From Vienna to Chicago — Understanding neoliberalism

Neoliberalism is one of the most used terms in political discussion as in Europe. Often, the term neoliberalism is used and presented in mythological, unobjective and “politically theoretically incorrect” way. Political actors and opinionmakers foremost from the left but also the right are using neoliberalism to objectively or unobjectively describe real or unreal problems raging from economy and welfare to climate and migration.

For many reasons, neoliberalism is often a contested term and used with strong emotions. But what is the real meaning of neoliberalism, as when it comes to political theory and how neoliberalism was socially constructed? One book presenting relevant answers is Reinventing Liberalism. The Politics, Philosophy and Economics of Early Neoliberalism (1920–1947) by Ola Innset.

Innset’s book is an analytical presentation of the early neoliberal ideas and thinkers. The book is divided into two main parts focusing on the history of ideas and history of thinkers themselves. The starting point is the “Red Vienna” in the 1920s and finishes with the first meeting of the liberal network Mont Pelerin Society in Switzerland in 1947.

In this article, I am presenting the following aspects of the book.

1. Ideological construction

According to Innset, the original ideas behind neoliberalism was to renew liberalism by aspirations to construct new liberalism. The neoliberal ideology is based on three main ideological developments and their respective essential parts:

a) Austrian economics = free markets, individual freedom, limited government/state

b) (German) Ordoliberalism = competition laws, central-banking and inflation, the role of the state regarding companies and entrepreneurship

c) Chicago school = economic liberalisation, privatisation, regional and global market integration and trade (as globalisation, European integration)

2. The “Dual-argument”

Innset argues that what he calls “the dual-argument” was a vital part of the early neoliberal thought. Because neoliberal thinking was opposing both side social-liberalism (positive freedom and rights) focusing on higher use of the state as for welfare and market regulations and opposing classical liberalism (laissez-faire, negative freedoms and rights) focusing on limited or minimal state and size of the public institutions.

According to Innset, the dua-argument of neoliberal thinkers as Friedrich Hayek was based on rejecting economic central-planning and also completely deregulated economic system which in Hayek’s opinion both were leading to totalitarianism as communism and fascism.

3. The state and other public institutions

Innset argues that critics of neoliberalism often misunderstood how neoliberals used and are arguing when it comes to the function of the state and public institutions, as the international ones. Neoliberals are not anti-state as libertarians and anarchists. Instead, neoliberals as Hayek argued during the 1930s and 1940s that the state’s role had to be redefined so that the state would “secure” and “ensure” aspects as individualism, open society, free markets and trade, free enterprise and competition.

In fact, most of the thinkers that gathered in Mont Pelerin in 1947, including Hayek argued that the state should be limited but at the same time provide its citizens with certain services such as health-care. This was the case despite that the early neoliberal movement was more right-wing liberal even if there were divisions and pluralism within the movement.

4. Markets as modernity

Innset argues, neoliberalism was and is much more of an economic idea since it was also and still is a more moral and philosophical idea. For neoliberals, the markets were not only about economy and interactions but also about modernity and progress itself. Markets and combination with ideas of human rights are seen as vital for civilisational reasons and human progress.

5. Views on democracy

In the debate, neoliberalism is also criticised for being undemocratic or against democracy, such as regarding welfare systems and programs. As Innset writes it, neoliberals were against or sceptical to “popular democracy” as it was argued that unlimited and popular democracy would lead to the abolishment of personal freedom and totalitarianism. Instead, neoliberals were arguing in favour what today is understood as liberal-democracy or constitutional democracy where majoritarian decisions should not infringe or abolish individual freedoms, human rights and rule-of-law.

For more insights, I highly recommend the reading of Innset’s book via the following link.

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Vladan Lausevic

Vladan Lausevic

I am active as a social and policy entrepreneur. SEEDS ambassador. Motto: I have no identity, I have only identities.