On the Origins of Neoliberalism

In my previous piece on neoliberalism I began with a rough description of neoliberalism, but mostly I worked to clear up problems specific to the general American understanding of neoliberalism. The first problem with the American understanding of neoliberalism is that in the US “liberalism” usually means welfare liberalism of the New Deal type, whereas in Europe “liberalism” the word designates what we call market conservatism in the US. Neoliberal American politicians like Bill Clinton or Barack Obama were really neoliberals, but they weren not neo-New-Dealers but rather neo-freemarketers. Because they were Democrats and bright college types rather than hacks it was assumed that they were just modernizing the New Deal, but in fact they were working to limit and roll back the New Deal (and above all, LBJ’s Great Society).

The second problem is that while neoliberalism can be traced back to to old-school market liberalism of the Republican type, it is not the same thing, but something new and different — thus the “neo”. Neoliberals do hold many points in common with the anti-tax, anti-regulation, anti-union, little-government conservatism we know all too well, but their ideas about the political history and the role of government are entirely different.

Most of what I will say here comes from The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective, ed. Mirowski and Plehwe (Harvard , 2009), which I think is the best single source on the topic. I will only discuss what I think are the main points, with special emphasis on the American-based neoliberals Friedman, Hayek, and Buchanan and will mostly draw from Plehwes’s introduction, Mirowski’s two contributions, and the chapter on neoliberalism in Chile.

Mirowski sees the 1938 “Colloquium Walter Lippman” (CWL) in Paris as neoliberalism’s starting point, and the Mont Pelerin Societ (1947- present) as its institutional embodiment. The CWL was meant to be the first of a series of meetings, but WWII intervened, and in 1947 the MPS picked up were the CWL had left off. Both groups had been hand-picked for their loyalty to market liberal principles, but other than that there was a considerable range of opinion. The majority of the participants were academics, but there was no restriction as to academic department and many journalists, statesmen, and public intellectuals were included. However, economists tended to be dominant, and economists from the Austrian school, the German ordoliberal school, the Chicago school, and (later) the Virginia school were all represented. Some participants were active in government, but the MPS did not endorse candidates or parties, and while the MPS did believe that propaganda suppose for free market principles was absolutely necessary, it kept a low profile and did not do public outreach directly.

The 1938 CWL had been called by the French philosopher Louis Rougier to discuss Walter Lippmann’s book The Good Society, which advocated free market principles. As a journalist and public intellectual, for decades Lippmann played a major role in American public opinion, ending up as a journalistic elder statesman people deferred to even if they did not agree with him. 1938 when the CWL met was probably the historical low point for market liberal ideas. Socialist ideas had already been a serious threat for half a century or more when the Depression hit in 1929and further discredited market liberalism. During the Depression most governments intervened aggressively in economy to minimize the suffering, if only as an emergency measure. In the Soviet Union a Communist government had been in place since 1918 and in Germany the Nazis had taken power in 1932. While the Nazis were anti-Communist and not really socialist, and while they eventually came to terms with the bankers and industrialists, they had no qualms about massive intervention in the economy. (On the basis of their economic interventionism, in the early and middle 1930s the writings of the proto-neoliberals tend to lump Stalin, Hitler, and Roosevelt in a way that read strangely today, though of course the worst crimes of the Nazis and Stalinists were still in the future).

From the beginning neoliberals argued against two groups of thinkers. Their obvious adversaries were all political tendencies (left, right or center) advocating massive state intervention in the economy. But they also argued against traditional laissez-faire liberalism of the “night watchmen government” type. The neoliberals they believed that the old liberals had failed, leaving an opening for Communism and Fascism, and that liberalism would have to be rethought. Most of what they said about the socialists, et. al., was the same as what the laissez faire conservatives said. They opposed unions, Keynesian deficit spending, the full employment policy, economic planning, industrial policy, subsidies to favored industries, and all other governmental attempts to reshape the economy, thinking that in general tariffs, taxes, regulations, and the welfare state should be kept to a minimum — though at the beginning, at least, the welfare state was not the main target.

However, tthe interest of neoliberalism lies in its differences from little-government, laissez-faire liberalism, rather then in what the two tendencies hold in common. Neoliberals accepted the need for a strong state which would enforce liberal principles, by authoritarian methods if necessary. In some respects this just authorized practices (e.g., as the violent repression of unions) which the old laissez liberals had supported, even though it didn’t fit into their little-government philosophy. In a broader historical sense, neoliberals realized that market liberalism is not the inevitable natural state of society once oppressive government has been eliminated, but something that must be constructed and defended. They still claimed that the market liberal society is the natural, best state of mankind, but just denied that it would automatically be achieved once government interference was lifted, holding that it must be achieved and maintained by political action and a strong state.

