'Winning the War of Ideas' : Lessons from the Neo-Liberals

'Winning the War of Ideas' : Lessons from the Neo-Liberals

Briefing for the Human Development and Capabilities Association working group expert roundtable at King’s College, Cambridge in November 2004

This is a draft document: not for quotation

This briefing will look at the success of neo-liberal economists in promoting their beliefs in academia, society, and eventually in government. In particular, it will look at the impact of F.A. Hayek, and of the Institute for Economic Affairs (IEA). It will ask what lessons could be learnt by advocates of the capability approach from the neo-liberals' story.

1. Foundations: The Road to Serfdom

The condensed version of Hayek’s The Road to Serfdom inspired businessman Antony Fisher to be a founder of the IEA. He was one of many for whom this book had a major effect. So I want to begin by looking at the distinctive features of this very influential tract:

· The Road to Serfdom is neither a work of economics, nor is it a particularly technical piece of philosophy or political theory. It is written clearly and accessibly (even more so in the condensed version), and outlines a moral case for classic laissez-faire economic liberalism.
· The book does contain some empirical claims, but they are not largely about economic efficiency. They are about the kinds of society that will emerge if different economic and social policies are followed.
· Central to the work is the history it offers - a broad-brush account of the way collectivist policies are alleged to have led on to Nazism. ‘There is scarcely a political ideal or concept which does not involve opinions about a whole series of past events.’ (1) The account we give of the past shapes what seems plausible and wise for current policy-making.

Hayek and the founders of the IEA saw their work in moral and visionary terms. In The Intellectuals and Socialism, Hayek tells his readers

The main lesson which the true liberal must learn from the success of the socialists is that it was their courage to be Utopian which gained them the support of the intellectuals and therefore an influence on public opinion which is daily making possible what only recently seemed utterly remote. Those who have concerned themselves exclusively with what seemed practicable in the existing state of opinion have constantly found that even this has rapidly become politically impossible as the result of changes in a public opinion which they have done nothing to guide. (2)

Hayek wants the neo-liberals to learn these lessons of history , and so ensure the widest possible dissemination of their views. Hayek made a distinction between scholars in academia, and intellectuals - journalists, novelists, filmmakers (and even clergy!). This latter group, he said, were vital to the promotion of any political and moral vision. The spread of Hayek’s ideas was helped by the issuing of a condensed edition of the Road to Serfdom in the April 1945 Reader’s Digest. John Blundell looks at the relationships with the publisher that led to this - it is a study in the importance of contacts within the media. (3)

To influence both scholars and academics required institutions which could respond to the demands and opportunities of each decade. Hayek's foundation of the Mont Pélerin Society, as an international community of scholars and intellectuals was a means of developing the vision of neo-liberalism, and of disseminating it in the wider culture. In the early post-war years, when these ideas remained unfashionable, a network of institutions in the US supported neo-liberal thinkers who could not get tenure, and printed and distribute books which could not find mainstream publishers. As these ideas began to take deeper root, and tenure and publication were easier to come by, there could be more of a focus on identifying new talent, and persuading it it to take advantage of these opportunities. Since the 1970s, the American Institute for Humane Studies has been able to devote its entire focus to

identifying, developing and supporting the very best and brightest young people it can find who are (a) market-oriented and (b) intent on a leveraged scholarly, or intellectual, career path. (4)

2. Practical application: Chile

In the early stages of neo-liberalism, Hayek urged a certain distance from politics itself. Whilst there was a need for serious empirical work to demonstrate the applicability of neo-liberalism, Hayek saw politicians as constrained by circumstance and expediency:

Society’s course will be changed only by a change in ideas. First you must reach the intellectuals, the teachers and writers, with reasoned argument. It will be their influence on society which will prevail, and the politicians will follow. (5)

Some of the reasons for this flow from the content of neo-liberal thought, and may not apply in the same way to alternative approaches. In the nature of neo-liberalism there is a considerable suspicion of the political process: the economic freedom of exchange at the heart of both Hayek and Friedman's thought can be imperilled by the tyranny of the majority. A situation where socialist policies are pursued, even with the approval of most voters, is an intolerable infringement of liberty. And so, paradoxically, authoritarian states - such as Chile under Pinochet, or some of the East Asian "tigers" - might find it easier to restore economic freedom. According to Valdes' study of Pinochet's Economists, the neo-liberals who determined the military régime's economic policy acknowledged that dictatorship was

a positive and necessary situation. It allowed the historic vices of statism to be corrected. The economists and their media apologists did not hesitate to admit that it was precisely the authoritarian nature of the régime that allowed the reforms to take place. (6)

The military did not initially intend to pursue neo-liberal policies: it was a policy vacuum which gave the 'Chicago Boys' their opportunity. The vital prelude was the relationship which had developed between the economics faculties in Chicago and in the Catholic University in Chile.

