Johns Hopkins historian Angus Burgin recently published a meticulously researched, finely grained history of how free-market economic and political theory went from heresy to orthodoxy, The Great Persuasion: Reinventing Free Markets since the Depression. (I reviewed the book here.) It is a rewarding read that digs deeply into an embattled network of unreconstructed 19th-century liberals, Austrian economic theorists, Chicago advocates of free markets, all struggling to define themselves and their ideas in what they viewed as a hostile, mostly Keynesian, world. A few of the names are familiar: Friedrich Hayek (and his inescapable doppelganger, John Maynard Keynes), Ludwig von Mises, Milton Friedman, Karl Popper, Irving Kristol -- but many are not. Burgin digs deeply to reveal the tensions within the core institution Hayek created to propagate the faith, the Mont Pelerin Society, with its contentious cast of characters, including, for a brief dalliance, Walter Lippmann. Burgin is laying out a kind of intellectual ascendancy, a Kuhnian paradigm shift, which in retrospect seems inevitable. Of course at the time, and his research captures the struggles and failures, nothing about this movement seemed certain.
A few larger questions hover over this book. Were they -- meaning this crowd of free-market advocates (some more doctrinaire than others; some of fleeting faith) -- right in their analysis, either economically or politically? This is a large and difficult judgment that Burgin sensibly avoids. Of course, for many readers, less interested than Burgin in the internecine squabbles of what (after many debates) came to be called neoliberalism, that's the only question, which is why these positions often take on aspects of a faith. (That's certainly the case with Keynesianism as well, an increasingly postwar mathematized project that Keynes himself, a great skeptic and pragmatist, may have rejected if he had lived.) Was the neoliberal critique, however defined, roughly correct, or was it only suitable for a given set of historical conditions, which may or may not be passing? Is the neoliberal critique, in its economic and philosophical wings, some kind of absolute truth, and thus applicable to all times and places? Is it thus ahistorical, determinative, which would render the kind of historical struggle Burgin has researched so impressively in The Great Persuasion, superfluous?
Burgin gingerly takes up those issues in his final chapter, which he calls "The Spirit of the Age," seemingly offering a clue to his thinking. If neoliberalism is the spirit of the age, then what if we have landed in a new age? Burgin recounts how the reaction from both left and right after the financial crisis predicted an upsurge in Keynesiasm or at least greater state activism. "For a brief period it seemed that the developed world was reenacting the collapse of market advocacy that had unfolded in the wake of the Great Depression," he writes. But not so fast.
"In the intervening decades market advocates developed an elaborate intellectual and rhetorical apparatus in support of their worldview, a substantial base of supporters in the economic and public policy worlds, and extensive institutional structures that were adept at incentivizing and propagating their ideas. Radical alternatives to capitalist modes of social organizations found little traction in the global public sphere, and assumptions about the benefits and organizational necessity of a market framework became much more broadly shared. Although opinion polls in the wake of the crisis registered increased uncertainty about the benefits of free markets, the hold of market advocacy on the popular imagination has remained far stronger than in the early 1930."
All this is undeniably true. But it also ignores what the rest of the book effectively demonstrates: how long it takes, how difficult and contingent it is, to undermine and finally overthrow a dominant economic and political paradigm. If these conditions held true, then Hayek should have retired to his study in the '50s and Friedman should have avoided Barry Goldwater in the '60s. Burgin seems to be suggesting that the tangible reality of institutions and popular beliefs not only confirm the truth (or as least the persuasive power) of this lurch to free markets, but insures it will continue. He may well be right on that last point -- for now. But the question really is not what is happening on the surface, but what's going on far below, where the sources of the Zeitgeist spring.
No one can predict either financial markets or markets in ideas. That's a Keynesian notion, articulated far more elegantly by the man himself. Whatever happens next will not be exactly what has come before; there may be a big difference between neo-Keynesianism, however defined, and the original (and quite complex) Keynes ascendancy, or neo-Socialism (the bête noir of the Austrians) or neo-Communism (the bogey man, with some justification, of the Friedmanite rump). We cannot imagine a return to a world that, at least in part, found top-down economic planning a sensible idea. But that's how dominant ideas work; they make their competition seem unimaginable and irrational -- at least until events occur that erodes its certainties. The financial crisis is not yet a set of events that changes worldviews. But it has dealt a blow to some powerfully linked free-market economic ideas: concepts of efficient markets, rational expectations, market prescience and self-regulation, the reliance on reductionist market models. They have not been killed; they have been academically maimed. And perhaps, in a Darwinian market response, they will self-correct and grow stronger. Or not. But even if they do, these tools of economic policymaking face real-life problems that, given our democracy, can't just be dismissed, notably advancing inequality. The era of free-market triumph has left an economy not only prone to breakdown, but to charges of unfairness.
A final point on paradigms and the spirit of the age: Ideas that congeal into institutions and take refuge in public opinion have undoubtedly entered late-middle age. They are flush, powerful and retain most of their faculties. But old age beckons. And ideas historically always overstay their welcome, as formulaic Keynesianism did in the '70s.
Revolutions erupt in weeks. Counter-revolutions take decades, and mostly fail. They are, of course, the same long process, chopped up and labeled by pundits and historians. Burgin, chasing history, never really answers the philosophical question of whether neoliberalism, in all its variants, offers eternal truths or whether its triumph was a combination of preparation, personality and circumstance, and thus prone to overthrow. (To define them as ideas approved by the markets is to suggest how relative they are. Markets, after all, regularly re-price.) He understands how close a call it was -- and how many compromises had to be made for these ideas to succeed in a world not of scholars, but of democracy and power. Near the end, he notes: "Even as members of the Mont Pelerin Society experienced greater public and professional influence in its later years, many of its founders remained distinctly ambivalent about its trajectory. Some stopped attending meetings, sending notes to Hayek in which they indicated that the tenor of the arguments no longer reflected their perspectives; others continued to participate while expressing private dismay at the direction its membership had taken." These ideas were shaped by the spirit of the age, moving rightward from advocating not just capitalism "but a much more specific category of a capitalism unencumbered by substantial constraints."
Burgin then reopens a door to possibilities of change that should never be closed. He reprises the core idea that motivated Hayek in the '30s and Friedman in the '80s: "To what extent do we wish to make ours a market-centered world? This remains a source of discontent. We have accepted the virtues of markets but failed to determine how to integrate them into life as we wish it to be." When we figure that out we'll be living in a utopia.