The neoliberals’ expressed prime value is freedom, which for them far outweighs democracy and equality, but for them freedom is narrowly defined and, like justice and any other good, unevenly distributed. In Mirowski’s words (p. 37), neoliberals define freedom as the right “to improve their lot in life by engaging in market exchange”. Neoliberals do oppose slavery, but they have no problem with wage slavery or debt slavery, when formally free individuals are trapped in an endless succession of jobs so poorly paid that they can barely survive; for neoliberals wage slavery is one of the forms of freedom. By and large, neoliberals are unfriendly to democratic political participation, which they fear will move government in an anti-liberal direction by interfering in the economy in various ways, so neoliberal freedom does not include the right to significant political participation. It also does not necessarily include the other Bill of Rights freedoms, since these might have to be restricted if a political threat to liberalism arises, and while neoliberals do not openly commit themselves to authoritarianism and do not absolutely reject democracy, they come very close to doing so. (This is pretty ominous considering that there is good reason to believe that what they say is more restrained than what they actually think). At a time when Pinochet was regarded as a pariah by most of the civilized world, all three of the big U.S.-based neoliberals (Friedman, Hayek, and Buchanan) visited Chile to observe and give counsel.


So far I’ve mostly just been summarizing Mirowski, but I have some things to add what he said on inequality and on religion.

Neoliberals see pronounced inequality of economic resources and political rights not as an unfortunate by-product of capitalism, but as a necessary functional characteristic of their ideal market system. Inequality is not only the natural state of market economies, but it is actually one of the strongest motor forces of progress (Mirowski, p.438).

Until very recently, in much of the Western world (and often elsewhere). hierarchy was regarded as natural, normal, inevitable and good, and along with this often came the belief that the lower orders (the majority) had no right to make any claims on society as a whole, and essentially were of no worth except to the degree that they were docile and productive. If some of them happen to be wretched and miserable, this is of no public concernm and no cause for government action unless it leads to social unrest which will have to be suppressed. The misery of the lower orders is natural and inevitable and has a disciplinary effect, and to relieve their misery would only make them worse than they already are. (This was never a universal belief, and many of the dominant classes did feel a prudent degree of social concern, but it was a mainstream and perhaps majority belief of the dominant group, and was often acted upon with great cruelty).

This is traditional conservatism, and for conservatives, the dominance of a splendid, wasteful, wealthy and powerful class (however that class might be defined) is in the order of things and is essentially the goal of human society. Resources that go to the lower orders (to labor, to the majority) should be held to the minimum required to keep them functional, since they are not capable of excellence, and anything more than that would just be wasted. All important decisions should be made by the dominant class or by experts in their employ.

For neoliberals, the dominant class should be the high bourgeoisie (capitalists) and especially, “entrepreneurs”. Limited popular input from those below is permissible as a way to find out what they’ll put up with and as a way to get their support for the plans already decided on. But the lower orders are just a collection of inferior individuals, and none of them and no group of them should ever be allowed to change the order of things by mass action, if doing so harms in any way the dominant group.

shouldnly in the 19th century did this contempt for the majority come to be seriously challenged, and only with universal adult suffrage was it officially rejected as state policy. Something like this is a defining belief of all forms of today’s conservatism – whether neocon, neolib, neo-Confederate, Randian or simply unthought. Hierarchy and contempt foe the mass can be justified in traditional religious terms with quotations from scripture, or in secular social Darwinist terms by genetics (or folk racist beliefs which come to the same thing), or in moral terms based on the allegedly incorrigible bad behavior of the lower orders, or in economic terms based on the alleged low productivity of unskilled labor, or as the outcome of Nietzchean / Randian / cowboy competition which brings splendid heroes to the top, or as an observable social and historical fact taken as inevitable, or finally, in cynical Durkheimian terms: some individuals should be selected for punishment, even randomly if necessary, in order to make it clear to the sinful others that they should watch themselves unless they want to be next. When you’re arguing with someone deeply committed to the hierarchal principle, any one of these justifications might show up, and you often will hear incoherent ad hoc combinations of several of them.

In American politics, however, it is still is very dangerous to openly advocate this anti-democratic principle, and in order to avoid marginalization its adherents are forced to work surreptitiously, which is what neoliberals do.


The neoliberals have struggled from the outset to make their political / economic theories do dual service as a moral code. First and foremost, the thought collective worshiped at the altar of a God without restraints.: individual freedom, which it is most appropriate to regard as a moral principle of social action. Like all moral principles, it demands that it be accepted as a value in itself. (Hayek 1960). However, Hayek in his original address to the first MPS meeting said, I am convinced that unless the breach between the true liberal and religious convictions can be healed, there is no hope for a revival of religious forces
(Mirowski, p. 440).

