Reviewing Quinn Slobodian's Globalists: The End of Empire and the Birth of Neoliberalism (May 2023)

According to Quinn Slobodian in Globalists: The End of Empire and the Birth of Neoliberalism (2018), what connects empire (the Austro-Hungarian Empire) and European, specifically, Austrian neoliberalism is the supranational economism of capitalism. In other words, the greatest public good the state can contribute is the framework, preconditions, and laws that enable the free trade of goods and services and the free movement of capital within and across political borders. Social justice not only doesn't figure in but constitutes a threat to free and open commerce. Slobodian's timeframe, 1918 - 1995, begins with the demise of the age of European empire (though the British Empire remained) at the conclusion of the First World War and the creation of the World Trade Organization, the evolutionary endpoint of the General Agreement on Tariffs and Trade (GATT), which became part of the new international order after World War II. For neoliberals, the link between the Austro-Hungarian Empire and the World Trade Organization was supranational management of the conditions required to elevate economic interdependence above the level of fractious politics of and among sovereign nation-states.

In his biographical-cum-historical account of the origins of neoliberalism—occasionally footnoted to distraction—Slobodian uncovers the ancestry of neoliberalism as a body of economic thought and political action and follows its development, primarily in Europe, over the course of seven and a half decades through the 20th century. Early neoliberalism grew out of the Austrian School of Economics, a heterodox tradition of conservative (as opposed to progressive) economic thought. Among its leading exponents were the Austrians, Friedrich August von Hayek, Ludwig von Mises, and Gottfried von Haberler, the German economist, Wilhelm Röpke, and the British economist, Lord Lionel Robbins. Milton Friedman, perhaps the most recognized and celebrated neoliberal for North American audiences was generations later. At least some of these names will be familiar as will their strong advocacy for free market economics (free trade, competitive markets, property rights and capital mobility) and against the social justice aspects of European-style socialism and Anglo-American Keynesianism.

While there have been differences of opinion among neoliberals in the past and present, the genealogy of present-day neoliberalism is clear. In a 2004, article, 'Can Bankers Govern Better?,' this reviewer described contemporary neoliberalism thusly:

Neoliberal economic policy is characterized by strong laissez-faire instincts, especially where government intervention tends to raise the operating costs of business and industry, and by supply-side incentives, and particularly those designed to maximize profitability. The logic behind structural reforms (e.g., in labour markets and in social programs), free trade in goods, services and capital (the inputs and outputs of global production systems) and competition policy that exempts intellectual property rights and economy-of-scale mergers is to reduce producer costs, to increase efficiencies, to stimulate investment and, in the long run, to increase employment and incomes—supply-side economics updated for 21st century globalization. This is the economic policy regime found the world over in government, academia and business. Even more fundamental to the neoliberal economist is the positivist belief that economics can be scientific and value-neutral with respect to policy, hence the authoritative and objective aura of the monetarist pointing the way to the best of all possible worlds. Nowhere is this more evident than in the neoliberal mantra that monetary policy is too important to leave to the discretion of politicians—democracy being only marginally inconvenienced in the greater interest of efficient economic policy.

Austrian neoliberals viewed competition (antitrust) policy much more favourably than the Chicago School (of neoliberalism) where legal theorists such as Richard Posner, whose views continue to influence judges and justices in US antitrust cases, argued the rather counterintuitive point that highly-concentrated markets may lead to greater consumer benefits than markets where no firm has a dominant market presence. More generally, there is a striking divergence regarding political sovereignty between past and present, as the Austrian view rejects economic nationalism, which is manifested in the economic sovereignty of the state and tends to prioritize national political agendas at the expense of the global economy. This is completely at odds with the Chicago School for whom the role of a market-dominant national champion is warranted as a defense against unfair foreign competition, as has been illustrated in the sharp disagreements between the US and the EU over competition (antitrust) policy, particularly in the technology sector. The case of Microsoft from the turn of the century is particularly instructive. The EU, too, has its national champions in industry, e.g., Airbus, the global rival of Boeing.

In the first paragraph of his introduction to Globalists, Slobodian directs attention to the broad appeal of contemporary neoliberalism, going so far as to include former US President Bill Clinton (Democratic Party) and former German Chancellor Gerhard Schröder (Social Democratic Party). That former Federal Reserve Board Chairman Alan Greenspan—a self-described "lifelong libertarian Republican"—is also included should be no surprise.

