Published: 15 March 2021
Draft Topic for our ‘Transformation, a Manifesto for Democratic Socialism’
(will appear as an Appendix)
Suggested improvements welcome at the Facebook discussion page link (available at the end of the text)
After capitalism’s ideology crashed in 1929, a group of right-wing economists began to renew the ideology and devise a programme to implement it. In the following decades they successfully organised to spread their ideas across the capitalist world.
The ‘Liberal’ Days of Capitalism
In its early days, capitalism operated in a free-for-all, lawless situation. Workers had no rights. Industrial safety was non-existent. Child labour was widespread. And the employers had the whip hand. This was the period of laissez-faire capitalism – officially known as the ‘Liberal’ economic era. Based around a minimal state, it was called Liberal because it stood for ‘free’ trade, ‘free’ markets, and ‘free’ enterprise. And above all for ‘freedom’ from government interference. Of course, all this ‘freedom’ only applied to the rising capitalists and the wealthy. Not to the workers and the poor. They were only ‘free’ to work for a master. And to compete with other workers for the privilege. Just as long as they didn’t join forces and fight the masters collectively.
All this so-called ‘freedom’ was a reaction to feudalism where production and trade was heavily regulated. In this feudal system the monarch awarded production and trading monopolies to favourite aristocrats and merchants. While workers were often organised into powerful guilds in order to control the supply of labour and production. And thereby to protect their living standards.
Under the laws of the new capitalist system, the old restrictions on ownership and trade were increasingly removed and the guilds abolished. This allowed capitalist enterprise to flourish. And provided dangerous and poorly paid jobs for the desperate working people who were being forced off the land into the towns.
It was only when the workers became organised and fought back through their trade unions, that improvements were forced on the bosses and their society. Step by step, laws were introduced to ease the conditions of the worker both at home and in the workplace. Eventually, these contributed to an expansion of public services in housing, health and education. Nevertheless, laissez-faire capitalism continued to be the ideology that dominated capitalist government economic policy until the Second World War.
Under this ‘Liberal’ economic system, in each area and sector certain capitalists emerged on top of the heap. These ‘winners’ began to use their advantages of scale and profitability in order to tilt the odds in their own favour. As the 19th Century advanced, ownership became more and more concentrated. And national monopolies and oligopolies became the norm rather than the exception. And arm in arm with this came monopolistic practices and large scale corruption.
The same process developed on an international level. The most successful capitalist countries became dominant throughout the globe. In first place was Great Britain, followed by France and Holland. Soon afterwards, the newly united Germany, and post Civil War America began their rise. In Europe this process manifested itself in a scramble for colonies in Africa and elsewhere. And the creation of various empires to manage them. In this way, individual European powers could gain guaranteed access to raw materials and cheap labour. Plus captive markets for their products.
Capitalism’s intensifying international competition led inevitably to friction. And an arms race between the leading capitalist nations. This culminated in the First World War in 1914 and the deaths of tens of millions.
Another feature of capitalism that made a marked appearance was the regular cycle of upturns and downturns in business activity. This made life gravely uncertain for working people as they faced regular spells of unemployment and hardship. Instability had been an integral part of capitalism since its inception in the 18th Century. But from the 1870s onwards the downturns became more generalised. And more severe. These downturns reached their peak in the economic Crash of 1929. The Great Depression that followed caused the spread of mass unemployment and poverty across the advanced world.
The Era of State Intervention
The Great Depression in the 1930s shattered faith in the old Liberal hands-off approach to economic management. The near collapse of the economies of the advanced capitalist countries was bad enough. But the failure of governments to respond to the crisis. And thus to allow mass unemployment to grow. Thoroughly discredited the Liberal laissez-faire approach. This is what led to the election of President Roosevelt in the Fall of 1932. And brought forward his programme of public works and state intervention to combat the disaster. However, key sections of the American ruling class bitterly resented these measures. The big capitalists even attempted in 1934 to organise a military coup against Roosevelt. A coup that fortunately was forestalled in time. In spite of this, Roosevelt then went on to become the most popular President in America history. Serving for 12 years until his death just into his fourth term.
