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The origin of neo-liberalismThe authoritarianism of the Market

Fernando FloresExtracts from

Marco Antonio Moreno http://mamvas.blogspot.se/2007/11/el-origen-del-neoliberalismo.html

Kenneth Minoguehttp://online.wsj.com/news/articles/SB10000872396390443995604578002432460754000?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10000872396390443995604578002432460754000.html

Preventing the “Abuses” of Democracy: Hayek, the “Military Usurper” and Transitional Dictatorship in Chile?

^ Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism, pp. 164–169, Macmillan, 2008, ISBN 0-312-42799-9 .

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Walter Lippmann's Inquiry into the Principles of theGood Society

• The publication of Walter Lippmann's Inquiry into the Principles of the Good Society in 1937 sent seismic waves through the Depression era's nascent network of academic supporters of free markets.

• Through his column "Today and Tomorrow," syndicated in more than 100 newspapers and read by more than ten million Americans, Lippmann had become, in one reviewer's terms, the nation's "genial companion of the breakfast table," a role that garnered his opinions an extraordinary breadth of influence.

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• Walter Lippmann (1889 – 1974) was a reporter, and political commentator famous for being among the first to introduce the concept of Cold War.

• Lippmann won two Pulitzer Prizes, one for his syndicated newspaper column "Today and Tomorrow“.

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• For economists and political theorists who remained acutely aware of the unpopularity of their views and their inability to gain a foothold in the popular imagination, Lippmann's apparent embrace of free-market principles and repudiation of economic planning were transformative events.

• Decades later, on the cusp of the publication of The Constitution of Liberty, Friedrich Hayek declared the magnum opus of his political philosophy to be "the final outcome“ of a "trend of thought which may be said to have started twenty-two years ago when I read The Good Society. "

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Paris in August 1938• The first international gathering to discuss “neoliberal" ideas was held in

Paris in August 1938, in celebration of the publication of a French translation of Lippmann's book. ("Colloquy Lippmann“.)

• In subsequent years the Centre International d'Etudes pour Ia Renovation du Liberalisme was founded in Paris;

• the Free Market Study was established in association with the Economics Department at the University of Chicago;

• and Friedrich Hayek prepared the groundwork for the first meeting of what became the Mont Pelerin Society in Switzerland in 1947.

• https://www.montpelerin.org/montpelerin/index.html

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The origin of the term ”neoliberal”• Although the participants in the "Colloquy Lippmann"

are often referred to as neoliberals, the precise meaning of the term has long remained unclear.

• Jamie Peck has observed, "Neoliberalism was a mix of prejudice, practice and principle from the get-go.

• It did not rest on a set of immutable laws, but a matrix of overlapping convictions, orientations and aversions, draped in the unifying rhetoric of market liberalism.“

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• It is extremely difficult to treat in a sophisticated manner a concept that cannot be firmly identified or defined.

• For many years attempts to do so remained the province primarily of social scientists, who overwhelmingly focused on the period of increasing neoliberal influence over economic policy that began in the early 1970s.

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The group of Mont Pèlerin

• In April 1947 in the foothills of the Mont Pèlerin in the Swiss Alps, Friedrich von Hayek

• brought together a group of intellectuals of the right to express their rejection to the New Deal and Keynesianism which at that time dominated the world economy.

• https://www.montpelerin.org/montpelerin/mpsAbout.html

Mont Pelerin –

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• The first meeting of the Mont Pelerin Society, in 1947, was chaired by F.A. Hayek (left). Ludwig von Mises is seated in the front row, third from right. (Mont Pèlerin Society Records, Envelope J, Hoover Institution Archives.)

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• Hayek gathered together a variety of academic believers in freedom to a conference in Switzerland in 1947 and thus established the Mont Pelerin Society, a group of freethinkers in every sense of the word.

• The people that Hayek brought together were a talented but quarrelsome group, who could not even agree on how to name the core principle they stood for.

• The society was a trans-Atlantic project, driven by professors at the London School of Economics and the University of Chicago, and "neoliberalism"—a belief in free trade and free markets—seems to be the term that best captures the outlook they espoused.

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• The society faced many crises, and as Hayek became disillusioned with its prospects of success, the public face for such free-market ideas came to be Milton Friedman, who had an enormous charm with a genius for pedagogical explanations.

• The aim of Hayek, Friedman and the thirty entrepreneurs and invited politicians, among them Karl Popper - who had just published, The Open Society and its Enemies, was laying the ideological bases for a reduction in the state apparatus…

• which with the revolution of the British economist John Maynard Keynes had had gained new impetus in the leadership of the economic performance.

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• The importance of Keynesianism bothered Hayek because of the possibility to establish and legitimize socialism, which would be a true road to serfdom to the civilized world.

• His criticism of the State planning was: "cannot constitute an economic solution due to the complexity of the economic calculations".

• For Hayek the planning of the State "can only lead to stagnation or chaos".

• This vehement political and theoretical reaction against State interventionism and Social Welfare State, is known as the origin of neoliberalism,

• ideological movement that creates and develops - through the think tanks-models of attack to any limitations imposed by the State to the market mechanisms.

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Thatcher, Reagan and Pinochet• After World War II an "iron curtain" divide Europe. The origins of the

“cold war” opened for a radical criticism of socialist ideas.

• Hayek sensed that the decision-making role of the State, validated by the ideas of Keynes, can lead to countries the same disaster that German Nazism.

• Hence the book that serves as founding of neoliberalism was Hayek’s The road to Serfdom, (1944),

• Some years later, Margaret Thatcher (1979) would take this book as her economic "Bible".

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• In April 1947 in the foothills of the Mont Pèlerin the group developed the economic counter-revolution to order the impact of Keynesian ideas.

