Would libertarian socialism work in Canada?
"From a neoliberal point of view, the point is that democracy cannot damage the economic order"
The discussion about democracy usually turns into a discussion about liberalism sooner or later - especially in Switzerland with its liberal state tradition. The concept of liberalism is not only used by the most diverse forces and forced into the most contradicting compound words - social liberal, economically liberal, green liberal, conservative-liberal - but accompanied as if by a shadow by its polemical twin: neoliberalism.
Is neoliberalism a mere expression of struggle to say that capitalism and globalization are evil? Or is it the term that allows us to articulate how liberal thinking has changed over the course of the 20th and 21st centuries? In any case, neoliberalism is still the big buzz word of our epoch today. Whoever wants to talk about democracy has to talk about liberalism. And anyone who wants to talk about liberalism should not be silent about neoliberalism.
Clarification of terms is therefore indicated. That is probably the reason why the young Canadian historian Quinn Slobodian sparked intense debates with his conceptual study “Globalists: The End of Empires and the Birth of Neoliberalism”. It not only traces which worldview and which political concepts were represented by the thought leaders of neoliberalism, but also how the neoliberal doctrine has changed over the decades. How do neoliberal theorists view democracy? What is your relationship to the nation state and to supranational organizations? Why has free trade become such a charged political issue today?
The democracy check
Everyone is talking about the crisis of democracy - so do we. And we want to know: what is it that holds democracy together at its core? Which forces currently pose the greatest threats? How and by what means does democracy prove to be resilient? Our overview of the main topic.
Mr Slobodian, you have written a book that is obviously in tune with the times. “Globalists” is an academic study of the history of ideas on neoliberalism - and at the same time an international bestseller. What was your intention with the book?
I tried to grasp neoliberalism as a spiritual movement. At first I am not concerned with denouncing his errors or proving his reason. I want to reconstruct what the economists, who called themselves “neoliberal”, represented and how their arguments developed over the decades. It is a classic study of the history of ideology. One can apply this type of analysis to the history of socialism or conservatism as well.
Where does neoliberalism originate?
The first intellectuals to use that name met for a conference in Paris in 1938. They were shaped by the experience of the Great Depression and shared the conviction that capitalism in its laissez-faire form would not be able to survive and was in need of reform. They believed that the state had to become much more proactive than it had been in the 19th century and the first decades of the 20th century, that the night watchman state was no longer sufficient and that politics had to act against monopolies in particular. On the one hand, this meant that one had to act against the cartelization of the labor market - and that meant against the unions - and to create a free labor market. On the other hand, however, also that monopolies from dominant companies had to be prevented.
The participants in this conference described themselves as neoliberal?
It was the German economist Alexander Riistow who launched the term at the Paris meeting. Among the most important participants were economists such as Friedrich von Hayek, Ludwig von Mises and Wilhelm Röpke, who were among the founders of the Mont Pèlerin Society after the Second World War and who described themselves as "neoliberal". It was therefore not disputed whether they should be classified under this label. However, in the late 1950s, they stopped calling themselves neoliberal and began calling themselves classic liberals. As a result, the term disappeared from the map for a few decades until it reappeared as a polemical swear word that was only used by the critics of the school of thought - and not by their representatives themselves.
Nobody wants to be a neoliberal today?
That has changed a little - thank God, because it makes life easier for people like me. For a few years now, various intellectual currents that see themselves in the tradition of Hayek, Milton Friedman or Ludwig von Mises have been calling themselves neoliberal again. We no longer have to argue about the legitimacy of the expression, but can concentrate on what this worldview represents and how its basic arguments have developed.
So there was a phase when neoliberalism was understood as the renewal of liberal ideas through a proactive understanding of economic policy. And there was a phase when it became a polemical term. That went hand in hand with a shift in content: What was denounced as neoliberalism in the 1990s is an economic policy that is no longer directed against laissez-faire capitalism, but on the contrary like a forced, libertarian version of laissez-faire capitalism. appears fair.
The importance that progressive critics - people like Susan Strange, Pierre Bourdieu, Noam Chomsky and Naomi Klein - gave neoliberalism in the late 1990s is actually that of an anarchist form of capitalism: the dream of self-regulating markets based on states and Borders are no longer dependent and which threaten the foundations of democracy and social cohesion. However, there is a problem with this definition. It does not fit in with how the institutions that had emerged to create a framework for global capitalism developed up to the turn of the millennium.
