Continuing my series in defence of liberalism.
Friedrich Hayek did not like John Stuart Mill.
Okay, that’s a little unfair. He frequently said nice things about Mill. But he did profoundly disagree with him. More specifically, he believed that Mill had been lead astray by his “friend” and eventual wife Harriet Taylor into something that Hayek did not consider to be liberalism at all. In a tale as old as time, it was a woman’s fault.
(Ironically, it was Hayek’s painstaking research on Mill and Taylor that lead to much of their correspondence coming to light, which in turn eventually lead to a growing academic conclusion that Taylor-Mill was the co-author of On Liberty. It seems fair that if On Liberty was her “fault”, that she receive at least some credit! As a matter of convention in this article, I’m going to refer to the authors of On Liberty as “The Mills” — but occasionally where I am referring to something written by J. S. Mill one, or someone else is referring to Mill, I will refer to Mill singular. Hopefully that won’t be too confusing).
What was his beef with the Mills? The Mills asserted that in cases of injustice, inequality or harm that under circumstances government had a limited duty to correct that. Hayek by contrast believed that any government intervention, however well intentioned, lead to socialism and ultimately oppression.
Writing in the 1930s and the height of World War Two, you can see where Hayek was coming from. The spectre of communism and fascism was everywhere, not least in his native Austria. You can certainly make a case that Jeremy Bentham and the Mills paved the way for the sort of muscular government interventions that those systems represented, although you could equally argue the opposite.
Making the same claims in the 1950s in his adopted USA was perhaps harder to make. Roosevelt’s New Deal was entering its second decade. An iron curtain had descended across Europe and while the people on the West were certainly more free in terms of civil liberties, they all lived under systems with welfare states, nationalised utilities and industries, and planned economies. None of these countries seemed to be showing any signs of descending into totalitarianism. Indeed, notwithstanding moral panics such as McCarthyism (a reaction against Communism), by the 1960s, the tide was turning very much in favour of greater freedoms, not less.
But of course, Hayek didn’t like that kind of freedom at all, which again he blamed on the Mills. He was against the permissiveness of the time, going so far as to call it “antiliberal”. He argued that “we owe our freedom on certain restraints on freedom”. That sounds very much like something the Mills wrote in their essay On Liberty as it forms the basis of concepts such as the harm principle. But then, the Mills were quite clear that they viewed the “tyranny of the majority” as worse than the tyranny of government, which goes to the heart of Hayek’s disagreement.
And so it was that we find that, during the civil liberty struggles of the 1960s, Hayek was not only far from the front lines but actually blaming the Mills for them happening in the first place.
Neoliberalism and “Individualism”
I find this fact interesting because one of the main narratives of the embrace of laissez-faire economics at the end of the 20th century is that it went hand in hand with the rise of something called “individualism”. It’s true that the two correlated, but while neoliberal thinkers and politicians were very keen on notions of individuals acting in their own interests in matters of commerce, they were at best ambivalent about people taking that as far as self-expression and actualisation. The two are often seen as sides of the same coin, when I would argue that to a large extent they represent two competing visions of society, both of which emerged from what they differingly saw as the stifling consensus of society in the 1950s and 1960s.
To return to the Adam Curtis documentary Shifty that I alluded to in Part One, in it he had notably very little to say about the rise in queer identities over the course of the 1980s. To the extent that he did, it came in the form of an excerpt from a documentary featuring a gay British man visiting a GUM clinic to get tested for HIV.
Adam Curtis likes to say that he doesn’t like to lecture people in his documentaries but it’s always very clear what argument he is framing and the meaning of the GUM clinic section was fairly clear in context. This was that we were all being sold this idea of unrestrained individualism in the 1980s, and this poor idiot had learned that there were consequences to his rampantly individualistic identity. I can’t see any other read in a documentary that omitted the rise in HIV among gay and bisexual men across the 1980s, nor the moral panic that it coincided with.
Far from urging him on to fly his queer flag, Margaret Thatcher had blocked officials from informing the public about the risks of gay sex out of a fear that it might encourage people to “experiment”. Meanwhile she responded to a tabloid-lead moral panic about “lefty councils” indoctrinating children with gay and lesbian propaganda with Section 28, a clause in the Local Government Act 1988 which prohibited any government money from being spent on anything which “promoted the acceptability of homosexuality as a pretended family relationship”.
And where were the queers? Generally speaking they were out on the streets protesting against Thatcherism in one form or another. Not just to defend their own rights either, due to the actions of solidarity-building organisations such as Lesbians & Gays Support the Miners.
