The rise and fall of neoliberalism the collapse of an economic order

INTRODUCTION • A World Turned Right Way Up 1 KEAN BIRCH AND VLAD MYKHNENKO 1 How Neoliberalism Got Where It Is: Elite Planning, 23Corporate Lobbying and the Release of the Free Market D

The Rise and Fall

of Neoliberalism

About the Editors

Kean Birch is a lecturer in the Department of Geographyand Sociology at the University of Strathclyde Previously

he was a research fellow in the Centre for Public Policyfor Regions at the University of Glasgow His mainresearch interests concern the social and geographicalbasis of different economies and especially the implica-tions that new knowledge, science and technologies havefor these economies He teaches courses on globalization,neoliberalism and knowledge-based economies

Vlad Mykhnenkois a research fellow in the School of raphy at the University of Nottingham Previously he was

Geog-a reseGeog-arch fellow in the Centre for Public Policy forRegions at the University of Glasgow, before acting as aninternational policy fellow at the Central European Uni-versity and Open Society Institute, Budapest His researchinterests broadly include critical political economy, post-communist transformations, and European urban andregional studies He teaches courses on European regionalgeographies and countries in transition

The Rise and Fall

The Rise and Fall of Neoliberalism: the Collapse of an Economic Order? was first published

in 2010 by Zed Books Ltd, 7 Cynthia Street, London N1 9JF, UK and

Room 400, 175 Fifth Avenue, New York, NY 10010, USA

www.zedbooks.co.uk

Editorial Copyright © Kean Birch and Vlad Mykhnenko 2010

Copyright in this collection © Zed Books 2010

The rights of Kean Birch and Vlad Mykhnenko to be identified as the editors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act, 1988

Designed and typeset in Great Britain by Long House Publishing Services Index by John Barker

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INTRODUCTION • A World Turned Right Way Up 1

KEAN BIRCH AND VLAD MYKHNENKO

1 How Neoliberalism Got Where It Is: Elite Planning, 23Corporate Lobbying and the Release of the Free Market

DAVID MILLER

2 Making Neoliberal Order in the United States 42

KEAN BIRCH AND ADAM TICKELL

3 Neoliberalism, Intellectual Property and the Global 60Knowledge Economy

ELISA VAN WAEYENBERGE

6 The Corruption Industry and Transition: Neoliberalizing 112Post-Soviet Space?

ADAM SWAIN, VLAD MYKHNENKO AND SHAUN FRENCH

7 Remaking the Welfare State: from Safety Net 133

to Trampoline

JULIE MACLEAVY

PART TWO • THE FALL OF NEOLIBERALISM 151

8 Zombieconomics: the Living Death of the Dismal 153Science

LEONITH HINOJOSA AND ANTHONY BEBBINGTON

13 Defeating Neoliberalism: a Marxist Internationalist 239Perspective and Programme

JEAN SHAOUL

CONCLUSION • The End of an Economic Order? 255

VLAD MYKHNENKO AND KEAN BIRCH

We would like to thank the Economic and Social Research Council(ESRC) for funding the seminar series titled ‘Neoliberalism, anti-neoliberalism and de-ideologisation’ (RES-451-25-4258) from whichthese chapters are drawn We would also like to thank our ex-colleague and co-organizer of the seminar series Katherine Trebeckfor her help and advice during the editing process Further thanks toall the contributors for their forbearance, including to those whowithdrew, and to the editors at Zed Books, Ellen Hallsworth andKen Barlow

About the Contributors

Anthony Bebbington is professor in the School of Environment andDevelopment, University of Manchester, an ESRC professorial fellow,and research associate of the Centro Peruano de Estudios Sociales

Paul Chattertonis a writer, researcher and scholar-activist based in theSchool of Geography at the University of Leeds

Ben Fine is professor of economics at the School of Oriental andAfrican Studies, University of London

Shaun French is lecturer in economic geography at the University ofNottingham

Leonith Hinojosa is researcher and fellow lecturer at the School ofEnvironment and Development in the University of Manchester,faculty associate in the Brooks World Poverty Institute and researchfellow in the Impact Assessment Research Centre

Bob Jessop is distinguished professor of sociology and co-director ofthe Cultural Political Research Centre at Lancaster University

Larry Lohmann is an activist based at The Corner House, a UK governmental organization

non-Julie MacLeavy is a lecturer in human geography in the School ofGeographical Sciences at the University of Bristol

David Milleris professor of sociology in the Department of Geographyand Sociology at the University of Strathclyde

Paul Routledge is a reader in human geography at the Department ofGeographical and Earth Sciences at the University of Glasgow

Jean Shaoul is professor of public accountability at Manchester ness School

Busi-Adam Swain is an associate professor of economic geography at theSchool of Geography, University of Nottingham

Adam Tickellis vice principal at Royal Holloway, University of London

David Tyfield is a lecturer at the Centre for Mobilities Research(CeMoRe), Sociology Department, Lancaster University

Elisa van Waeyenbergeis a lecturer in the Economics Department at theSchool of Oriental and African Studies, University of London

INTRODUCTION • A World Turned Right Way Up

KEAN BIRCH AND VLAD MYKHNENKO

Writing about neoliberalism in 2010 is a challenge On the onehand, the credit crunch and banking crisis have exposed the faultlines in the neoliberal economic order that has been dominant forthe last three decades: Margaret Thatcher’s confident assertion that

‘there is no alternative’ springs to mind here On the other hand,the different impacts and implications of the recent economic crisesillustrate the diversity in the implementation and embeddedness ofneoliberalism in many countries, thereby suggesting that neo-liberalism is not (and never was) a single hegemonic system in thefirst place Such a challenge, however, represents an opportunity tofurther our understanding of neoliberal economic order(s) and howthis order grew to such prominence and held sway over national andinternational policy for so long According to David Harvey (2006),neoliberalism has failed even to come close to, let alone achieve, thegrowth rates of the golden age of Keynesianism (1960s), which raises

a serious question about how it has maintained legitimacy in the

face of its own failed raison d’être – to ensure wealth for all through

market efficiency Thus it is pertinent to consider the core diction underpinning the seeming collapse of neoliberalism: theextent to which the current crisis is tied to the very foundations onwhich neoliberalism was built, namely the expansion of financecapitalism and the associated housing and stock market booms ofthe 1990s and 2000s

contra-There is a terrible irony in the fact that neoliberal policies ofprivatization, marketization and liberalization over the last thirtyyears have produced proceeds with a monetary value (€1.3 trillion)that is only twice the recent bank bail-outs by the US and Europeangovernments (see Hall 2008: 6), a fact that can be lost in the soul-searching of mainstream commentators Furthermore, government

guarantees for bank debts – at €6 trillion – dwarf the proceeds ofprivatization to such an extent that, should there be widespreaddefaults, our governments would have effectively not only givenaway the ‘family silver’, but paid someone handsomely to take it offtheir hands Who then benefited from this economic order? We canpoint fingers at the bankers, as government have found it politicallyexpedient to do, but we have also to acknowledge that thefinancialization of the global economy has gone hand in hand withproperty booms that have effectively enrolled citizens in theexpansion of neoliberalism – a windfall largely limited to citizens inthe Global North, it must be stressed For example, MatthewWatson (2008) argues that as individuals have been incorporatedinto the British housing market, which was (and still is) dependentupon ever-increasing house prices, they have been remade politically

as ‘monetary conservatives’, more concerned with inflation thanwelfare spending More generally, Stuart Hall (2003: 10) argues that

