The struggle to moralise capitalism
A fascinating exploration of the role of liberal intellectuals such as Milton Friedman and Friedrich Hayek in the rehabilitation of free-market ideology also exposes the crisis of liberalism in the modern era.
The Great Persuasion: Reinventing Free Markets Since the Depression, by Angus Burgin, is an important study of the long, protracted battle for the rehabilitation of the principle of the free market. Although its focus is on the postwar contribution of the liberal Mont Pelerin Society to the revitalisation of the market principle, it does something else, too: it provides crucial insights into the crisis of liberalism in the modern era.
Burgin writes a story that explains why the collapse of cultural affirmation for laissez-faire capitalism in the 1930s did not lead to its terminal decline. His study begins in the late Thirties, when it was widely presumed that the free market would never recover its nineteenth-century reputation and status, and it ends with the triumphant return of the free market in the 1980s. In this regard, John Maynard Keynes was rather premature when he announced the death of the free market in the 1920s. By the 1980s, it was Keynesianism rather than free-market economics which, in Keynes’ own words, ‘had come to be seen as a relic of a rapidly receding economic world’. As Burgin writes: ‘By the 1980s, debates in the Anglo-American public sphere were permeated with the assumption that the workings of the free market should be protected from governmental attempts to intervene.’
Burgin’s story about the reconstitution of free-market ideology focuses on a small network of highly dedicated groups of people. These groups were isolated and ‘marginalised from national debate’, but they developed a capacity to ‘act as a broad and diverse community by conceiving of their project in supranational terms’. Burgin claims these individuals, gathered around the Mont Pelerin Society, made a crucial contribution to the intellectual ascendancy of free-market economics. How an idea that was consigned to the margins of society in the 1930s succeeded in making such a triumphant comeback in the 1970s is explained as a result of the hard work and dedication of a handful of formidable thinkers.
It is important to remember that during the 1930s and 40s, the right was literally lost for words. Those aspiring to uphold the ideals of the free market inherited ‘conceptual apparatuses that many saw as ambiguous or obsolete’. This was apparent in 1937, when a group of liberals met in Paris as part of the Colloque Lippmann – named after journalist Walter Lippmann, author of the liberal tract The Good Society. Their ambition was to form an international network to save the liberal, free-market doctrine, but the first difficulty they faced was how to define themselves. After all, the term ‘liberalism’ had been discredited by its association with the nineteenth-century Manchester School (a derogatory term for the belief of Manchester men such as Richard Cobden and John Bright that free trade was a social and political panacea). Those liberals who gathered in Paris in 1937 therefore ‘shared a commitment to attempt to save liberalism by changing it, even as the ideology seemed to be ineluctably entering the later stages of self-inflicted decline’. (This meeting has often been referred to subsequently as the founding moment of neoliberalism.)
As Burgin puts it, those in attendance at the Colloque Lippmann ‘could no longer consider themselves “liberals” because the use of that title would identify them with the very philosophy they were attempting to overcome’. At the meeting, terms like ‘liberalism’, ‘neoliberalism’, ‘individualism’, ‘laissez-faire’ and ‘liberalism of the left’ were all ‘variously raised and rejected’. This was an important moment: a movement dedicated to rescuing the liberal tradition was forced to confront the corrosion of its own public identity. In subsequent decades, those who identified with this tradition would attempt to ‘develop additional allegiances around the terms “classical liberalism”, “libertarianism” and “conservatism”’. But, as Burgin writes, ‘the failure of the participants in the “Colloque Lippmann”… to name themselves generated a problem that would plague the movement in later years… in the absence of a shared reference, its members increasingly identified themselves with divergent labels and focused intensively on the differences their respective choices entailed’.
The problem of terminology continues through to the present day. Though in the Fifties he presented himself as a radical, even Chicago School economist Milton Friedman had problems describing his outlook. Burgin suggests that, in this respect at least, Friedman ‘was at a loss for words’.
The issue of terminology expressed a far deeper problem: how to provide the free-market capitalist outlook with a principled philosophical and social foundation. In the late 1930s, Lippmann’s The Good Society served as ‘the foundational text of neoliberalism: the first work to shape the conjoint critique of economic planning and laissez-faire into a holistic and popularly compelling philosophical system’. But neither The Good Society nor subsequent attempts by Friedrich Hayek and his colleagues to develop a moral foundation for capitalism succeeded in making much headway.
The problems faced by advocates of the free market during the anti-capitalist cultural moment of the 1930s and 1940s have been frequently discussed. And the most intractable problem facing defenders of the capitalist system was to provide a philosophical or moral justification for it. To some extent, supporters of the free market were able to avoid facing up to this question during the Cold War. Against the manifest failures of the planned economy and a corrupt Soviet society, the open-market principle of capitalism appeared to possess moral authority.
But the absence of an intellectually compelling moral foundation for capitalism meant that it was always exposed to a cultural critique of its values. The supporters of the Mont Pelerin Society knew well that the prevailing intellectual climate tended to be hostile to their project. Even at the height of the postwar boom in the 1960s, capitalism acquired only a limited influence over intellectual and cultural life. This so-called cultural contradiction of capitalism emerged with full force in the late 1960s, when many of capitalism’s values were explicitly challenged in what would turn out to be an interminable Culture War.
At the time, journalist John Davenport sought to explain why the ideas of the Mont Pelerin Society faced so much resistance. According to Burgin, Davenport told the society’s 1970 meeting to go beyond ‘utilitarian economics’ and ‘to re-examine our own political and philosophical premises’. He claimed that the society’s single-minded focus on economic efficiency detracted from its advocacy of values. ‘Economics, we say is neutral’, he noted. However he argued that ‘in seeking to maximise human choice and options, we have, I submit, been far from neutral. We have, to some degree, smuggled in ends or values, and we have to this extent tried to define the political and human good. My suggestion is that the smuggling process should stop and that our choice of values be made explicit’.