I suspect that the less queerphobic advocate of laissez-faire economics would argue that this rise in alternative identities was down to economic growth, notwithstanding the fact that wealth inequality grew enormously during that period and that the poorest of LGBTQI people, while hurt by ever more miserly benefits, stubbornly remained LGBTQI. It’s certainly true that among the “winners” of our economic experiment over the last 40 years there are several high profile queer people who have the economic power to express themselves with relative impunity. But it certainly can’t be denied that this was not the intention of the neoliberals.
That’s before we even get into neoliberal governments’ opinions about liberation movements such as the anti-Apartheid cause in South Africa.
And then there’s Chile.
Chicago and Santiago
Hayek’s writings proved to be a big influence on the Chicago School of Economics despite never being a part of it (he did join Chicago University in 1950, but in a different capacity). He was particularly influential on Milton Friedman, although the two differed on a number of key economic points.
The Chicago School is generally credited with turning vague notions about small state government and laissez-faire economics into practical, applicable policy. They made the intellectual case for ending the Bretton Woods system which underpinned the Western government post-War Keynsian consensus. While Nixon’s ending of Bretton Woods and the 1970s oil crises were waging havoc on governments still clinging to their interventionist policies in the global North, free marketeers were given free rein to use Chile as a petri dish for what would later be unleashed upon the rest of us.
In 1973, following a coup d’etat backed by the CIA, the military lead by Augusto Pinochet took charge in Chile. After a brief flirtation with Keynsian policies, Pinochet embraced free market economics and was closely advised by the so-called Chicago Boys; Chilean economists who had largely studied at the Chicago School.
Pinochet’s reforms lead to great economic growth, although this was largely to the benefit of wealthy. But alongside this came repression. Pinochet’s regime “disappeared” thousands of political dissidents and tortured tens of thousands more. He managed to rake up an impressive 17 years in power, although the lack of elections did help.
Famously, the Chilean dictatorship was supported by the US and UK, but then Western-backed juntas were a dime-a-dozen in the global South at the height of the Cold War, Kissinger’s realpolitik, and all that. What was more surprising in the case of Chile was the degree to which both Ronald Reagan and Margaret Thatcher — credited as the pioneers of neoliberalism in Western democracies — personally supported Pinochet, even regarding him as a friend.
As Pinochet’s reign started to look increasingly shaky in the mid-1980s, Reagan suggested personally visiting the country to urge the dictator to stand down with dignity, and even considered offering him asylum. Margaret Thatcher went even further after Pinochet finally did stand down. When Pinochet was arrested in the UK in 1998 for his numerous human rights crimes, the ailing Thatcher made it her personal mission to end his house arrest and extradition to Spain, denouncing it as a “tragedy”.
But surely the economists whose policies Pinochet based his reforms on had no time for their ideas being abused in such a way? Far from it. Friedman toured America to praise the Miracle of Chile. Hayek, who railed against the rise of authoritarian dictatorship in the 1930s and 40s, wrote a letter to the (London) Times in 1978 stating that “I have not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende.” He had nothing but praise for regime, condemning its critical coverage in the Western press as “scandalous”.
Adam Smith and Homo Economicus
This seems like a far cry from the person who 30 years previously was insisting that governments had a responsibility to abide by the rule of law. It isn’t clear to me to what degree this is a shift in the views of someone who was approaching his 80s by that point, or the consistent view of someone who never say liberty and freedom as having real meaning outside of an incredibly narrow economic one. Is it really the case that Hayek never really viewed liberalism as having anything to say on anything other than your freedom to spend your money however you like?
But then, Hayek’s mission was to turn back the clock of liberalism, precisely to Adam Smith and his Wealth of Nations. It is Smith, not the Mills, who neoliberals look to as their forefather.
Ironically, the idea that humans can be reduced to little more than economic terms was something which Mill was criticised for. Charles Stanton Devas coined the term “homo economicus” to critique Mill’s reduction of humanity to little more than a “dollar-hunting animal.” Ironically, Hayek evokes a similar sentiment when he criticises Mill for being a “constructivist rationalist,” albeit from the perspective that Mill is using this model to advocate for socialism rather than argue against it.
Yet, while I can understand these criticisms of the Mills by 19th century socialists advocating more radical reforms, I don’t think this cold image of their philosophy is entirely fair. John Stuart Mill was raised as a strict utilitarian by his father James, and while he espoused utilitarianism his entire life, he critiqued Jeremy Bentham’s version of it in a number of key ways, arguing for a distinction between “higher” and “lower” pleasures. On Liberty is generally regarded these days as elevating liberal philosophy beyond mere economics. But yes, in an earlier work when writing on the subject of political economy, he did indeed write that “is concerned with him solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end” (“On the Definition of Political Economy, and on the Method of Investigation Proper to It,” London and Westminster Review, October 1836.).
