This past June, just after the summer solstice, a group of economists and political philosophers gathered on one of the Galápagos Islands, off the coast of Ecuador, to discuss the subject of “Evolution, the Human Sciences and Liberty.” In between touring the islands—and perhaps posing for photos with iguanas or the famous turtles?—the assembled guests attended panels on such subjects as “the moral animal” and the archetypal figures of “the Warrior” and “the Entrepreneur.” The sponsor of this Pacific getaway was the Mont Pelerin Society, the fabled organization founded by the Austrian economist Friedrich Hayek in 1947 to “contribute to the preservation and improvement of the free society,” simply by providing a space where intellectuals committed to the free market could meet and exchange views.
The Mont Pelerin Society was and remains an unusual organization. Its 1947 Statement of Aims proclaimed that the group would not “conduct propaganda,” become aligned with any political party, or attempt to establish a “meticulous and hampering orthodoxy.” A cross between a salon and an academic conference, the society held itself above the contentious world of elections and policy-making. It would not seek to recruit a mass popular membership (even today, new members must be nominated by two people already in the group). It was meant as a haven for intellectuals who believed that their skepticism about state intervention in the economy and their philosophical commitment to the free market put them outside the mainstream of postwar political thought.
The society has often been seen in terms of the rise of conservative anti-government thought and politics in the postwar United States. In A Brief History of Neoliberalism, the radical geographer David Harvey describes it as a “small and exclusive group of passionate advocates” hostile to the welfare state and celebratory of the free market. And as its founder, Hayek might seem a crusader and polemicist whose fierce denunciations of economic planning anticipated the subsequent conservative attacks on unions, the social safety net and the very idea of market regulation. This image was reinforced last summer when Mitt Romney’s vice presidential running mate, Congressman Paul Ryan, claimed Hayek as an intellectual inspiration. The Great Persuasion, by Johns Hopkins historian Angus Burgin, challenges this image of Hayek and of the Mont Pelerin Society—and, by extension, the commonly accepted story of the intellectual roots of neoliberalism. Far from being confident, Burgin suggests, Hayek and those affiliated with Mont Pelerin in its early days were uncertain, almost as critical of the sunny premises of nineteenth-century classical liberalism as they were of economic planning. The Mont Pelerin Society—and neoliberalism itself, in its first incarnation—emerged at a time when the idea of the market was not triumphant but in tatters.
Although it focuses on a small circle of esoteric intellectuals who believed deeply in the political importance of ideas but studiously sought to avoid actual engagement in political life, The Great Persuasion is neither a narrow book nor one meant for specialists. It is capacious and quietly ambitious, offering a dramatic retelling of the intellectual history of the postwar revival of free-market ideas, and it is an excellent example of what can be gained when intellectual history doesn’t focus exclusively on individuals. Burgin shows that the mobilization around the idea of the market—and by extension the broader conservative movement—was not domestic, parochial or anti-intellectual. Rather, it depended on an international community of thinkers, especially academic economists (who are often left out of the story of changing attitudes toward the market, despite their centrality).
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In contrast to the bombastic Tea Party, the men of the Mont Pelerin Society—very few members of the group in the early years were women—were cosmopolitan, self-doubting, almost brooding about the fate of capitalism. That their efforts to define a new, self-critical liberalism should have culminated in the free-market cheerleading popularized by the University of Chicago’s Milton Friedman in his book Capitalism and Freedom and his PBS series Free to Choose (as well as a bestselling book by the same name) seems to Burgin deeply ironic, almost comic. The history of Mont Pelerin is, for him, a narrative of declension, “a parable of the perils, in the exercise of ideological influence, of success.”