‘a new neoliberal common-sense’ has ‘colonized’ civil society.What is evident in this mess is that the conceit at the heart ofneoliberal thought has been exposed The very idea that markets areself-organizing, efficient and liberating is no longer credible, butillustrates the extent to which neoliberalism – as shorthand formarket-like rule – is an economic, political and ideological projectpursued by certain groups (such as governments and corporations)

to construct a reality that is perceived to be founded in the inherentproperties of economic markets This circular reasoning hasreplaced any sense of what we ought to do to achieve democraticgoals and ambitions with a logic built on the perception of theinherently good and essential qualities of markets Thus moralityand ethics have been turned right way up in response to the ‘naturallaw’ of economic exchange in which the rich can buy more freedomthan the poor This book is an attempt to understand how this hashappened, how it has come undone, and what alternatives we canturn to now

The Ideological and Historical Origins of Neoliberalism

The origins of neoliberalism as an ideology can be traced back to thelate 1930s when a group of liberal intellectuals met in Paris to discussthe threat posed not only by totalitarianism, such as NationalSocialism in Germany, but also by collectivist planning of the

economy as in the British Keynesian state and the New Deal in theUSA This meeting, held in 1938 and organized by Louis Rougier,led to the coining of the term ‘neoliberalism’ to update nineteenth-century liberalism by introducing the idea that governments play animportant role as the guardian of ‘free markets’ by securing the rule

of law (Turner 2007; Peck 2008) In part, this ‘new’ liberalism wasthe consequence of the incorporation of marginalist economicthought (see Fine, this volume) with critiques of equilibrium theory,both of which had characterized the emerging Austrian School ofeconomics As such, economics is directly implicated in the two mainfoundational tenets of neoliberalism: first, in the view of von Misesthat ‘egoism is the basic law of society’ (quoted in Peet 2007: 73);and, second, in Hayek’s view that free markets lead to ‘spontaneousorder’ that solves the problem of economic calculation In manyways, these two individuals – Ludwig von Mises (1881–1973) andFriedrich von Hayek (1899–1992) – represent the founding fathers ofneoliberalism, providing the theoretical backbone for the politicaland ideological claims made by others In this sense, neoliberalismwas very much an ideological project, one that attempted to counterwhat neoliberal thinkers saw as the inherent totalitarianism ofcollectivist and state planning of the economy by drawing oneconomic theories which, in turn, posited the impossibility ofeconomic planning in the first place

The Second World War and the emigration of Austrianeconomists helped to spread neoliberal thinking around the world asfigures like von Mises, Fritz Machlup and Michael Polanyi fled

Nazism It was also during this time that Hayek wrote The Road to Serfdom, published in 1944, in which he outlined the main caseagainst central planning and defended capitalism against the claimsthat it had led to fascism: in essence, the book upheld the idea thatmarket freedom came before democratic freedom because ‘onlycapitalism makes democracy possible’ (quoted in Turner 2007: 73).Following the war, neoliberalism was more formally established inintellectual networks such as the Mont Pelerin Society (MPS),founded in 1947 Bringing together several diverse strands ofneoliberal thought, including Austrian émigrés, British intellectualsfrom the London School of Economics (LSE) and University ofManchester, Americans from the Chicago School – includingMilton Friedman – and Germans from the Freiburg School, theMPS built on the work of the earlier meeting in Paris (Peck 2008)

Two of the MPS’s aims are relevant for the discussions in this book:first, that the role of the state needs to be redefined; second, that aninternational order needs to be created to ensure internationaleconomic agreement (Plehwe and Walpen 2006: 33–4)

Implicit in the establishment of the MPS was the view that ideasmatter, playing an important role in determining the outcome ofevents as they circulate through government, universities, civilsociety and the media Consequently, neoliberal thinkers and theirbusiness sponsors – such as Sir Antony Fraser – helped to foundnumerous organizations to promote neoliberalism, particularly thinktanks and business forums (see Miller; Birch and Tickell, thisvolume) Examples of the establishment of such neoliberal thinktanks include the Institute of Economic Affairs (IEA) in the UK(1955) and the Heritage Foundation in the USA (1973) – see thework of Carroll and Carson (2006) for a more thorough analysis.These ‘idea centres’ represent the emergence of a neoliberal politicalproject to counter Keynesian policy and government intervention inmarkets, incorporating a number of often seemingly diverse theoriesand ideas from across economics and political science Mark Blyth(2002) demonstrates particularly clearly that the combination ofMilton Friedman’s monetarism with theories of rational expecta-tions, supply-side economics and public choice contributed to thebreakdown of the post-war consensus through the promotion of aneoliberal agenda and economic policies

The motivation lying behind this attack on Keynesianism wasprimarily a concern with taxation and inflation, brought to wide-spread attention during the stagflation crisis of the 1970s when bothunemployment and inflation rose dramatically Duménil and Lévy(2004: 23–4) attribute this ‘structural crisis’ to the falling rate ofprofit; that is, the declining return on capital invested in machinesand technology Consequently the only way to increase profit was bycontrolling labour costs, which means that neoliberalism can be seen

as a political project intent on restoring class power (Harvey 2005).The neoliberal political project was also enabled by the collapse ofthe Bretton Woods system in 1971 when the USA ended the con-vertibility of dollars to gold, ushering in a new era of free-floatingcurrencies and international capital flows (Hutton 1995) The 1970stherefore provided the political opportunity to push for a neweconomic project founded on neoliberal assumptions about economicefficiency, reduced state intervention and free markets

