The economic crisis has placed neo-liberalism under pressure. But the left has much to learn from the movement that pushed the rise of the free-market right.
The economic crisis has placed neo-liberalism – and its influence over global economic policy-making – under pressure. Yet the earlier successes of the neo-liberal movement demand careful study by those who want an economic new deal to emerge from the current crisis.
The latest issue of Renewal takes up this task by examining the right’s post-war journey to political victory. Leading experts investigate what the left can learn from the dedicated intellectuals, activists and business-people who nurtured the gospel of the free-market through its wilderness years. As a taster, here is a brief summary of the themes which emerge.
1) the advance of the right required money as well as idealism. There were crucial material foundations to the elaboration of free-market ideology, in particular sustained, long-term financial support from corporate foundations for intellectuals and think tanks engaged in the development and popularisation of free-market alternatives.
2) the revival of free-market ideas was an international project right from the start. A complex transnational network of intellectuals, politicians, business-people and activists was generated from the core neo-liberal organisation, the Mont Pèlerin Society, an elite international discussion group convened by Friedrich Hayek from 1947 onwards to rethink market liberal ideas. The ideological strength of the free-market right derived from its internationalism and, in particular, from harnessing the energies of the American right to a global political project.
3) the free-market right had a strategic analysis of how to go about promoting political change. Hayek thought the boundaries of political feasibility were determined by a conventional wisdom that was itself the product of ‘second-hand dealers in ideas’: journalists, teachers, publicists, public intellectuals, novelists, political advisors, etc. These individuals – who had no particular claim to expertise themselves – drew upon what they took to be the most fashionable expert opinions and broadcast them to a wider audience. The key to changing policy, Hayek argued, was therefore to change the minds of this opinion-forming stratum of society. This was why the think tank was such an important weapon in the neo-liberal armoury. It was a crucial instrument for changing the climate of opinion by persuading journalists, commentators and politicians that what they had previously regarded as out of date and intellectually unfashionable was, on the contrary, at the cutting edge of political thinking. The free-market right was therefore extremely serious about identifying sympathetic experts (especially economists) and systematically marketing their ideas to elite opinion.
4) policy change does not simply reflect ideological change but is rather driven by sporadic crises that delegitimise dominant policies and force policy-makers to cast around for fresh ideas. This is how the economic crises of the 1930s and 1970s are often understood in political folk-memory. But it took a long time, and a tough political struggle, before policy actually changed. The arrival of neo-liberalism in British economic policy-making required not only an external economic shock, but also a full-scale battle of ideas over how to run the economy.
This issue of Renewal therefore forces us to confront some hard questions. Does the left currently possess the long-term strategic thinking and economic resources that facilitated the rise of the free-market right? Has the left developed (or refurbished) a core of intellectually authoritative economic ideas that it can transmit to opinion formers and policy-makers? Can the left forge the international alliances that are needed to build global collective action and solidarities?
Our guest writer is Ben Jackson, Lecturer in Modern History at Oxford University and editor of the ‘Renewal’ issue on the rise of the free market right. Click here for more details.
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14 Responses to “What the left can learn from the free-market right”
Tom Miller
Tim, I don’t think any idea is ever ‘correct’. Any given situation is eitehr correct for the ends of person X or Y, or it is not. Of course then, ideas can be correct for fewer or more people, or indeed be 60% correct for an individual who would not lose out completely if they opted for the alternative.
In short, things happen, some are more or less good or bad for interests or people that need specifying; to make this easier to generalise, we give them names.
The job of deciding what is ‘right’ or not belongs simply to those who have the most influence within the population specified.
Here we are talking about Britain, and the people with the influence are our media. Which is right wing and dominated by corporates.
As a free marketeer you probably won’t identify with the course of this; nevertheless:
“The ideas of the ruling class are, in every age, the ruling ideas… The class which has the means of material production at its disposal has control at the same time over the means of mental production”.
The challenge for the left is to become efficient at throwing spanners in these particular machines; machines that were beautifully constructed and well oiled by the late 1970s neoliberal movement within academia and their political adherents. They appear at present to be cyclical machines of perpetual motion.
We all know about the physical viability of those.
Tom Miller
I meant to type ‘the source of this’, not the ‘course’ of it.
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This post was mentioned on Twitter by Paul0Evans1: Really pertinent point about how the free-Market right was nurtured – and what the left can learn from them http://bit.ly/cdGGIi…
Josh
The Left were emasculated by the destruction of socialism when 300,000,000 stood up and threw off their chains between 1989-1991. However, you lefties attack a false enemy when you say this crisis has been a failure of neoliberalism.
This crisis is a failure of government and central banking. Jimmy Carter passed the Communities and Reinvestment Act in 1977, which forced Fannie Mae and Freddie Mac to lend to the NINJA constituency (No Income, Jobs or Assets). It was a form of social engineering, and Carter did it for votes.
The main villains are the central bankers who nailed interest rates to the floor, fuelling an asset bubble. The Austrian Business Cycle theorists predicted this crash. When the central bank lowers interest rates below market rates, it creates a false sense of prosperity, which stimulates ‘irrational exuberance.’ Malinvestments become the norm. Assets have such a low yield because of low interest rates that investors become ‘hungry for yield,’ creating more complicated financial instruments. Without the central bank, this is impossible. If we were on a gold standard, fractional reserve banking would end, and money would have to be backed by a commodity. This would end the boom and bust cycle instantly. The central banks have committed a disgusting crime. They have redistributed wealth from the working and middle classes to a few corporatist fascistic elites at the top. Political turnout has declined, so parties rely on businessmen and women for donations. They expect favours in return. What we have had for 20 years has been a neofascist corporatist state. In a true free market, no businessman or woman would receive favours from the government. They would be subjected to the discipline of the market place. Fractional reserve banking would end, and fiat money would end, because governments and central banks have proven themselves completely untrustworthy with the currencies of their respective countries e.g. the dollar is worth 3% of its 1913 level, the year of the creation of the Federal Reserve. We need a gold and silver standard to reduce exchange rate volatility and to prevent governments from being fiscally irresponsible.
This crisis has proved that governments should stay out of the economy. It has also proved wrong the Chicago School of Bob Lucas and Eugene Fama, who based their models on the assumption that humans are completely rational and forward thinking in their decisions. This is patently nonsense. The Chicagoans assume we are all like supercomputers. The Austrian School economists know this is nonsense, and this is the strength of our school of thought. We reject computer models because computer models cannot replicate the dynamism of unpredictability of human behaviour. This is an argument against socialism too. Economic planners cannot replicate the price signals which are a product of supply and demand. A board of 12 socialist planners cannot replicate the decision making of millions of market participants. Without the price signal, they cannot allocate resources efficiently because they don’t know how much is demanded and how much to supply. The Chicago School, the Keynesian School and the socialist school of economics have been destroyed by this crisis. The Austrians have been vindicated. It’s time for a true minarchist, free market economy, not the corporatist state advocated by the Keynesians we have suffered for two decades.