Neoliberalism versus liberal solidarity

The common core of all varieties of liberalism is the stress on individual liberty and universal rights, including the rights to private property and to freedom of expression. These universal rights and liberties require equality under the law, under a competent legal system that protects rights and pursues justice.

In a previous blog I laid out Seven Dimensions of Liberalism. The present blog extends that analysis by considering different varieties of liberalism within this seven-dimensional space. I contrast what (in forensic mood) might be described as neoliberalism with what I call liberal solidarity.

There are several possible names come to mind as possible labels for the highly varied constituent territories of liberalism. Terms such as classical liberalism, new liberalism, social liberalism, neoliberalism and libertarianism should be considered. But all these labels have their problems.

Consider classical liberalism. This is typically applied to foundational liberal thought from John Locke, through Adam Smith and Jeremy Bentham to John Stuart Mill. But there are profound divisions within classical liberalism.

Thomas Paine’s pursuit of measures to reduce inequality is unmatched by his liberal contemporaries.

Adam Smith’s emphasis on the importance of “moral sentiments” and justice contrasts greatly with the reductionist-utilitarian approaches developed by Hume and Bentham and adopted (albeit with reservations) by Mill.

Apart from the emphasis on individual rights including private property, the classical liberals agreed on the need for a small state. But they lived in a period when the state and its tax levels were much smaller than they became in the twentieth century.

We cannot automatically assumed that they would have taken the same small-state view in the present context, especially if they were responsive to practical experiment and historical experience.

Consequently, classical liberalism does not denote one distinctive type or phase of liberalism. The original Liberalism from the seventeenth to the mid-nineteenth century contained widely diverging variants.

A major turn in liberal thought was foreshadowed by Mill and developed in the later decades of the nineteenth century and the early twentieth century by Thomas H. Green, Leonard T. Hobhouse and John A. Hobson in the UK, and in the US by Lester Frank Ward, John Dewey and others.

These “new liberals” saw individual liberty as something achievable only under favourable social and economic conditions. Poverty and ignorance were barren soils for individual freedom and fulfilment. They argued that individual flourishing required the development of an education system, a welfare state and other state action to reduce unemployment and poverty.

Thinkers such as Green, Hobhouse, Hobson, Ward and Dewey have been described as new liberals. But their ideas are no longer new and the label is in little use today. It also risks confusion with the now-ubiquitous and over-stretched swear-word of neoliberalism.

Social liberalism is another term that has been to describe the strain of liberal thinking – from Green to Dewey – that pursued greater state intervention and a welfare state.

But a problem with this label lies in the multiple meanings of the word social. Many used social liberalism to signal an emphasis on the need for cooperation between individuals through social arrangements to further human fulfilment. The word social here is used in a broad and inclusive sense.

An alternative understanding of social is exclusive: social is regarded as an antithesis to economic. This commonplace but problematic dichotomy contrasts the economic sphere of business and profit-seeking with the social sphere of the family, non-market relations, reciprocity and so on.

This enabled an alternative interpretation of social liberalism as liberalism applied to the narrowly-conceived social sphere. It would involve, for example, the promotion of homosexual rights and the decriminalization of the use of recreational drugs. Worthy as those aims may be, this is a much narrower agenda than that promoted by social liberalism in the broader sense.

Another option is the word solidarism. Inspired by Émile Durkheim and Léon Bourgeois, ideas emerged in France that were similar to and at about the same time as the new liberalism of Hobhouse and Hobson in Britain.

The solidarists criticized extreme laissez-faire and argued that individuals had a debt to society as a whole, which should be repaid through taxation and social welfare schemes. But solidarism in France took a distinctive form, putting more limited emphasis on state intervention than the proposals of some of their British counterparts.

A final term to be considered here is social democracy. This has shifted more successfully in meaning than socialism, but originally they amounted to more or less the same thing. Many of the early social democratic parties were led by Marxists, including the important Social Democratic Workers’ Party of Germany, founded in 1869. Although some social democrats favoured peaceful reform rather than violent revolution, at that time they mostly agreed on the goal of large-scale common ownership.

During the twentieth century the usage of the term social democracy shifted radically. After the Second World War it came to mean the promotion of greater economic equality and social justice within a capitalist economy. It also connoted a political strategy orientated toward the interests of the trade unions and the working class.

The term social democracy still carries this historical and strategic baggage. It has been eschewed by some because of its links with socialism. Others argue that its strategic, class-orientated vision has become obsolete. Another problem is that the word social does not make a clear addition to democracy, which few would oppose.

