Neo-liberalism

The roots of neo-liberalism may be found in Thomas Hobbes, John Locke, and Adam Smith. In the 20^th century, neo-liberalism took its current form through the writings of Ludwig von Mises and Friedrich Hayek, among others.

Hobbes, Leviathan, 1651. Hobbes accepted self-interest as a legitimate motive for people.

Locke, Second Treatise of Government, 1690. Locke favored minimal government interference with private enterprise. An inspiration for Thomas Jefferson, Locke envisioned an agricultural economy in which producers would remain unconstrained by government and public taxes would not be used to re-distribute wealth to the poor. Poverty would be addressed by private organizations, such as churches.

Adam Smith, Wealth of Nations, 1776. Smith advocated a laissez-faire policy toward business in which the government would not interfere with the law of supply and demand. Smith, however, did advocate a limit of 5% on interest.

Ludwig von Mises, Bureaucracy, 1944. Mises compared private and public enterprises and favored the view that private enterprises operated more successfully than public. When profit or loss served as a measure of success, the measure could readily be applied. A business unable to make a profit would cease to exist, but a public bureaucracy that ceased to make a profit could be supported for years by public money. Mises joined others in the neo-liberal camp in advocating the privatization of social services: education, health, transportation, roads, prisons, and so forth.

Friedrich Hayek, The Road to Serfdom, 1944. Hayek regarded the New Deal under Franklin Delano Roosevelt as a form of collectivism, and placed the policy in the same league as communism and Nazism. He argued that government should allow businesses and corporations to pursue their self-interest.

Friedrich Hayek in his book The Constitution of Liberty (University of Chicago Press, 1960, 2011), rejects the view that society is based on a social contract. As we have seen, a number of philosophers—including Epicurus, Thomas Hobbes, John Locke, Thomas Jefferson, Immanuel Kant and John Rawls accept the notion of a social contract. Hayek proposes instead of a social contract the alternative explanation that society and its practices emerged from people imitating successful people. Hayek’s rejection of the social contract rests on his interpretation of the social contract as an actual document or agreement in human history. Several of those who defend the notion of the social contract, including Rawls and Kant, view the social contract as a hypothetical agreement made from a fair-minded point of view. This hypothetical contract helps to explain where moral rules come from (Kant) and the origin of basic rights (Rawls).

In “Why I Am Not a Conservative” (an appendix to The Constitution of Liberty), Hayek defends a position that has come to be known in political and economic circles as neo-liberalism. He sees both fascism and socialism as placing too much emphasis on a “collective.” The result of this emphasis in fascist and socialist societies is that people are forced to conform to state policy.

Hayek notes that conservatives are willing to enforce their morality on the population at large. In this, conservatives resemble socialists. Conservatives also lack principles that enable them to work out differences with those who disagree with their own conservative views.

He explains that he is not a conservative since a conservative favors the status quo (the present state of things). He regards himself as a liberal for the reason that he favors change and progress. He also advocates individual liberty in the marketplace. Following John Locke’s support for individual liberty, Hayek accepts the view that people should be free to engage in private acquisition and disposal of property.

He acknowledges that freedom in the marketplace is sometimes regarded as a conservative political position, but he states that a conservative places the market under the control of state authority. The position that Hayek favors is that the market alone can provide control and social stability through such principles as supply and demand.

Hayek observes that conservatism has come to be associated with nationalism, and it tries to protect the nation’s businesses. He notes that patriotism may be expressed without resorting to nationalism. Liberalism, by contrast, is international in scope and advocates international trade (globalization).

STRENGTH: Hayek’s position has a strong appeal to those who see economic change as a source of progress, including moral progress since it aims to increase the well-being of individuals.

WEAKNESS: Some major differences exist between the agricultural society of Locke and Jefferson and the industrial society of the 20^th century when Hayek was writing. By the 20^th century, industry had spawned large corporations, some of which had annual budgets larger than some nations. The distinction between private and public that Locke and Jefferson drew has been profoundly altered by the rise of large corporate empires. Policies of “private” corporations have heavily impacted ways of life, for example. Corporations have been defined as persons by the U.S. Supreme Court. As persons, corporations possess the rights to life, liberty, and property—rights that were historically also possessed by communities in moral conservatism (moral communitarianism). Thus, the weaknesses of classic communitarianism are resurrected again in neo-liberalism—namely, the imposition of a way of life and doctrines that are not shared by the majority in the upright social pyramid of corporate capitalism with its rule by the wealthy (plutocracy).

The following article, written in 2016, links neo-liberalism and the contemporary political scene and offers some criticisms of neo-liberalism:

https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot