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| Paul Klee, Berg und Luft synthetisch, 1930 |
Introduction
Friedrich Hayek’s Road to Serfdom has a central place in the intellectual and symbolic landscapes of British neoliberalism (Tribe, 2009). Hayek’s central argument is that the classical liberalism on which the liberty and prosperity of Britain in the 19th century was built was displaced by state-centric German ideas that pursued increasingly deliberate regulation of all social life.
However, Keith Tribe (2009) argues, classical liberalism had already been displaced in Britain during the latter part of the 19th century by a ‘new’ liberalism. This ‘new’ liberalism itself was a spent force by mid-20th century. This was because the forces that had pushed ‘classical’ liberalism towards ‘new’ liberalism, in turn, undermined the ‘new’ liberalism by the end of the 1920s. These forces were the extension of the franchise and the emergence of the Labour Party, forces that were compounded by the political consequences of World War Two.
So, while the chronology offered by Hayek for the decline of classical liberalism is broadly correct, it is not for the reasons that he adduces, Tribe argues.
British Liberalism
The history of British Liberalism passes through John Stuart Mill, Thomas Gladstone, Henry Sidgwick, Lloyd George, William Beverage and John Maynard Keynes. Mill set the frame for the discussion of the relationship between the individual and the state in his essay On Liberalism. He conducts his critique of the state by means of a negative characterisation of state education. For Mill (2001, 1859: 97),
“A general State education is a mere contrivance for moulding people to be exactly like one another: and as the mould in which it casts them is that which pleases the predominant power in the government, whether this be a monarch, a priesthood, an aristocracy, or the majority of the existing generation; in proportion as it is efficient and successful, it establishes a despotism over the mind, leading by natural tendency to one over the body.”
State education, Mill thinks, should be undertaken only in such circumstances as when a society is so backward that it could not provide any proper educational institutions itself unless the government undertakes the task. Otherwise, he suggests,
“An education established and controlled by the State should only exist, if it exist at all, as one among many competing experiments, carried on for the purpose of example and stimulus, to keep the others up to a certain standard of excellence.” (Mill, 2001, 1859: 97)
As Keith Tribe comments, Britain did not have a system of compulsory education in the 1850s when Mill was writing On Liberty. However, within 20 years, this was considered a grave deficiency in a world in which the UK was facing more progressive economic competitors. Universal education was generally perceived as a desirable, modernising force in all 19th century industrialised countries. The development of formal education structures in Britain lagged behind those of continental Europe.
Mill’s ‘classical’ Liberalism, particularly its conception of the relation between state and individual, could not survive the development of parliamentary democracy based on universal suffrage [1]. By the 1920s, the extension of state control was no longer perceived as an encroachment on individual liberty. Rather, each enlargement of the state’s authority and activity was now judged in terms of its impact, positive or negative, on personal liberty. Importantly, the liberties that the state defended in this way were increasingly conceived in economic rather than political terms, notably in discussions of free trade and hostility to the corporatism of both employers and trade unions. As the 20th century progressed, the transition from political freedom to economic freedoms became a hallmark of an emerging neoliberal agenda.
Hayek’s intervention
Friedrich Hayek’s The Road to Serfdom, the canonical work of neoliberalism, is strangely silent on the contribution made by democratic institutional developments on the demise of the British Liberal tradition, arguing instead that this was brought about by the introduction of “foreign ideas” (Tribe, 2009: 70). Hayek’s narrative is that, in the 19th century, Britain had set forth on a liberal path, one theorised by Mill and practised through free trade, limited government and parliamentary democracy.
‘German’ developments, as he called them, began to roll back the diffusion of liberalism in the latter part of the 19th century, a process which, Hayek argues, accelerated rather than halted after the defeat of Germany in 1918. Among the developments Hayek lists as being detrimental to liberal progress are the supremacy of the state, as expressed by Hegel; socialism, as articulated by Marx; List’s economic nationalism; the German historicism of Schmoller; the cultural criticism of capitalism by Sombart and the new social sciences, with Mannheim taken as the representative figure.