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Hayek set out on the road to Mont Pelerin when he left his native Austria for the London School of Economics in 1931. He had been invited to teach there to act as a counterweight to John Maynard Keynes, who had been arguing since the 1920s that the age of laissez-faire had reached its end and a new era of managed capitalism was dawning. Hayek’s first lecture at the LSE was about the loneliness of being an advocate for the free market at a time when “there are, of course, very few people left who are not socialists.” Yet he wasn’t given to despair. Hayek spoke of being “hopelessly out of tune” with the current generation of economists. But he observed that the intellectual predecessors of those who were coming to dominate the field in the early 1930s had been marginal figures only a few years before—such as the Fabian socialists, who founded the LSE. So, too, could free-market economists once again exercise influence; it would likely take “a long time,” but with patience they might yet hold sway.
Today, the central precepts of market capitalism are so widely accepted in economics departments and among social elites that it is hard to imagine that it was ever otherwise. But in the early 1930s, the Great Depression had created a genuine, widespread sense even in these circles that the idea of the market might be intellectually incoherent. The blithe insistence of nineteenth-century social Darwinists that the “millionaires are the product of natural selection” (to quote William Graham Sumner) and that the gutter was the appropriate place for drunkards seemed antiquated and harsh amid the global economic ruin. The cheerful Victorian mathematics of Alfred Marshall might be useful for describing market competition, but the problems he addressed seemed technical, not moral; they could not convince people to defend capitalism as a social or economic order.
Today, “Chicago School” is shorthand for the aggressive advocacy of free markets and opposition to government intervention. But even the economists who taught at the University of Chicago in the 1920s, ’30s and ’40s were skeptical about capitalism and wary of openly advocating on its behalf. Frank Knight, one of the department’s leading lights (best known for his book Risk, Uncertainty and Profit), feared that market societies subordinated all social values to the quest for profit: “Economic man is the selfish, ruthless object of moral condemnation.” Jacob Viner was sharply critical of corporate bombast: “Nothing in the history of American business justifies undue confidence on the part of the American public that it can trust big business to take care of the community without supervision, regulation or eternal vigilance.” And Henry Simons—the most politically engaged of the three—denounced monopoly power as the “great enemy of democracy.”
Small wonder, then, that Hayek began to believe that if a market society was to survive, it would need a new philosophical grounding. Its defense couldn’t be limited to its ability to produce abundant wealth; nor could its workings be so atomized and individualistic. As Hayek’s intellectual orientation changed, economists paid less attention to his work. Hayek insisted that government could do nothing to end the Depression; the only good solution to even the direst economic downturn, he argued, was to wait it out. To economists and graduate students who wanted to use their knowledge for the social good, this was an immensely unsatisfying position, while to the millions of people who were unemployed and desperate, it was an affront. In the early 1930s, Hayek had sparred with Keynes in the economics journals, but when he declined to review Keynes’s The General Theory in 1936, it was widely viewed as a concession that Keynes was right. As Keynes’s star rose and his fell, Hayek began to lose interest in doing purely economic work, instead becoming more concerned with the problem of how to shore up political and intellectual support for the free market.
The central problem he faced was how to think about liberalism in a new way, adapting the old creed to dramatically changed surroundings. Hayek was not alone in this intellectual project. He took inspiration from The Good Society, American journalist Walter Lippmann’s 1937 critique of the New Deal, which protested the “authoritarian collectivism” of those who called themselves progressives, radicals or Roosevelt liberals, but which also rejected a return to the “Adam Smith fundamentalism” of an earlier time (summed up by Lippmann as a “philosophy of neglect”). Lippmann sought to revive classical liberalism’s skepticism concerning government’s ability to plan the economy, but to do so in positive terms: to orient liberalism around saying yes to a set of principles instead of a knee-jerk no to any action undertaken by the state. In the summer of 1938, Hayek and various colleagues organized the “Colloque Lippmann,” which met in Paris to discuss “the decline of liberalism and…the conditions of a return to a renovated liberal order distinct from Manchester laissez faire.” Four years later, one of these colleagues, the German economist Wilhelm Röpke, published The Social Crisis of Our Time, which condemned the “sterile” choice between collectivism and old-fashioned liberalism, calling instead for a “Third Way” that would use the state to foster traditional agricultural life and artisanal industry. The desire to reinvent liberalism, to create a new or neo-liberalism, was shared by all of these thinkers as the 1930s turned into the 1940s, and fascism and war engulfed Europe and the world.
