unherd | When people think about the direction of global capitalism over the last century, they usually look upwards and outwards: to the supranational and the international level. After the Second World War, America assumed the role of conductor in the world financial orchestra it had declined after the First World War. National economies were layered over with private circuits of trade and inter-state agreements in the form of treaties, regional compacts, and shared membership in international organisations. After the Seventies, when the term “globalisation” was coined, the volume of cross-border flows of goods and money increased steadily before being turbocharged in the Nineties. The graph of global exports shows a steep climb up to the eventual slump of the Global Financial Crisis of 2008, and later the Coronavirus Crisis of 2020.
The term people often use for the period from the late Seventies to the early 21st century is “neoliberalism”. Conservative leaders such as Ronald Reagan and Margaret Thatcher in the Eighties were followed by centre-Left leaders such as Bill Clinton, Tony Blair, and Gerhard Schröder in the Nineties, who consecrated free trade and deindustrialisation as natural, inevitable, and, despite increasing inequality, ultimately a net win for all. Today, it is common to hear all the policies of the Nineties and 2000s — from the transformation of welfare benefits and the move to precarious employment to the privatisation of state-owned assets and the enforcement of austerity — as “neoliberal”.
To some, neoliberalism means a kind of hyper-capitalism and the commodification of every last aspect of existence. To others, it is a package of policies that involves deep scepticism of states but is still committed to using states to safeguard capitalism against threats — often from democracy itself.
The term neoliberalism itself was coined as self-description by a group of intellectuals in the Thirties who reconvened after the Second World War in the Mont Pelerin Society established by Friedrich Hayek, Milton Friedman, and others. “A voluntary community of individuals who share a dedication to the principles of a free society,” according to the Encyclopaedia of Libertarianism, the MPS meets regularly for the exchange of papers-in-progress and response to current events. Its membership includes eight winners of the Nobel Memorial Prize in Economics including Hayek and Friedman alongside George Stigler, Gary Becker, James M. Buchanan, Maurice Allais, Ronald Coase, and Vernon Smith.
What is fascinating to observe is that even as many commentators saw neoliberalism as triumphant, neoliberals themselves sang a different tune. On paper, it appeared that battles had been won. At first, free-market intellectuals responded to the fall of the Berlin Wall by putting up busts of Mises and Hayek in libraries and public squares across Eastern Europe, as the region bathed in what the National Review called a “neoliberal zeitgeist” in 1990. But victory proved illusory.
Very quickly, neoliberals concluded that the supranational institutions which had once looked promising were socialist Trojan Horses. “Socialism was dead but Leviathan lived on,” as MPS president James Buchanan put it in 1990. Communism had changed shades from red to green. “It is fitting that the MPS, the world’s leading group of free market scholars, was meeting the week that communism collapsed in the Soviet Union,” the Wall Street Journal reported in 1991. But those gathered saw that as “Communism exits history’s stage, the main threat to liberty may come from a utopian environmental movement that, like socialism, views the welfare of human beings as subordinate to ‘higher’ values”.
Interviewed by Peter Brimelow in 1992, Milton Friedman expressed a similar sentiment. Asked about the Cold War’s end, he responded:
“Look at the reaction in the US to the collapse of the Berlin Wall… There weren’t any summit meetings in Washington about how to cut down the size of government. What was there a summit meeting about? How to increase government spending. What was the supposedly Right-wing President, Mr Bush, doing? Presiding over enormous increases in paternalism — the Clean Air Act and the Americans with Disabilities Act, the so-called Civil Rights quota bill.”
At the first meeting of the Mont Pelerin Society after the wall’s fall, the president, Italian economist Antonio Martino, hit similar notes when he announced: “While socialism is dead, statism is not.” The three biggest threats he saw were environmentalism, continued demands for state spending, and the European Community. The comedown was intense. At a meeting of the Cato Institute in Moscow in 1990, ice sculptures of hammers and sickles dissolved into puddles as Paul Craig Roberts, the author of a book on the end of communism called Meltdown, beamed for the camera. Just a few years later, Roberts warned of an “alien future” in which “whites are turning over their country to Third World immigrants” and will soon have to worry about being targets of “ethnic genocide”. Crack-up capitalists fed on fear of what they saw as the “mutated” socialism of environmentalism and “alienism”.
In the Nineties and beyond, neoliberals began to focus ever more on the vision of decentralisation, dissolution, and even disintegration. Polities must become smaller. Fragmentation was the new frontier of liberty. When the map shattered with the end of the Soviet Union and Yugoslavia, they thought: let it shatter more. In 1990, MPS president Becker wrote that “small fry nations” were entirely viable and perhaps even preferable as they were more dependent on the world market and thus driven to more adjustment. The immediate context he was responding to was campaigns for secession in Quebec from Canada, provinces from Spain and Ethiopia and Lithuania from the Soviet Union.