for, after all, whyever would a shindig produced and paid for by George Soros actually conjure up any authentic New Economic Thinking?8 True to form, there was almost no serious debate of any sort at Bretton Woods, nary even an impressionistic summary of possible alternative paths for economics; there was, however, a nostalgia so thick it curdled the sumptuous desserts, sustained by a motley scrum of B-list celebrities (since no economist after Keynes would ever attain the cultural name recognition of an Arnold Swarzenegger, or a Bob Dylan, or even a Malcolm Gladwell) hoping to enjoy a frisson of safe transgression; their jollity tempered by a caution that it was prudent to downplay any concrete divergences from the economic orthodoxy that, after all, had granted them their modicum of fame in the first place. None of the participants evinced the slightest unease in their embrace of the dogma that nothing that had transpired in the last seventy-five years had moved the goalposts of allowable economic controversy away from those supposedly positioned by John Maynard Keynes and Friedrich Hayek. Many speakers openly delighted in conjuring the Shade of Maynard in those hallowed halls. Surely it had been fatuous of me to hope INET might have provided a platform for any authentic divergent strains of economic thought, given that those glitterati would have avoided the conference like the plague if it had been stocked up with post-Keynesians, Regulation School representatives, Institutionalists, and Minskyites, much less Chinese-style Marxists.9
But the nightmare scenario was not confined to INET or George Soros. It turns out to have been far more pervasive than that.
From the White Mountains to Mont Pèlerin
On March 5–7, 2009, the Mont Pèlerin Society (MPS) held a special meeting at Ground Zero of the global economic meltdown, New York City, to discuss the implications of the tremors for their political project. Around a hundred members and an additional hundred guests convened under the banner “The End of Globalizing Capitalism? Classical Liberal Responses to the Global Financial Crisis.” Back then, many titular heads of the neoliberal movement were dreading the possibility that the snowballing crisis might just be their own worst nightmare. After all, the prime event that had originally prompted the organization of the nascent Neoliberal Thought Collective [NTC] was the Great Depression of the 1930s. The initial motley crew of Friedrich Hayek, Ludwig von Mises, Lionel Robbins, Milton Friedman, and all the rest had endured the horror of being ridiculed and lambasted for their responses to the Great Contraction, relegated to the margins of discourse by the sheer misfire of the Economic Engine of Human Progress. They had huddled at Mont Pèlerin in 1947 to try and figure out how to intellectually redeem themselves. In many ways, the first generation had spent the rest of their lives living down the shame that had accompanied their disenfranchisement and defeat at the hands of John Maynard Keynes, FDR, scientists such as J. D. Bernal, a phalanx of market socialists such as Oskar Lange and Jacob Marschak, and a host of European political thinkers. So it was not pitched beyond the realm of possibility that, with the benefit of hindsight, the Third Generation Neoliberals would be in for a rough ride in 2009.
Once upon a time, such an emergency executive committee meeting of the NTC might have been the occasion for truly imaginative blue sky thinking, forging an optimal response to the impending collapse of their cherished worldview. Perhaps, in a rerun of the 1940s, the neoliberals in 2009 might have come up with some transformative new ways to think about the market, stealing some of the thunder of the left by combining previously statist concepts with a novel revision of the True Nature of market activity. To a historian, it is striking the extent to which the neoliberals have repeatedly taken ideas from the left over the last half of the twentieth century and twisted them to their own purposes. Perusing the papers from the New York conference, however, one finds instead mostly predictable platitudes and tired retreads about the wicked government causing the crisis.10
Deepak Lal raised an interesting question in his keynote address: why did the crisis occur when so many “Friends of the MPS” like Alan Greenspan and Jean-Claude Trichet were in charge of the world financial system, and hinted they may not have leaned sufficiently in favor of “Sound Money.” Niall Ferguson rallied the troops with the catechism that it must have been regulation that caused the crisis, and not some failure of the market economy, while also exploring his personal theme that somehow China might be to blame. Gary Becker floated the opinion that it might be better to do nothing in response to the crisis, rather than flail about with all manner of government remedies. (This book refutes that canard, when it comes to the neoliberals.) It seems the general mood of the conference was that neoliberals (the “classical liberal” moniker was a smokescreen to be discussed in later chapters) should pretty much keep doing what they had been doing all along, even if the crisis appeared a little scary. Other observers of the neoliberals noticed this soon thereafter: “And just like that, the idea-intoxicated American right vanished . . . Instead of reckoning with a starkly transformed global economy, conservative thinkers are reviving seventy-odd-year-old talking points from the Liberty League.”11
For some on the left, this betokened evidence of relative decline of the MPS from its postwar heyday, or perhaps the participants had been just caught unawares, like most professional economists. Nevertheless, three years on, it now looks as though the neoliberals have come through the crisis unscathed. Far from the economic crisis constituting the invigorating jolt of the 1930s redux for the Neoliberal Thought Collective, early returns seemed instead to have ratified their intransigence, repetitiveness, and lack of imagination. Now it confirms that they were right to stick to their guns, because, contrary to every expectation, nothing much has been changed by the crisis. But the neoliberals have not won by default—that would be a sorry interpretation of events. Neoliberals don’t let a serious crisis go to waste. Instead, the thought collective subsequently made a number of moves that cemented their triumph. This book aims to document the strategies, and survey their successes. Many of these activities involved the economics profession.
Ranging from the White Mountains to Mont Pèlerin, economists have proven exceedingly shopworn and hackneyed in their responses to the crisis. This opinion has congealed into conventional wisdom. However, this coagulation has had an asymmetrical effect upon the two ends of the political spectrum. Monotonous repetition seems to have fortified the right admirably well in weathering the crisis, whereas by contrast, it has delegitimated the left to an even greater degree than its rather parlous status during the decade of the Great Bubble. Beyond the tendering of excuses, there hovers the open question of to what extent the unexpected resurgence of the right after the crisis has grown out of the stock of neoliberal cultural infrastructure built up over the period from 1980 till 2008, and conversely, to what extent the left has been the author of its own rout. This phenomenon, I will suggest, needs to be examined much more closely.
Nothing substantial has been altered in the infrastructure of the global financial system from its state before the crisis.12 Government “reforms” have proven superficial at best in both Europe and the United States. Further post-2008 evidence of debilities, such as the “flash crash” of May 2010, the epic failure of the BATS IPO in March 2012, and the Knight Capital meltdown in August 2012 passed without serious concerted response, even though they suggest that market malfunctions run deeper than the conventional fixation over mortgage securitization and banking fraud. The coincidence of employment stagnation and persistent inflation has resurfaced for the first time in three decades, although the responsible agencies persist in obscuring the evidence. Bubbles have returned with astounding rapidity in commodities speculation (especially in oil) and in initial public offerings (such as LinkedIn and Fusion-io). The predominant focus upon government austerity programs as the central response to the crisis demonstrates that public discourse has degenerated to an analytical level that one would have recognized in the early 1930s. The MPS apparently has not suffered the ignominy of dramatic falsification of its cherished economic ideas; rather, it has been its opponents situated on the “level-headed left” that have collapsed instead. Given the palpable absence of innovative neoliberal analyses, one is hard-pressed not to suspect that one major source of weakness inheres in what passes for interventionist economic doctrine among the professional economic orthodoxy. But perhaps the debility runs even deeper than that.
Where There’s Smoke,
