What Is Neoliberalism?

Neoliberalism is often understood as a set of solutions, a bullet-point plan to destroy social solidarity and the welfare state.

Naomi Klein describes it as a ‘shock doctrine’: swoop in at times of disaster, gut, and sell off public services and transfer control from states to corporations.

The Washington Consensus described by the economist John Williamson in 1989 is the most famous example of neoliberal solutionism: a list of ten must-dos for developing countries, from tax reform to trade liberalisation to privatisation.

From this perspective, neoliberalism can look like a recipe book, a panacea, and a one-size-fits-all nostrum.

But the writings of neoliberals themselves offer a different picture — and here is where we have to go to make sense of the Right’s apparently contradictory political manifestations. We discover that neoliberal thought is not filled with solutions but with problems.

Can judges, dictators, bankers, or businesspeople be reliable guardians of the economic order? Can institutions be built or must they grow? How can markets be accepted by people in the face of their frequent cruelty?

The problem that has most troubled neoliberals through the last seventy years is the balance between capitalism and democracy. Universal suffrage meant movements of the emboldened masses, always threatening to push the functioning market economy off of its tracks as populations used their votes to ‘blackmail’ politicians, in their eyes into ever more favours, thus draining the state budget. Many neoliberals feared that democracy had an inherent bias toward socialism.

They disagreed about which institutions would safeguard capitalism from democracy. Some defended a return to the gold standard, while others argued that currencies should be free to float. Some fought for strong anti-trust policies, others accepted some forms of monopolies. Some thought ideas should circulate freely, others made the case for strong intellectual property rights. Some thought religion was a necessary condition for a liberal society, others saw it as dispensable.

Most saw the traditional family as the basic economic and social unit, but others disagreed. Some saw neoliberalism as a matter of designing the right constitution, others saw a constitution in a democracy as — in a memorably gendered metaphor — ‘a chastity belt whose key is always within the wearer’s reach.’

Compared to other political and intellectual movements, however, it was the absence of serious sectarian splits within the neoliberal movement that was most remarkable. From the 1940s to the 1980s, the centre more or less held.

The sole major internal conflict came in the early 1960s with the estrangement of one of the movement’s leading thinkers and so-called intellectual father of the social market economy, the German economist Wilhelm Röpke.

It foreshadowed later conflicts that Röpke’s split with the other neoliberals happened amid his strident advocacy for Apartheid South Africa and his adoption of theories of biological racism, which posited shared Western culture and shared heredity as the precondition for a functioning capitalist society.

While the open embrace of whiteness was an outlier position in the 1960s, it would return to divide the neoliberals in the decades to come.

While some might see it as a contradiction to combine xenophobia and anti-migrant sentiment with neoliberalism — the supposed philosophy of open borders — this was not the case in an early site of neoliberal breakthrough: Thatcher’s Britain.

In 1978, Hayek, who had taken British citizenship as an émigré from fascist Austria, wrote a series of editorials supporting Thatcher’s call for an ‘end to immigration’ in advance of her election as prime minister.

To make his case, Hayek harked back to his native Vienna, where he was born in 1899, recalling the difficulties created when ‘large numbers of Galician and Polish Jews’ arrived from the East before the First World War and failed to integrate easily.

It was sad but true, Hayek wrote, that ‘however far modern man accepts in principle the ideal that the same rules should apply to all men, in fact he does concede it only to those whom he regards as similar to himself, and only slowly learns to extend the range of those he does accept as his likes.’

While far from absolute, Hayek’s suggestion by the 1970s that a shared culture or group identity was necessary for a functioning market order was a turn from what had previously been thought of as the blueprint for the neoliberal society — much more founded in a universalist notion of humans everywhere under the rule of law.

This new restrictionist attitude resonated with British neoliberals in particular, who always tended Tory in comparison to the libertarian tendencies of Americans. Recall that no less an opponent of non-white immigration than Enoch Powell was a member of the Mont Pelerin Society and spoke at several of its meetings.

One of the novelties of the 1970s was that Hayek’s rhetoric of conservative values was combined with influences from a new philosophy — that of sociobiology, itself commingled with his previous interest in cybernetics, ethology, and system theory. Sociobiology was named in 1975 in the title of a book by Harvard biologist E. O. Wilson. It held that individual human behaviour could be understood by the same evolutionary logics as animals and other organisms. We all sought to maximise the reproduction of our own genetic material. The fate of traits in humans could be understood the same way: selection pressures weed out the less useful traits while the more useful ones multiply.