Critics of the homo economicus model also cite Smith for taking a similar stance, with his talk about market economics being, at their heart, concerned with the self-interest of individuals. Once again, Smith’s position was more nuanced than that, citing circumstances in which government intervention was necessary and advocating passionately for state-funded education.
It’s crucial to understand that the Wealth of Nations was written in 1776, the same year the American revolution began and only two years after James Watt’s much-improved version of the steam engine entered the market. Adam Smith may have understood how manufacturers made pins, but didn’t have the faintest conception of how a 19th century cotton-mill would work, let alone a Chinese iPhone sweatshop in the 21st.
Perhaps more to the point, the purpose of Wealth of Nations was to critique a very specific type of government intervention: mercantilism (or, to use more modern terminology “Trumponomics”). That is, he was arguing specifically against the idea that government’s should intervene to discourage imports and maximise exports. Indeed, on that point the tea bag yeeters on the other side of the Atlantic very much agreed.
Like Mill, Smith very much saw life — and his work — in more than economic terms. He deplored how the factory system promoted ignorance and advocated for a world based on more than mere market mechanisms. It isn’t at all clear that the neoliberals who beatified him actually agreed with him on that. When George Stigler, a contemporary of Milton Friedman at the Chicago School of Economics, edited a new edition of The Wealth of Nations, he was careful to redact the passages from it which he found unhelpful.
And so it was the version of Smith that Hayek ended up resurrecting was a zombified husk designed to do his bidding, not the social reformer whose zeal went on to inspire classical economics. Not for nothing do academics increasingly distinguish between “Kirkaldy Smith” and “Chicago Smith“.
Burying neoliberalism
I’ve deliberately used the term “neoliberalism” throughout this article because my focus is on the philosophical underpinnings of what lead to Thatcherism and Reaganomics rather than the economics of it. Neoliberalism is predominently used pejoritively by its critics and not by its supporters. Writing in the “neo-liberalism” section of Dictionary of Liberal Thought (edited by Duncan Brack and Ed Randall, 2007), John Meadowcroft has this marvellous quote which I think is worth reflecting on here, by the Peruvian novelist and right-wing politician Mario Vargas Llosa:
To say ‘neo-liberal’ is the same as saying ‘semi-liberal’ or ‘pseudo-liberal’. It is pure nonsense. Either one is in favour of liberty or against it, but one cannot be semi-in-favour of liberty or pseudo-in-favour of liberty, just as one cannot be ‘semi-pregnant, ‘semi-living’ or ‘semi-dead’.
By contrast, I think that it is entirely possibly to espouse liberalism while in practice only believing in semi- or pseudo-liberalism, as I think neoliberals (sic; I prefer to see neoliberalism as its own thing and not a qualifier of something else) do.
As I’ve argued here, Hayek and his successors didn’t merely take liberalism back to Adam Smith, they fileted Smith’s own writing and beliefs to suit their purposes. They defined liberalism to such a narrow extent that they had no trouble at all endorsing dictators and policies which had an absolutely appalling human cost. And in so degrading notions of liberty and freedom, they helped usher in an era where politicians can make it mean whatever they want.
Llosa may consider it nonsense, but we live in an era of pseudo-liberalism. It’s why US Vice President J.D. Vance feels that he can lecture European countries about impinging on freedom of speech whilst supporting the most authoritarian US President in history. Pseudo-liberalism is now everywhere, because liberalism can be defined however you like it in the “marketplace of ideas”. You can even, as Hayek did, define any form of self-expression you don’t like as antiliberal.
In principle, if neoliberalism had been an unqualified success, that would be okay. I mean, what do words matter if the global population was richer, happier and more fulfilled as a result? But while neoliberal policies did deliver an awful lot of growth for a period of decades, it came at the expense of widening wealth inequalities. Even that growth has now gone as neoliberalism ate itself in the late 2000s.
It isn’t just liberalism that neoliberalism devalued the meaning of. With markets running rampant they even lost all understanding of what they were trading, resulting in the creation of such fungible fictions as “mortgage-backed securities” and “collateralised debt obligations”. This lead to the credit crunch of 2008, which we have been paying for — literally and figuratively — ever since.
In Part One I approvingly quoted Jo Swinson for saying that centre-left governments continue to support “the neoliberal status quo” while right-wing governments have abandoned it, but I’d qualify that to suggest that it is the “status quo” bit that governments are variously defending or abandoning. As I’ve looked more into the narrow way in which neoliberal philosophy defines liberalism, in some ways the right are being remarkably consistent since it was only the freedom to acquire wealth that they were really interested in. It’s no surprise to see the heirs to Hayek and Friedman line up to support someone like Curtis Yarvin, whose ideal system of government would make General Augusto Pinochet look like a simpering wet blanket. And why would anyone who never cared about the context of Adam Smith’s writings, give a hoot about the return of mercantilism in the form of Donald Trump’s tariffs?
