Monty Pelerin is a pseudonym taken from the Mont Pelerin society. Here is some background on the formation of the organization. I am in agreement with most of their ideals and philosophy although am not a member and do not speak for the group. Some of the greatest economists of the twentieth century were charter members of the society.
October 26, 2012, 2:39 p.m. ET The Death and Life of Liberal Economics By KENNETH MINOGUE
Two histories chart the resurgence of free-market thinking in the second half of the 20th century.
The first meeting of the Mont Pelerin Society, in 1947, was chaired by F.A. Hayek (left). Ludwig von Mises is seated in the front row, third from right.
Everyone agrees we are going through a crisis—but a crisis of what? The members of the Occupy Wall Street movement think it is a crisis of capitalism. Others think the crisis is moral: Our propensity to consume without thought for the planet, the poor or even the person next door is a sign that greed and fear are the motives of the moment. Meanwhile, economists debate the significance of reducing the national debt or pouring more money into a stimulus that might restore our economic dynamism.
Amid such confusion, we need wisdom—and historians who might help by telling us how we got into this scrape in the first place. Now we have two notable contributions to such a project. Both books are intelligent accounts of how the postwar vogue for state regulation came to be challenged by a revived recognition of the things that markets alone can do. The books differ, however, in their judgment of the long-term effects of those ideas.
In “The Great Persuasion,” Angus Burgin, an assistant professor of history at Johns Hopkins, offers a concise account of how F.A. Hayek and later Milton Friedman disseminated the virtues of free markets and enlivened conservatism in Britain and the United States, culminating in the triumphs of Margaret Thatcher and Ronald Reagan. But history, of course, moves on, and Mr. Burgin ends by remarking that “we have accepted the virtues of markets but failed to determine how to integrate them into life as we wish it to be.”
In “Masters of the Universe,” Daniel Stedman Jones, a barrister in London, covers the same ground and has intelligent things to say, but his book’s historical virtues are compromised by more adjectival attitudinizing than a chronicler of history should allow himself. Free-market ideas are characterized as “aggressive,” “relentless” and “uncritical,” culminating in the description of market enthusiasm as a “holy grail” and the use of a variety of religious metaphors designed to suggest that it is irrational.
The familiar story at the heart of both books is that of the Austrian economist F.A. Hayek, who taught at the London School of Economics in the 1930s and 1940s and who came to challenge the core belief of his friend John Maynard Keynes—that states have the power to “fine tune” economies and smooth over cyclic ups and downs. Hayek wrote “The Road to Serfdom”—his famous argument against state planning and redistributionist thinking—in 1944, but it took some time for its ideas to penetrate elite opinion.
In the early postwar period, state regulation and welfarist policies dominated public life. Free-market enthusiasts were regarded as a reactionary survival from a laissez-faire past. Hayek, however, was convinced that even the mild social democracy of Clement Attlee’s welfare state in Britain, in the late 1940s, would eventually degenerate into something resembling the totalitarian extremes of the Soviet system.
Many economists at that time still believed in economic planning, and some thought of Soviet Russia as a possible economic model, even up to the moment of communism’s collapse in 1989.
Hayek famously gathered together a variety of academic believers in freedom to a conference in Switzerland in 1947 and thus established the Mont Pelerin Society, a group of freethinkers in every sense of the word. (I should mention that I am a recent president of the society, which exists to this day.) The people that Hayek brought together were a talented but quarrelsome group, Mr. Burgin shows, who could not even agree on how to name the core principle they stood for. The society was a trans-Atlantic project, driven by professors at the London School of Economics and the University of Chicago, and “neoliberalism”—a belief in free trade and free markets—seems to be the term that best captures the outlook they espoused. This was a period before the later proliferation of think tanks, and funding wasn’t easy to arrange. But Hayek had a profound conviction that the world responded to true ideas, and he persevered.
The society faced many temperamental crises, and as Hayek became disillusioned with its prospects of success, the public face for such free-market ideas came to be Milton Friedman, who combined enormous charm with a genius for explaining the almost miraculous way in which a capitalist market can assemble the many components of such a simple thing as a pencil so that it can become cheaply available. Mr. Burgin’s story is focused on the career of Friedman, but both Mr. Burgin and Mr. Stedman Jones agree on how central Friedman was to the revival of conservatism and free-market ideas in recent political life.
