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The Empire of Lies: The Truth about China in the Twenty-First Century

Eye on the News

Guy Sorman
The Road to Freedom
A flawed essay collection charts the early history of the Mont Pelerin Society.
23 July 2010

The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective, edited by Philip Mirowski and Dieter Plehwe (Harvard University Press, 480 pp., $55)

There is no political life without rallying cries, and the best rallying cries have ideas behind them. Where did Ronald Reagan, Margaret Thatcher, Newt Gingrich, and Tea Party activists find concepts like supply-side economics, privatization, free trade, and limited government? These political combatants needed intellectual suppliers. According to The Road from Mont Pelerin, a collection of essays edited by Philip Mirowski of the University of Notre Dame and Dieter Plehwe of the Social Science Research Center in Berlin, the American neoconservative agenda is the brainchild of a “thought collective”: a transnational network of like-minded economists, philosophers, journalists, civil servants, and entrepreneurs. This network furnishes the long-range artillery of conservative activists and politicians, and its origin is the Mont Pelerin Society.

The Society, founded in 1947 by Friedrich von Hayek, is usually considered the cradle of European neoliberalism—the combination of free-market economics with democracy and the acceptance of some income redistribution. “Neoliberalism” is a familiar term in Europe, often used derisively by socialists. It’s rarely heard on the other side of the Atlantic, where the American version, what became neoconservatism, has generally been more opposed to redistribution and the state than its European cousin. Thus in the United States, “conservative” and “libertarian” are the more common words.

One can agree with this book’s editors, however, that neoliberalism is the proper term to define the common ground that U.S. libertarians and conservatives share with European, Asian, and Latin American free-marketeers or classical liberals. (Africa, too, has its neoliberals, like Dambisa Moyo, author of Dead Aid.) These different terms follow the diversity of local political traditions and also reflect the complexity of the neoliberal idea. Mont Pelerin has nonetheless served as the model for conservative think tanks, which now constitute a global network that includes, among others, the Washington-based American Enterprise Institute and Cato Institute; the Manhattan Institute in New York (the publisher of City Journal); and in the United Kingdom, the Institute for Economic Affairs, which converted Margaret Thatcher and her Tory Party to free-market policies.

As Mirowski and Plehwe’s book shows, the Mont Pelerin Society was divided from the beginning between classical liberals seeking to return to a nineteenth-century, laissez-faire model and interventionists who wanted the state to create the necessary institutions for a free society. Such ideological opposition would eventually translate into the real world of politics. Think of two recent U.S. presidents. Stronger governments for a freer world became George W. Bush’s agenda. The president whom Bush so admired, Ronald Reagan, said: “Government is not the solution to our problems; government is the problem.” But both presidents’ visions can be described as neoliberal, since their common aim was individual freedom, regardless of borders or ethnicities.

The dawn of neoliberalism may have been 1937, when the American journalist Walter Lippmann published An Inquiry into the Principles of the Good Society. Lippmann preached the superiority of the market economy over state intervention, a view that leaned into the wind in the depths of the Great Depression. Free-market and classical intellectuals in the United States welcomed the book, however, as did European freedom advocates, squeezed between Marxism and fascism. The following year, an obscure French philosopher, Louis Rougier, organized the Colloque Walter Lippmann in Paris to celebrate the French translation of the book. Most of those who attended—including Hayek, the Austrian economist Ludwig von Mises, and the French sociologist Raymond Aron—would participate in the founding of the Mont Pelerin Society nine years later.

