The Network Project is dedicated to constructing a critique of
the neo-classical world-view, which is commonly called neo-liberalism,
and in assessing alternative ideas and developments. The nature
of the corporation, the market and free trade are being questioned
in the West as elsewhere, and alternatives such as fair trade
and global justice are being suggested. However, the nature of
neo-liberalism, as the dominant political ideology, is poorly
understood, and the necessary challenges to neo-liberal ideas
cannot be made successfully without gaining such an understanding.
This essay is concerned with demonstrating the basic facts about
the neo-liberal worldview, its values and political strategy.
This will start with the following definition of neo-liberalism
and its political strategy:
The neo-liberal worldview can be defined as the belief that
the unfettered pursuit by individuals of private and selfish good
creates a spontaneous order that benefits all of the members of
society. The political strategy of neo-liberalism is to ensure
that an international competitive order is created in which every
state is governed according to the values implied by this worldview.
Neo-liberal values are increasingly being presented as Western
values. The whole world is being modernised; every
world state is to be run according to neo-liberal values, often
projected as democracy, liberty under law
or justice under law. Neo-liberal ideas have become
so mainstream that politicians act on neo-liberal advice as a
matter of course. Neo-liberals have apparently made their intellectual
case so well that there appears to be no alternative: alternative
intellectual ideas are ignored or ridiculed as unrealistic or
as speculation; alternative values and political movements are
marginalized and excluded from decision-making processes.
In fact, there seems little evidence that any meaningful percentage
of Westerners do in fact share neo-liberal values. Many leading
Western cultural spokesmen, such as John Ruskin, Thomas Carlyle
and Mathew Arnold, as well as scientists such as Charles Darwin
and Albert Einstein, have attacked the morality and scientific
credibility of the ideas that make up the neo-liberal worldview.
Historically, this view was criticised from the beginning, particularly
after 1720, when the collapse of the South Sea Bubble revealed
what really happens when corporations are managed according to
the selfish whims and the corruption of their directors. Ideologically,
neo-liberalism specifically does not coincide with the British
libertarian heritage that flows through John Locke, John Stuart
Mill and T.H. Green to Harold Laski. The West does have cultural
and ideological values that we can be proud of, but these by no
means always undermine other cultural values. Indeed, the very
idea that Westerners have values that conflict with those of Islam
or any other cultural group is not one that should be accepted
without scrutiny to say the least.
The exclusion of alternative voices and political groups from
political representation, the continuation of poverty and exploitation
across the world, and the position of the law in condoning these
things, are not helping to convince thinking activists that we
live in a world of democracy, liberty or justice as they would
be generally understood in a Western context. If neo-liberals
believe in their ideas and values, then that is as it is; but
to proclaim their values as the values of the entire West is provocative,
and needs to be answered. Neo-liberals do not speak in the name
of the whole West.
This essay will deal with neo-liberalism in three sections. First,
the basic ideas of the competitive, spontaneous order will be
sketched. Second, the meaning of law, democracy, liberty, justice,
and welfare in the neo-liberal worldview will be explained, as
well as the way in which neo-liberals control democratic decision-making.
Third, the history and form of neo-liberal political strategy
will be described.
This is a very brief essay, with little attempt to reference any
but crucial ideas. The intention is to put this right in a later,
Section One: The Spontaneous Order
Modern neo-liberals present their ideas as being developed mainly
in the Scottish Enlightenment of the Eighteenth Century. The fundamental
idea, that the unfettered pursuit by individuals of private, selfish
good creates a spontaneous order that benefits all of the members
of society, is traced to Bernard Mandevilles notion in The
Fable of the Bees (1715), that
The worst of all the multitude
Did something for the common good.
This is the basis of the classical worldview, stated famously
in 1776 by Adam Smith as the invisible hand theory:
every individual necessarily labours to render the
annual revenue of the society as great as he can
only his own gain, and he is in this, as in many other cases,
led by an invisible hand to promote an end which is no part of
This is the dominant idea in the classical worldview and in neo-liberalism.
There are five strands to this that are important from a critical
point of view. The first is that each individual is after his
or her own gain. The second is that this process results in a
spontaneous order. The third is that this spontaneous order is
created unintentionally. The fourth is that the spontaneous order
benefits the welfare of the whole society, through an increase
in the wealth of the nation. This leads to the fifth implication
of the classical idea: that of cultural or societal competition
for scarce resources. Although the idea of spontaneous order might
seem to be an argument for individual liberty alone, it must be
noted that Mandeville and Smith were arguing that purely self-seeking
behaviour creates a nation that is more productive than other
societies, and as such is able to dominate world trade. The message
of Mandeville that must be grasped in order to understand the
reverence that neo-liberals feel for him is that the selfish individual,
in seeking his or her private interest, contributes to the spontaneously
created selfish national interest, and allows the society to engage
successfully in cultural competition for world resources.