This economic project found its advocates in a number of newright-wing politicians around the world exemplified by MargaretThatcher (1979–90) in the UK and Ronald Reagan (1981–9) in theUSA, whose policies became known respectively as Thatcherismand Reaganomics Other countries have followed suit by imple-menting neoliberal policies (see Swain, Mykhnenko and French, thisvolume), whilst some started even earlier than the UK and USA.For example, the ‘Chicago boys’ – Chilean economists trained at theUniversity of Chicago where Milton Friedman worked – helped thedictator Augusto Pinochet to privatize and deregulate the economyafter the coup that ended Salvador Allende’s government and life inSeptember 1973 (Harvey 2005) Although the spread of neoliberaleconomic policies around the world has been uneven, in that eachcountry has witnessed varying levels of ideological and politicaladherence to different economic policies (see Jessop, this volume),what has characterized them all has been an emphasis on five core

principles (Hall 2003; Hay 2004; Mudge 2008): privatization of run assets (firms, council housing et cetera); liberalization of trade in goods and capital investment; monetarist focus on inflation control and supply-side dynamics; deregulation of labour and product markets

state-to reduce ‘impediments’ state-to business; and, the marketization of society

through public–private partnerships and other forms of modification (see Tyfield; Lohmann; Shaoul, this volume) Theseprinciples are all meant to enable individual freedom throughrecourse to a ‘free’ market that is efficient in allocating resourcesacross society and the world because only the market can coordinateall the information signals from numerous agents (such as sellers andbuyers) As will be shown in several chapters in this book, suchassumptions are rightly castigated, having led to severe hardship formany people in society in many parts of the world

com-Waves (and com-Waves) of Neoliberalism

It is useful to distinguish – as we have done above – between theideological, political and economic projects of ‘neoliberalism’ in order

to understand how it has come to be so dominant a economic discourse To start with, neoliberal economic theories repre-sent an ideological project based on abstract concepts (e.g rational

political-expectations, utility maximization, free markets, et cetera) that assumes

market efficiency and therefore underpins a re-conceptualization of

the state’s role in the economy: that is, enforcing the ‘rule of law’ asopposed to owning and running businesses or welfare services (seeMacLeavy, this volume) As highlighted above, this form of discoursehas spread through global networks of neoliberal thinkers and (usuallycorporate) supporters that are positioned in specific sites around theglobe; for example, London (Miller, this volume) and Washington(Birch and Tickell, this volume) The subsequent incorporation ofneoliberal ideas into specific government policy more accuratelyreflects a political project allied to specific state-led strategies thatpromote neoliberalism through different processes characterized byprivatization, liberalization, marketization, deregulation and mone-tarism These strategies, however, differ in their political motivationsand priorities, depending on where they are applied (Birch and

Mykhnenko 2009) Thus, Brenner et al (2010) argue that these

state-led projects are also context-specific in that the implementation ofneoliberalism is always embedded within and reworks existing

‘institutional landscapes’ through processes of neoliberalization; that is,neoliberalization does not represent a single homogenizing process,but leads to variations across different places, as is evident in many ofthe later chapters

It is therefore possible to identify different forms of neoliberalismalongside the differing impacts of neoliberalization not only in con-crete historical and social, political and economic terms, but alsogeographically, since neoliberalism operates in multiple scales(Larner 2003) For example, neoliberalism is evident in localprojects, national-state policies, and supranational institutions likethe World Trade Organization (WTO) and the World Bank (seevan Waeyenberge, this volume) Although there are differences inthe form that neoliberalism takes and in the responses to it (seeChatterton; Routledge; Shaoul, this volume) – especially on acountry by country basis (see Hinojosa and Bebbington, this volume)– this issue of variations in neoliberalism is an empirical questionthat needs to be teased out through careful research Conceptually,however, it is possible to think about neoliberalism as a hegemonicpolitical-economic project, as many scholars have done In par-ticular, Adam Tickell and Jamie Peck (2003: 166) argue thatneoliberalism is a process best described as ‘the mobilization of statepower in the contradictory extension and reproduction of market(-like) rule’, which can be split usefully into ‘roll-back’ and ‘roll-out’phases

What this means is that it is too simplistic to assume that liberalism leads to the ‘hollowing out’ of the state because neo-liberalism involves the shifting of state intervention to new forms ofgovernance underpinned by a ‘logic of competitiveness’, including:

neo-‘active’ and flexible labour policies; new commodification regimessuch as intellectual property rights and carbon trading (see Tyfield;Lohmann this volume); fiscal austerity; and public spending on

supply-side inputs (e.g education, infrastructure, et cetera) What is

evident, according to Peck and Tickell (2002), is a shift in emphasisover time For example, Thatcherism and Reaganomics represent a

‘rolling-back’ of regulation, state ownership and welfare servicesduring the 1980s, driven, in large part, by a monetarist preoccupa-tion with inflation that encouraged different forms of privatization(Prasad 2006) This phase was motivated by ‘external’ pressures –that is, pressures not induced by neoliberalism itself – including the

‘structural crisis’ of the 1970s and the extension of neoliberalism tothe Global South through the ‘Washington Consensus’ (Williamson1990): this ‘consensus’ promoted ‘reforms’ in Southern countries inpursuit of trade income to offset debt obligations A subsequent shifttowards ‘roll-out’ neoliberalism, especially through marketization, isthen evident in the 1990s as Northern countries have sought to con-tain the ‘internal’ contradictions inherent in the neoliberal projectsuch as mass unemployment (Tickell and Peck 2003; see Jessop, thisvolume) In this latter phase, national political economies are recast

as problematic in relation to the emerging global economy, leading

to a rescaling of governance as sub-national partnerships areencouraged to deliver on nationally or, increasingly, supranationallyset priorities and goals oriented around competitiveness (Peck 2001;van Apeldoorn 2008)

What we end up with are ‘race-to-the-bottom’ or neighbour’ strategies in which responsibility for the delivery ofpolitical priorities is shifted further and further downwards untilwhat results is a new model of citizenship in which societal rightsand responsibilities transform personal ‘deficiencies’ (such asunemployment) into ‘failures’ of the individual rather than society(see MacLeavy 2008) The encouragement of competition betweenindividuals (and localities) for government or private sector resourcesprovides one avenue through which the market state, already en-rolled as a facilitator in the ‘re-regulation’ and extension of markets,fosters new individualistic subjects for market rule (Hall 2003; Cerny

‘beggar-thy-2008) Individuals are constructed as rational subjects – encouraged

to compete in flexible labour markets that depend onentrepreneurship, life-long learning and transferable skills (that is,employability) – by shifting responsibility for social justice, well-being and health outcomes from the state to the individual (seeMacLeavy, this volume) One particularly invidious example of howthis is enacted is in the expansion of consumer credit – and hencedebt – in Anglo-American countries, encouraged in large part bystagnation in real wages resulting from flexible labour markets andunemployment (Boyer 2000; Montgomerie 2007) Easy credit andincreasing levels of debt have left countless households in ruin as aconsequence of the current crisis The responses of people fightingthis individualization and marketization of responsibility are diverse,and the dramatic impacts that impoverishment and disempower-ment have on individual health and achievement are in need offurther study In this book, several contributors address these issuesdirectly by looking at the impact of alternative politics (see Shaoul,this volume) and alternative personal and community strategies (seeChatterton; Routledge, this volume) on people, countries and theworld