Both of these books talk of “faith” in the free market, but such a faith in fact rests on sophisticated economic and philosophical arguments. Freedom certainly creates problems (inequalities most notably), but it also solves them. The Muslim world is currently in turmoil as people try to change their brutal and incompetent rulers. Free Western states solve the problem and save lives by a cunning device called an election. Friedman adopted Karl Popper’s famous criterion of scientific theory—that it is in principle falsifiable by evidence. He thought that argument was better than breaking heads over who was right.
But the central aspect of freedom advanced by these thinkers was the market, or what Adam Smith had described as the propensity to truck, barter and exchange. In this area, freedom allowed dispersed individuals—disposing of their own resources and choosing for themselves what they want to buy—to generate a level of prosperity that has had no precedent in human history. And the pricing system that emerges from the market—that is, from the push and pull of supply and demand—provides the indispensable knowledge needed to guide the economy. As Friedman argued, state experts implementing abstract ideals about satisfying human needs are merely blundering about in the dark. Price changes are an indispensable discovery procedure.
Nothing here, of course, denigrates the essential role of the state in providing the infrastructure of law and justice (not to mention defense) on which freedom in all its forms rests. The Mont Pelerin Society’s members were usually careful to distinguish their convictions from advocacy of a hyper-minimalist state. But their greatest worry was the authority of the state being used despotically to achieve some higher form of justice in which the needs of all would be satisfied by redistributing the national product.
The Mont Pelerinists did in time reveal what Mr. Burgin calls “incongruous world views” underlying their agreement on free markets. Many were also concerned about the effect of markets on culture. There is in capitalism, said Ludwig von Mises, an Austrian philosopher and economist who had emigrated to the United States, little room for the activities of the solitary thinker, the detached poet or the lofty artist. The earlier Chicago economist Frank Knight and the Austrian Joseph Schumpeter also worried about capitalism’s cultural effects. All agreed, in any case, that markets depended upon moral probity.
Mr. Stedman Jones’s version of the story, in “Masters of the Universe,” takes the free-market rejection of state regulatory power onboard and argues that Friedman and the Mont Pelerinists were more successful than they often claimed—that the dangers of too much state interference in the economy had all become well understood by the 1970s. The presidency of Jimmy Carter in the United States and the government of James Callaghan in 1970s Britain, Mr. Stedman Jones says, were already liberating economies from the controls under which they suffered. Such follies as wage-and-price controls and fixed exchange-rate policies were already being consigned to history.
Mr. Stedman Jones’s argument is that the contribution of Reagan and Mrs. Thatcher to this desirable outcome was merely to supply a misleading “philosophy” to the ideas, giving unbridled laissez-faire a legitimacy that has led to the crisis of greed, fear and banking follies in which we are now embroiled. This causal theory implausibly jumps over two decades of rising prosperity. It also ignores other kinds of folly that were appearing, including an ever expanding public sector, massive government debt and pension obligations, a monetary policy that encouraged bubble investment, and the intrusion of government inducements into the housing market.
Hayek at the end of his life was still puzzled at the fact that a truth so evident as the virtues of the free market should have had such little permanent effect on public opinion. He toyed with the idea that humanity must be in the grip of an evolutionary passion for the intimacies of tribal societies. He never understood, I suspect, the power exerted over us by the ideal of social justice, even in our free societies. There is no doubt that freedom on the one hand and entirely just outcomes on the other are (however judged) impossible to combine. Yet believing that we have such immense power over nature, we yearn to be able to create a society that guarantees the happiness and contentment that would result from the universal satisfaction of human needs.
Flourishing during the Cold War, the Mont Pelerin Society clearly benefited from the rising evidence of the sheer incompetence of the Soviet system. But the real point lies not in grand comparisons between competing systems but in the importance of freedom itself. Only by being valued for its own sake can freedom contribute to our prosperous world.
Over the years, a curious conspiracy theory seems to have attached itself to the Mont Pelerin Society, a theory in which the society appears as one of those sinister organizations—like the Freemason, the Templars or the Trilateral Commission—that rule the world, insinuating their ideas into the highest echelons of power. As a recent president of the society, I can testify that this presumption of conspiratorial influence is false. If we had ruled the world, the United States and the European states would not have been allowed to slide into their current catastrophic condition.
—Mr. Minogue, a professor emeritus at the London School of Economics, is the author of “The Servile Mind: How Democracy Erodes the Moral Life,” now in paperback edition from Encounter Books.
A version of this article appeared October 27, 2012, on page C5 in the U.S. edition of The Wall Street Journal, with the headline: The Death and Life of Liberal Economics.