But it was the book Hayek published near the end of the war that would transform economic thought. The Road to Serfdom is an anguished cry to protect a world that Hayek believed was on the verge of annihilation. The book’s core premise is that a free society in the 1940s faced a challenge more insidious than the external threats of fascism and Nazism—namely, the well-meaning liberals and socialists who sought to regulate the market and plan the economy out of the desire to end poverty and create a more just society. Hayek warned that they would ultimately become “the totalitarians in our midst.” Like Röpke and Lippmann, Hayek tried to make it clear that he thought returning to the laissez-faire of the nineteenth century was impossible. His book devoted a few pages to outlining some of the ways that the state could provide “security,” actions that were “outside of and supplementary to the market system,” many of which might surprise Hayek’s fans in the Tea Party. The state could mitigate the “general fluctuations of economic activity” and combat “the recurrent waves of large-scale unemployment” by adjusting monetary policy; it could also regulate the health and safety of business practices, limit pollution, establish maximum working hours, build public infrastructure, and provide social insurance, old-age pensions and health insurance. “Some minimum of food, shelter and clothing…can be assured to everybody,” Hayek wrote.
Whereas earlier advocates of the market had focused on the individual, Hayek emphasized the market itself: the delicate, spontaneous interaction of hundreds of millions of people joined in an economic web that transcended anything human beings could consciously conceive. Poverty, exploitation, the threat of concentrated economic power—none of these were Hayek’s concern. He noted a terrible irony: by seeking to make the world better, people would actually make it worse. “It was men’s submission to the impersonal forces of the market that in the past has made possible the growth of a civilization which without this could not have been developed,” he wrote in The Road to Serfdom. “It is by thus submitting that we are every day helping to build something that is greater than any one of us can fully comprehend.”
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To Hayek’s great surprise and occasional dismay, The Road to Serfdom found a receptive audience in the United States, where its message caught fire with people—especially business conservatives—who had been fervent opponents of FDR’s New Deal and the growing labor movement. They were accustomed to hearing their ideas trashed as so much self-interest, but in Hayek’s work they found a sophisticated new way of understanding their own opposition to the state and its efforts to regulate the economy, as well as a guide to thinking about the market in terms of a principled defense of freedom. The book became a must-read for young conservatives and has remained one ever since.
One fan of the book was DeWitt Wallace, the anticommunist editor of Reader’s Digest, who decided to publish an abridged version that omitted passages about how the minimum wage might be compatible with competition and retained the polemics about totalitarianism. One million reprints were ordered, many by companies that distributed them to their employees. The Road to Serfdom gained even greater circulation when Look magazine printed a cartoon version of the book, which then appeared in General Electric’s corporate publication. In 1945, Hayek traveled to the United States for a speaking tour and was greeted by a crowd of 3,000 at New York City’s Town Hall. The old-fashioned Viennese academic toured the country, his speeches at local chambers of commerce and bankers’ associations an unexpected hit.
Although he appreciated the acclaim, Hayek was frustrated by the “Liberalism for Dummies” interpretation of his book that had taken hold in the United States. Many people seemed to ignore his endorsement of some kinds of state action and his critique of laissez-faire, instead touting the book as an anti-government jeremiad. Hayek was acutely aware that support for his book in the more conservative reaches of the business community might damage his ability to appear a disinterested, neutral scholar. He worried that he was ruining his academic career. “Keynes died and became a saint,” he would later say, while “I discredited myself by publishing The Road to Serfdom.” But at the same time, he was aware that he might be able to find allies in these new friends: his failure might hold the seeds of a different kind of success.