Right from the start the process... was a deliberate and programmed attempt to transfer ideas... backed by a specialised structure [i.e. the predominant group of economists at Chicago] ... based on an intermediary [the International Co-operation Administration of the US Government) which had the adequate means to make the operation viable. (7)
In the end, Valdes suggests that this tightly controlled "ideological transfer" created a strong loyalty to a moral and conceptual analysis of the economic order. Whilst this strong "emotional and affective attitude to economic doctrine" enabled drastic structural reforms to be effected, it may also have contributed to the inability to respond effectively to the shocks leading up to the economic crisis of 1982.

3. Practical application: The United Kingdom

If a military coup gave the neo-liberals their opportunity in Chile, it was a political and economic upheaval that presented the opportunities in the UK. As in Chile, it was not within the neo-liberals' power to make the economic weather - what they neo-liberals had done was placed themselves in a position to act effectively when a storm broke; offering a compelling account of the crisis, and of the reforms they claimed would be necessary to restore national prosperity and confidence.

Blundell identifies key factors in the readiness of the neo-liberals in Britain, and their effectiveness once in power:

· first deploying an 'artillery' (IEA, Chicago School et al) which outlined a set of principles, and then a distinct 'infantry' (in the Centre for Policy Studies, committees etc) dealing with practical application
· identifying a small number of key issues (unions, inflation, privatisation) for the focus of all available thinking and political capital
· planning ahead whilst in opposition; but keeping analysis going whilst in power which is separate from the structures of government itself.
· orchestrating key speeches once in power which communicated the neo-liberal analysis in simple terms to the wider public. (8)

4. Self-interest and group interest

Thus far, the terms in which the neo-liberal ascendancy have been described have been intellectual. They have centred on the development of a moral and political vision; its organised dissemination, and the consequent readiness of a body of analysis and policy when political opportunity arose.

What is lacking is an analysis of group interest. It is not surprising that it is amongst entrepreneurs that The Road to Serfdom has the greatest impact, and inspires factory-farmer Anthony Fisher to found, and fund, the IEA. The narrative Hayek is offering him is one that chimes with his economic interests: lower regulation and lower taxes are a message about which an entrepreneur would want to read a compelling defence. Likewise in the 1970s and 1980s, the moral rhetoric of Thatcher and Reagan is found persuasive by precisely those social groups who see in it a possibility of greater net income, and either vastly increased personal capital - or the first opportunity to own any significant property at all.

Moral narratives have a crucial place in public debate, and yet it is rare to see a group convinced by a narrative that involves a redistribution of wealth and power away from them and towards someone else. As we move to consider the lessons for advocates of the capability approach we will have to bear this in mind.


5. Lessons for the Capability Approach

(i) Philosophical foundations: The neo-liberals began with solid philosophical foundations. Straightforward theses were outlined clearly and forcefully. Hayek, for example, makes a clear commitment to individualism: “What are called social ends are for it merely the identical ends of many individuals - or the ends to the achievement of which individuals are willing to contribute in return for the satisfaction of their own desires.” (9) A distinct, but related issue, is that of property rights. The capability approach implies a different stance on each of these questions. There is no lack of good philosophy on the subject. What is missing is a short, powerful and clearly-expressed statement of the position - accessible to lay people.

(ii) A ‘broad-brush’ vision: The Road to Serfdom is not simply a well-expressed philosophical argument; it offers a vision. This strikes me as one of the most promising avenues for the capability approach - it too is based on a strong moral vision. And it is timely: just as Hayek’s work struck a chord in a world haunted by fascism and communism, today’s world may be ready to question the maximising national income as our primary policy goal. Western culture is aware that material saturation does not necessarily bring contentment or safety - and issues of international security, and of population migration mean questions of the well-being of the “two-thirds world” cannot be ignored.

