their better inclinations. While some neoliberals like Ropke built racist sensibilities into their theoretical worldviews, Slobodian observes that most neoliberals were personally hostile towards authoritarianism and racism. But this often wasn’t enough to motivate them to energetically agitate against authoritarian or racist regimes which served their purposes. This is a deep blemish against the reputation of great thinkers such as Hayek, who should have had the moral fortitude to unambiguously condemn Pinochet’s Chile and apartheid South Africa as the abominations they were. But, more damningly, Slobodian observes that there were not just strategic compromises necessary to advance the greater good. His book paints a picture of neoliberals as largely ambivalent about the virtues of democracy. Allowing the people a say in government was fine up to the point at which democratic polities decided not to support neoliberal policies. This ambivalent relationship to democracy was there from the beginning. Early thinkers like Ludwig von Mises would enthusiastically invoke personal liberty to call for the reduction of the state one day. The next day they would support bloody state crackdown on labor activists in the name of maintaining order. The same ambivalence is present in the neoliberal respect for human rights. Neoliberals were keen on entrenching certain political and economic rights into their international constitution. At the same time, they emphatically rejected more participatory and egalitarian political and economic rights as unnecessary and even dangerous. As Slobodian points out, this resulted in some strange ideological contortions about rights. The right of all living individuals to healthcare was rejected, while the right of legal abstractions like corporations to have a say in politics was embraced.
Ultimately, the portrait of neoliberalism Slobodian paints is quite damning. While he does not directly address the rise of right wing populism—what I call post-modern conservatism elsewhere—Slobodian makes it quite clear that these anti-democratic and anti-egalitarian efforts were not motivated by strategy or compromise. They were deliberate features of the world neoliberals wanted to create and protectively encase from all forms of public pressure. Given this, it is perhaps no surprise that we are seeing a concerted pushback against their efforts today.
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The essence of globalization is: labor is commoditized as mobile capital is free to roam the globe for the lowest cost labor. In contrast, labor is far less mobile, and unable to shift as fluidly and frictionlessly as capital to exploit scarcities and opportunities. Neoliberalism–the opening of markets and borders–enables capital to effortlessly crush labor. The social democrats, in embracing open borders, have institutionalized an open immigration that shreds the scarcity value of domestic labor in favor of lower cost immigrant labor that serves capital’s desire for lower costs. http://charleshughsmith.blogspot.com.au/2017/01/the-collapse-of-left.html For someone who is professional class, someone who has a nice income and who does NOT make their income from labor but from providing intellectual services (doctors, lawyers, teachers, white collar work in general) then immigration is overall a plus. THEIR job is usually not threatened by immigrants (H1B cases being a big exception) and their costs go down as… Read more »