Two views of Liberalism: New Deal – New Liberalism and the Rise of Neoliberalism

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Began reading yet another interesting history of the rise of neoliberalism. This time by two Frenchman Pierre Dardot and Christian Laval in The New Way Of The World: On Neoliberal Society. Like many of these histories and critiques of neoliberalism they take us on a cruise down history lane. This time they pick out the threads of a crisis in liberalism during the 19th Century. Pitting Bentham and his progeny in Tocqueville, J.S. Mill, J.A. Hobson, and A.G. Wagner against Herbert Spenser and Auguste Comte.

Two types of liberalism would vie with each other during this period. The first based on utilitarian voluntarism and state interventionism (Tocqueville and Mill), and the other based on the principle of competition and non-interventionist policy – or, better known under the rubric of ‘Social Darwinism’. These two forms of liberalism by the 1930’s would be defined under various names and platforms that would eventually come to be known as the ‘New Liberalism’ and ‘Neoliberalism’. The New liberalists defined by both Karl Polyani and John Maynard Keynes would form the backbone of F.D.R.’s New Deal of strong central government, state intervention, and a large intervention into and creation of a safety net for society at large. The base motto for this was as Keynes put it in his essay ‘The End of Laissez-Faire’ (1926): how to save from liberalism itself what could be salvaged of the capitalist system.

Having recalled Edmund Burke’s statement,  and Bentham’s distinction between ‘agenda’ and ‘non-agenda’, Keynes wrote: ‘Perhaps the chief task of economists at this hour is to distinguish afresh the Agenda of government from the non-Agenda; and the companion task of politics is to devise forms of government within a democracy which shall be capable of accomplishing the Agenda.’ (ibid. KL 850) Against Spenser, Comte and other social Darwinist Keynes wrote:

The economists were teaching that wealth, commerce, and machinery were the children of free competition – that free competition built London. But the Darwinians could go one better than that – free competition built man. The human eye was no longer the demonstration of design, miraculously contriving all things for the best; it was the supreme achievement of chance, operating under conditions of free competition and laissez-faire. The principle of the survival of the fittest could be regarded as a vast generalisation of the Ricardian economics. (ibid. KL 854)

So under such thinkers as Karl Polyani and John Manard Keynes the New Liberalism sought to control economic forces in order to avoid social and political anarchy, reformulating the question of the agenda and non-agenda in a way conducive to political intervention. The state was allocated a fundamental regulatory and redistributive role in what is also presented as a ‘liberal socialism’. (ibid. KL 873)

John Dewey in Liberalism and Social Action (1935), demonstrated the powerlessness of classical liberalism to realize its project of personal freedom in the nineteenth century, incapable as it was of making the transition from the critique of old forms of dependence to a social organization wholly based on liberal principles. He attributed to Bentham the merit of having spotted the major threat to political life in modern societies. The democracy he wanted to establish was designed to prevent politicians from using their power in their own interest. (ibid. KL 904)

Hobhouse, Keynes and Dewey represent a current, or rather a diffuse milieu, of the late nineteenth century and early twentieth century, at the intersection of radicalism and socialism, which endeavoured to think through a reform of capitalism.  The idea that politics is guided by a common good, that it must be subjected to collective moral goals, is essential to this current – which accounts for its potential intersection with the socialist movement. Fabianism, via journals and circles, forms one pole of these encounters. But the new liberalism must above all be reintegrated into the history of British radicalism. Hobson must be taken seriously when he says he wants ‘a New Utilitarianism in which physical, intellectual, and moral satisfactions will rank in their due places’. (ibid. kl 913)

These men along with Polyani would defend a form of interventionist voluntarism drawing on the most diverse ideologies, its logic involved ‘protecting society’. This movement of reaction against the destructive tendencies of the self-regulating market assumed two aspects: national trade protectionism and social protectionism, which was established in the late nineteenth century. (ibid. 951)

Yet, during this same period a faction within this new liberalism would begin to split off and formulate another form of interventionist policy, the intervention for market creation against the intervention for societal protection, the ‘movement’ and ‘counter-movement’ of a divergent liberalist agenda would arise. But there was a third variety that would sneak by in the gaps: the intervention for market operation. Market operation intervention, intended to ensure the self-regulation of the market, sought to enforce respect for the principle of competition that was to govern it. (ibid. KL 978)

As Walter Lippmann would later say of it,

Strictly, economic liberalism is the organizing principle of a society in which industry is based on the institution of a self-regulating market. True, once such a system is approximately achieved, less intervention of one type is needed. However, this is far from saying that market system and intervention are mutually exclusive terms. For as long as that system is not established, economic liberals must and will unhesitatingly call for the intervention of the state in order to establish it, and once established, in order to maintain it. The economic liberal can, therefore, without any inconsistency call upon the state to use the force of law; he can even appeal to the violent forces of civil war to set up the preconditions of a self-regulating market. (ibid. KL 987)

What both forms of liberalism discovered in common was a common enemy during the 1930’s: totalitarianism, or the destruction of liberal society. No doubt this is what motivated them to fashion a discourse that was simultaneously theoretical and political and which conferred legitimacy, form and meaning on government intervention – a new discourse that generated a new governmental rationality. (ibid. KL 1022)

During its heyday the new liberalism one of whose late, most developed expressions at the level of economic theory was Keynes’s, consisted in re-examining the whole set of legal, moral, political, economic and social means for realizing a ‘society of individual liberty’ benefiting all. It might be encapsulated in two propositions: 1. The state’s agenda must go beyond the boundaries imposed on them by laissez-faire dogmatism, if it wishes to safeguard the essential benefits of a liberal society; 2. These new agenda must practically challenge the confidence hitherto reposed in the self-regulating mechanisms of the market and faith in the justice of contracts between supposedly equal individuals. In other words, realization of the ideals of liberalism requires knowing how to make use of means that are seemingly alien or opposed to liberal principles, the better to defend their implementation: labour protection legislation, progressive income tax, compulsory social insurance, active budgetary expenditure, and nationalization. But if such reformism envisages curbing individual interests the better to protect the collective interest, it only ever does so in order to better guarantee the real conditions for achieving individual goals. (ibid. KL 1028)

I’ll deal at length in coming posts on Neoliberalism but for now it seems like a decantation of the ‘new liberalism’; in others, an alternative to the kinds of economic interventionism and social reformism advocated by the ‘New Deal. It was largely in agreement with the latter as regards the first proposition. But while neo-liberals accept the need for state intervention and reject pure governmental passivity, they are opposed to any action that might frustrate the operation of competition between private interests. State intervention even has the converse sense. It does not involve limiting the market through corrective or compensatory action, but developing and purifying the competitive market through a carefully tailored legal framework. It is no longer a question of postulating a spontaneous agreement between individual interests, but of creating the optimal conditions for the interplay of their rivalry to satisfy the collective interest. In this respect, rejecting the second of the two propositions mentioned above, neo-liberalism combines a rehabilitation of public intervention with a conception of the market centred on competition, whose source in the Spencerism of the second half of the nineteenth century.  It extends the turn that shifted the axis of liberalism by making competition the cardinal principle of social and individual existence. However, in contrast to Spencer’s phobia about the state, it recognizes that the market order is not a natural datum, but the artificial product of a political history and process of construction. (ibid. KL 1037)

1. Dardot, Pierre; Laval, Christian (2014-03-11). The New Way Of The World: On Neoliberal Society (Kindle Location 505). Verso Books. Kindle Edition.

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