Varieties of Neoliberalization: Poor Results and Divergent Trajectories

In the three decades since the election of the first ideologically mitted neoliberal government in May 1979, neoliberalism has gonetruly global, reaching every corner of the world and producingnumerous variants (see Jessop, this volume) Indeed, the end of theCold War and the collapse of Soviet power in 1989–91 even ledFrancis Fukuyama (1989) to declare that history had ended with anunqualified victory for free-enterprise capitalism and the totalexhaustion of viable systemic alternatives to Western liberalism.Before the advent of the current financial-economic crisis in August

com-2007, the political ascendance and geographical spread of liberalism had been greatly aided by the maintenance of dogmaticand rhetorical purity Whilst persistently advocating maximumscope for the free play of market forces in economy and society,neoliberal ideologues were able to specify their own recommen-dations (termed ‘policy reforms’) aimed at achieving a free market

neo-revolution (see Swain et al., this volume)

In 1989, John Williamson (1993: 1334) designed what hedescribed as a generally applicable ‘universal convergence pro-gramme’ comprising ‘the common core of wisdom embraced by allserious economists’ The proposed ten policy reforms included animposition of a tight fiscal discipline (with virtually no public budgetdeficit allowed); an end to subsidies and re-direction of publicexpenditure on basic health, education and infrastructure; tax cuts;financial liberalization; free-floating exchange rates; trade liberal-ization with a unified low tariff; openness to foreign direct investment(FDI); privatization; deregulation; and secure private property rights.

Williamson dubbed his list of reforms a Washington Consensus because

‘both the political Washington of Congress and senior members ofthe administration and the technocratic Washington of the inter-national financial institutions, the economic agencies of the USgovernment, the Federal Reserve Board, and the think tanks’ hadreached by then an explicit agreement that ‘prudent macroeco-nomic policies, outward orientation, and free-market capitalism’ had

to be urged on the rest of the world (Williamson 1990, 1993) TheWashington Consensus heralded a new order when, according to acritic:

Life used to be relatively simple for the peddlers of policy advice in thetropics Observing the endless list of policy follies to which poor nationshad succumbed, any well-trained and well-intentioned economist couldfeel justified in uttering the obvious truths of the profession: get yourmacro balances in order, take the state out of business, give markets freerein ‘Stabilize, privatize, and liberalize’ became the mantra of ageneration of technocrats who cut their teeth in the developing worldand of the political leaders they counselled (Rodrik 2006: 973)

The Washington Consensus had its operational memory rooted

in Chile’s neoliberal reforms under General Pinochet in the 1970s

By the 1980s, the Washington Consensus reforms spread acrossLatin America in a series of ‘structural adjustment’ packages aimed

at ensuring that Latin America’s massive foreign debt to the Westwould be fully repaid; some of the consequences of and responses tothese reforms are addressed in the chapter by Hinojosa and Bebbing-ton Assuming that all problems with Latin American, Soviet andindeed non-Anglo-American economies stem from ‘pervasive’government involvement and control over economic activity, pricesand international trade, and from ‘extensive’ public ownership ofproductive assets, the fundamental solution prescribed by neoliberal

policy advisers was that of macroeconomic stabilization andstructural adjustment With the collapse of the Berlin Wall, thestabilization programme first applied by Harvard economist JeffreySachs in Bolivia in 1985 was redesigned and expanded by his team

in Poland and Russia This ‘shock therapy’ aimed at the wholesaletransition of centrally planned societies towards market-basedcapitalism Back in 1990, Milton Friedman (1990: 7) personallyencouraged his followers in shock therapy by assuring them that all

‘the talk about “the enormous costs of moving to a free-marketeconomy” is much too gloomy There is no reason why total outputcannot start expanding rapidly almost immediately after thetotalitarian restrictions on people’s activities are removed.’

Whilst Latin American, East European and sub-Saharan tries were fast liberalizing their ‘emerging’ and ‘transition’ economies,they had also been forced to undergo a radical process of slimmingdown, shrinking and re-inventing the state (see Jessop, this volume)

coun-The World Bank’s 1996 policy manifesto From Plan to Market drew

the contours of the neoliberal blueprint being peddled both in thetropics and near the Polar circle; the latter manifestations of WorldBank policy are described in the chapter by van Waeyenberge TheWashington Consensus promised that the combination of stabiliza-tion, liberalization and privatization would bring ‘renewed growth’,and along with it prosperity, to the most remote corners of the globe

by ‘the unleashing of markets – the basic enabling reform fromwhich all the potential benefits of transition [to free-marketcapitalism] follow’ (World Bank 1996: 7)

However, contrary to popular expectations, and despite the mostfar-reaching programme of deregulation and privatization in theworld’s history, the 1990s and 2000s turned out to be lost decadesfor most developing and transition economies As the authors of theWashington Consensus have had to confess, the Latin Americandecades have been punctuated by several crises (including the 1994Mexican peso crisis and the 1999–2002 Argentine economic crisis),achieved disappointingly slow growth, and seen no improvement inthe region’s highly unequal income distribution (Kuczynski andWilliamson 2003) In the post-Soviet world, the ensuing ‘trans-formational depression’ lasted for six years on average across centraland eastern Europe and the former Soviet Union, ranging from twoyears in Poland to ten years in Moldova and Ukraine In terms ofits scale, the deepest slump in output was suffered by Bosnia and

Herzegovina (– 88 per cent), Georgia (– 75 per cent), Armenia (– 69per cent), and Moldova (– 68 per cent) Only four countries (theCzech Republic, Uzbekistan, Poland and Slovenia) managed milderrecessions, losing 15–20 per cent of GDP, whereas the scale ofdepression in the remaining economies in the region rangedbetween 30 and 60 per cent The collapse of production also meantmassive job losses and the deprivation this brings Large proportions

of the redundant labour force had to withdraw from economicactivity altogether, either migrating abroad or relying on informalsurvival strategies at home Unemployment levels reached doubledigits in most transition economies, peaking around 20 per cent inrelatively successful Poland and Slovakia, and rising above 40 percent in the areas affected by civil strife and political instability Allthe evidence based upon the broader human development indica-tors, including life expectancy, infant mortality, demographicgrowth, income distribution, headcount poverty and educationalattainment, suggest a very significant social cost to transition acrossthe region (Mykhnenko 2009)

In striking contrast with the radical purity of neoliberal ideology,the results and consequences of neoliberalization as a process havebeen rather messy and admittedly ‘unexpected’ for the mainapologists of reform (World Bank 2005: xi) Moreover, the economicand spatial impact of neoliberalization was very uneven The trans-formation of Western capitalism in the Global North, as well asvarious transitions to capitalism in the East and South, havegenerated a great divergence in outcomes between the differentgeographical blocs of old and newly emerging capitalist states,between different individual countries, and between urban and ruralareas within those countries In our previous work we illustrate howneoliberalism has produced variegated, hybrid and geographicallyspecific political economies in which universal economic tenets andpractices were married to national and regional concerns (Birch andMykhnenko 2009) We show how neoliberalism – as a state-ledproject – produced national varieties of neoliberalism in whichderegulation, privatization and trade liberalization were pursued fordifferent political reasons, in different ways and to different extents(see also Jessop, this volume) In turn, the pathway that wasundertaken by the Anglo-American liberal market-based states led

to the abandonment of old industries and the creation of a ‘neweconomy’, based upon finance and business services, and greatly

facilitated by information and communication technologies (see also

Boyer 2000, Hancké et al 2007; and Tyfield; Shaoul, this volume).