In fact, we have not moved towards self-regulating markets. The number of laws that regulate the global economic order continues to grow and is in no way shrinking. With the establishment of organizations like the WTO, supranational institutions were brought into being and not the abolition of institutions enforced. That is why in my book I underline the importance of the current of thought within neoliberalism, which I call the "Geneva School" because its important representatives taught at least in phases in Geneva and because the institutions that are decisive for their economic philosophy are located in Geneva. So the question comes into focus, what importance neoliberalism ascribes to the international framework.
The current concept of neoliberalism is strongly influenced by another school, namely the Chicago School, and especially by Milton Friedman and his advocacy of economic freedom. What are the differences compared to the Geneva School?
Let's go back to the Paris Conference of 1938. The occasion for the meeting at that time was a new book by the publicist Walter Lippmann, who was one of the most important American opinion leaders. With the exception of Lippmann, however, almost all of the participants were European. The situation in Europe was marked on the one hand by the triumphant advance of fascism and the rise of communism; on the other hand, from the instability of the interstate order after the fall of the German Empire and the Habsburg Empire at the end of the First World War. The problem of interstate relations therefore had a priority for the European neoliberals that it should never have for the American neoliberals. America has such a huge domestic market and territory that covers such a large area that throughout the 20th century the issue of external market access and free trade was never as important as it was for smaller countries. The foreign trade share of the American economy is still much more modest today than is the case with countries like Switzerland or Austria. The representatives of the Chicago School, in addition to Friedman, Gary Becker and George Stigler, should therefore be preoccupied with the question of how the framework conditions for the American internal market are to be organized, while for Europeans the intergovernmental order is much more central.
From the beginning the Viennese economists played a special role, that is above all Hayek and Mises.
Both were trained to become administrative officials of the Habsburg Empire, which however went under in 1918. What should be your new job now? They kept the perspective of the administration of the Habsburg Monarchy, but they extended it to the global order. They scaled up the dual monarchy.
So her innermost concern was international trade. And the model was the Habsburg Empire?
That may seem strange. It's not that the neoliberals per se had a particular fondness for empires. It depends which empire. They rejected it when imperial powers forced their colonies to trade only with the motherland. However, they valued the British Empire because Great Britain also granted its colonies free trade, at least until the 1930s. The Habsburg Empire in particular had a role model function: it was a multi-ethnic state in which numerous languages were spoken and many national, political identities coexisted. The subjects of the Habsburgs did not form a homogeneous nation, but they were subject to the same territorial state. The dual monarchy was the largest free trade area in Europe. It encompassed numerous nations and national languages, guaranteed a common economic framework and allowed the individual ethnic groups a certain amount of self-determination.
So the Habsburg Empire guaranteed economic unity and political diversity at the same time?
What the neoliberals in the Habsburg Empire saw to some extent realized was the separation of empire and dominium. This distinction from Roman law is guiding their conception of the ideal legal order. Empire denotes the rule of states over peoples, dominium stands for the guarantee of property and goods. In his influential treatise “Der Nomos der Erde”, the philosopher of constitutional law Carl Schmitt stated that the increasing separation of empire and dominion was the great achievement of the 19th century. Property was protected wherever it was on the globe. Money could circulate anywhere because its value was secured by the gold standard and the international financial system - essentially the City of London at the time. The dominion was decoupled from the empire, property rights became independent of territorial sovereignty. Schmitt, however, not only brings this development to the fore, he denounces it with all sharpness: In his view, the states lost their sovereignty because they no longer had access to property rights. Wilhelm Röpke, who reviewed “Nomos der Erde” in detail, and the other representatives of Geneva neoliberalism were completely different: For them, the separation of dominion and empire was exactly what they wanted to continue and preserve.
How should that be done?
At first it is a delicate balancing act: you have to get the states to restrict their own sovereignty in order to enable the free circulation of goods and capital. That first requires persuasion: What are the reasons for the states to get involved? But then the autonomy of the Dominium must be put into action by international law: How can one create intergovernmental agreements that stipulate the independence of the Dominium and its protection from the legal order of the Empire as much as possible?
So the basic impulse of neoliberalism is not to liberate the markets, but to legally secure international trade?