Meanwhile, in the UK the continuing inaction of the British government caused a major adjustment in economic thinking among some sections of the capitalist elite. Economist John Maynard Keynes came to represent the new trend with the publication in 1936 of his influential work ‘The General Theory of Employment, Interest and Money’. Among other things, Keynes proposed that governments had a duty to step in during economic downtowns with a range of measures including public works in order to reduce unemployment. Plus increased spending to stimulate demand and boost economic activity.
This new popularity of state intervention also included elements of state planning. State Planning in the capitalist West had become increasingly accepted in light of the dramatic success of the Soviet Union’s Five Year Plans which began at the end of 1928. Even Hitler’s Nazis cashed in on the idea, introducing Four Year Plans through which they put the unemployed to work on infrastructure and manufacturing for rearmament.
All this was strongly reinforced in the Second World War with capitalist governments introducing wide-scale emergency powers. These were needed in order to direct businesses to produce what was needed for the war effort.
Finally, in the period after the Second World War the policy of state intervention became mainstream. The expectations of working people had risen greatly after the long hardship of the Great Depression and the War. This led to the election of majority social democratic governments in many parts of Europe. These governments introduced many progressive reforms and widespread public ownership. Even in the United States, the public mood forced the Truman administration to implement high taxation on the rich. And to continue the pro-trade union policies of the previous Roosevelt government. Later, the Republican Eisenhower Presidency that followed Truman took on the task of building a massive expressway network across America.
The Soviet Union & the ‘Post War Settlement’
A major pressure on the ruling classes at this time was the appeal of the Soviet Union, which emerged greatly strengthened out of the Second World War. Indeed, the existence of the USSR and its competing social system appeared to threaten the very survival of capitalism. In such circumstances, concessions to the workers by the ruling elites was a far more preferable alternative to revolution. In this way, a ‘Post War Settlement’ was established in which welfare states were created. Public ownership of basic industries was tolerated. And governments agreed to include the newly powerful trade unions in national economic management. Last but not least, the old empires began to be dismantled in the face of widespread anti-colonial revolt.
The Rise of Neoliberalism
The version of capitalism we live under today, with its growing inequality, corruption, insecurity, and widespread privatisation is powered by the ideology of Neoliberalism. ‘Neo’ means new or modified. In this case, it meant a modified form of liberalism. One that accepts some element of state intervention. But not state intervention to protect working people or develop production. No. It is a form of state intervention to support competition and ‘free markets’. And to roll back public ownership and public services by cutting them. Or by selling them off to private owners. As such, this new ideology represents a counter-revolution consciously designed to reverse all the historic gains made by working people. An ideology aimed at restoring power and wealth to the capitalist elite.
This new ideology began to first dominate capitalism with the victory of Margaret Thatcher as British Prime Minister in 1979. And with the election of Ronald Reagan as US President the following year. Neoliberalism has since spread across the capitalist world and come to dominate it. Its rise to prominence has gone hand in hand with the massive expansion of globalisation, which it helped to facilitate. Even the Great Recession of 2008-9 which neoliberal policies clearly caused, has not stopped the neoliberal juggernaut. It continues to deepen its impact in one capitalist country after another.
The Origins of the Neoliberal Ideology
The first call for a revision of classical liberalism, and a change in the relationship of the market to the state, goes as far back as 1921. It supposedly appeared in a book by Eli Heckscher, the Swedish economist, entitled ‘Old and New Economic Liberalism’. Heckscher later became a founder member of the organised neoliberal movement. The actual term ‘neoliberalism’ was apparently first coined in 1925 by Swiss economist Hans Honneger in his ‘Trends of Economics Ideas’.
