The Rise and Fall of Neoliberalism

The Collapse of an Economic Order?

Kean Birch, Doctor Vlad Mykhnenko, Kean Birch, Vlad Mykhnenko

• Publisher: Zed Books
• Year: 2013
• ISBN:
  9781848139015
• Edition: 1
• Topic: Economics
• Subtopic: Political Economy
• Index: Economics

The recent, devastating and ongoing economic crisis has exposed the faultlines in the dominant neoliberal economic order, opening debate for the first time in years on alternative visions that do not subscribe to a 'free' market ethic. Bringing together the work of distinguished scholars and dedicated activists, The Rise and Fall of Neoliberalism presents critical perspectives of neoliberal policies, questions the ideas underpinning neoliberalism, and explores diverse responses to it from around the world.

PART ONE • THE RISE OF NEOLIBERALISM

1 How Neoliberalism Got Where It Is: Elite Planning, Corporate Lobbying and the Release of the Free Market

DAVID MILLER

The argument of this chapter is that corporate lobbying organizations are at the forefront of organizing and pursuing capitalist class interests through the promotion of neoliberal agendas and the planning of neoliberal projects (see Birch and Mykhnenko, this volume). These organizations exist to plan and implement policy, sometimes for a wide range of ruling class fractions and sometimes for a much narrower ideological base, as a number of chapters in this book (for example, Birch and Tickell; Jessop) will later show. Either way, corporate lobbying has been at the centre of efforts to expand and globalize corporate power, to introduce and develop the ‘doctrine’ of neoliberalism according to which, as David Harvey (2005) has put it, ‘market exchange is an ethic in itself, capable of acting as a guide for all human action’. In this sense, neoliberalism is the ideology of the emergent transnational capitalist class which has planned and constructed an architecture of global governance in response to threats from national capital (Euroscepticism in the UK, for example), from neoconservatives (internationalist American exceptionalists, for example – see Diamond 1995) and from the Left.

However, the planning and implementation of the global architecture of neoliberalism depended on the organization of interests. It was only possible to introduce neoliberal ideas in practice when enough members of the ruling class were either won over or had become indifferent or constrained enough to make opposition futile; it was only possible, in other words, by preparing the ground. This has been a long-term process, as will be outlined in this chapter, and has depended on a battle of ideas, certainly, but also on a battle to put certain ideas into practice, to win certain conflicts and to build concretely on these victories. It is certainly not the case that this was done in an abstract way, in total divorce from national and global economic conditions. But nor was it the case that the economic conditions of the mid-1970s inevitably produced neoliberalism. It depended on the existence of a relatively coherent if inchoate and evolving set of ideas, an emergent class ideology to which increasing fractions of the ruling class could be won over. If the neoliberals had to invent on the spot all the ideas and the concrete political victories they had won by the 1970s, and then practically build on them, they would have tried – but they would have been acting in (different) circumstances not of their choosing.

As might be apparent from this brief discussion it is my argument that the question of ideas is important in historical development as discussed elsewhere in this book (by Birch and Tickell, for example). The concept of hegemony is useful here, though it is important to specify that the ‘ruling ideas’ referred to do not necessarily become those of subordinated classes. Rather I refer to hegemony as the process by which ruling class fractions are able to exert leadership over closely related fractions and to forge ruling class unity on particular questions, even if only fleetingly. Of course this unity need not be total and may fracture quickly, as arguably has been the case with the ruling class ‘realist’ opposition to the invasion of Iraq in 2003 and the peeling off of other elements of the ruling class when Iraq turned out not to be a cake walk. The other obvious way in which ruling class consensus is fractured is when ‘experience 1’ (as Edward Thompson called it) walks in ‘without knocking’ (Thompson 1978: 201). I refer of course to the financial crisis, which has forced the entire apparatus of bankers, financiers, economists, politicians, regulators, journalists and other ‘experts’ on such matters to hurriedly rearrange their analysis of global finance (see Shaoul, this volume). A series of splits quickly emerged to be followed by regrouping and ideological projects aimed at defending the castle of capitalism slightly further up the hill.

