Friday, May 27, 2016

Philip Mirowski on Neoliberalism

In this article here:
Philip Mirowski, “This is Water, or is it the Neoliberal Thought Collective?,” Naked Capitalism, May 26, 2016.
There is a lot to digest here, and some good analysis.

Here is the killer insight on the more doctrinaire versions of neoliberalism:
“Hayek realized that the great democratic masses might not accept the imposition of the New Neoliberal Order from above; especially in a democracy, neoliberal gains might be quickly reversed at the ballot box. Hayek often complained that the socialists thought they knew what was best for the masses, often absent their consent, but in this regard, effectively, the neoliberals were no different. The one place where Hayek and the NTC diverged from Polanyi was that they could never ever allow that the blowback from markets could ever be considered a ‘natural’ response of the masses. At various points, Hayek would blame the recalcitrance of the populace to ‘market reforms’ on the scurrilous class of intellectuals, or on the self-interest of the politicians, or even upon the fundamental ignorance of the populace about the consequences of their preferences. But, contrary to Polanyi, they took that pushback into account. Polanyi, so besotted with the trope that opposition to encroachment of the market was ‘natural’, never entertained the notion that it, too, could be manipulated. The eventual solution favored by the bulk of the neoliberal thought collective was to render democracy so hamstrung and ossified that it would never prove capable of neutralizing neoliberal market structures erected by the strong state. Their strong state had to come cladded with strong defenses against the will of the governed. ‘I doubt whether a functioning market has ever newly arisen under an unlimited democracy, and it seems likely that unlimited democracy will destroy it where it has grown up.’ This became the watchword of the later Hayek, of Bruno Leoni, of James Buchanan and the Virginia public choice school, of the ‘Washington consensus’, and the architects of the WTO and the European Union and the independence of central banks.”
Philip Mirowski, “This is Water, or is it the Neoliberal Thought Collective?,” Naked Capitalism, May 26, 2016.
That is an excellent summary of the historical tendency of modern neoliberalism, because – once disastrous neoliberal programs fail and as things get worse and worse – in a democracy you get an angry, resentful and rebellious electorate who will start voting for anti-free market parties.

These days neoliberalism, as practised by governments, has degenerated into an open crony capitalism and corporate tyranny that is effectively trying to dismantle democracy by means of so-called “free trade” agreements like the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP).

And, with respect to Hayek, we also have his weird interview with the Chilean newspaper El Mercurio in 1981:
“[A]s long-term institutions, I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. And it is also possible for a democracy to govern with a total lack of liberalism. Personally, I prefer a liberal dictator to democratic government lacking in liberalism. My personal impression. . . is that in Chile . . . we will witness a transition from a dictatorial government to a liberal government . . . during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement.”
El Mercurio, p. D8-D9, 12 April, 1981.
To return to Mirowski’s argument, the point that Neoliberalism isn’t monolithic is well taken: it is divided into all sorts of streams, where there are different definitions of what “freedom” even is, and Neoliberalism is undoubtedly a type of political movement too.

But I don’t think Philip Mirowski has properly defined what he means by “Classical liberalism.”

If we mean the general political and economic program of 19th century Classical liberalism, this was different even from most streams of modern Neoliberalism which even Mirowski seems to admit.

By the 1940s/1950s, for example, Austrians like Ludwig von Mises were the last aging dinosaurs of 19th century Classical liberalism.

But here’s the thing: the emerging Neoliberal movement (which was itself heterogeneous) was despised by Ludwig von Mises, who regarded these early neoliberals as being too interventionist.

See this video:

I think it is also a mistake to see the modern Austrians as part of neoliberalism. It is true that the Austrian school in the 1920s to the 1930s was heavily influenced by neoclassical theory.

But the modern Rothbardian anarcho-capitalists and Misesians aren’t neoliberals. The Misesians are old-fashioned 19th century Classical liberals. The Rothbardian anarcho-capitalists are bizarre, utopian free market cultists (who, strangely, also have a decidedly anti-free market bias in their mistaken opposition to fractional reserve banking).

It is true that Hayek provided an intellectual inspiration for modern neoliberalism in his political writings and ideas on knowledge and prices, but his practical policy ideas in later years – such as, for example, his crackpot ideas on money and banking – have not been taken seriously by modern Neoliberal ideologues.

Today most modern Austrian economics is a train wreck of absurdity and has degenerated into a cult like Marxism. But there was, however, one stream of Austrian theory that is of interest: the thought of Ludwig Lachmann, who, if anything, was closer to G. L. S. Shackle than other Austrians.

However, I see no modern Austrians anywhere who have carried on Lachmann’s insights into economics, and this is not really surprising because Lachmann’s theories – if seriously developed and combined with a sensible pragmatism about government – would probably morph into a type of Post Keynesianism.