Financialization – a process of financial deepening of the

increasing-ly global capitalist economy – was set to become both the tion and the beginning of the end for the neoliberal economic order

culmina-Financialization and the New Neoliberal Order

As the formerly successful, coordinated market economies ofGermany and Japan were undergoing an acute crisis of accumu-lation, spending the 1990s in a series of attempts at upgrading theindustrial base, their Anglo-American liberal market counterparts(for the distinction, see Hall and Soskice 2001; Amable 2003) hadpursued finance as a new bedrock of competitive profit making Yetthis new ‘structured’ finance was different from the centuries-oldpractice of manipulating and managing money, as it involved thecreation of complex debt instruments through ‘securitization’ (seeShaoul, this volume) Securitization was the key vehicle for theexplosive expansion of the financial intermediation since the break-down of the Bretton Woods system It is described as the process ofturning non-marketable, non-tradable financial assets into tradablesecurities: for instance, claims on debt (such as government bonds),claims on ownership (such as ordinary shares), or ‘derivatives’ – awide rage of financial products whose value is derived from theactual or expected price of some underlying asset, which may be acommodity, a security, a currency, or indeed any economic variable.Used as a hedge to reduce risk or for speculation, derivatives can beexchange-traded as well as ‘over-the-counter’ (OTC) instruments,including futures contracts, forwards, options and swaps Whilst themain market-traded derivatives are futures and options, the OTCtrades are off-balance-sheet, specific and customer-tailored instru-ments (such as asset-backed securities, collateralized debt obligations

or credit default swaps), involving seemingly esoteric practices such

as the pooling of assets, the tranching of liabilities and the creation

of ‘special purpose vehicles’ ostensibly to reduce risk (see Moles andTerry 1997) The expansion of structured finance has beenfacilitated by low interest rates policies pursued by the world’s majorcentral banks, which encouraged excessive ‘leverage’ or gearing upthe debt to originate and distribute more derivatives at the fastestpossible pace (Mizen 2009)

As early as 1988, the Anglo-American economies were leadingthe way in securitization as measured by the relative weight ofcapitalization of national security markets, with the UK and USAcombined taking a 37 per cent share of the global securities market.Yet with financial deregulation spreading across the globe, nationaland systemic differences in openness of capital markets were erodedand various surveys of the world of finance carried out since thenpointed to convergence as a long-term trend (Neal and Tilly 2003).

At the peak of financialization in 2007, the ratio of global financialassets – the sum of the stock market capitalization, debt securitiesand bank assets – to global GDP reached 440 per cent This ratiowas even higher for the USA (445 per cent), Japan (547 per cent)and the European Union (581 per cent), jumping to 900 per cent inIreland Although the global openly traded financial assets wereworth $241.1 trillion in 2007, the size of the ‘shadow’ bankingsystem of OTC trade in derivates was even larger Whilst theexchange-traded derivative financial instruments amounted in 2007

to $26.7 trillion, the respective notional figure for global shadowy

OTC derivatives stood at $595.3 trillion or 11 times (!) the world’sannual output (authors’ own calculations, on the basis of IMF 2009:statistical appendix tables 3–6)

The sheer volume and the range of various exotic financialinvestment products generated since the 1990s have led some criticalobservers to describe global finance capitalism as ‘an economicwonderland’ of illusionary, speculative ‘derivative castles built onsand’ (Cloke 2009) However, as Leyshon and Thrift (2007) pointout, the basis of finance capitalism has not been this spectacularsystem of speculation but rather a ‘capitalization of almost every-thing’, as financial capitalism fed on the most mundane ‘assetstreams’ and stable sources of income Robin Blackburn (2008)provides further evidence that underneath the layer of speculativewizardry, financialization has indeed relied on the process of com-modification of every aspect of human life and the life course – babybonds, student loans, car loans, credit-card debt, health insurance,private pensions and, most importantly, residential mortgage loans(see also Lohmann, this volume) Focusing on mortgage capital,Saskia Sassen (2008) uncovers a whole new spatial frontier for globalfinance, which is now able through residential mortgage-backedsecurities to extract the smallest of resources that low- and moderate-income households in emerging as well as advanced market

economies can command Yet it is this extensive tapping into theeveryday resources of the US’s poorest households which haseventually led to the beginning of the world’s worst financial crisis

Anglo-UK (Northern Rock), the US (New Century Financial, wide, Dillon Reed, Citigroup, MBIA), Switzerland (UBS) andGermany (IKB) led the crisis to unfold further as it entered itssecond phase (March–October 2008), with the collapse and ‘rescue’takeover of Bear Stearns, Wall Street’s fifth biggest bank The third

Country-phase of the financial crisis, occurring from October 2008, beganwith the bankruptcy of Lehman Brothers and resulted in a full-blown global recession (Blackburn 2008; Gowan 2009; Mizen 2009).With the financial sector placed firmly at the heart of globalfinancial capitalism, Western governments have been quick toabandon all the tenets of free and self-regulating markets, rushing tocommit themselves to full financial support of financial institutions,opening the era of massive bail-outs and stimulus packages By mid-

2009, the US government had committed $8.5 trillion to support itsbattered financial system, with $5.8 trillion earmarked for FederalReserve lending, credit guarantees and asset purchase schemes; $2trillion in other schemes; and $700 billion in the Troubled Asset ReliefProgramme, a new ‘public–private partnership’ aimed at buying ‘toxic’assets from banks It is worth noting that the US government’scommitment to the financial sector amounted to two-thirds of its GDP.The size of the UK rescue package for banks was $2.12 (£1.22)trillion, or 87 per cent of the country’s GDP, with £585 billionallocated to asset protection; £300 billion to bank credit guarantees;

£185 billion to central bank loans; £94 billion to bailing out fivebanking institutions (RBS-Royal Bank of Scotland, Lloyds TSB,HBOS-Halifax Bank of Scotland, Northern Rock and Bradford &Bingley); £50 billion to the Bank of England corporate debt scheme;and £10 billion to a working capital fund for small businesses