Post-war social-democratic policies are challenged by the fragmentation of their traditional base in the organized working class and by the heightened forces of globalization.

Consequently, while a reformed and reinvigorated social democracy may have some mileage, I suggest we consider the alternative term liberal solidarity to describe an important zone within liberalism. We should examine its principles and its agenda for reform. But first it is necessary to deal with the tricky label and substance of neoliberalism.

The Mont Pèlerin Society changed in substance and direction. It began under a different name in the 1930s and was first convened under its current name in 1947. It was then an attempt to convene different kinds of liberals in defence of a liberal market economy, just after the defeat of fascist tyranny, during an expansion of Communist totalitarianism, and while witnessing the rise of statist socialist ideas in Western Europe and elsewhere. Liberalism broadly was on the rocks: it needed its defenders.

Michael Polanyi (the brother of Karl Polanyi) advocated Keynesian macroeconomics in a market economy, alongside a radical redistribution of income and wealth. He rejected a universal reliance on market solutions, seeing it as a mirror image of the socialist panacea of planning and public ownership. He did not mince his words against this “crude Liberalism”:

“For a Liberalism which believes in preserving every evil consequence of free trading, and objects in principle to every sort of State enterprise, is contrary to the very principles of civilization. … The protection given to barbarous anarchy in the illusion of vindicating freedom, as demanded by the doctrine of laissez faire, has been most effective in bringing contempt on the name of freedom … .”

Although he attended the first meeting of the Mont Pèlerin Society, Polanyi had drifted away by 1955, stressing its inadequate solutions to the problem of unemployment and its promotion of a narrow view of liberty as the absence of coercion, neglecting the need to prioritize human self-realization and development.

In its early years, the Mont Pèlerin Society hosted debates on the possible role of the state in promoting welfare, on financial stability, on economic justice, and on the moral limits to markets. Like Polanyi and other early members of the society, Wilhelm Röpke argued that the state was necessary to sustain the institutional infrastructure of a market economy. The state should serve as a rule-maker, enforcer of competition, and provider of basic social security. Röpke’s ideas were highly influential for those laying the foundations of the post war West German economy.

While they received a more sympathy from Hayek, Ludwig Mises regarded Röpke’s views as “outright interventionist”. Mises became so frustrated with these arguments in favour of a major role for the state that he stormed out of a Mont Pèlerin Society meeting shouting: “You’re all a bunch of socialists.”

Angus Burgin’s history of the society shows how its early period of relative inclusivity was followed by schisms, departures, and a narrowing of opinion. People like Polanyi and Röpke became inactive. Eventually the primary locus of the Mont Pèlerin Society shifted to the US, with greatly increased corporate funding under the rising intellectual leadership of Milton Friedman.

Hence the Mont Pèlerin Society evolved from a broad liberal forum to one focused on promoting a narrow version of liberalism that is more redolent of Herbert Spencer than of Adam Smith, Thomas Paine or John Stuart Mill. This ultra-individualist liberalism entailed a narrow definition of liberty as the absence of coercion, it relegated the goal of democracy, it neglected economic inequality, it overlooked the limits to markets, it saw very limited grounds for state welfare provision and intervention in financial markets, and it stressed self-interest rather than moral motivation.

But in the seventh dimension it tolerated a multiplicity of positions, as exemplified by Friedman’s opposition to the Iraq War. In all of the seven dimensions of liberalism, the post-1970 position of the Friedman-led Mont Pèlerin Society was redolent of Spencer, but without some of the latter’s Victorian idiosyncrasies. In the first six dimensions, this post-1970 neoliberalism is very different from liberal solidarity.

It is only after the 1960s that the Mont Pèlerin Society acquired a narrower identity, which at a pinch might be described as neoliberalism. Here Mirowski is onto something: “Neoliberals seek to transcend the intolerable contradiction by treating politics as if it were a market and promoting an economic theory of democracy.” In other words this neoliberalism reduces, all of politics, law and civil society as markets, and are analysed using market categories.

This neoliberalism has an odd similarity with Marxism, despite other major differences in theory and policy. Marx and Engels also reduced civil society to economic matters of money and trade. Marx wrote in 1843: “Practical need, egoism, is the principle of civil society … The god of practical need and self-interest is money.”

Civil society, for Marx, was the individualistic realm of money and greed. Hence Marx concluded that “the anatomy of civil society is to be sought in political economy.” The analysis of the political, legal and social spheres was to be achieved with an economics based on the assumption of individual self-interest.