But yes, centre-left political parties have a problem because they largely took neoliberalism at face value while projecting the idea onto it that the greater wealth that it promised to deliver could be spent on delivering nice, progressive centre-left things. And because the dismal logic of centrism prohibits them from ever looking above the parapet to see the bigger picture, their only response to our economic system falling apart has been to keep buggering on in the hope that it will sort itself out.
While neoliberal thinkers might be consistent in their authoritarian shift, neoliberal economics certainly no longer works the way it once did. To complete the irony, the only part of the world which seems to still be enjoying free market economics is Communist-controlled China. The road that was meant to lead us away from serfdom turned out to be shaped remarkably like the M25.
Beyond Keynes?
Since Hayek sought to bypass 200 years of development in liberal thinking, I don’t personally feel we should feel too guilty about ditching the last 80. But does that mean simply going back to Keynes?
I haven’t really mentioned Keynes so far, which is arguably an oversight given the extent to which Hayek and his successors were reacting very much against the interventionist policies which he championed; not to mention Hayek’s personal relationship with him. I certainly consider him to be a personal hero, at least in terms of his strenuous efforts to pursuade the US to fund European construction at the cost of his own health. I also think that the post-War consensus essentially worked. It helped millions out of poverty and provided a stable economic system that balanced the interests of both workers and businesses.
But can we just hit the reset button and go back to Keynsianism? I vaguely used to think that; now I fear that the vandalism of neoliberalism has been so great that it simply wouldn’t work.
It would certainly require building a global consensus on economics. That was largely possible in the West during the Cold War but we would struggle to establish it in our even more fractured modern world. So many policies that I’d ideally like to see, for example wealth taxes, seem impossible to implement in practice while there are other countries offering a tax-free place to stash their wealth instead. We rightly criticise Liz Truss for pressing ahead with a system of tax cuts to the wealthy irregardless of how the markets would react, but the fact remains that any left-wing government wanting to use a similar increase in spending to provide a better safety net is likely to meet the same response.
There is something mind-bogglingly appalling in the fact that governments have given banks trillions of dollars in the form of quantitive easing only to find that banks are not willing to let us touch a penny of it except entirely on their terms. But we are where we are.
Finally, the dirty little (not so) secret is that the post-War Keynsian consensus was mainly possible due to US hegemony underpinning all of it, ostensibly through the dollar but — inconveniently for progressives — through military strength as well. 20 years ago that might have been something the West could conceivably switch back to. Now we have China, and corporations which have grown so powerful that they act like governments themselves.
Yanis Varoufakis has declared capitalism to be dead; replaced by what he calls techno-feudalism. I am open to that argument, albeit not yet entirely convinced. I certainly think that the rules are no longer the same and that rent-seeking monopolies are now a far greater threat to liberty than profit in a free market. Any new economic model that doesn’t address this is simply pissing in the wind.
What I really hate is that mainstream politicians don’t talk about any of this. This isn’t a new phenomenon. I joined the Lib Dems in 1995 thinking that I was joining a party that was firmly committed to fight “Thatcherism” at a time where Labour seemed to be embracing it. I very quickly got absorbed in different political ideas. I ate up political discussions about Cobden and Bright, Joseph Chamberlain and Municipal Liberalism, the Rochdale Pioneers and the cooperative movment, Georgism, local exchange trading systems, Jubilee 2000 and debt forgiveness. But that was all on the fringes, being whispered at the sidelines by cranks (complimentary); it rarely made it as far as even mainstream Liberal Democrat discourse, although of course everyone enjoyed the ritual singing of The Land at every conference Glee Club.
And so it was that when ideological pushes such as The Orange Book came along, the main response was to simply welcome internal debate rather than to see it for the policy hijack that it clearly was. The Orange Book presented itself as continuing in the traditions of Mill and Jo Grimond, but its agenda was to get the party to embrace the neoliberal consensus. It was a cuckoo.
Via Keynes, liberalism gave the world the least imperfect economic system it has yet seen. Economic stability that did not come at the expense of personal liberty. If liberals had remained proud of that heritage and erected stronger ideological firewalls against those who simply saw it as an unnecessary burden on the wealthiest, it is possible that we might have had a stronger response when neoliberalism collapsed. But it isn’t too late to at least start to reclaim that history now.
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