All of this does not emerge spontaneously from the economic circumstances in which the capitalist class find themselves. They need to discuss and debate, to wheel and deal to come to a view on their response. All of this is accomplished in a myriad of social circles and institutional locations, from the golf course to the gentleman’s club, but is most obviously institutionalized in the elite policy planning organizations, the think tanks and the class-wide corporate lobby groups that both have distinct national characteristics – as I will show in relation to the UK – and cut across national borders in the extension of global corporate power. Sidney Blumenthal (2004: xix) notes in the introduction to The Rise of the Counter Establishment that his aim is to advance the argument that ‘ideas themselves have become a salient aspect of contemporary politics’. He also writes that at the heart of what he calls the ‘counter-establishment’ ‘is an intellectual elite … attached to the foundations and journals, think tanks and institutes’ (ibid.: xx).

Putting the Architecture in Place

As we will see, the architecture for elite global policy planning was constructed by means of lobby groups, think tanks, research institutes, corporate-sponsored foundations and so on. International groupings emerged gradually over the course of the twentieth century, starting in 1920. In general, they developed in line with the three waves of business activism which can be identified in both the US and the UK in the twentieth century (Miller and Dinan 2008).

Elite policy planning groups have a long pedigree. One of the earliest groups – set up in 1919 – was the Royal Institute for International Affairs (RIIA), based in London and often called Chatham House, the name of the building in which the Institute is housed. In the US the Council on Foreign Relations (CFR) – created in 1921 – performed a similar function. Both appear to have emerged from an organization called the Round Table, set up to pursue a worldwide ‘Anglo-Saxon brotherhood’ uniting the empire into one state. This project was associated with imperial propagandist Lionel Curtis and other prominent writers, administrators and politicians (Mackenzie 1986). Both the RIIA and the CFR remain key establishment organizations today. For example, the CFR is the central upper-class foreign policy think tank in the US, whilst the RIIA has around 1,500 individual members and 267 corporate members (RIIA, undated).

These attempts in the UK and the USA (see Birch and Tickell, this volume), being largely successful at the national level, then opened up a window for the implementation of new structures of global governance. Such organizations, although set up in the early part of the twentieth century, remain important players in national and global decision making. Furthermore, the process of globalization was activated by the conscious and calculated lobbying and long-term policy planning carried out in organizations and networks like the Mont Pelerin Society (MPS), which aimed to win the ideological battle, and think tanks like the British Centre for Policy Studies and the Adam Smith Institute, along with the American Heritage Foundation and American Enterprise Institute, which aimed to put those ideas into practice (see Birch and Tickell, this volume).

The MPS, itself an ideological backlash, began on the slopes of Mont Pelerin above Lake Geneva in Switzerland. It illustrates the international and global dimensions of elite planning and policy making. In the company of a ‘tiny band of economists, philosophers and historians’, the MPS was founded in 1947. As one of its British acolytes, Ralph (Lord) Harris, recalled, it had the ‘war aim’ of reversing ‘the tide of collectivism sweeping across Europe after 1945 from the Soviet Union westward to Britain already being converted into a socialist laboratory’ (Harris 1997). Their intent was the same as those who had met in Dean’s Yard in London in 1919 to found the first class-wide propaganda organization (National Propaganda), namely to undermine popular democracy in the corporate interest. Their intellectual bellwether, Friedrich von Hayek, declared: ‘We must make the building of a free society once more an intellectual adventure, a deed of courage’ (cited in Harris 1997). The strategy was not to convince the public, who in the view from Mont Pelerin were mere followers of their betters, but to convince society’s intellectuals, who were perceived to have been won over by socialism: ‘Once the more active part of the intellectuals have been converted to a set of beliefs, the process by which these become generally accepted is almost automatic and irresistible’ (cited in Harris 1997).

The MPS sought to assemble at ‘agreeable’ venues around the world a ‘growing number of carefully vetted’ members to meet in ‘private conclave’ every year or two (Harris 1997). Like contemporary professional lobbyists, these shock troops in the battle for ideas ‘eschewed publicity’, preferring to work amongst the intellectuals and through sympathetic institutes and other influential back rooms. The result was a very wide range of think tanks across the world.