However, the first real stirrings of this new ideology began in mid-1930s Paris. It emerged in the period of the timidly left-wing Popular Front government which ruled France from 1936-37. IN particular, right-wing economists and politicians were becoming increasingly alarmed by the worldwide spread of government intervention. Along with the growing popularity of the concept of a planned economy.
Louis Rougier, a French philosopher, took the initiative to launch the new neoliberal movement. Rougier believed that the increasingly popular support for state intervention could only lead to bureaucracy, inefficiency and the curtailing of personal freedom. In opposition to this he embarked on a campaign for a much more limited role for the state – solely as a regulator of the market and encourager of free competition. His initiative was squarely aimed at developing a new ideology through publishing and intellectual debate. To this end, he participated in the founding of The Librairie de Médicis publishing house in 1937. Its motto was that “a change in minds is always closely followed by a change in facts.” 
From 1937 to 1940, around forty books and brochures were published by the Librairie including three books on the USSR. Other key books included: ‘Socialism and The Illusions of Protectionism and Autarky’ by Ludwig von Mises. ‘Planned Economy and the International Order’ by Lionel Robbins. And ‘Planned Economy in a Collectivist Regime’ with an introduction and conclusion by Friedrich Hayek.
“By having its own publishing house, neoliberalism already became partly institutionalized and, above all, obtained a recognizable name.”
Louis Vallon, a supporter of the new approach, explained the publishing strategy: “A few months ago, the Librairie de Médicis published a string of works attacking the fundamental theories of socialism, syndicalism, and collectivism, and advocating the implementation of a new liberalism.”
Also in 1937 came the publication of ‘The Good Society’ by Walter Lippmann, the influential editor of the New York Herald Tribune. Lippmann not only opposed fascism and communism as examples of state power acting against the market. He also criticised the old traditional free-for-all ‘laissez faire’ form of liberalism. Instead he argued for a society in which the market was strictly regulated by the state in order to maintain competition and an even playing field for the competitors.
The success of Lippmann’s book provided Louis Rougier with a credible platform on which to organise a major international Conference. This was held from August 26-30 in Paris in 1938. In addition to Lippmann himself, the conference was attended by a wide range of influential neoliberal co-thinkers including Ludwig von Mises, Alexander Rustow and Wilhelm Röpke from ‘the Austrian School’. Plus Friedrich Hayek and Michael Polanyi both based in Britain.
There were significant differences expressed in the Conference but it managed to agree the Neoliberal name for the movement. And a general conclusion that “the state must be responsible for determining the legal regime that serves as a framework for the free development of economic activities.” The Conference also decided to establish an international neoliberal organisation: the International Center of Studies for the Renovation of Liberalism. The mission of this new Centre was “to promote neoliberalism, by circulating publications and organizing public and private demonstrations.”
Five or six public meetings were subsequently organised by the new Centre in France during 1939. And one issue of its magazine published. Plans were made for the establishment of additional foreign divisions in the US, UK and Switzerland. But the Second World War cut these plans short.
The Neoliberal Movement Resumes
Once the Second World War ended, the neoliberal movement was able to resume its activities. Thus, a number of the prewar faithful came together from 1-10th April 1947 in a ski resort hotel at Mont Pelerin in Switzerland. Prime mover of the meeting was Friedrich Von Hayek, an Austrian aristocrat and economics professor who had penned the best-selling ‘The Road to Serfdom’ in 1944. Hayek invited thirty-nine scholars, mainly economists, to the meeting to continue the discussion. And to spread the developing neoliberal doctrine. Among the attendees was another Austrian aristocrat and economist Ludwig von Mises who had been Hayek’s mentor. Also present were George Stigler and Milton Friedman both of whom went on to win the neoliberal ‘nobel’ prize for economics. An unusual addition was the father of scepticism, Karl Popper, who later left the movement in disgust. Most notably absent at this first meeting was Louis Rougier, the French philosopher who had initiated the movement in 1936. During the War he had disgraced himself by acting as an intermediary between the pro-Nazi French Vichy regime and Great Britain. And for subsequently trying to defend the disgraced fascist French leader, Marshall Petain.