In another striking move heralded by most financial mentators as ‘the end of the Thatcher era’, a host of governmentsfrom North and South pushed forward with massive Keynesian-stylefiscal stimulus packages (Rachman 2009) As the world’s economyhad slowed sharply in 2008 and was set to decline in 2009 by atleast 1.3 per cent, thus entering the first truly global recession sincethe Second World War, governments of the world’s twenty largeststates agreed to spend billions of dollars in tax relief and buildingprojects to stabilize the decline and stimulate economic growth, withthe US government pledging $937 billion; the UK $29 billion;Germany $103 billion; China $586 billion; and India $4 billion Avast majority of developing, transition and even advanced capitalistcountries, however, have been unable to either fund or borrow fortheir own much-needed bank bail-outs, corporate rescues and fiscalstimulus packages, with several countries having to go cap in hand

com-to the IMF and EU monetary authorities (among them Iceland,Latvia, Hungary and Ukraine)

A number of preliminary conclusions can be drawn from thiscrisis The 2007–9 financial turmoil appears to be rather unique in

at least four ways First, geographically, it has broadened to includehouseholds, corporations and the banking sectors in both advancedand emerging capitalist countries Second, this has been the largestcrisis in terms of capital loss According to a recent estimate by theIMF, subject to a number of assumptions, the write-downs on US-originated assets to be endured by all holders since the outbreak ofthe crisis until 2010 could reach a total of around $4 trillion, two-thirds of which would be incurred by banks (IMF 2009: xi) Third,the sub-prime credit crunch has led to the demise or restructuring

of several giants of the corporate world, including Lehman Brothers,Bear Stearns, Royal Bank of Scotland, Lloyds TSB, Citigroup, AIG,Fannie Mae, Freddie Mac, Bank of America, Northern Rock,Bradford & Bingley, Halifax-Bank of Scotland, Merrill Lynch, andAlliance & Leicester (see Klimecki and Willmott 2009) As aconsequence, the current financial crisis has highlighted a dramaticshift in banking’s centre of gravity, with potentially dramatic geo-political repercussions In 1999, the world’s largest financial institu-tions were dominated by Anglo-American banks; the world’s toptwenty banks by market capitalization included eleven US-basedinstitutions (with Citigroup, Bank of America and Fannie Mae infirst, second and fifth positions respectively), four UK-based (withHSBC and Lloyds TSB as the world’s third and fourth largest), twoSwiss, two Japanese and one Spanish By contrast, in 2009 just ahandful of the top twenty had their headquarters in the US or the

UK Amongst the top twenty banks, five were based in the People’sRepublic of China (with the Industrial & Commercial Bank ofChina, China Construction Bank, and Bank of China holding thethree top positions respectively); three were bailed-out US banks(JPMorgan Chase, Goldman Sachs and Wells Fargo); the restincluded only one British bank (HSBC), two Brazilian, twoCanadian, two Australian, one Japanese, one Spanish, one Swiss,one bailed-out French bank (BNP Paribas) and one bailed-out

Italian bank (Unicredit) (Bernard et al 2009).

Finally, in addition to the return of geopolitics, the decline of thepower of the Atlantic states and the dollar/Wall Street regime(Gowan 2009), the current crisis has undoubtedly severely damagedneoliberal ideology by revealing the intrinsic link between neo-liberalism as a state/class project and global financial capitalism

(Wong 2009) To some, the crisis response of the major Westerngovernments has even embodied the natural progression of neoliberalmarket states into financial ‘activists’ – public entities which behavelike activist shareholders in the market (Caprotti 2009) Whilst it isperhaps too early to understand the full ramifications of the collapse

of neoliberal economic order, it is hard to resist reminding ourselvesthat the neoliberal consensus of twenty years ago claimed that ‘Left-wing believers in “Keynesian” stimulation via large budget deficitsare almost an extinct species an operational budget deficit in

excess of around 1 to 2 per cent of GNP is prima facie evidence of

policy failure’ (Williamson 1990) At the time of writing, when thegovernments in the Anglo-American world – especially in the UK,USA and Ireland – are set to reach budget deficits in the range of

11 to 13 per cent, and busy trying to fund a Keynesian stimulationprogramme, there can hardly be more glaring evidence of neo-liberalism’s abject failure As left-wing ideas are seemingly back infashion, this book may contribute to the search for viablealternatives

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PART ONE • THE RISE OF NEOLIBERALISM

The argument of this chapter is that corporate lobbying tions are at the forefront of organizing and pursuing capitalist classinterests through the promotion of neoliberal agendas and the plan-ning of neoliberal projects (see Birch and Mykhnenko, this volume).These organizations exist to plan and implement policy, sometimesfor a wide range of ruling class fractions and sometimes for a muchnarrower ideological base, as a number of chapters in this book (forexample, Birch and Tickell; Jessop) will later show Either way,corporate lobbying has been at the centre of efforts to expand andglobalize corporate power, to introduce and develop the ‘doctrine’ ofneoliberalism according to which, as David Harvey (2005) has put it,

organiza-‘market exchange is an ethic in itself, capable of acting as a guide forall human action’ In this sense, neoliberalism is the ideology of theemergent transnational capitalist class which has planned and con-structed an architecture of global governance in response to threatsfrom national capital (Euroscepticism in the UK, for example), fromneoconservatives (internationalist American exceptionalists, forexample – see Diamond 1995) and from the Left

However, the planning and implementation of the global tecture of neoliberalism depended on the organization of interests Itwas only possible to introduce neoliberal ideas in practice whenenough members of the ruling class were either won over or hadbecome indifferent or constrained enough to make opposition futile;

archi-it was only possible, in other words, by preparing the ground Thishas been a long-term process, as will be outlined in this chapter, andhas depended on a battle of ideas, certainly, but also on a battle toput certain ideas into practice, to win certain conflicts and to buildconcretely on these victories It is certainly not the case that this wasdone in an abstract way, in total divorce from national and global

1 How Neoliberalism Got Where It Is: Elite Planning, Corporate Lobbying and the Release of the Free Market

DAVID MILLER

economic conditions But nor was it the case that the economicconditions of the mid-1970s inevitably produced neoliberalism Itdepended on the existence of a relatively coherent if inchoate andevolving set of ideas, an emergent class ideology to which increasingfractions of the ruling class could be won over If the neoliberals had

to invent on the spot all the ideas and the concrete political victoriesthey had won by the 1970s, and then practically build on them, theywould have tried – but they would have been acting in (different)circumstances not of their choosing

