Desmund Hui (’24) is the Chicago chapter head of the Platypus Affiliated Society. Representatives of the Thinker and Platypus recently engaged in a debate entitled “The End of American Democracy?” This letter is an adapted abridgment of Hui’s opening remarks.
Sir, The political crisis of neoliberalism has naturally taken the form of a crisis of the legitimacy of neoliberal economics.
The Left’s constant attacks on neoliberal economics for the last 40 years appear to have borne fruit with the Biden presidency. During the 2020 presidential campaign, Joe Biden proclaimed, “Milton Friedman isn’t running the show anymore!” The millennial Left’s dream, exemplified in the two Bernie Sanders presidential campaigns, of reintroducing “the S-word”–socialism–into mainstream American politics against the neoliberal consensus seems to have succeeded.
However, as the Biden administration stands wracked with the lowest approval ratings on its economic performance in living memory, this victory does not taste as sweet as first imagined. The dirty little secret about the “socialism” the millennial Left has peddled is that it has the same meaning for them as for Obama’s Tea Party opponents–big government New Deal liberalism.
But in this case, the millennial Left is doomed to fail, for neoliberalism was born in a struggle with the “socialism” introduced by the prior New Deal order–and history has deemed neoliberalism the victor. To truly understand neoliberalism and its relationship to socialism, we must return to the roots of neoliberalism in its original critique.
Fortunately, the University of Chicago provides an opportunity to do just that. Professor Casey Mulligan currently teaches a class on “The Economics of Socialism,” which I had the pleasure to attend in the fall quarter of 2023. Mulligan, drawing from the intellectual origins of neoliberalism in the Mont Perelin Society, reminds us that innumerable collective action problems arise from any form of collectivistic organization (free rider problems, metering problems, gluts, and shortages due to price controls) and that wherever the state has encroached on the market, from the Soviet Union even to the squeaky clean welfare states of the Scandinavian countries, the result is underwhelming at best and a complete economic disaster at worst.
All true! The only problem is that Mulligan doesn’t go far enough in his criticism of contemporary “socialism.” Mulligan in his class identified contemporary “socialism” with Marxism, and furthermore a Marxism that extends all the way back to Marx. But the Mont Perelin Society itself, whose first meeting was in 1947, was aware that the welfare state socialism they were confronted with in the mid-20th century was an entirely different beast to the Marxist-led socialist movement of the 19th century. As Ludwig von Mises, an astute reader of Marx, wrote in Omnipotent Government:
Marxians do not support interventionism. They recognize the correctness of the teachings of economics concerning the frustration of interventionist measures. In so far as some Marxian doctrinaires have recommended interventionism they have done so because they consider it an instrument for paralyzing and destroying the capitalist economy, and hope thereby to accelerate the coming of socialism. But the consistent orthodox Marxians scorn interventionism as idle reformism detrimental to the interests of the proletarians. They do not expect to bring about the socialist utopia by hampering the evolution of capitalism; on the contrary, they believe that only a full development of the productive forces of capitalism can result in socialism. Consistent Marxians abstain from doing anything to interfere with what they deem to be the natural evolution of capitalism.
Ludwig von Mises, Omnipotent Government, 1944
Indeed, while the Mont Perelin Society proclaimed in its founding statement that the solution to socialism was a renewal of belief in “the rule of law… private property and the competitive market,” they quickly discovered that to clarify what it meant to return to such classical liberal values was no easy task. In a now-infamous incident, von Mises, the arch-economist of the Austrian school of economics, midway through the first meeting of the society yelled, “You’re all a bunch of socialists!” before storming out of the room.
This gets at the difficulty of defending the concept of so-called “capitalism” against “socialism,” for capitalism is itself a socialist term. The term “capitalism” was coined in 1850 by French socialist Louis Blanc as “the appropriation of capital by some, to the exclusion of others.” Capitalism in its original socialist definition then did not refer to private property or free markets, but the appearance that these institutions were being monopolized by a capitalist class post-Industrial Revolution.
It would make no sense, for instance, for Adam Smith to defend the rule of law, private property, or free markets as a system of “capitalism” – in other words, a system in the service of capital or capitalists. Rather, for Smith the purpose of modern “commercial society” was to serve not capital, but labor.
Mulligan in his class as a criticism of statist “socialism” raised Friedman’s four ways of spending money, which demonstrates that only when you spend your own money on yourself are you incentivized to economize on and maximize the value of your purchases. Very good! But this only raises the question, what makes money yours? Is it because you hold it in your hand? But then any common thief or beggar could claim another person’s money was theirs. What turns mere possession into property is the claim to a legitimate right. But this only raises a deeper question, what is property?
Marx is usually applauded or mocked for his alleged advocacy of a labor theory of value, but the real author of this theory is of course Smith, who wrote, “Labour was the first price, the original purchase-money that was paid for all things.” For Smith, labor was the source of value because it was the source of cooperation; value was the expression of the powers of artisanal skill and the detailed division of labor harnessed to productive purposes. As Jean-Jacques Rousseau recognized in The Social Contract, one could only lay a legitimate claim to private property insofar as it served the general will of society; one has to justify their property to society, which in return transforms possession into right.
To take any foundation other than cooperative labor as the basis of private property is to immediately summon the state, for any right that cannot be justified on the basis of social cooperation can only be enforced through coercion. It is in this way that the demand for “free markets” in the abstract, totally disconnected from the right of labor, is not the opposite of state interventionism but can actually become a demand for state intervention. It is not for nothing that Murray Rothbard, an Austrian school follower of von Mises, in his infamous essay Milton Friedman Unravelled, accused Friedman of all people of “statism.” Friedman’s policy suggestions, such as his monetarism, intended to improve the efficiency of free markets, ultimately depend upon the state for enforcement and implementation.
Neoliberalism has thus turned out in practice to be more a continuation than a change in the statism introduced by the New Deal. The immense power the Federal Reserve has over the entire world economy today, where millions can become unemployed by the turn of a dial, is truly the triumph of “socialism.” Privatization has served not to liberate civil society, but merely outsource state functions to the private sector–think corporate enforcement of vaccine mandates. In capitalism, problems accumulate instead of being resolved.
— Desmund Hui (B.A. ’24)
*The views expressed in this article solely represent the views of the author, not the views of theChicago Thinker.
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