The neoliberals’ strengths and weaknesses were apparent from this first Colloque, as they remain apparent today. The partisans of laissez-faire derided the interventionists as closet socialists for advocating strong public institutions to restore freedom. The interventionists attacked their critics’ hands-off approach to government, which, they argued, had led to the demise of economic freedom. But both camps had sufficiently threatening common enemies—socialism, New Dealers, Keynes, fascism—to force a synthesis. For the first time, neoliberalism defined itself by a set of postulates that constituted an agenda: the use of the price mechanism as the best way to obtain the maximal satisfaction of human expectations; the state’s responsibility to institute a juridical framework adjusted to the market order; the ability of the state to pursue long-term goals, rather than short-term expedients, and to do so by levying taxes; the acceptance of state intervention, so long as it favors no particular group and seeks to act upon the causes of economic difficulties.

World War II delayed a second meeting of the Colloque Walter Lippmann until 1947, when Hayek convened a group of 40 in the small Swiss town of Mont Pelerin. Most of the initial Colloque members attended and added new members to their ranks, including entrepreneurs, scholars, and civil servants who, during the war, had made no compromise with any kind of statism. In 1944, Hayek himself had published a radical pamphlet, The Road to Serfdom, indicting the British government for using the war as a pretext to reduce economic and individual freedom. This first Mont Pelerin meeting upheld the transnational character of neoliberalism. Hayek, a University of Chicago professor, was Czech, born in the Austrian Empire and later to become a British citizen; he completed his academic life in Germany. Another leading member of the Mont Pelerin Society was Peter Bauer, who before becoming a British lord also originated from Austria. Bauer had been the first economist ever to advocate free markets as the road out of poverty in Africa and to demonstrate the counterproductive effects of well-intentioned foreign aid. This initial mixture of Europeans and Americans would later be enriched by Japanese, Latin Americans, and Russians. Today, the Society has over 1,000 members.

Like the Colloque Walter Lippmann, the Mont Pelerin Society was always ideologically divided. Hayek told me personally that at the first meeting, the participants couldn’t even agree on a name for their group. A French civil servant proposed Turgot, after the free-market statesman in eighteenth-century France; the British counterattacked with Lord Acton. Hayek saved the day by suggesting that they adopt the name of the village where they met. In the 1980s, the laissez-faire militants felt strong enough to exclude the more statist neoliberals. Hayek, had he lived that long, would probably have been blackballed. Mont Pelerin then became “a cult organization,” according to one of its most eminent founders, Milton Friedman, who told me that the Society had outlived its usefulness.

Another internal division eventually developed: between scholars who wanted no interaction with entrepreneurs and scholars who saw entrepreneurs as fellow travelers. But the Mont Pelerin Society, and the other organizations that would follow its model, needed private funding just to be able to convene. This practical need solved the theoretical debate. Still, not all scholars have felt comfortable with entrepreneurs attending their academic debates. It’s worth noting that countries where intellectuals and businesspeople don’t mingle—like France, Spain, and Japan—are those with the weakest networks of neoliberal think tanks. The United States, Great Britain, and Latin America, by contrast, have strong intellectual networks.

The Road from Mont Pelerin focuses on the origins of neoliberalism, not on its contemporary applications from the late 1970s to today. This is disappointing and also somewhat befuddling. The editors and authors sometimes hint that neoliberalism has been a plot between well-heeled scholars and wealthy entrepreneurs to take over the world: Mont Pelerin as a modern Protocols of the Elders of Zion. This is preposterous. At a time when freedom is under attack—from neo-Keynesians on one flank and Chinese-style state capitalism on the other—neoliberalism has clearly not yet conquered the globe. It would be preposterous as well to pretend that Hayek, von Mises, Friedman, and Bauer have already said everything that needs saying. Just as neoliberalism successfully attacked Marxism and fascism, we may need an updated neoliberalism to contradict doomsday prophets, “deep green” ecologists, fans of authoritarian China, welfare statists like Joseph Stiglitz and Paul Krugman, and other anti-globalists. And we surely still need the long-range artillery furnished by pro-market scholars and think tanks—those whom Hayek called “intellectual dealers of ideas”—in our ongoing quest for a free society.

Guy Sorman, a City Journal contributing editor, is the author of Economics Does Not Lie and other books.

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