The meeting in Switzerland agreed to establish itself as the Mont Pelerin Society (MPS) and to meet regularly which it has done on a biannual basis ever since. The founding statement of the Mont Pelerin Society was both a political and economic declaration against the threat of state intervention in both Social Democracy and the Soviet Bloc. On one side it focused on a conservative view of the threat to freedom of speech posed by the growing strength of the Soviet Bloc and the wider socialist movement. On the other it reasserted the need for private ownership and the market as a bulwark against state domination.
Two years after its founding, Hayek offered a mission statement for the new Society:
“We must be able to offer a new liberal program which appeals to the imagination. We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia… which does not confine itself to what appears today as politically possible. We need intellectual leaders who are willing to work for an ideal, however small may be the prospects of its early realisation. They must be men who are willing to stick to principles and to fight for their realisation, however remote.”
The new neoliberal movement did not set out with a short-term perspective. Rather they recognised that it would take at least a generation to develop into a serious intellectual and political force. They then set about applying their new ideology in a practical way to the world.
As the 1950s progressed, neoliberals began to draw on new ideas in fields such as individual and mass psychotherapy, game theory, military strategy etc. And to use new techniques such as surveys and computer analysis. The warped, self-serving conclusions that they came to was that every individual was effectively alone and competing with everyone else. That everybody was solely motivated by selfish motives and involved in a battle for advantage over the rest. That ideas of cooperation and solidarity were hopeless attempts to counter these basic aspects of human nature.
The fact that human beings are dialectical creatures that possess both positive and negative impulses was ignored by them. Or that human society is based on both cooperation and competition. Thus, the neoliberals set out to build a society that was almost entirely built on and encouraged personal greed and competitive advantage at the expense of others. And continually sought to strip the laws and institutions of society of any cooperative, sharing or giving aspects. Believing that these ran counter to human nature, despite the fact that they directly reflected the positive aspects of human nature.
In summation, the main contribution of the neoliberal movement was the development of a new far more aggressive pro-capitalist ideology. They organised a ‘crusade for capitalism’ in contrast to the apologetic justifications that were often current in the 1950s and 60s. In doing so, neoliberalism openly rejected the concepts of economic fairness or justice. It confidently trumpeted the drive for profit and defended selfishness. The famous ‘Wall Street’ movie phrase “greed is good” came right out of its foundry. In so doing, it opposed business ethics or corporate social responsibility. And in its place argued that companies only had a responsibility to maximise the return for their shareholders. Furthermore, it defended the inequality that private enterprise created on the basis that the market was merely rewarding winners and penalising losers.
A Counter-Revolutionary Ideology
In political terms, neoliberalism was a counter-revolutionary ideology that sought to overturn the gains that working people had won in a century of struggle. Unlike classic liberalism with its relatively hands-off approach to business and politics, the new neoliberal ideology not only argued for state intervention to ensure the operation of a free market. But also set out to determine in detail how to cut back the massively increased role of the state in every area possible. To this end, Hayek himself declared that the principal intention of the reconvened neoliberal conference in 1947 was to discuss how to fight the “state ascendancy and Marxist or Keynesian planning sweeping the globe”.
However, neoliberalism did not limit itself to rolling back the state. It sought to go further and apply the power of the market to virtually every aspect of society. In the early days of capitalism, classical liberalism in the economy existed side by side with other powerful institutions. These included the aristocracy, the churches, old customs and practice etc. For neoliberalism there were to be no such limits. No stone would be left unturned in the drive for more competition and more profit.
For the neoliberals the need for a thorough renewal of capitalist thinking and practice was clearly overdue. Events in the previous decade had moved even further away from them. Indeed, the reforms of the post-war Liberation seem to have cemented the victory of the planned economy and state intervention. The Soviet Union’s state bureaucratic version of socialism was being imposed throughout Eastern Europe which it now controlled. Widespread nationalisation was being introduced across Western Europe, alongside the creation of new public services and welfare state institutions.