As might be apparent from this brief discussion it is my argumentthat the question of ideas is important in historical development asdiscussed elsewhere in this book (by Birch and Tickell, for example).The concept of hegemony is useful here, though it is important tospecify that the ‘ruling ideas’ referred to do not necessarily becomethose of subordinated classes Rather I refer to hegemony as theprocess by which ruling class fractions are able to exert leadershipover closely related fractions and to forge ruling class unity onparticular questions, even if only fleetingly Of course this unity neednot be total and may fracture quickly, as arguably has been the casewith the ruling class ‘realist’ opposition to the invasion of Iraq in

2003 and the peeling off of other elements of the ruling class whenIraq turned out not to be a cake walk The other obvious way inwhich ruling class consensus is fractured is when ‘experience 1’ (asEdward Thompson called it) walks in ‘without knocking’ (Thompson1978: 201) I refer of course to the financial crisis, which has forcedthe entire apparatus of bankers, financiers, economists, politicians,regulators, journalists and other ‘experts’ on such matters tohurriedly rearrange their analysis of global finance (see Shaoul, thisvolume) A series of splits quickly emerged to be followed byregrouping and ideological projects aimed at defending the castle ofcapitalism slightly further up the hill

All of this does not emerge spontaneously from the economic cumstances in which the capitalist class find themselves They need

cir-to discuss and debate, cir-to wheel and deal cir-to come cir-to a view on theirresponse All of this is accomplished in a myriad of social circles andinstitutional locations, from the golf course to the gentleman’s club,but is most obviously institutionalized in the elite policy planningorganizations, the think tanks and the class-wide corporate lobbygroups that both have distinct national characteristics – as I willshow in relation to the UK – and cut across national borders in the

extension of global corporate power Sidney Blumenthal (2004: xix)

notes in the introduction to The Rise of the Counter Establishment that

his aim is to advance the argument that ‘ideas themselves havebecome a salient aspect of contemporary politics’ He also writesthat at the heart of what he calls the ‘counter-establishment’ ‘is anintellectual elite attached to the foundations and journals, think

tanks and institutes’ (ibid.: xx).

Putting the Architecture in Place

As we will see, the architecture for elite global policy planning wasconstructed by means of lobby groups, think tanks, research insti-tutes, corporate-sponsored foundations and so on Internationalgroupings emerged gradually over the course of the twentiethcentury, starting in 1920 In general, they developed in line with thethree waves of business activism which can be identified in both the

US and the UK in the twentieth century (Miller and Dinan 2008).Elite policy planning groups have a long pedigree One of theearliest groups – set up in 1919 – was the Royal Institute for Inter-national Affairs (RIIA), based in London and often called ChathamHouse, the name of the building in which the Institute is housed Inthe US the Council on Foreign Relations (CFR) – created in 1921– performed a similar function Both appear to have emerged from

an organization called the Round Table, set up to pursue a wide ‘Anglo-Saxon brotherhood’ uniting the empire into one state.This project was associated with imperial propagandist Lionel Curtisand other prominent writers, administrators and politicians (Mac-kenzie 1986) Both the RIIA and the CFR remain key establishmentorganizations today For example, the CFR is the central upper-class foreign policy think tank in the US, whilst the RIIA has around1,500 individual members and 267 corporate members (RIIA,undated)

world-These attempts in the UK and the USA (see Birch and Tickell,this volume), being largely successful at the national level, thenopened up a window for the implementation of new structures ofglobal governance Such organizations, although set up in the earlypart of the twentieth century, remain important players in nationaland global decision making Furthermore, the process ofglobalization was activated by the conscious and calculated lobbyingand long-term policy planning carried out in organizations and

networks like the Mont Pelerin Society (MPS), which aimed to winthe ideological battle, and think tanks like the British Centre forPolicy Studies and the Adam Smith Institute, along with theAmerican Heritage Foundation and American Enterprise Institute,which aimed to put those ideas into practice (see Birch and Tickell,this volume)

The MPS, itself an ideological backlash, began on the slopes ofMont Pelerin above Lake Geneva in Switzerland It illustrates theinternational and global dimensions of elite planning and policymaking In the company of a ‘tiny band of economists, philosophersand historians’, the MPS was founded in 1947 As one of its Britishacolytes, Ralph (Lord) Harris, recalled, it had the ‘war aim’ ofreversing ‘the tide of collectivism sweeping across Europe after 1945from the Soviet Union westward to Britain already being convertedinto a socialist laboratory’ (Harris 1997) Their intent was the same

as those who had met in Dean’s Yard in London in 1919 to foundthe first class-wide propaganda organization (National Propaganda),namely to undermine popular democracy in the corporate interest.Their intellectual bellwether, Friedrich von Hayek, declared: ‘Wemust make the building of a free society once more an intellectualadventure, a deed of courage’ (cited in Harris 1997) The strategywas not to convince the public, who in the view from Mont Pelerinwere mere followers of their betters, but to convince society’s intellec-tuals, who were perceived to have been won over by socialism: ‘Oncethe more active part of the intellectuals have been converted to a set

of beliefs, the process by which these become generally accepted isalmost automatic and irresistible’ (cited in Harris 1997)

The MPS sought to assemble at ‘agreeable’ venues around theworld a ‘growing number of carefully vetted’ members to meet in

‘private conclave’ every year or two (Harris 1997) Like porary professional lobbyists, these shock troops in the battle forideas ‘eschewed publicity’, preferring to work amongst the intellec-tuals and through sympathetic institutes and other influential backrooms The result was a very wide range of think tanks across theworld

contem-Elite Planning and the Rise of Thatcherism in Britain

In the UK one of its early manifestations was the creation of theInstitute for Economic Affairs (IEA) in 1955 The decision to refrain

from overt propaganda or direct political action was taken at thefirst meeting of the MPS:

The group does not aspire to conduct propaganda It seeks to establish

no meticulous and hampering orthodoxy, it aligns itself with noparticular party Its object is solely, by facilitating the exchange of viewsamong minds inspired by certain ideals and broad conceptions held incommon, to contribute to the preservation and improvement of the freesociety (Hayek, cited in Cockett 1994: 116–17)

The influence of Mont Pelerin has been extremely significant.Within a generation their ideas had been adopted by right-wingpolitical movements everywhere and after a further 10–15 yearsthey had also successfully neutralized what was left of parties set up

to represent the common interest On her election in 1979 MargaretThatcher elevated the head of the IEA to the House of Lords ‘Itwas primarily your foundation work’, wrote Thatcher in a letter ofthanks, ‘which enabled us to rebuild the philosophy upon which ourParty succeeded in the past’ (quoted in Cockett 1994: 173) The IEAwas the first of what would eventually become more than a hundredfree market think tanks around the world