Hayek began planning a new organization to bring together the advocates of a reborn liberalism. He had won the attention of the Volker Fund, a small foundation started by a Kansas City furniture manufacturer that, by the late 1940s, was spending about $1 million a year on various free-market advocacy projects. The Volker Fund helped to underwrite Hayek’s salary for ten years at the University of Chicago (as well as that of fellow Austrian Ludwig von Mises at New York University) and also contributed financially to his new group (Wilhelm Röpke worked from Switzerland with Hayek to get it off the ground). In 1947, the Mont Pelerin Society held its first meeting—attended by thirty-nine international academics and intellectuals—at a resort lodge near Vevey, Switzerland, close to the eponymous mountain. Hayek spoke to the assembled group about the “wild experiment” he saw them undertaking. They would set about the task of reinventing liberalism in an intellectual environment in which everyone shared an “agreement on fundamentals.”
But did they agree on all that much? Some members of the group—such as Knight and Röpke—worried that unregulated markets degraded ethical values, and they struggled to reconcile capitalism and social tradition. Hayek himself suggested that there was congruence between the preservation of tradition and the support for markets, as both opposed a hubristic rationalism that sought to replace spontaneous interaction with directed plans. Still others, such as von Mises, thought that there was too much focus on the critique of liberalism and that what really mattered was defending it vociferously. Although there was a general sense that capitalism was the only economic order compatible with political democracy, many of the participants in the Mont Pelerin Society were ambivalent about majority rule, fearing that democratic publics would vote for the very restrictions on the market they so feared.
Nor did they ever reach any consensus on how to describe their ideas. None of them liked the word “libertarian” (some felt it sounded too much like “libertine”), while “liberal” linked them to FDR. And Hayek slowly distanced himself from conservatism. In 1957, he delivered an address at Mont Pelerin titled “Why I Am Not a Conservative,” arguing that supporting capitalism meant embracing ceaseless change rather than preserving social order as traditionalist thinkers like Russell Kirk wished. However, Hayek’s work had more in common with the conservatives than he acknowledged. By the late 1950s, the major target of his critique was no longer socialism (in The Constitution of Liberty, he argued that “socialism in the old definite sense is now dead in the Western world”); instead, he now directed his ire at labor unions, progressive taxation and the welfare state more generally. The thrust of his argument—that economic regulation, even if undertaken out of the best of motives, would jeopardize the values of liberty and democracy that it was initially intended to advance—had much in common with conservative ideas all the way back to Edmund Burke’s, as A.O. Hirschman observed in The Rhetoric of Reaction. Hayek shared with Burke, too, an anxious sense of the fragility of society and a fear of rationalism. Nonetheless, Hayek thought it important to stake out independent ground, to differentiate his stance from those he saw being adopted in the growing conservative movement.
Despite Hayek’s high hopes, the Mont Pelerin Society was almost immediately a source of frustration to him and others. It proved immensely difficult to use the society to construct an alternative vision of liberalism. By the 1950s, the fluid postwar world had given way to the sharp divisions of the Cold War. In the new climate of postwar prosperity, the agonized skepticism that had characterized the early years of the society gained little traction. A new thinker came to the fore of the free-market movement: Milton Friedman, who was brash, bold and unapologetically political. Like Hayek, he did not like to describe himself as a conservative. (“Good God, don’t call me that!” he told the magazine Human Behavior in 1978.) He embraced “positive economics,” seeing the discipline as a scientific one in which hypotheses could be tested, proved or refuted, in contrast to Hayek’s philosophical approach. He had none of Hayek’s ambivalence about participating in political life or contemporary policy debates. He continued doing academic work while advising Barry Goldwater in his 1964 presidential campaign; he also wrote popular books and articles for The New York Times Magazine, had a regular column in Newsweek, and ultimately produced Free to Choose in 1980 to broadcast his ideas to a still-wider audience.