Mirowski states that “Keynes was the exemplary Classical Liberal of the interwar period.” This is a bizarrely untrue statement. Keynes was a progressive liberal, and came to reject the economic doctrines of Classical Liberalism. This can be seen in Keynes’ book The End of Laissez-Faire (1926).

Even late 1920s British Liberalism had departed far from its Classical Liberal origins. For example, when Lloyd George became leader of liberal party for the 1929 general election, he proposed a large program of what we now call Keynesian stimulus to solve Britain’s problem of high unemployment after the disastrous return to the gold standard. At this time, Keynes was an economic adviser to the Liberal party and helped design that program. That program can hardly be described as Classical Liberalism.

Not even Keynes’ essay “Am I a Liberal?” (1925) refutes this. The Liberalism with which Keynes identifies himself here was very much the progressive liberalism that had diverged from its 19th century ancestor.

By 1939, in an interview with the leftist British journalist Kingsley Martin (1897–1969), Keynes seemed quite comfortable with defending what he called “liberal socialism”:
“The question is whether we are prepared to move out of the nineteenth-century laissez faire state into an era of liberal socialism, by which I mean a system where we can act as an organized community for common purposes and to promote social and economic justice, whilst respecting and protecting the individual—his freedom of choice, his faith, his mind and its expression, his enterprise and his property.” (Moggridge 1982: 500 = Keynes and Martin 1939: 123).
This political vision has long parted company with Classical liberalism.

There is a final point about Post Keynesianism. Mirowski states that “Post-Keynesians and other heterodox factions seem not to grasp that effective political mobilization requires a thoroughgoing alternative to the neoliberal definition of what a market is, comprehension of how diverse markets work, and appreciation for what it means to participate in a market society.” I find that baffling given that any good reading of Post Keynesian literature reveals that this is precisely what Post Keynesians are engaged in.

Nor do I see “[e]ndless denunciations of ‘capitalism’” within Post Keynesianism either, which if anything is a trait of vulgar Marxism. On the contrary, the line I usually see is that Post Keynesianism is the right empirical description of how capitalism actually works and that Post Keynesian economic theory is what is required to make capitalism work properly.

As for the political side of things, I wouldn’t doubt a new and forceful alternative to Neoliberalism is necessary. But an ideology that invokes and takes up Post Keynesian theory and economic policy recommendations isn’t even necessarily committed to being left-wing politically, though admittedly it is probably more likely to be so.

But I can imagine a socially conservative movement hostile to the socially and culturally destructive aspects of capitalism and the extremism of the modern cultural left taking up the economic ideas of Post Keynesianism and shunning modern Neoliberalism. Or non-dogmatic Keynesian Marxists could adopt it. Or progressive liberals.

Given the way that the modern Postmodernist and cultural left is destroying itself by its sheer insanity and toxic obsession with rotten ideas, it is not even clear at this point whether the left could even provide a serious and popular political alternative to Neoliberalism.

Moggridge, D. E. (ed.). 1982. The Collected Writings of John Maynard Keynes. Volume 21. Macmillan, London.

Moggridge, D. E. 1992. Maynard Keynes: An Economist’s Biography. Routledge, London.


  1. LK
    can you give me a link to a blog about lahman ideas?

    Also i have a question shackle is post keyensian or austrian?

    I saw some people say that and other say something else

    1. (1) There was once a blog about Lachmann, but it has long ceased:

      On Lachmann:

      (2) Lachmann at one point called Shackle an “Austrian” (Lachmann 1978: 15), even though Shackle was a Keynesian in his policy prescriptions. Some classify Shackle as a hybrid Austrian/Post Keynesian (or someone who drew “Keynesian conclusions from Austrian premises”).

      However, I have no doubt that Shackle was a Keynesian, albeit of an idiosyncratic type.

      On Shackle:

    2. Also, I have to say I think Lachmann and Shackle went way too far on the radical uncertainty concept.

    3. Thank you so much.

      Lachman is really interesting austrian scholar because he is truly subjectivist economist (even though i think post keyensian school is way more developed).

      Also carl menger and weiser are interesting too because of their somewhat progressive views.

      Ita really interesting movement if we will ignore the zeal of neo misseans and rothbardians.

  2. Thanks, I'll be digesting the contents of this. Some have insisted to me that Libertarians aren't Neo-Liberals, so if you think so that's worth me at least giving it further consideration.

    1. Liberterians may be and may not its dependence.

      For example in my opinion krugman is part of the neoliberal intellectual circle.

      Even though he is more in favour of government intervention than lets say misses or hayek.

    2. This comment has been removed by the author.