All this further emphasised the weakness and isolation of the neoliberals. In this situation, the nascent neoliberal movement was clearly facing an uphill task in trying to reverse the massive trend towards state intervention. A task that must have appeared almost overwhelming to them. As participant Karl Popper put it: “The present position is one where we nearly despair.” *
Nevertheless, it was in this unpromising environment that the neoliberals set out “to discover ways in which free enterprise can replace many functions currently provided by government entities.” Their chosen agency, the Mont Pelerin Society, was designed as a scholarly organisation on one side, and an influence network on the other. Over the following decades it successfully sought to achieve its ambitious goal of changing economic thinking. It did this through a combination of book publishing, conferences and the establishment of a myriad of a hundred think-tanks. The latter included the Heritage Foundation, the Hoover Institute, the American Enterprise Institute, the Cato Institute and many others in the US. In the UK they included the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. In time, this work led to the widespread penetration of educational institutions, business organisations and conservative political movements.
Of course, the neoliberals had great advantages. From the beginning they had rich backers. Their founding meeting in Mont Pelerin had been largely paid for by Credit Suisse, one of the Swiss banks that had helped the Nazis store money and valuables stolen from their Jewish victims. Meanwhile, the Volker Fund had paid for the travel expenses of the US participants who made up over half of the attendees. Plus, they had important allies in Western governments. In particular, they were helped by the outbreak of the Cold War against the Soviet Bloc. This had begun side by side with the growth of the neoliberal movement. We know that the far right Dulles brothers who controlled the US State Department and the newly formed CIA, favored the appearance of the neoliberal movement. To what extent this came in the form of financial and organisational support is unknown as the relevant papers are still classified (a significant fact in and of itself).
Equally important was the growing support from the right-wing of big business and the wealthy elites, especially in the United States which in the post-war period had become the dominant economy and the citadel of capitalist ideas. This was despite the evident economic success of the Post-war Settlement with its state interventionist approach. A success that evidently contradicted much of the neoliberal arguments. Nevertheless, reactionary capitalist elements still wanted to reverse the reforms that favoured working people. And they found in the ideology of the neoliberals a justification for not just stopping these reforms, but in reversing them.
Thus, towards the end of the 1950s and into the 1960s more and more of these reactionary elements began to sponsor and subsidise the activities of the neoliberals. To this end, a network of right wing intellectuals, racist politicians and wealthy sponsors set out to build a powerful conservative movement in the United States. As has been revealed from the archives of leading American neoliberal James Buchanan, consciously, step by step, they penetrated academia. Even inventing the fake Nobel economics prize which of course they mainly awarded to their leading devotees. Next came the media, the legal and justice profession, big business, relevant government institutions, and political circles.
Evolution of an Ideology
An ideology only becomes important when it fits in with or appears to further the economic or social interests of a class. Or at least a significant social group in society.
The Socialist ideology of Karl Marx and Frederick Engels gained mass support in the 19th and 20th centuries because it outlined and championed the interests of the growing proletariat and its organisations. On the other side of the class struggle, the same was true with the neoliberal ideology. It rapidly came to be seen as the most uncompromising and militant voice for capitalist interests.
However, in the process of becoming more powerful or more popular an ideology may evolve into something significantly different from its original conception. In important ways this is what has happened to the ideology of neoliberalism. It began as an attempt to halt and reverse the trend towards top-down, state-dominated economy and society. As such it declared itself for freedom and against dictatorship. And against monopolies and corruption. It was in this guise that neoliberalism initially attracted a key range of economists, philosophers, politicians etc.
But the neoliberalist movement soon attracted another element of support. Namely, right-wing industrialists and employers who saw in it a means of defeating the power of their employees and working people generally. And thereby to increase their share of society’s income which they believed was being unjustly siphoned away from them in the Post-War Settlement. A Settlement they had never accepted.