(iii) Nurturing people: Like the neo-liberals, those advocating the capability approach need to develop a clear strategy in to support scholars in need of tenure and publication - and to make this an attractive career choice for those in each new generation with the relevant gifts. Likewise, the media, writers and the leaders of community and faith groups need to be enlisted to promote this vision in the wider world.

(iv) Narrating events: The neo-liberals had great success in fashioning a narrative. This applied both to Hayek’s account of how centralised planning led to tyranny, and to later developments - the analysis of the failure of the “mixed economy” which led to the rise of Thatcherism and “Reaganomics”; the story of the “Asian tigers”, as contrasted with the failure of the planned economies in post-colonial Africa.

Crucial to the success of an alternative vision is the provision of an alternative narrative. An example of this is Sen’s account of the progress of different national economic policies in Development as Freedom. (10) The point of this briefing is not to argue the merits of these rival accounts - merely to point out that the importance of these areas of debate, and of the diffusion of the capability approach's scholarly analysis via the "intellectuals".

One could make a very similar point about the contemporary debate in British politics. Thatcherism and New Labour both have powerful historical narratives based on the failure of the corporatist consensus in the 1970s. A reason why New Labour has not changed the terms of national political debate in the dramatic way Thatcherism did is because it essentially shares a Thatcherite understanding of the mistakes of the past. A truly alternative economic and political vision would have to provide a different analysis of the crises of the 1970s, and the lessons to be learnt from them.

(v) Practical application: The examples of Chile and Britain both show the importance of having laid foundations: as well as having an 'artillery' outlining a basic philosophical position, there is an array of 'infantry' working on a carefully-selected (and not too large) number of policy implications. In the face of the economic crises which had faced Allende and Callaghan, they had a clear account of what had gone wrong - and people in place ready to recommend alternatives. Advocates of the capability approach would need to map out the key areas of economic and political reform their position requires - and have practical policy recommendations for governments.

(vi) Group interests: Perhaps this last point should really be the first! It will certainly need to inform the way we shape our argument and the dissemination of information. A lesson of the neo-liberals’ success is that the moral and practical case for laissez-faire capitalism found a willing ear in those who would benefit from it financially.

Who, then, should advocates of the capability approach seek to address - and how? The answer must surely be that different groups will benefit from the kinds of policies it would seek to promote, and in different ways. For some the benefits (if the approach is effective in practice) would be in improved public services and in the redistribution of wealth in their direction through progressive taxation or reforms in labour laws. On the whole such people already find the case for alternatives to neo-liberalism compelling. For six years, I have been involved in the work of broad-based community organising in East London, including a major campaign for a Living Wage of £6.70 for all workers. (11) I have never once had to convince a low-paid worker that the labour market is monopsonistic - only that the campaign had a chance of succeeding! The effective articulation of an alternative approach will be well-received by groups already dissatisfied with laissez-faire capitalism, but unsure what else is seriously on offer.

However, as I suggested earlier, there is another constituency which Sen’s approach may attract. These are people in the west dissatisfied despite material affluence - and threatened by some of the implications for the security of western peoples of a ’global village’ in which the communications revolution means we cannot escape the effects of having so many of our fellow-humans living in such poverty. Such people may already be concerned about the effects of individualism and commercialism - the kinds of issues popularised in books such as Bowling Alone and The Corrosion of Character. In a sense, like the first group, they are dissatisfied with the way things are (but not because they are deprived financially) and yet unsure how else things might be.

Questions about how our ideas are framed and disseminated will be closely related to these questions of our potential audiences. How, if at all, are they organised? What means of communication will reach and engage them? Or is the organising of citizens itself one of our primary tasks?
Angus Ritchie
November 2004

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(1) F.A. Hayek, Capitalism and the Historians, cited in J. Blundell, Waging the War of Ideas (London, 2003)., 35
(2) Ibid., 37.
(3) Ibid, 97-8
(4) Ibid, 40.
(5) Ibid, 84.
(6) Juan Gabriel Valdes, Pinochet's Economists (Cambridge 1995), 29
(7) Ibid, 49
(8) Blundell, op. cit., 110-112
(9) F. Hayek, The Road to Serfdom (Ark, London, 1986), 44.
(10) A. Sen, Development as Freedom (OUP, Oxford, 1999), Chapter 2
(11) The Living Wage campaign is an action of London Citizens; part of the Citizen Organising Foundation. More information at www.londoncitizens.org.uk