• Mark Hartwell, Economist and member of the society said that this initiative "produced around the world institutions that spread economic liberalism" contributing to the change of policies in Governments through the role of its members as direct advisors or creators of internal policies.

• Industrial, bankers and the Rockefeller Foundation funded the operation whose aim was to convert an important generation of intellectuals to the creed of liberalism touted by Adam Smith.

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• Hayek and Friedman argue that this "equal" socialist State destroy the freedom of citizens and of the vitality of the competition, two factors which depend on the general prosperity.

• Noteworthy is that Hayek and Friedman see the inequality a positive value, which requires the company to move forward and grow.

• This is not anything other than the thesis of savagery and the natural selection of Spencer, in which only the most suitable species manage to adapt to and survive the changes.

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Nixon and the financial collapse of Viet Nam

• It took a quarter of a century to make the theses of Hayek and Friedman could jump to the fore.

• And the causal relationship was the Viet Nam war. So great was the fiscal deficit of the Nixon administration by the cost of the war, and so the international liquidity of Europe in dollars, that the Bretton Woods agreement collapsed.

Richard Nixon ordered the inconvertibility of the dollar into gold on 15 August 1971, in an act that had disastrous consequences for international economy.

• And the crisis that became as a result of the unilateral decision by the American Government destabilized markets around the world.

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• This situation generated a widespread crisis and led to a global recession that burst with the oil crisis in 1974.

• Inflation and unemployment have climbed, situation which allowed driving the arguments of Hayek and Friedman.

• With such a project in mind, Milton Friedman visited Chile in April 1975, to light the way that Pinochet should take to avoid the debacle.

• And his thesis was clear: "there is only one, and only one way to stop inflation: reduce the money supply, reduce spending, make a policy shock."

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Neo-liberal politics

• In 1979 Margaret Thatcher, in England, publicly committed to implement the neoliberal agenda.

• In 1980 Ronald Reagan, did the same,

• and in 1982 it was followed by the Christian-Democrat Helmuth Kohl in Federal Germany.

• Japan, Argentina, Mexico and other countries, adopted the model in the mid-1980s.

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• What were the characteristics of the neoliberal policy?

• raising interest rates,

• cut taxes on higher incomes,

• abolish controls on financial flows (entry and exit of foreign exchange),

• strongly raise the unemployment rate (to crush strikes and remove power to trade unions),

• imposing strong cuts in tax expenditures and,

• began an extensive program of privatization.

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• The results of the application of strength of these measures of the neoliberal hegemony as ideology being the world to a polarization in terms of social exclusion.

• The elevation of the unemployment rate, known as a natural and necessary mechanism for the effective operation of the model, was its most convincing victory.

The increasing and systematic expansion of the gap between rich and poor was understood as a mechanism of development.

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The ideology of market

• Free-market ideology : allow business to do what it wants. Reduce taxes and regulations on business, and the economy will prosper.

• Put up no government barriers to the free market, and the benefits of the unleashed free market will drop down from the rich, who create the jobs, to the rest of us.

• This means that lower taxes and fewer regulations will create greater economic activity, generating the revenue that will offset what is lost by lowering the taxes.

• In the 1980s until the 2000s this was tried, and it failed. The budget deficits created by this policy, became astronomical.

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Hayek in Chile

• Hayek visited Chile in the 1970s and 1980s during the Government Junta of general Augusto Pinochet

• During these visits he accepted being named Honorary Chairman of the Centro de Estudios Públicos.

• For Hayek, the unfair way in which the international media treated Pinochet’s Chile amply demonstrated that international hypocrisy was endemic.

• As Hayek noted, he had met many members of the government during his initial visit to Chile in 1977—“educated, reasonable, and insightful men.”

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• For Hayek, the international propaganda campaign against Chile (and also that against South Africa)—the “systematic distortion of . . . [the facts” about these countries—would have serious consequences: “politicians in Western countries. . . . increasingly bow to this false public opinion”

• and their representatives at the United Nations had voted in favor of the international arms embargo “against South Africa”.

• These actions, Hayek argued, could ultimately lead to the wholesale destruction of the “international economic order.”

• Hayek was highly critical of the United Nations and argued that the imposition of “boycotts and similar measures against individual countries” (Chile and South Africa) had been made on an arbitrary basis rather than in accordance with binding rules that had “been set and announced prior.”

• For Hayek, the United Nations had been “seduced” into adopting “such measures . . . by insensitive vote-catching.” (Hayek 1978b: 44).

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Transitional dictatorial government

• For Hayek, the supposedly stark difference between authoritarianism and totalitarianism has much importance

• and Hayek places heavy weight on this distinction in his defense of transitional dictatorship.

• 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.

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• Personally, I prefer a liberal dictator • to a democratic government

lacking in liberalism.

• My personal impression . . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement” (Hayek 1981a: D9, emphasis added).

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• Hayek provided several examples of the type of supposedly transitional dictatorial government he had in mind (1981a: D9):

• England under Oliver Cromwell (1599-1658; Cromwell’s Protectorate supposedly providing a vital transitional way-station “between absolute royal power and the limited powers of constitutional monarchies”),

• the example provided by the Portuguese “dictator Oliveira Salazar”. (António de Oliveira Salazar (1889 –1970) dictator of Portugal from 1932 to 1968. )

• Hayek had sent Salazar a copy of Hayek’s The Constitution of Liberty (1960) in 1962 and Hayek’s accompanying note to Salazar is particularly revealing:

• Hayek hopes that his book—this “preliminary sketch of new constitutional principles”— “may assist” Salazar “in his endeavor to design a constitution which is proof against the abuses of democracy” (Hayek 1962).

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The End