These wealthy and powerful interests had the money to greatly advance the cause of the neoliberals. And in the course of doing so they began to call the tune. Naturally, these big companies and the rich individuals behind them had no interest in freedom for the masses. And rather than opposing dictatorship, they supported brutal military despots all over the world when it suited their own interests. Nor did they care about monopolies or corruption. On the contrary, the striving for monopoly power and the use of corruption to achieve it, was their day-to-day means of operation.
In time, the ideology of neoliberalism, and even more its practice, favoured the interests of the big companies and served the wealthy elites. So, far from being the champion of small businesses in open and highly competitive markets, neoliberalism ended up becoming a mouthpiece for big business. Defending monopoly and turning a blind eye to large-scale corruption.
For example, leading neoliberal James Buchanan, in promoting the cause of incentives and self-interest, openly argued that ‘politicians for sale’ were far more preferable for society than politicians who genuinely believed in trying to help the public. No wonder the neoliberals and their billionaire backers went on to become masters of the art of political influence and crooked lobbying. An approach to financial manipulation of politics that reached its culmination with the Citizens United case in the US Supreme Court. This abolished all limits on company political spending and cleared the way for today’s flood of political corruption.
There are those who argue that the neoliberals were always charlatans and never really believed in their own arguments. That they used their propaganda for freedom and competition as a cover for a reactionary pro-capitalist and anti-working class agenda. Certainly, the fact that neoliberalism was first built up in the 1950s and early 1960s in order to campaign against the prevailing Post-War Settlement – a time when American and European capitalism was achieving its fastest increases of growth and living standards – certainly raises a lot of questions. Why would a pro-capitalist movement be trying to undermine the capitalist mainstream during capitalism’s most successful period?
That said, whether the early neoliberals really believed their own bullshit is not the crucial question. What is more important is that neoliberalism became a convenient ideological justification for a series of proposals that helped dramatically produce wealth for the wealthy and poverty for the rest.
The 1970s World Economic Crisis
An increasing crisis of capitalist profitability became apparent in the mid-1960s provoking a fall in investment and a steady rise in inflation. This provided the breakthrough the neoliberals needed. These problems created an economic crisis that forced the United States under President Nixon to introduce emergency measures. These included controls on wage and prices; surcharges on imports; and the abandonment of the direct international convertibility of the United States dollar to gold.
However, none of these measures solved the problem. A world economic crisis broke out in 1973. A crisis that brought the continuous expansion of production and trade in the capitalist world to a shuddering halt. Unusually, the international economy was a hit by ‘stagflation’, a strange combination of high unemployment and inflation. According to the Keynesian policy of state spending to offset downturns, such things were not supposed to happen at the same time. In particular, the Keynesian policy was increasingly blamed for artificially boosting demand and creating inflation. An issue that became a major problem in the following years. To counter inflation, the neoliberals offered a ‘Monetarist’ alternative in which they proposed cuts in money supply and public spending; and wage restraint.
Neoliberalism Put into Practice
The first notable practical application of neoliberalism was in Chile after the right-wing coup in September 1973 that overthrew Salvador Allende’s Popular Unity government. Pinochet, the vicious new dictator of Chile understood the need to reverse the left-wing reforms of the Popular Unity coalition. But he was unsure what to put in their place. For this he turned to an economic plan known as El Ladrillo which had been secretly prepared before the coup. This plan was drawn up in May 1973 by economists who opposed Salvador Allende’s government together with the American neoliberals at the University of Chicago. This was the department which became famous as the Chicago School of Economics under Milton Friedman. The Ladrillo plan was fully supported by America’s CIA which was itself helping to prepare the coming coup.
The Plan proposed reforms which included making the Central Bank independent; cutting tariffs and taxes on business and the rich; along with privatising the state pension system, state industries and banks. All neoliberal policies that we are very familiar with today. Pinochet’s stated aim at the time was to “make Chile not a nation of proletarians, but a nation of entrepreneurs“.