The metaphor that seems most appropriate to me is "sheathing". The free circulation of goods and capital has to be wrapped in a legal structure: this idea is much more accurate than the idea of liberation. Such agreements are not made in a vacuum, but are created through legal means borne by sovereign governments. It is also not the case that the rules of the market become independent of the states. Dominion and empire overlap. The states have to agree and enforce the rules - and mostly do so on a voluntary basis.
So there is a need for political approval. That brings us to a central question. They say: neoliberals like empires. Do you like democracy too?
I think whether the neoliberals like democracy or not is not really the point. They were realists. They assumed that democracy has already become the binding norm. According to Walter Eucken, the best-known representative of the so-called Freiburg School of Neoliberalism, the democratization of the world has taken place for two reasons: First, the political participation of all citizens, at least in Europe and North America, has become a universal principle. Second, because of the peoples' right to self-determination, the empires were destroyed - the colonial empires, the Habsburg empire, the Ottoman empire. Even the poorest nations got their independence and a voice in international institutions. The neoliberals did not assume that these developments would be reversed. Your key question was therefore: How can one accept democracy as the new normal and at the same time create institutions that prevent this democracy as much as possible from damaging the international economic order?
Democracy is there. But the good order must be protected against democracy?
As a matter of fact. What is needed is a guarantee of order that has the ability to prevent democratic majorities from destroying the orderly framework. Take Hayek, who - also directly inspired by Carl Schmitt's categorizations - dedicated his main work «Law, Law and Freedom» to this problem: How can one prevent democratic constitutions from being implemented in parliamentary institutions in such a way that laws are passed undermine economic freedom? At least freedom as Hayek understands it. How can one create institutions that watch over the legislation and are immune to the democratic interference emanating from the population? Hayek gave this function mainly to strong courts; other representatives of neoliberalism relied on powerful, independent central banks; still others to independent arbitration tribunals, which are supposed to watch over international treaties, or to the appellate bodies of the World Trade Organization. From her point of view, it is always about checks and balances to create so that democracy cannot damage the economic order.
From Hayek - and not only from him - there is also clear party support for non-democratic governments. For example, in defense of Augusto Pinochet's junta, he made the much-quoted statement that he would “prefer a liberal dictator to a non-liberal, democratic government”.
Some of the representatives of neoliberalism were ready to approve of military dictatorships - on the assumption that they represent the “lesser evil”. Mises wrote in 1927 that fascism “saved European morals” - his political worldview was so strongly influenced by the fear of communism. However, such positions were always controversial within the neoliberal movement and lost their importance in the 1990s.
Let's stay with Hayek: First of all, he's not a constitutional law theorist, but an economist. He began his career as a major theoretician of business cycles and carried out data-based statistical research. Amazingly, however, by the end of the 1930s, many representatives of neoliberalism - including Hayek himself - showed a marked decline in interest in data-based research. How did that happen?
First of all, there are specific reasons: in the 1920s, practically the only way to get funding for economic research was to study business cycles. American sponsors, particularly the Rockefeller and Ford Foundation, funded projects across Europe, and other research funding was virtually non-existent.In 1929, Hayek and Mises therefore applied for funding from the Rockefeller Foundation for a newly founded economic research institute in Vienna. They had an ambitious program for the time: to predict the economic development and the most important economic indicators based on prognostic models and statistical data. You ran this business with some success and great ambition.
What has tarnished this ambition?
Let me tell you an anecdote: In the archives of the Austrian Chamber of Commerce, which housed the economic research institute, I found an extract from a Viennese trade union newspaper. It was the leading article that announced that a new economic research institute was opening in the city, which was very welcome from a trade union point of view, because one would finally have objective information about how the economic development was going precisely and how one had to terminate the strikes in order to achieve them hurt employers as much as possible. The spot was underlined four times in red and given a large exclamation mark. Apparently the Chamber of Commerce and the research institute took little pleasure in risking providing the other side with reliable information. Development has confirmed this: as early as the late 1930s, econometrics and business cycle research were mainly carried out by progressive and left-wing forces.
But behind this were not only tactical, but also ideological reasons.
In the course of the 1930s, Hayek became convinced that something that can be forecast can also be planned. If one knows how to model economic developments, one can also determine or at least influence their result. This was precisely the mechanistic understanding of economics that formed the basis of left interventionism and that Hayek saw as the mortal intellectual sin.