Hayek was taken by the insights of sociobiology but questioned its over-emphasis on genes. He proposed that human change could be better understood through processes of what he called ‘cultural evolution’. While US conservatives had promoted a so-called ‘fusionism’ of market libertarianism and cultural conservatism in the 1950s and 1960s around William F. Buckley’s magazine, National Review, Hayek’s opening to science would ultimately create a new fusionism that would offer a conceptual space for scattershot borrowings from evolutionary psychology, cultural anthropology, and even revived racial science. In the coming decades, strains of neoliberalism were combined time and again with strains of neo-naturalism.

By the early 1980s, Hayek had begun to speak of tradition as a necessary ingredient for the ‘good society’. In front of the Heritage Foundation, he spoke in 1982 of ‘our moral heritage’ as the foundation for healthy market societies. In 1984, he wrote that ‘we must return to a world in which not only reason, but reason and morals, as equal partners, must govern our lives, where the truth of morals is simply one moral tradition, that of the Christian West, which has created morals in modern civilisation.’

The implication was clear. Some societies had developed the cultural traits of personal responsibility, ingenuity, rational action, and low time preference over long periods; others had not.

Because these traits were also not easily imported or transplanted, those less culturally evolved societies — in other words, the developing world — would need to experience a long period of diffusion before catching up to the West — an end point which he was not guaranteeing would ever arrive.

Race and Nation

In 1989, history intervened and the Berlin Wall fell. In the wake of this unforeseen event, the question of whether cultures of capitalism could be transplanted or had to grow organically exploded into relevance. ‘Transitionology’ became a new field as social scientists set themselves to the problem of making ex-communist countries capitalist.

Hayek was granted a Presidential Medal of Freedom by George H. W. Bush in 1991 as a ‘visionary’ whose ideas were ‘validated before the eyes of the world.’ One might assume that neoliberals would spend the remainder of the 1990s basking in self-congratulation, polishing the busts of Mises for display in universities and libraries across Eastern Europe.

Yet the exact opposite was true. Recall that the prime enemy of the neoliberals since the 1930s had not been the Soviet Union but the social democracy of the West. The fall of communism meant that the real enemy had new fields of potential expansion. As Mont Pelerin Society president James M. Buchanan pronounced in 1990, ‘socialism is dead but Leviathan lives on.’

For neoliberals, the 1990s brought three major concerns. First, could the newly liberated communist bloc be expected to convert to responsible market actors overnight, and what would be necessary for them to do so? Second, was ever tightening European integration the harbinger of a neoliberal continent or simply the scaling up of a super-state of welfare policy, labour rights, and redistribution? And finally, changing demographics — an ageing white population matched by a growing non-white population. Perhaps some cultures — and even some races — might be predisposed to market success while others were not?

The 1990s inaugurated a rift in the neoliberal camp between those who believed in supranational institutions like the EU, the WTO, and international investment law — we could call them globalists — and those who felt that neoliberal outcomes were best served by sovereignty returning to the nation — or maybe even smaller units of secession. This confluence, it could be said, provided the basis many years hence for the combination of populists and libertarians which drove the Brexit campaign.

The ever-growing influence of Hayek’s ideas of cultural evolution and the growing mainstream popularity of neuroscience and evolutionary psychology also led many in the secessionist camp to turn to the harder sciences. To some, searching for the foundations of market order required going ‘deeper into the brain’, as Mont Pelerin Society member Charles Murray titled an article in 2000.

The crises that followed 2008 brought the tensions between the two camps of neoliberals to a head. The arrival of over one million refugees to Europe in the course of 2015 created the opportunity for a new winning political hybrid that combined xenophobia with free market values. But it’s important to be clear-eyed about what was new here on the right, and what was inherited from the recent past.

The right-wing Brexit campaign, for example, built on foundations laid by Thatcher herself. In a famous speech in 1988 in Bruges, Thatcher declared that ‘we have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.’

Inspired by the speech (and the woman who had knighted him), former Mont Pelerin Society president Lord Ralph Harris of the Institute of Economic Affairs formed the Bruges Group the following year.