Furthermore, the state, law and politics under capitalism were made analytically subservient to this dismembered, economistic vision of civil society.

Accordingly, Frederick Engels wrote in 1886 that under capitalism “the State – the political order – is the subordinate, and civil society – the realm of economic relations – the decisive element.” Everything was deemed a matter of greed and commerce, to be understood through economic analysis.

Hence, in its theory of capitalism, classical Marxism was a harbinger of modern neoliberalism, reducing everything to market relations. There was no defence of civil society in its own right.

When attempts were made to build socialism on Marxist principles, not only markets were minimized but also civil society was virtually destroyed. Before 1989, the restoration of civil society was one of the foremost demands of the dissident movements in Eastern Europe.

Certainly there are more sophisticated and less reductionist treatments by Marxists of civil society and the state, not least by Antonio Gramsci. But Marx and Engels, alongside some neoliberals, embraced economic reductionism. Everything turns into the economics of trade, eclipsing the autonomy of politics and law, and neglecting the vital importance of non-commercial interaction and association within civil society.

On these vital issues, liberal solidarity stresses its differences from both neoliberalism and classical Marxism. It does not treat the individual purely as a self-interested, market-oriented maximizer. It is committed to democracy as a distinctive source of legitimation for government, and a means of individual and social development (dimension 2), not as a marketplace for power.

Liberal solidarity stresses the feasible and moral limits to markets (dimension 4). It upholds a view of the individual that combines measures of self-interest with a moral concern for justice and fairness (dimension 6). On all these points it is distinct from these other doctrines.

Today, liberal solidarity must emphasise its radical differences from both post-1970 neoliberalism and from Marxism. This is made extremely difficult in a leftist intellectual context when any defence of markets or private enterprise, to any extent or degree, is pushed aside as neoliberal. Current cavalier uses of the term do much more harm than good.

Many so-called anti-neoliberals are also anti-liberals. They prioritize neither liberty nor freedom of expression. They offer no defence of private enterprise or markets, to any extent or in any form. They promote a state-dominated economy, which we know from history will always threaten freedom and human rights. They believe they are principled. They may have good intentions. To quote from their mentor Lenin: “The road to hell is paved with good intentions.” But as Marxists fail to understand, the only principled and effective defence of human rights is some form of liberalism.

Liberalism has to be fortified, but not in all of its forms. Liberal solidarity is the radical alternative to the illiberal or undemocratic populisms of the left or right. It can address the problems created by large corporate interests, by the power of undemocratic capitalist technocrats or by incipient dictatorships. It emphasises the importance of markets and private property, but without regarding them as universal panaceas. It retains uppermost the importance of human rights and human cooperation, with the goal of human flourishing and social development.

 

19 August 2018

Burgin, Angus (2012) The Great Persuasion: Reinventing Free Markets since the Depression (Cambridge MA: Harvard University Press). See pp. 16, 80-86, 121.

Hodgson, Geoffrey M. (2015) Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press).

Hodgson, Geoffrey M. (2018) Wrong Turnings: How the Left Got Lost (Chicago: University of Chicago Press).

Jacobs, Struan and Mullins, Phil (2016) ‘Friedrich Hayek and Michael Polanyi in Correspondence’, History of European Ideas, 42(1), pp. 107-30.

Marx, Karl and Engels, Frederick (1962) Selected Works in Two Volumes (London: Lawrence and Wishart). See vol. 1, pp. 362, 394-5.

Marx, Karl and Engels, Frederick (1975) Karl Marx and Frederick Engels, Collected Works, Vol. 3, Marx and Engels: 1843-1844 (London: Lawrence and Wishart). See p. 172.

Mirowski, Philip (1998) ‘Economics, Science and Knowledge: Polanyi vs. Hayek’, Tradition and Discovery: The Polanyi Society Periodical, 25(1), pp. 29-42.

Mirowski, Philip (2009) ‘Postface: Defining Neoliberalism’, Mirowski, Philip and Plehwe, Dieter (eds) (2009) The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective (Cambridge MA: Harvard University Press), pp. 417-55. See p. 456.

Mirowski, Philip (2013) Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (London and New York: Verso). See p. 71.

Polanyi, Michael (1940) The Contempt of Freedom: The Russian Experiment and After (London: Watts). See pp. 35 ff., 57-58.

Polanyi, Michael (1945) Full Employment and Free Trade (Cambridge: Cambridge University Press). See pp. 142-6.

Polanyi, Michael (1951) The Logic of Liberty: Reflections and Rejoinders (London: Routledge and Kegan Paul).