James Buchanan and Friedrich Hayek were clear from the beginning that they were creative political and moral thinkers, and not just economists. In this they differed from Milton Friedman (Essays in Positive Economics) as well as such welfare-liberal economists as Paul Samuelson, all of whom claimed that that their economics was pure science (“value-free” according to the fashions of the time) and derived its authority from Truth, with all “subjective” moral and political considerations set aside. But Buchanan and especially Hayek realized that their teaching conflicted with traditional teachings, including many Christian teachings, and that for their ideal free social to be secure the traditional teaching would have to be replaced by political, religious, and moral beliefs more in line with their freemarket utopia.

It has long been a cliche to say that the Calvinist interpretation of Christianity was of central importance in the development of capitalism, and whether or not this is historically true, many Calvinist doctrines are convenient for capitalism. Conservative, politically active evangelical churches of mostly Calvinist theology are key players in American and world politics of today. To Mirowski the need for a religious foundation is a difficulty for neoliberals, but evangelicals (especially preachers of the “prosperity gospel”) have already done much of the work toward providing that foundation.

Calvinism tends toward individualism, with little of the communal aspect of Catholic, Lutheran, or Jewish teachings. The individual’s struggle with sin in the face of an angry God is what is central to Calvinism. We are all born sinful and never stop being sinful, but we should still struggle mightily to avoid sin, but in full awareness of the fact that our efforts can never be enough. Salvation is only by the free grace of God, but God’s ways are mysterious and we can never know whether someone has been saved or condemned — much less why. In this world there can be no innocent victims, nor can those who are happy in life be confident that they have been blessed. Either misery or happiness can be a test sent by God, so that someone enduring terrible trials is being given a chance to redeem themselves in the eyes of an angry God, while if someone enjoying health, wealth, and success, is being tested by the temptation to become vain, slothful, luxurious, or otherwise sinful. And God’s mysterious ways of God cannot be questioned or protested against; only submission is allowed.

The Hayekian world seems much like the Calvinist world, with the market taking the place of the angry God:

For most, man in a complex society can have no choice but between adjusting himself to what to him must seem the blind forces of the social process and obeying the orders of a superior (Hayek 1972, in Mirowski p. 444).

The market order does not bring about any close correspondence between subjective merit or individual needs and rewards (Hayek 1967, in Mirowski p. 438).

Fpr neoliberals, freedom is participation in and submission to the market order (in neoliberal terms the freest order), but as in Calvinist Christianity, the reasons for punishments and rewards delivered by the market are not always apparent, and for that reason the market outcomes must be unquestioningly accepted and cannot be protested or judged.

Beyond that, one Calvinist tendency holds that prosperity and success are “the visible signs of invisible grace”. This brings religion in line with the market hierarchy in a way that Hayek could only approve. A prosperous man can be assumed to have been blessed by God (though he will still have to watch himself, since it is possible to fall from grace). In this version poverty is either God’s punishment or else a test sent by God, and in either case the poverty must be meekly accepted. The idea that the the successful have been blessed by God is central to the prosperity gospel, and beyond this, some prosperity churches offer truly repentant sinners the grace of God’s forgiveness, so that those of the prosperous who are unable to control their evil impulses can still be blessed.

III. Supporting Citations

Hence the rich are not parasites, but (conveniently), a boon to mankind. People should be encouraged to envy and emulate the rich. Demands for equality are merely the sour gapes of the loser, or at the minimum, atavistic holdovers of old images of justice that must be extirpated from the modern mind-set. As Hayek wrote (1967). “the market order does not bring about any close correspondence between subjective merit or individual needs and rewards”
(Mirowski, p. 438).

Man is, and must be, slave to the state. But it is critically and vitally important to recognize that ten percent slavery is better than fifty percent slavery.
(Buchanan, late 1980s, in Mirowski p. 441).

It is at least possible in principle that a democratic government may be totalitarian and an authoritarian government may act on liberal principles.
(Hayek, 1967, in Mirowski, p. 443).

The MPS collective believed that the masses will never understand the true architecture of the social order.
(Mirowski, p. 443).

The notion of freedom as the exercise of personal participation in political decisions was roundly denounced.
(Mirowski, p. 443, refrencing Hayek, 1960).

Man in a complex society can have no choice but between adjusting himself to what to him must seem the blind forces of the social process and obeying the orders of a superior.
(Mirowski, p.444, citing Hayek 1972).

The neoliberal thought collective, through the instrumentality of the strong states, sought to define and institute the types of markets that they, and not the citizenry, thought were most advanced.
(Mirowski, p. 444).

Nobody believes in democracy….what I believe in is not a democracy but an individual freedom in a society in which individuals cooperate with one another.
(Friedman, 2008 , in Mirowski, p. 445).

Dictatorship “may be the only hope.
(Hayek, Pinochet era, in Mirowski, p. 446).

Democracy “is not an end in itself. It is a rule of procedure whose task is to promote freedom. But in no way can it be seen in the same rank as freedom”.
(Hayek, 1981, in Mirowski, p. 446).