It must be stressed that selfishness, in the neo-liberal worldview,
is not only necessary to cultural competitive success, but is
also the main facet of human nature. Neo-liberal theory looks
to David Humes Treatise on Human Nature, published in 1739
as a further source for ideological justification of their ideas
in the British intellectual tradition. Hume had three principle
views that coincide with neo-liberal concepts. These are, first,
that human beings have only a limited concern for other people;
second, that resources are irretrievably scarce: and third, that
the state must protect private property. This fits well with the
ideas of Mandeville and Smith.
The implications of this are that, for neo-liberals, ownership
is irretrievably linked with competition for scarce resources,
for the individual, the cultural national unit, and the corporation
that is protected in law as an artificial individual; and this
all without effective legally defined regard for the social and
environmental consequences. Furthermore, the state is the protector
of this individual, corporate and cultural competitive struggle;
and this is justified by a belief in a spontaneously created beneficent
order. Taking all this into account, it can be readily seen that
(for neo-liberals), the market, if allowed perfect freedom, must
necessarily distribute resources in the most efficient way possible.
The Law of Liberty and Western Values
To restate the matter, neo-liberals believe in the idea that
selfish individual behaviour, if allowed to act freely, results
in the emergence of a spontaneous, highly productive society.
As Frederick Hayek pointed out, this amounts to a Law of Liberty,
upon which all neo-liberal theory and political action is based.
In a general sense, neo-liberals can be defined by this belief,
and neo-liberal policy can be defined by the actual creation of
a world market underpinned by the Mandeville-Smithian view of
emergent human behaviour.
Neo-liberal thinkers, however, develop the idea of the Law of
Liberty much further, to underpin the notion that they are the
true protectors of Western values. Neo-liberals talk of liberty
under law, justice under law, and the Western mission to spread
democracy and liberty around the world. If this belief-system
is to be questioned, the form of the neo-liberal argument must
Within the neo-liberal belief-system, the privatisation of property
and the free competition for profit of individual property owners
(and the corporations that are regarded in neo-liberal law as
individuals) are conditions that, by virtue of the natural law
of selfish competition that leads to the spontaneous order, must
necessarily maximise human welfare. Maximal human welfare follows
from the Law of Liberty.
The distribution of wealth that emerges from the competitive
order is the best that can be achieved. Any interference with
the market is by definition self-defeating. The market is seen
as self-regulating, and for this reason, recession is the result
of production and distribution becoming unbalanced. The only thing
that can be done in recessions is to leave the market to sort
itself out. This follows from the Law of Liberty.
The reality of distribution through free trade is defined as
justice in neo-liberalism; and it is therefore moral, also by
definition. Market distribution is just: market distribution is
moral; and these too follow from the Law of Liberty.
The Law of Liberty, then, defines neo-liberal ideas of freedom,
welfare, justice and morality. In neo-liberalism, these values
are realised by ensuring that the law protects private property
and free trade. Neo-liberals, however, are painfully aware that
they represent a minority opinion, even in the West. Democracy,
if allowed to develop naturally, will tend to act against neo-liberal
principles, to form social democratic and welfare states in which
market intervention is the norm. Furthermore, pressure groups,
such as religions or trade unions, will interfere, through democratic
channels, with the free working of the market. The problem for
neo-liberals is to ensure that the Law of Liberty is maintained,
and that it supersedes any democratic rights of the majority.
As can be seen, this is why all alternatives to neo-liberalism
must be excluded from political influence. This leads to the neo-liberal
concept of democracy.
David Held, in his Models of Democracy, calls this model legal
democracy, asserting that the over-riding principle of justification
is that individual freedom and initiative must be protected by
law in both the political and economic sphere: majority rule must
therefore be circumscribed by the rule of law. The justification
of majority rule is simply in maintaining liberty through protecting
individuals from arbitrary government, by maintaining the possibility
that leaders can be removed from office.
Held notes that general conditions are that political leaders
should be guided by neo-liberal principles; the minimisation of
bureaucratic regulation; restriction of the role of interest groups,
particularly trade unions; an international free-trade order,
and the eradication of the threat of collectivism of all types.
This agrees with the analysis stated here; but it raises the question
of neo-liberal strategy. As Held says, neo-liberals fulfil their
aims by ensuring the existence of a political leadership guided
by neo-liberal principles. The question is: how is this guidance
done? This will be dealt with next; and it involves going back
to the Scottish Enlightenment.
The Politics of Neo-liberalism.
The point about the Scottish Enlightenment is that it represents
a school of thought concerning the appropriate way in which human
beings should live. The end result of such ideas is not academic
but practical and political. The proponents of the ideas sought
to ensure that the government of the nation followed their advice,
and allowed selfish behaviour full scope. Furthermore, the school
had its enemies, who had to be argued against. For instance, Bernard
Mandeville criticised the third Earl of Shaftesbury, who believed
that, as man was made for society, he might be expected to intentionally
work for the welfare of it: and Mandeville was well aware that
his own system could not be more opposite to that of Shaftesbury.
The two schools of thought were, and are, antithetical; they underlie
two completely different systems of political thought and action.