What Davenport suggested was an attempt to replenish the ideological armoury of the free-market with the weapons of conservatism. He argued that ‘at least in the matter of morality’ the ‘libertarian should move over a bit to make room for what some of our conservative friends have been long urging – namely that the end of man is not just the pursuit of pleasure, but of something quite different – the pursuit of excellence, the pursuit, let us say it, of virtue’. Burgin claims that, in effect, he was calling for a return to the society’s original goal of developing a ‘comprehensive moral worldview’, which was the prerequisite for making ‘free markets… compelling to the public’. However, this call to subordinate liberal impulses to conservative tradition can also be seen differently – as an acknowledgement of the impasse reached by liberalism.
The question that neither Burgin nor the leaders of the society explicitly addressed was why these thinkers failed to develop a ‘comprehensive moral worldview’. This was clearly not an oversight, and numerous members of the society – including its most prominent representative, Friedrich Hayek – drew attention to the import of this project in the Fifties and the Sixties. The society’s focus on economics was in part a consequence of the fact that this was the territory where pro-capitalist arguments could make most headway. In contrast, the attempt to recast traditional moral virtues as the foundation for modern capitalist life was a far more challenging project. To this day, the right has remained on the defensive on moral issues and has tended to lose most of the important battles in the Culture Wars.
In 1972, neo-conservative ideologue Irving Kristol warned that capitalism was living off the ‘accumulated moral capital’ of the philosophies that preceded it. He was critical of the tendency of market advocates to promote materialism and their failure to recognise the perils of cultural decline. Sensitive to the absence of a moral foundation for capitalism, he exhorted members of the Mont Pelerin Society to enter the battle for cultural values. Burgin writes that Kristol believed the members of the society ‘were still fighting a battle that they had already effectively won’. He told the 1972 meeting that ‘this ideological battle is over, and the dispute over the relative economic merits of central planning, vis-à-vis the market, had been settled’. For Kristol, the struggle had to be fought on the battleground of culture. He told the society that the New Left had abandoned the battle over efficiency in favour of values. What distinguished the New Left from its predecessor, noted Kristol, is its representatives’ ‘refusal to think economically and [their] contempt for bourgeois society precisely because this is a society that does think economically’. He presented their critique of capitalism not as progressive but as ‘utterly regressive’, observing that the New Left adopted the approach of the Old Right, which ‘never did accept the liberal-bourgeois revolutions of the eighteenth and nineteenth centuries’.
Kristol concluded that secular libertarian philosophy ‘simply had too limited an imagination when it came to vice’. Burgin writes that Kristol believed ‘the members of the Mont Pelerin Society needed to situate their economic insights within a comprehensive moral framework that preserved a place for virtues and correspondingly delineated boundaries of human interaction where the market place should be curtailed’. In other words, Kristol wanted the members of the society to reconstitute themselves as social and cultural conservatives.
Milton Friedman was not prepared to go down the path of neoconservatism. He took the view that free markets possessed a moral dimension. Unlike Hayek, he made no serious attempt to integrate a defence of the free market with a traditionalist worldview – and he was far less restrained in his advocacy of the market. Burgin says Friedman sought to pose the terms of the debate differently by advocating an ‘unapologetically market-centred world’. Previous critics of planning, such as University of Chicago economist Frank Knight, saw little connection between the market and morality. In contrast, Friedman claimed that by upholding individual responsibility, the ‘markets elegantly and reliably promoted virtuous behaviour’.
Burgin’s explanation of Friedman’s remarkable career and influence focuses far too much on the tactics he adopted to influence public life. No doubt Friedman was a uniquely effective public intellectual who possessed impressive communication skills. But Friedman was also the beneficiary of the postwar economic boom and of global economic conditions that readily resonated with his ideas. During the period between the late 1960s and the mid-1970s, ‘his ideas seemed irresistibly prescient, and those of his numerous opponents repeatedly wrong’. By this time, the problems associated with the massive expansion of public expenditure and the inefficiencies of welfarism had diminished the appeal of planning. The disintegration of the Soviet system of planned modernisation was all too apparent. Unlike Hayek, Friedman did not face a world where economic planning enjoyed ideological hegemony. In such circumstances, his free-market liberalism was of the moment and his receipt of a Nobel Prize in 1976 merely confirmed this.
That market economics triumphed over Keynesianism and other attempts at planning is undeniable. What is less clear is the role of groups and their ideas in the realisation of this development. What this fine book lacks is an assessment of important external developments – the postwar boom, the loss of the moral authority of the Soviet Union, the disintegration of the welfare state – which influenced the trajectory of economic thinking from the late 1960s to today.
Even during the best of times, the triumph of free-market capitalist ideas was always limited. And, importantly, it rarely succeeded in inspiring the imagination of the wider public. In his 2004 article ‘The battle’s half won’, Friedman wrote that after the Second World War, ‘opinion was socialist while practice was free market; currently opinion is free market, while practice is heavily socialist’; he concluded that ‘we have largely won the battle of ideas (though no such battle is ever won permanently); we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course’. What Friedman has characterised as a half-won battle can also be understood as part of a war with no clear victors. Moreover, while Friedman and his allies made significant headway on the economic front, they have suffered a string of defeats on the cultural front.
That Friedman and his allies made a significant contribution to the reconstitution of economic policy cannot be denied. Their efforts demonstrate the important role of the battle for ideas in modern society. Today, despite the unpopularity of so-called neoliberalism, alternatives to it are conspicuous by their absence. Which is why this era of global economic depression really does not feel anything like the 1930s.