A series of ‘Chicago Boys’, as they became known, visited Chile to advise Pinochet. The results of the reforms were very mixed. The most obvious effect was to drastically increase unemployment and reduce workers’ wages. It was backed up by mass arrests, imprisonment, torture and assassination. Similar economic and repressive policies were applied by the Argentinian dictatorship from 1976 onwards.
The 1970s also saw neoliberal ideas and the think-tanks that promoted them making steady progress in the more advanced countries. Of particular note, was the election in 1975 of Margaret Thatcher, a fanatical follower of neoliberal ideas, as leader of the Conservative Party, Britain’s main opposition party.
In the following year there was a major run on Britain’s currency. To cover this the Labour Government applied for a massive loan from the International Monetary Fund. Major cuts in spending on public services and wage restraint were the bitter price for the loan, conditions that were to become the norm for future loans to other countries In the teeth of strong opposition from the ranks of the Labour Party and the trade unions, the Labour Prime Minister, James Callaghan, declared the death of Keynesian government intervention. In a speech to the Party Conference in late 1976 he declared that: “We used to think that you could spend your way out of a recession, and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists.”
Tony Crosland, another key figure from the Labour Leadership, accompanied the announcement of major cuts in public spending with the brutal statement: “The party is over.” All this laid the ground for ‘the full neoliberal experience’ when Thatcher and her Party went on to be elected to government in 1979.
A little over a year later another supporter of neoliberalism, Ronald Reagan, was elected President of America. And set about implementing the neoliberal agenda with gusto. Thus, as the 1980s opened, we had two leading capitalist countries advocating the new capitalist ideology. An ideology whose policies of liberalisation of finance and markets; and privatisation and deregulation, were to greatly facilitate the massive expansion of globalisation that was opening up.
These neoliberal policies were also implemented across the developing world as neoliberal economists came to prominence in the World Bank and the International Monetary Fund. To begin with, poorer countries were encouraged to take out high interest loans from both institutions in order to cope with their increasing economic problems. But when the loans came due they found themselves unable to pay. And had to return to the World Bank and the IMF to renegotiate the loans. In the renegotiations severe conditions were imposed as part of new Structural Adjustment Programmes – the Western financial institutions insisted on austerity programmes which reduce subsidies to the poor, cut wages and welfare programmes. These caused great suffering in many poorer countries during the 1980s and 90s, especially in Latin America and Africa. Ironically, the chickens came home to roost in the richer countries, especially in Europe, when the same austerity programmes were applied in the years following the 2008-9 Great Recession.
The Structural Adjust Programmes were usually accompanied by privatisation, deregulation and changes to investment and ownership rules. These were designed to make it easier for foreign companies to operate in the poorer countries with their cheaper labour and business costs. This greatly helped a massive expansion of foreign direct investment from the advanced countries to the developing world. And resulted in a major transfer of production and jobs from the wealthier nations to the poorer ones.
Meanwhile, the neoliberal agenda spread throughout the capitalist world and came to dominate academia, economics and politics. Even the neoliberal-caused Great Economic Recession of 2008-9 failed to stop the neoliberal juggernaut. In the absence of a countervailing ideology and movement from the Left, neoliberalism continues to deepen its grip, most notably in the European Union as well as in important developing countries like India and Brazil.
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Footnotes (to be finished)
On Paris – (‘The Origins of Neoliberalism in France – Louis Rougier and the 1938 Walter Lippmann Conference’ by François Denord, in Le Mouvement Social Volume 195, Issue 2, 2001, pps 9-34, https://www.cairn-int.info/article-E_LMS_195_0009–the-origins-of-neo-liberalism-in.htm#)
1949 paper called “The Intellectuals and Socialism,” by Hayek
K. Popper quoted in: ‘The Road From Mont Pèlerin’ by Philip Morowski and Dieter Plehwe, p.19 PDF, https://uberty.org/wp-content/uploads/2015/10/mt-pelerin.pdf