This pushback from the banks was organized around a simple idea that had come in a “sudden illumination” in 1936 to an Austrian economist called Friedrich Hayek. Within a couple of years this idea had a name: neoliberalism. For many people, “neoliberalism” isn’t a serious term but a political swear word brandished by people on the Left against anyone to their right whom they don’t like. (It’s also not to be confused with the term “liberal,” which some in the United States seem to wield as a term of abuse against anyone to their left whom they don’t like.) The word “neoliberalism” has a particular history and meaning, which in terms of its practical effects has meant financial deregulation, privatization, and globalization actively promoted and protected by governments that have fallen under the sway of these ideas.
Neoliberalism is an outgrowth of classical liberalism, which dates back a couple of centuries. There’s political liberalism, which is all about citizens having equal democratic rights in a system of sovereign law, and there’s economic liberalism, which starts from Adam Smith’s “invisible hand,” by which free exchanges or trade in properly functioning—that is, unsabotaged—markets are supposed to make society better off overall. The more liberal (or free) the exchange, in this view, the better for society as a whole; government’s role is to provide basic functions like defense, to enforce property rights, and to keep a watchful eye out for monopolies, but otherwise to get out of the way. Political and economic liberalism are fairly separate realms, but in each case freedom is foremost.
Neoliberalism put these ideas on steroids and gave them a rather large twist. Its starting point was the theory that government inevitably amasses ever more power and heads toward tyranny. At the time Hayek had his sudden illumination, this fear was understandable. The Nazis loomed over Europe, and Soviet totalitarianism was just over the hill. The Thought Police from George Orwell’s hit novel Nineteen Eighty-Four, published in 1949, also hung like a leering specter over Western culture. Hayek began with the idea that competition in markets delivered efficiency and collective benefits for all. Then he took a giant leap of faith and argued that this conclusion could be, and even should be, true not just of markets and commercial exchange but of other aspects of life. What if you could reengineer society and laws into a giant market or set of markets, he wondered, using government scissors to cut the social fabric into separate fragments, then pitching these fragments into competition with one another? The simplest example of this is privatization, where governments sell off state assets to the private sector in the hope that they will compete and become more efficient. If you can achieve this, Hayek argued, then the market can become a tool for finally taming government, the handmaiden of tyranny.
Hayek’s most famous book, The Road to Serfdom, laid this all out. Competition and the price system were the only legitimate arbiters of what was good and true, he said. And this soon became a neoliberal mantra. Cut taxes, deregulate, privatize, and launch all these pieces into competition with one another, then let it all rip. Not just banks or companies, but also health services, universities, school playing fields, environmental protection bodies, prisons, military capabilities, regulators, lawyers, shell companies, and the kitchen sink—all of it could be, should be, must be, shoehorned into the same competitive framework, to be sorted and judged by the only true test of virtue: the test of the market. In this framework, explained the writer Stephen Metcalf, humans are transformed from being “bearers of grace, or of inalienable rights and duties,” into ruthless profit-and-loss calculators, sorted into winners and losers. Society is no longer a space for political debate or collective action but a universal market that harnesses the benefits of competition to work as a giant, all-knowing mind, a sort of organically emerging intelligence in which the market constantly figures out the best way to distribute scarce resources among competing priorities to deliver the greatest good for all. Government is, in this view, not necessarily weakened but instead reengineered as an agent for making markets penetrate as deeply into society as possible. Things like citizenship and traditional notions of justice and even the rule of law are swept aside and replaced with technocratic measures like productivity, risk, and returns on capital. Neoliberalism is “the disenchantment of politics by economics,” as the British political thinker Will Davies put it: “an attempt to replace political judgement with economic evaluation.… [T]hrough processes of competition it becomes possible to discern who and what is valuable.” By doing so, he concludes, “competition, competitiveness and, ultimately, inequality, are rendered justifiable and acceptable.”14 This was a wholly new notion of justice. A more revolutionary idea is hard to imagine.
The neoliberal revolution was born in earnest at a historic meeting of American and European intellectuals at Mont Pèlerin near Geneva in 1947, just a few years after the Bretton Woods summit. The meeting was attended by Hayek and many other famous economists and thinkers, including Milton Friedman, Ludwig von Mises, George Stigler, Frank Knight, Karl Popper, and Lionel Robbins. The meeting was financed by Switzerland’s three largest banks, its two largest insurance companies, the Swiss central bank, the Bank of England, and City of London interests.15 Hayek himself, after leaving the London School of Economics in 1950, “never held a permanent appointment that was not paid for by corporate sponsors.”
The ambition of the Mont Pelerin Society (MPS), born at that meeting, was utopian, even messianic, envisaging private-sector heroes overturning the dark forces of authoritarian state control. “We must raise and train an army of fighters for freedom,” declared Hayek, “to work out, in continuous effort, a philosophy of freedom.” Economic freedom would deliver political freedom. A tide of corporate money began to flow into a new network of radical think tanks, which pushed these ideas. This began as a trickle with the MPS in Switzerland but soon spread to London, with the launch of the Institute for Economic Affairs, which became immensely influential there, and then shifted rapidly further afield and offshore, buoyed by financial and corporate donations in each place. The MPS’s intellectual momentum morphed and branched into an international chain of think tanks and supporters, which in the United States would be guided by the ideas of extreme antigovernment thinkers like James McGill Buchanan and heavily funded by billionaire members of the family that founded the commodity trading firm Koch Industries. Globally, they would become the backbone of the Atlas Network, a syndicate of nearly five hundred think tanks and institutions promoting libertarian, anti-state ideas, also funded by myriad billionaires, millionaires, and financial and large corporate institutions. This loosely connected coalition would form the engine of neoliberalism and the pushback against the Keynesian consensus.16
In terms of raw power, neoliberalism takes authority away from politicians and hands it to economists and to moneyed interests. At the apex of this new form of authority sit the financial players who buy and sell global companies, exerting a kind of veto power over governments that have drunk the neoliberal elixir. Perhaps the most pervasive and insidious outcome of this ideology is the broad-based phenomenon I mentioned in the introduction, financialization, a central element of the finance curse, which involves not just the growth in size of the financial sector but also the injection of financial techniques and competition into pretty much anything that can’t be nailed down—and a lot that can be.
These ideas enraptured growing numbers of people, including a British woman called Margaret Roberts, the president of the Oxford University Conservative Association. Half a century later, long after she had married, taken the surname Thatcher, and become Britain’s first female prime minister, she would call Hayek’s Road to Serfdom the book “to which I have returned so often.” The ideas would also percolate through to Ronald Reagan, who famously declared that “government is not the solution to our problem; government is the problem.” As the historian Nancy MacLean and the journalist Jane Mayer have documented, these ideas were carefully networked, targeted, and funded in the United States and beyond, to help produce the money-tainted political systems we have today.17
But the ideas’ influence