_____

Considering Slobodian's profound philosophical differences with neoliberalism, he appears to be mostly fair in recounting their intellectual history. Though while even descriptions cannot be value neutral, Slobodian appears to concentrate on reporting as opposed to editorializing. The facts he selects will not satisfy everyone, nor is the reader likely to change their political/economic views. What this book will do is reinforce pre-existing opinions about contentious theories and policies in European and North American political economy.

Slobodian's narrative is a multi-dimensional history of ideas disaggregated into various orders—a world of walls, a world of numbers, a world of federations, a world of rights, a world of races, a world of constitutions, a world of signals, and a world of people—to illustrate "[w]hat neoliberals pioneered in the 1930s was the idea of thinking in orders, seeing the question of liberalism versus socialism as one that required a total-system perspective." In other words, methodologies ranging from Marxist class exploitation to probabilistic econometric forecasting represented aspects only of a complete representation of the economy. Furthermore, Slobodian suggests that the neoliberal approach has a greater affinity with the emerging discipline of International Relations and its global approach rather than with the quantitative, empirical methodology of mainstream economics.

_____

Of particular interest in Slobodian's historical narrative are the implications for democratic capitalism, the fallacy of laissez-faire political economy, and the limits of economics as a science. Regarding the first, the history of neoliberal thought shows that democracy can be an important social stabilizer but only up to a point, a conclusion validated by the Vienna riots of 1927. The worker uprising occurred just months after the groundbreaking World Economic Conference—a precursor to the GATT, sponsored by the International Chamber of Commerce and the League of Nations, the two leading institutional champions of global free trade at the time.

The confrontation with mass democracy was also at the heart of the century for neoliberals. On the one hand, they embraced democracy for providing a means of peaceful change and a space for evolutionary discovery beneficial to the system at large—thus proving mistaken those who describe neoliberals as opposed to democracy as such. On the other hand, democracy bore the seed of destruction for the totality. Reflecting on the challenges to the liberal order posed by the demands of a politically mobilized working class, Röpke observed in 1942 that “a nation may beget its own barbarian invaders.”

And then later in the book referring to the Seattle protests against the WTO in 1999, Slobodian writes

Many critics have noted that the turn to an authoritarian solution always seems close at hand, with Hayek and Friedman’s visits to Augusto Pinochet’s Chile being exhibit A. Referring to Pinochet, Hayek said he would “prefer a liberal dictator to a democratic government lacking liberalism” and that “it is possible for a dictator to govern in a liberal way”—while qualifying that this should be only a “temporary transitional arrangement.” Hayek’s statements recalled both Röpke’s discussion of “dictatorial democracy” in 1940 and Mises’s point in 1927 that Italian “fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.” Following the logic of the lesser evil, the suppression of a disruptive force from the left periodically made support for dictators thinkable for some neoliberals. Mises wrote in 1922, “Our whole civilization rests on the fact that men have always succeeded in beating off the attack of the re-distributors.”

Though Slobodian's book ends before the present age when illiberalism is again on the rise, the fact that the book was published in 2018 lends support to the idea that he intended for his genealogy not only to extend backwards to the age of European empires and proto-democracy in the early 20th century but also up through the early 21st century. For recent examples of European writers arguing that democratic capitalism is under siege, see Wolfgang Merkel's 'Is Capitalism Compatible with Democracy?' (2014), Wolfgang Streeck's How Will Capitalism End?: Essays on a Failing System (2016), Katharina Pistor's Code of Capital: How the Law Creates Wealth and Inequality (2019) and Martin Wolf's Crisis of Democratic Capitalism (2023).

_____

Secondly, and also highly interesting, is the importance that Austrian economic thought places on non-economic factors, in particular the legal framework. Unlike typical Anglo-American laissez-faire capitalism, the Austrians expected the state to play a significant—not in the redistribution of wealth—but in establishing the preconditions for free market capitalism. Slobodian believes that this perspective derives from the neoliberal's favourable view of the relationship between the Austro-Hungarian Empire and its nation-states, a form of double government in which the disparate political and cultural spheres of the empire's multicultural population were managed by the nation-states, while economic unity and openness for the whole was underwritten by the empire itself. In many respects, the European Union—which as a result of Brexit excludes the UK—could be considered a descendant of the Austro-Hungarian Empire, comprising as it does sovereign states circumscribed by the Union's economic framework of competition, fiscal, and monetary policies.