The winning school is the one that manages to influence the actual
government of the state. The politics of neo-liberalism continues
As it happens, this tradition lost influence during the nineteenth
century, and by the mid twentieth century, there was a general
commitment to the post-war consensus, to welfare states, and to
pluralism in decision-making. However, the ideas of the Scottish
Enlightenment did not wither and die: rather, they gained new
champions. The particular champion of neo-liberalism is Frederick
Hayek, whose 1944 book The Road to Serfdom can be taken to represent
the beginning of the neo-liberalism that we see before us. Hayek
was appalled at the domination of Left-wing ideas in academic
life, and decided to create a movement to connect those few liberals
who still held positions in academic institutions: a network of
intellectuals. This came to fruition in April 1947, when perhaps
the most significant event of the twentieth century took place:
a group of liberals met in the Hotel du Parc on Mont Pelerin,
Switzerland, to discuss liberalism and its decline, the possibility
of a liberal revival, and the desirability of forming an association
of people who share certain common convictions about
the nature of a free society.
This association of people called themselves the Mont Pelerin
Society, and the quote above is from their historian, Max Hartwell.
The certain common convictions about the nature of
society were the conviction that Bernard Mandeville and Adam Smith
were right in their ideas that selfish behaviour created a spontaneous
order of public welfare. Members of this society were Ludwig von
Mises, Michael Polanyi, Karl Popper, and Milton Friedman, and
Frederick Hayek was the first president. This association has
remained small; in 1986, it still had only 500 members.
The neo-liberal position was not to enter into politics until
the root ideas of neo-liberalism (that is, classical economics
based on the Law of Liberty) had recovered their strength. As
Hayek put it, neo-liberals first had to make an intellectual
case amongst intellectuals for what you believe in.
The Mont Pelerin Society provided a setting in which neo-liberal
intellectuals could present and discuss papers that contributed
to making an argument for the recreation of free market economics.
The Mont Pelerin Society also set up think tanks to continue the
work of the popularisation of the neo-liberal message; this tactic
had been used by Mises and Hayek in Austria previously to work
out and spread arguments that trade cycles should not be interfered
with. The first of the Mont Pelerin generated think tanks was
the Institute of Economic Affairs, set up in 1953. Many more followed,
controlled strategically by placing Mont Pelerin Society members
on the advisory boards. By 1986, there were thirty neo-liberal
institutes in seventeen countries.
By the 1960s, the Mont Pelerin Society was making links with
politicians. They have a policy of avoiding direct links with
any particular party; and this follows from their belief that
all parties must rule according to neo-liberal ideas. Nevertheless,
when opportunities arise, the Mont Pelerin think tanks are keen
to give advice. Such an opportunity occurred in Britain from 1963
onwards, with the Conservative Party being increasingly influenced
by neo-liberal ideas through Mont Pelerin think tanks. Enoch Powell,
Sir Keith Joseph and Geoffrey Howe in particular helped to promote
neo-liberal ideas in the Conservative Party. A significant step
forward came when Sir Keith Joseph convinced Mrs Thatcher to take
up neo-liberal ideas and to put them into practice; but there
is no evidence that Mrs Thatcher was aware of the existence of
the Mont Pelerin Society.
At the same time, Ronald Reagan was heading towards presidency
in the USA. Reagans link to the Mont Pelerin Society is
not recorded; but he followed the same pattern in being influenced
ideologically by neo-liberal ideas of free enterprise and minimal
state intervention, and of being guided into the leadership of
a minority group of intellectuals who were seeking to undermine
the dominant ideas of the post-war consensus.
From these beginnings, neo-liberalism has spread, and it has
in fact successfully undermined the post-war consensus. Liberal
think tanks have captured the intellectual high ground, and produce
papers and advisors to facilitate governments in dismantling regulations
and in privatising public services. Neo-liberals fill academic
chairs and editorial roles. In short, the neo-liberal strategy
has two significant elements; the intellectual and academic development
of ideas based on neo-liberal values; and the systems that feed
those ideas into the circles of political power; and all of this
with the express intention of ensuring that political leadership
is guided by neo-liberal values.
In conclusion, then, I have described the basis of neo-liberal
values in their belief that the selfish behaviour of individuals
inevitably creates a spontaneous order that maximises social prosperity.
I have shown how neo-liberals present this belief in terms of
Western values, not just of liberty, but also of law, justice,
morality, and welfare. I have also shown that neo-liberals, despite
being only a small proportion of the population, have nevertheless
assumed a position of intellectual and political supremacy through
the guidance of political decision-making.
This, hopefully, will help those who do not hold neo-liberal
values to understand and counter neo-liberalism, to rediscover
the Western traditions that renounce neo-liberal values, and to
create, in partnership with non-western thinkers and activists,
a set of values that are neither Western nor Eastern, Southern
nor Northern: a set of values that are simply human.
Paper presented by Ian Brown
on 19th November 2005
at the inaugural conference
of the Network Project at
London School of Economics