Unlike the earlier Chicago economists, Friedman had no reservations about the market. For him, markets were an “unremitting good,” a way to achieve greater wealth and freedom for all. As Burgin notes, this belief in the universal superiority of markets was far more optimistic than the social Darwinism of the late nineteenth century. For William Graham Sumner, the market separated the world into winners and losers; its ruthlessness was efficient but cruel. For Friedman, however, there were no losers; with the market, everyone wins. He insisted that he shared the goals of the left—the elimination of poverty, the rise of living standards, a world made freer and more democratic—but simply believed that markets, not the state, were necessary to achieve them. Even at the first meeting of the Mont Pelerin Society, Friedman had argued against the pessimism of others in the group, saying that its manifesto should emphasize the “humanitarian” and “progressive” aspects of liberalism instead of worrying too much about establishing a positive role for the state.
By the late 1950s and early ’60s, the divisions within the society had become severe. In a vitriolic schism worthy of the Trotskyite left, the organization almost collapsed, with some founding members resigning in a huff and seeking to set up an alternative organization. Röpke was one, having grown distressed that the society had mostly abandoned its original openness to questioning the premises of older free-market faiths. He also complained that economists were increasingly powerful within the group, making it “ever more stale.” Then, after Friedman became president of the Mont Pelerin Society in 1970, he came to think that because it had changed so much since its founding, the best way forward was to shut up shop. (The annual meetings, he warned, had become pleasant “tourist attractions” rather than intense intellectual engagements.) The growing prominence and success of free-market ideas had made the society seem a relic of an earlier, more anxious time, and its role in a world that included the Heritage Foundation, the American Enterprise Institute and a resurgent Republican Party was no longer clear. Millions of Americans were reading or watching Friedman’s Free to Choose in their living rooms. Why did there need to be a cloistered, quiet space in which to ruminate upon the philosophy of the free market?
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Burgin’s account of the evolution of the Mont Pelerin Society is a study of the complexity of ideological change, of the ways that ideas conceived in one context can acquire a very different hue over time. It is an immensely rich, careful and thoughtful history that captures the range of opinion within a group of people who are too often seen as having marched in lockstep.
At times, an elegiac note creeps into Burgin’s treatment of the society, as though he is nostalgic for the early days of neoliberalism, with its studied ambivalence and notes of restraint. It can indeed be hard to reconcile the political atmosphere of the present—Grover Norquist and his no-tax pledge, the Club for Growth, the Tea Party, Super PACs, the stultifying timidity of both parties when facing the idea of the market—with the image of those thirty-nine lonely intellectuals meeting by the mountainside, drawing courage from one another in their last stand to defend an endangered civilization.
But even in their halcyon days, Hayek and his confreres were not as isolated as they perceived themselves to be. Ample support for their critiques of the welfare state and socialism came from certain parts of the business community and the political class. Whatever qualms they had about accepting this support, they did so nonetheless, and they also sought to cultivate connections with people for whom the main appeal of their ideas was that they could be employed in the fight against progressive economic reform. By some measures, their ideas about the market were out of fashion in the postwar years, but by others, they were far more easily accepted than their advocates realized, even at the time. There is a certain irony in Glenn Beck hawking Hayek and Paul Ryan invoking him: Hayek would hardly have known what to do with presidential politics, let alone cable TV. But the history of ideas is also the history of how people use them, and it is hard to imagine that Hayek would have been entirely surprised or displeased by his re-emergence in the contemporary fray.
Not that he would have been happy to relinquish the position of outsider. Far away from the halls of Washington, the society members gathering on Galápagos may find it sunnier than the mountains of Switzerland, and the political climate balmy compared with 1947. But for today’s Mont Pelerin Society, there is likely something revivifying about recalling the postwar crisis, when the world was menacing and it seemed far from certain that their side would win. For contemporary free-market advocates, who must confront the difficult aftermath of the crash of 2008, the decidedly unsubtle power of business in politics, and the nasty inequality that corrodes every aspect of our economic and political life, there must be something tremendously alluring about that moment of purity. Their ideas helped to build this world, but one can see—especially after reading The Great Persuasion—why those insiders would want to retreat.