The narrative offered here is a fairly contained story, presented largely through biography, about three generations of thinkers, from the Mises Circle in 1920s Vienna to the international economic lawyers of Geneva who helped theorize the WTO in the 1980s. Its focus is on the specific notion of a double government form designed to encase the respective fields of dominium [the rule of property] and imperium [the rule of states]. It finds the intellectual origins of neoliberal globalism in the reordering of the world that came at the end of empire and finds the historical roots of paradigms of international economic law and neoliberal constitutionalism more often covered by political scientists and sociologists than historians. Looking at the century from Geneva (rather than Chicago, Washington, or London), we see a strand of thought that held that, in order to survive, the world economy needed laws that limited the autonomy of nations. We see a version of neoliberalism where the core value is not the freedom of the individual but the interdependence of the whole.

Noted is the very different context of Austrian economic thought given the history of the Austro-Hungarian Empire—small, interdependent nation-states administered in a common economic zone—in contrast to British and American economic thought, the latter developed at the respective centres of relatively self-contained political economic systems. The economic nationalism of autarky was for Austrians a dangerous threat to global free markets, threatening as it did to make the economic world subservient to the political world. Moreover, for the Austrians, the impetus to self-determination at the end of the two World Wars posed "[t]he challenge for neoliberals was how to accommodate the reality of nationalism with the ongoing requirement of a supranational economic order." The rapid multiplication of nation-states, each with its separate political and economic agenda, complicated the already difficult task of establishing and maintaining a global economic order over and above sovereign nation-states jealous of their political independence.

______

Thirdly, it is immensely interesting to note the Austrian neoliberal turn away from the statistical and econometric modeling and forecasting, reflecting a philosophical predisposition to see the world of economic phenomena as fundamentally too complex to know in its entirety and thus to predict with any detailed accuracy. This thesis of 'unknowability' of economic phenomena is consistent with the skeptical view within the Vienna Circle (e.g., Sir Karl Popper's falsificationism) which delimits that part of the empirical world we can talk about meaningfully. For Austrian neoliberals, all that can be known are the broad outlines of the necessary and sufficient preconditions required for the emergence and maintenance of free market economies. Moreover, the business cycle forecasting that caught on among neoliberals during the 1920s and 1930s faded as they witnessed the New Deal and Keynesian responses to the Great Depression and recalled the central planning of wartime capitalism during World War I when

Foreign-owned property was seized, command economies replaced market supply and demand, centralized regimes of rationing and resource allocation displaced the price mechanism, and national governments and planning boards demolished the walls of corporate secrecy, intruded into private accounts and affairs of business to gather data about production and distribution, and created what some called “war socialism....

The expanded social planning of the new welfare state and the experience of "war socialism" did not augur well for economic freedom as the intrusive state violated the reserved space of a free market economy. Even today though, on both sides of the Atlantic, state aid (government subsidies) and weak competition (antitrust) policy demonstrate that economic nationalism is an ever-present menace to the Austrian neoliberal conception of a world of free and open markets. Even the post-World War II Bretton Woods institutions of the IMF and the World Bank, part of the international legal framework to extend free markets to the Third World (referred to as Global South since the end of the Cold War), are part of the Washington Consensus whose third and arguably dominant member is the US Department of the Treasury. This arrangement, in the Austrian view, has effectively kept international financial governance under the influence of the forces of economic nationalism.

Like Streeck, Merkel, Wolf, and Pistor, Slobodian delivers a sobering message on the prospects for the future of 'golden age' of twinned democracy and capitalism just three decades since Francis Fukuyama's famous proclamation that with the fall of Soviet communism, the 'end of history' had been reached. Democratic capitalism had proven to be the highest form of political economic organization in human history—a provocative thesis then and now. Now, the pendulum has swung, and alarms are sounding that in the future, capitalism may prosper quite well in less than democratic societies—even under outright autocratic regimes—such that what Wolf calls the "difficult marriage" of democracy and capitalism, always fragile owing to the inherent tension between the social and the individual, may yet be dissolved.

But a world of non-democratic states may not provide any more favourable global outcome for the hopes of the Austrian neoliberal, as economic nationalism will be no less an impediment than it has been in the past. A global economic order where the politics of economic outcomes is subordinated does not appear likely, and this is perhaps where the methodologies of International Relations and Austrian neoliberalism converge. What is to be organized and understood about globalism may be beyond the ken of the quantitative analysis and prediction, i.e., science. The economism advanced by Austrian neoliberals may gain traction in individual countries, but global economic arrangements will likely continue to be a function of great power politics.