Elite Planning and the Rise of Thatcherism in Britain

In the UK one of its early manifestations was the creation of the Institute for Economic Affairs (IEA) in 1955. The decision to refrain from overt propaganda or direct political action was taken at the first meeting of the MPS:

The group does not aspire to conduct propaganda. It seeks to establish no meticulous and hampering orthodoxy, it aligns itself with no particular party. Its object is solely, by facilitating the exchange of views among minds inspired by certain ideals and broad conceptions held in common, to contribute to the preservation and improvement of the free society. (Hayek, cited in Cockett 1994: 116–17)

The influence of Mont Pelerin has been extremely significant. Within a generation their ideas had been adopted by right-wing political movements everywhere and after a further 10–15 years they had also successfully neutralized what was left of parties set up to represent the common interest. On her election in 1979 Margaret Thatcher elevated the head of the IEA to the House of Lords. ‘It was primarily your foundation work’, wrote Thatcher in a letter of thanks, ‘which enabled us to rebuild the philosophy upon which our Party succeeded in the past’ (quoted in Cockett 1994: 173). The IEA was the first of what would eventually become more than a hundred free market think tanks around the world.

The IEA was set up by Anthony Fisher in 1955. He was a chicken farmer who had gone to the US and discovered battery farming. With the money he made introducing intensive chicken farming to the UK he intended to go into politics. However, after reading The Road to Serfdom and discovering that Hayek worked at the LSE, he promptly made contact. Hayek inducted Fisher into the Mont Pelerin Society and advised a different course. According to Fisher’s daughter, ‘Hayek said “Don’t go into politics. You have to alter public opinion. It will take a long time. You do it through the intellectuals”’ (BBC 2006). So Fisher set up the IEA and at a Conservative Party meeting in East Grinstead met Ralph Harris, who would run the new organization. Harris was joined by another economist, Arthur Seldon, and they began the task of countering social democracy. They gained valuable allies a decade later when William Rees Mogg, the newly appointed editor of The Times, asked Peter Jay, then a civil servant at the Treasury, to become a journalist. Jay was sent to Washington and there he came across the Chicago School of Mont Pelerin economists which included Milton Friedman. Jay was converted and The Times under Rees Mogg became a key propaganda outlet for market fundamentalism. But before the shift to the right came the events of 1968: the student uprising in France and the demonstrations against the Vietnam War in Britain. Revolution and change were in the air.

Post-1968 blues and the rise of Thatcher

Even before the wave of protests in 1968, the lobby group Aims of Industry was lamenting that ‘capitalism in Britain has, for many years, been intellectually on the defensive’ (Ivens 1967: 7). In the aftermath of the student revolt of 1968 and the rise of radicalism in the UK and across the West, the established propaganda organizations of capital – such as the Economic League and Aims of Industry – were joined by other pro-corporate groups. This period was the genesis of the third wave of corporate political activism, and was mirrored in the US at almost exactly the same time. In Britain, the Institute for the Study of Conflict (ISC) was created in 1970 with money from, amongst others, the CIA and big business. Two years later Nigel Lawson, a former editor of The Spectator who would later become Chancellor of the Exchequer under Thatcher, penned a pamphlet focused on ‘Subversion in British Industry’. Lawson had been approached to write the pamphlet by Brian Crozier, the director of the Intelligence-supported ISC, who had been impressed by a Lawson piece in The Times which in Crozier’s view ‘showed he understood the situation’ (Crozier 1993: 106). They printed only 30 copies of the pamphlet as ‘the report was not for the wider public: the target audience was industry itself ‘(ibid.). Previously, and with help from the Economic League and Aims of Industry, Crozier had managed to convert John Whitehorn of the CBI to the neoliberal cause. Whitehorn penned a memo appealing for more business support for the ISC and its collaborators, which also included extreme anti-democratic organizations like Common Cause Ltd and Industrial Research and Information Services Ltd (Ramsay 1996).

During 1971 the President and Director General of the CBI had talks with a number of heads of companies who are worried about subversive influences in British Industry … they have also been in touch with a number of organizations which seek in their different ways to improve matters…. Their objectives and methods naturally vary; and we see no strong case to streamline them or bring them together more closely than is done by their present loose links and mutual cooperation. (Quoted in Lashmar and Oliver 1998: 166)

Appealing for the necessary funding from business, the memo noted that the ISC

plans to take an increasing interest...