Today, the website of the Bruges Group proudly claims to have ‘spearheaded the intellectual battle to win a vote to leave the European Union.’ The so-called populists, in this case, come directly from the ranks of the neoliberals.

While the Brexiteers praise the nation, the appeal to nature is more conspicuously on display in Germany and Austria. Perhaps most striking about the new fusionism is the way it blends neoliberal beliefs about the market with dubious claims of social psychology. The fixation on intelligence is especially notable. While one usually associates the term ‘cognitive capital’ with French and Italian Marxist theorists, neoliberals like Charles Murray used it as far back as 1994 in The Bell Curve to describe what he believed to be the partially heritable group differences in intelligence that could be quantified as IQ.

The German sociologist Erich Weede, co-founder of the Hayek Society (and the recipient of its Hayek Medal in 2012), follows the race theorist Richard Lynn to understand intelligence as the primary determinant of economic growth. The wealth and poverty of nations is not explained by history but the intractable qualities of its populations, according to former Bundesbank board member Thilo Sarrazin, whose book Germany Does Itself In has sold over 1.5 million copies in Germany and spurred the success of Islamophobic parties such as the AfD. Sarrazin also cites Lynn and other intelligence researchers to argue against immigration from Muslim-majority countries on the basis of IQ.

The Volk Capital notions of right-wing neoliberals assign intelligence averages to countries in a way that collectivises and renders innate the concept of ‘human capital’. They add overtones of values and traditions that cannot be captured statistically, shading into a language of national essence and national character.

The new fusionism of neoliberalism and neo-naturalism offers a language that proposes not a pan-humanist universalism of the market but a segmented worldview based on culture and biology.

The consequences of this new vision of human nature extend beyond the populist parties to alt-right separatism, identitarianism, and white nationalism.

Less Rupture Than Continuity

Not all neoliberals have made the turn toward exclusionary concepts of culture and race. Some are mobilising against what they see as the hostile takeover of the cosmopolitan legacy of Hayek and Mises by intolerant xenophobes. Yet the vehemence of their protest can sometimes obscure the fact the supposed populist barbarians at the gates were actually nurtured from within the fortress.

A striking example is Václav Klaus, the darling of the neoliberal movement in the 1990s for his role as finance minister, prime minister, and president in the post-communist Czech Republic. Klaus was a firm advocate of shock therapy in the transition, a member of the Mont Pelerin Society, and a frequent speaker at their meetings. He claimed Hayek as his personal sage. In 2013, Klaus became a senior scholar at the Cato Institute, the stronghold of cosmopolitan libertarianism, complete with F. A. Hayek Auditorium.

Yet witness Klaus’s political journey. He began the 1990s by combining the call for an ordoliberal role of the strong state in a moment of transition with a Hayekian profession of the unknowability of the market. By the later decade, he had moved into an ever more vociferous targeting of the environmental policies of the European Union. By the early 2000s, he was a full-blown climate denier, penning a book in 2008 called Blue Planet in Green Shackles.

In the 2010s, Klaus discovered the populist movement as a force for good, calling for an end to the European Union, a return to the nation-state, and the closing of borders to migrants.

But this lurching swing rightward did not lead to a break with the organised neoliberal movement.

While the Mont Pelerin Society strikes a pose by hosting a conference on ‘the populist threat to the good society’, Klaus argued at their conference the same year that ‘mass migration into Europe . . . threatens to destroy European society and to create a new Europe which would be very different from the past as well as from the Mont Pelerin Society way of thinking.’ Along with the far-right parties he works with in the European Parliament, Klaus embraces free trade and the free movement of capital while drawing the line at certain kinds of people.

Ideologues like Klaus are better described as xenophobic libertarians than populists. They are less neoliberalism’s enemies, coming in from the countryside with torches and pitchforks, than neoliberalism’s children, nurtured from decades of conversations and debates about what fixes capitalism needs to survive.

The new fix found in race, culture, and nation is the most recent strain: a pro-market philosophy not based on the idea that we are all the same but that we are in a fundamental, and perhaps permanent way, different. For all of the furore over a rise of a new right, we have not entered a political era with a fundamentally new geometry. Exaggerating the rupture means missing this basic continuity.