The great Richard Ebeling has a new article called Why Neo-liberalism is Really Neo-socialism. Of course, I was drawn to reading it because of how much time I spend reading the socialist Jacobin Magazine, and they refer to everything they oppose in the socio-economic world as “Neo-liberalism.” I thought Ebeling’s article was helpful in some ways, but unhelpful in others. He points out, importantly, that “The idea of need for a “new,” or “neo,” ”liberalism did not arise out of the ranks of the proponents of laissez-faire as an attempted justification for unrestrained and unregulated markets.”
One of the Dominant Social Themes in our time, related to economics, is that on the far right extreme, you have Neo-liberals who emphasize markets, profits, capitalists, etc over people, the poor, and the environment. This would be the GOP, for instance. Then in the center you have someone like Elizabeth Warren, and on the Progressive left you have Alexandria Ocasio-Cortez.
But the thing that is shocking is almost nobody talks about the fact that Neo-liberalism is actually a historical deviation from classical liberalism. No one even mentions classical liberalism. Some libertarians scoff at the phrase Neo-liberalism as meaningless and a mere straw man. But this is not quite right. While many are certainly unaware of what it means and use it mindlessly, this does not mean it cannot serve a purpose. In fact, I think the best way to think about Neo-liberalism is in the context of the death of Keynesianism in the late 70s and early 80s during the rise of Milton Friedman. As the world of academic economists were trying to figure out where to go next, the famous (or infamous) Mont Pèlerin Society was born. It was an attempt to bring together those who opposed the budding socialism of the world and offer a new plan for freedom.
The classical liberals, led by Mises (who was supported by Hayek), obviously argued that it was time for complete freedom based on private property rights and that interventionism would never work. The Neo-liberals argued for a state-planned, or at least state-overseen economy. The Neo-liberals were Neo precisely because they feared the laissez-faire nature of Old School Liberalism and wanted instead to institute frameworks and institutions that would support and foster the health of the economy as a whole. Of course this means tax strategies, a keen central bank, anti-monopoly legislation, bureaus and agencies that would keep and eye on the ravages of the market. It was here that Milton Friedman, champion of using Government for freedom, overcame the older Misesians. As recounted by Guido Hulsmann:
Erhard’s success changed the Mont Pèlerin Society, sweeping in the very themes Mises had stressed should be excluded — such as the need for antitrust and the possible virtues of credit expansion. On both issues Mises sided with Volkmar Muthesius, who argued that the best way to combat monopolies was to abolish the policies and government institutions that created them in the first place. Mises was especially wary of yet another round of discussions of antitrust laws. In his youth he had witnessed the anticartel agitation that followed their rise in the 1890s. At the time, the debate had been propelled by the Verein für Socialpolitik, which was always seeking a new rationale for more interventionism. For decades now he had not come across new arguments on either side, and he expected that any debate in the Mont Pèlerin Society would quickly turn toward an interventionist agenda, rather than addressing the main case of present-day monopoly prices: the US price policies for agricultural products.
During the next three years, the conflict between Hayek and his recalcitrant secretary lurked beneath the surface. Hayek could not get substantial support to oust Hunold. Most American members were on Hayek’s side but feared that an open conflict would destroy the society. It eventually came to a showdown at the Kassel meeting in 1960. Both Hayek and Hunold stepped down from their positions, but Hunold would become vice president of the society and wreak havoc for a while longer. The 1961 meeting was to celebrate Mises’s eightieth birthday, but Hunold turned it into yet another battle between neoliberalism and laissez-faire. The Ordoliberals would soon be pushed into the background for a while; the power vacuum was not to be filled with Austro-libertarians, but economists from the Chicago School.
Neo-liberalism is therefore indeed the framework of our time. Socialist critics are correct about this. Neo-liberalism runs the world. But Neo-liberalism is economic interventionism. Neo-liberalism is the repudiation of free market capitalism. Therefore, when the far left criticizes the GOP and the Democrats for all being in the tank for the Neo-liberal mindset, there is no inherent reason to argue with this. Our age is the Neo-liberal one, inasmuch as Neo-liberalism is characterized by government interventionism, regulation, and progressive oversight into the framework of private ownership of the means of production. But from this, it is a severe mistake to assume that our age is one of free markets and a capitalist economy. This is because free markets, unregulated by the state and without central banking and national agencies of intervention, contradict the Neo-liberal framework. It is nonsense to blame laissez-faire for the failures of Neo-liberal intervention.
Finally, I do believe Ebeling makes a very common mistake. This mistake is a result of common lack of nuance in our circles. He calls Neo-liberalism Neo-socialism. I don’t think this is helpful. I believe that socialists believe in state ownership of the means of production and that Mises was right that interventionism was a dangerous and devastating deviation or contortion of capitalism, but is not actually socialism. Now, the Neo-socialism can be summarized either as a Neo-syndicalism (workers own their businesses and means of production, not the state itself) or a classical socialism via the backdoor of democracy (the “state is the people”). But neither of these are what we see in the postKeynesian-Monetarism-etc, Neo-liberal economic order under which we Austrians and Socialists all suffer.