Thus, rhetorically, Hayek poses himself as the defender of an English model of classical liberalism against the corrosive influence of German ideas, a rhetorical stance that was easier to understand in the context of the 1940s than perhaps in the 21st century. The power of Hayek’s rhetorical stance lessens, Tribe points out, when considered in the context of Germany in the interwar period.
The general principles advanced by Hayek derive from a body of continental interwar literature discussing parliamentary democracy and the state in the first German republic. The most prominent figure in these debates was Carl Schmitt who produced a devastating critique of parliamentary democracy, all the more powerful for its recognition that both classical liberalism and its limited state were gone for good.
Schmitt articulated a problem that remains unresolved, that is, how political order and liberty can be secured if the state has no limit other than laws passed by whoever controls parliament and government, a problem to which Hayek’s response is inadequate, amounting to “no more than a wish that the world were other than it is” (Tribe, 2009: 72).
Politics and Economics
Hayek’s The Road to Serfdom is a political tract. The classical liberalism that the book invoked promoted, above all, a conception of political freedom underpinned by a parallel but weaker conception of economic liberty. Free markets were a corollary of political liberty, not the other way round. What distinguishes neoliberalism from classical liberalism is the inversion of this relationship between politics and economics. Arguments for liberty become economic rather than political, with the impersonality of the market identified as the chief means for securing popular welfare and personal liberty.
Hayek appeals to classical liberalism, but argues from economy to polity. His ‘road to freedom’ ran through the market to political liberty. The transition in the foundation of liberal argument from politics to economics was first made obvious in the dispute over tariff reform leading up the 1906 election in Britain. A central feature of neoliberal argument, as recognised by David Collard, was the redefinition and reorganisation of state functions, with the public sector being characterised as clumsy, inefficient and bureaucratic and its pricing policies leading to shortages and restrictions of choice.
One of the centres where ’economic liberalism’ was developed and elaborated was the London School of Economics, whose academic economists bequeathed a policy framework to post-World War Two UK governments and provided the template for ‘Keynesian’ economic management. However, while having an initial academic locus, during the 1920s to the 1980s the centre of gravity of the production of neoliberal ideas shifted towards new, non-academic organisations, of which the Institute for Economic Affairs, established in 1955, was the first. British neoliberalism therefore became a current of thinking nurtured outside the academy and was not taken seriously within it.
The defeat of Labour in 1979 by a Conservative party led by Margaret Thatcher altered the terms of public debate. Perceiving the academic establishment to be arrayed on a spectrum from left-liberal to socialist, the Conservative government turned for advice to individuals associated with the Institute of Economic Affairs and the Adam Smith Institute. ‘Keynesian’ academics were firmly locked out of policy formulation. Think tanks and external advisers became a fixture in public administration, cutting out academic economists and diminishing their authority. The increasing polarisation of the university and the government throughout the 1980s was to the lasting detriment of the university.
As academic economics transitioned to a formalised neoclassical orthodoxy, whose purchase on public argument was increasingly discounted, neoliberal economism increasingly dominated the public domain.
Notes
[1] The name ‘Liberal’ was adopted by Gladstone for the Whig Party in 1868. As the electorate extended to all male and female adults, a process which was not completed until 1928, so its share of the vote declined, from 61.5% in 1868 to 6.5% in 1935, even though numerically it polled slightly higher in 1935 than in 1868.
References
Hayek, F. (2001, 1944). The Road to serfdom. Oxford, UK: Routledge Classics.
Mill, S.J. (2001, 1859). On Liberty. Kitchener, ONT: Batoche Books. Available from https://eet.pixel-online.org/files/etranslation/original/Mill, On Liberty.pdf [Accessed 3 August 2018].
Tribe, K. (2009). Liberalism and neoliberalism in Britain, 1930-1980. In: Mirowski, P., and Plehwe, D., eds. The Road from Mont Pèlerin: the making of the neoliberal thought collective. Cambridge, MA: Harvard University Press, 68–97.
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