That means what Hayek rejects is the rationalistic hubris, which from his point of view does not do justice to the inability to control economic processes.
In the course of the 1930s, Hayek came to the conclusion that the economy cannot be represented or modeled, either through empirical data or through theoretical reconstructions. One can only define an institutional framework that allows the market process to develop, but the economy itself remains unfathomable and cannot be represented. In the Geneva school, economics becomes a kind of negative theology.
Then would the market take the place of the unfathomable deity?
The theological references are relatively explicit. Hayek belonged to the founding committee of the magazine "Ordo" (order), which became the organ of the so-called German ordoliberalism. The title is a direct allusion to the theological ordo concept of St. Augustine. Hayek himself regularly quotes Augustine in his works. Augustine's preferred metaphor for the divine order is the mosaic. If you look too closely at the individual pieces of the mosaic, according to the theologian, everything looks ugly and shapeless. But when one understands that there is a greater order, so sublime that we cannot even perceive it, the majesty and beauty of the entire work becomes clear. Hayek argues that socialists only see individual pieces of the mosaic and regard them as inequality, exploitation, and oppression - simply because they lack the Ordo perspective, because they do not understand how complex and harmonious the incomprehensible overall mosaic is.
Wasn't his attitude more Socratic, that is, an insistence on the importance of intellectual humility? On the fact that there are so many things that we simply cannot know?
Sure, this motive is central. As I said, the worst sin for Hayek and the Geneva neoliberals was constructivism: the belief that we can design institutions that are more efficient and rational than the market. That is why the demand for intellectual humility is actually ubiquitous. Not for nothing was the title of Hayek's Nobel Prize speech “The Pretence of Knowledge”. In this speech, by the way, he also identifies two cases of intellectual hubris that are still relevant today. For example, he attacks the Club of Rome because he denies that reliable predictions can be made about the consumption of raw material resources. According to Hayek, the demand for sustainable resource consumption lacks intellectual humility. As part of the Club of Rome, an economist like the Dutch socialist Jan Tinbergen tried to develop proposals for the reorganization of world trade, which should reduce the north-south divide. For Hayek that too is of course pure hubris. The problem with this, however, is that Hayek's work itself has constructivist traits.
In what way?
His late work consists of working out instructions for writing a good constitution - constructivism in its purest form - even though good laws should actually arise spontaneously through an evolutionary process. There is, according to Hayek, a fine line of deliberate design of legal frameworks. However, this narrow line of conscious stipulations poses fatal problems for the neoliberal project.
Because it is precisely these deliberately designed interventions that typically come under legitimacy pressure. Take the framework of the Eurozone. The 3 percent rule for the allowable budget deficits or the no bailout clause of the central bank mandate were a piece of such deliberate design. The problem is that these rules immediately became obsolete in the euro crisis. The attempt to specifically create a supranational treaty that forces the democratic nation states into a corset of rules has failed in the EU. The neoliberal orderly thinking was bitterly disappointed by the supranational institutions, which euphorically affirmed it and helped to construct it. A part of the neoliberals therefore drew the conclusion after the euro crisis that their project had to find a new basis. That one cannot rely on supranational authorities, but only on the nation.
The nation should become the new base?
One must not forget that the AfD was founded by ordoliberal economists. From the 1920s to the 1990s, neoliberalism viewed democratic nation states as the greatest threat to a free economic order. He tried to tame them through strong international institutions. Today, given the fragility of these institutions, he seems to take the view that the nation is the better guarantor of order.
Does that mean neoliberalism is once again affirming national borders?
Neoliberalism was never against borders, not even at the time of its cosmopolitan heyday. There is a widespread misconception that neoliberalism's dream is to dissolve borders and states. But its representatives have always affirmed the value of international borders: they are the precondition for international competition. They enable location competition or, as it is called in the neoliberal debates, judicial competition. When a state cuts its taxes, deregulates, liberalizes labor law, it attracts capital - and its neighboring state is forced to do the same. That is the story of economic development over the past 40 years. In the neoliberal debates this mechanism is also called competitive federalism and is defended as beneficial. Switzerland is almost always cited as a shining example in this context.
So that means that the internationalist phase of neoliberalism could be history?
When the wall came down in 1989, the general belief was that with the North American trade agreement NAFTA, the EU, the euro, the WTO, we would enter a new period of global integration. But if you look at the 1990s even superficially, you immediately see the power of a counter-movement of nationalism and disintegration. It is the time of militant regionalism with the rise of the Lega Nord, the Flemish and Catalan secession movements. It is the era of the Balkan Wars. And it is the heyday of the great anti-European populists like Jörg Haider and Christoph Blocher.
Didn't all neoliberals dislike that?
There were fierce debates within the Mont Pèlerin Society, which idea historians are wonderfully able to follow because all the minutes are archived and publicly accessible. Certain neoliberal theorists viewed Yugoslavia as very hopeful when it fell apart. The libertarian economist Murray Rothbard, who had become a member of the Mont Pèlerin Society at Hayek's instigation, wrote in 1992: "It was a particularly wonderful thing to see with our own eyes how a state is dying."
But not only the multiethnic state, but also supranational institutions were suddenly viewed critically?
What if it was a mistake to create institutions for an international trade order ?, was the argument. What if the result is only Trojan horses for socialist projects? What if the EU does not become a free trade area but, as Maggie Thatcher once said, a back door for socialism? The Swiss People's Party in particular became an important source of inspiration for the debates of the Mont Pèlerin Society in the 1990s. What is, it was asked, when we have to enter an era of neoliberal populism?
The idea is simple: classic neoliberalism wanted, as I said, to keep the democratic masses in check, empower the elites and in this way protect the economic order. But in the 1990s the thesis became plausible that the masses had definitely lost faith in socialism and identified themselves more strongly with the free market economy than the elites. Perhaps the real problem was the elites, the bureaucrats in Brussels and Frankfurt. Instead of taming the masses, attempts were made to use their libertarian energies, for example resistance to taxes. And of course direct democracy was also discussed as a means of neoliberal populism.
And today has neoliberal populism blossomed?
These debates of the 1990s belong in the prehistory of Brexit. Nigel Farage already took part in them back then, for example as part of the Bruges Group, a eurosceptic, neoliberal think tank. His political project is a coherent form of neoliberal populism. In the end, he successfully used the democratic referendum to destroy supranational integration.
If it is no longer the institutionalization of an international trade order, what is the goal of neoliberalism today?
I think the best way to describe it is: the protection of the rights of capital. The various indices for economic freedom that have been developed today to determine which country is doing best in terms of location competition are meaningful. The principle according to which these indices are designed is always the same and very simple: The more economic operators are allowed to withhold from their income, the greater the economic freedom. Freedom means lower taxes and duties. Unfreedom means social transfers.
But didn't Hayek in particular speak out in favor of a social security system?
Things are shifting. If the argument is made today that corporate income taxes absolutely have to fall, then it is not with reference to Hayek or Friedman, but with reference to the competition between locations and the indices of economic friendliness. In other areas too, people have strayed far from the original neoliberal doctrine. Take intellectual property, which is at the center of international trade policy today and ensures that international corporations can earn money with their patents around the globe. Neoliberals like Hayek or Fritz Machlup did not take the position that patent rights must be strictly protected. There were also numerous neoliberal economists who were convinced that ideas should not have property rights. Originally, in any case, intellectual property was a completely secondary aspect of world trade concepts. The fact that things turned out differently does not have to do with pure doctrine, but rather with the fact that powerful interests knew how to enforce it.
What about the European Union? Is it a neoliberal project today? Or socialism through the back door?
It is instructive for a historian to trace such institutions over the decades. You realize how much they can change. In the 1970s, the EU was very popular among the Eurocommunists, with figures like Enrico Berlinguer and Altiero Spinelli. They were convinced that the EU would be the means to harmonize labor markets and strengthen the bargaining power of the trade unions. Then, in the 1980s and 1990s, things went in the opposite direction. However, this basic orientation can also change again. The euro crisis has shown that ideological orientations are never set in stone. When the European Central Bank (ECB) had to act, it did it, although it had no legal basis and no mandate to do so, although it violated the most sacred ordoliberal principles. If, under the pressure of circumstances, the ECB can suddenly make a dramatic change of direction, then it can also do so in any other policy area. Then all of a sudden other rules can no longer be valid. We just don't know until we've tried it.
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