The IEA was set up by Anthony Fisher in 1955 He was achicken farmer who had gone to the US and discovered batteryfarming With the money he made introducing intensive chickenfarming to the UK he intended to go into politics However, after

reading The Road to Serfdom and discovering that Hayek worked at

the LSE, he promptly made contact Hayek inducted Fisher into theMont Pelerin Society and advised a different course According toFisher’s daughter, ‘Hayek said “Don’t go into politics You have toalter public opinion It will take a long time You do it through theintellectuals”’ (BBC 2006) So Fisher set up the IEA and at aConservative Party meeting in East Grinstead met Ralph Harris,who would run the new organization Harris was joined by anothereconomist, Arthur Seldon, and they began the task of counteringsocial democracy They gained valuable allies a decade later when

William Rees Mogg, the newly appointed editor of The Times, asked

Peter Jay, then a civil servant at the Treasury, to become ajournalist Jay was sent to Washington and there he came across theChicago School of Mont Pelerin economists which included Milton

Friedman Jay was converted and The Times under Rees Mogg

became a key propaganda outlet for market fundamentalism Butbefore the shift to the right came the events of 1968: the student

uprising in France and the demonstrations against the Vietnam War

in Britain Revolution and change were in the air

Post-1968 blues and the rise of Thatcher

Even before the wave of protests in 1968, the lobby group Aims ofIndustry was lamenting that ‘capitalism in Britain has, for manyyears, been intellectually on the defensive’ (Ivens 1967: 7) In theaftermath of the student revolt of 1968 and the rise of radicalism inthe UK and across the West, the established propaganda organiza-tions of capital – such as the Economic League and Aims ofIndustry – were joined by other pro-corporate groups This periodwas the genesis of the third wave of corporate political activism, andwas mirrored in the US at almost exactly the same time In Britain,the Institute for the Study of Conflict (ISC) was created in 1970 withmoney from, amongst others, the CIA and big business Two years

later Nigel Lawson, a former editor of The Spectator who would later

become Chancellor of the Exchequer under Thatcher, penned apamphlet focused on ‘Subversion in British Industry’ Lawson hadbeen approached to write the pamphlet by Brian Crozier, thedirector of the Intelligence-supported ISC, who had been impressed

by a Lawson piece in The Times which in Crozier’s view ‘showed he

understood the situation’ (Crozier 1993: 106) They printed only 30copies of the pamphlet as ‘the report was not for the wider public:

the target audience was industry itself’ (ibid.) Previously, and with

help from the Economic League and Aims of Industry, Crozier hadmanaged to convert John Whitehorn of the CBI to the neoliberalcause Whitehorn penned a memo appealing for more businesssupport for the ISC and its collaborators, which also includedextreme anti-democratic organizations like Common Cause Ltd andIndustrial Research and Information Services Ltd (Ramsay 1996)

During 1971 the President and Director General of the CBI had talkswith a number of heads of companies who are worried about subversiveinfluences in British Industry they have also been in touch with anumber of organizations which seek in their different ways to improvematters Their objectives and methods naturally vary; and we see nostrong case to streamline them or bring them together more closely than

is done by their present loose links and mutual cooperation (Quoted inLashmar and Oliver 1998: 166)

Appealing for the necessary funding from business, the memo notedthat the ISC

plans to take an increasing interest in the study of subversion at home,and has a research project on the drawing board on conflict in Britishindustry to be carried out, if finance is forthcoming, through case studies

of conflicts in the docks, shipbuilding, motor industry, and construction

(Ibid.)

Money was forthcoming and the ISC produced a special report on

‘sources of conflict in British Industry’, published just before the 1974election Naturally this was not presented as a report funded bybusiness and it had its effect Published with what Crozier describes

as ‘unprecedented publicity’ in The Observer, the report was yet

another attempt by corporate and intelligence interests to interferewith the democratic process (Crozier 1993: 108) The ISC’s partner

in subverting democracy, Aims of Industry, was also active in the

1974 election campaign, spending £500,000 on anti-Labouradvertising – including one advertisement with Stalin behind asmiling mask (Dorril and Ramsay 1991: 230) The ISC was joined byother radical right-wing organizations in quick succession, from theCentre for Policy Studies (1974) and the Freedom Association (1975)

to the Adam Smith Institute (1976) The ferment of free market ideasincreased as these networks expanded At the centre of thisintellectual assault was the Hayekian obsession with extending freemarkets and, by association, corporate power The political activistsinvolved came directly from the circles nurtured by Mont Pelerin Enter the Mad Monk: the Thatcherite victory

Keith Joseph ‘would do more than any other politician to developthe ideas behind Thatcherism’; he was instrumental in setting up theCentre for Policy Studies in 1974 to accomplish this task Unlike theIEA, the proposed centre was to be self-consciously political – asJoseph put it, ‘My aim was to convert the Tory party’ (quoted inCockett 1994: 237)

Joseph was joined at the CPS by John Hoskyns, a systems analyst,and Norman Strauss, a marketing executive for Unilever Hoskynsspent over a year figuring out what was wrong with Britain andrepresenting it all in diagrammatic form The problem was thateverything seemed to be caused by everything else NeverthelessJoseph introduced Hoskyns and Strauss to Thatcher, whose interestprompted them to do more work on their model: ‘As they workedsome of the things that Hoskyns had put in his diagram seemed tobecome more important than others But one thing would come to

dominate their thinking’ (BBC 2006) After all the scribbling itturned out that the trade unions were to blame and they had to bedefeated.

The intellectual battle for market fundamentalism began to pick

up steam as the alleged threat from the trade unions and the Leftpersisted The IEA sponsored a new think tank called the SocialAffairs Unit (SAU), which was run by Digby Anderson, a far-rightsociologist and Mont Pelerin member Anderson had beenencouraged by both Michael Ivens of Aims of Industry and ArthurSeldon of IEA in establishing the SAU As Cockett notes (1994), theemergence of the SAU in 1976 marked the arrival of the last of thethink tanks which were key to the promotion and ‘practical imple-mentation’ of Thatcherite market fundamentalism, especially in theform of privatization and deregulation

The move towards the privatization of national assets and thederegulation of service provision in state institutions was not sparked

by a simple decision at the centre of government Privatization ofthe utilities was not mentioned in the 1979 Conservative manifesto(Thatcher 1993: 667–8) and was not really an issue in the 1983election campaign (Wiltshire 1987) Deregulation was the objective

of key currents in the Conservative Party and also of certain businessinterests who were in a position to take advantage of it Thelobbying campaign for deregulation of NHS services was by allaccounts extremely effective and had already started by the time ofthe 1978 Conservative Party conference Industry trade associationsmet with the Minister of Health in October 1979, only five monthsafter the Conservatives’ election victory However, alongside thepromotion of specific Thatcherite policies, the new breed of thinktanks, research institutes and their backers also directed theirattention to subverting the Labour Party

The threat of the Left: targeting the Labour Party

By itself the victory of Thatcherism was not enough, since theLabour Party still presented a threat as far as the business classeswere concerned Unlike the US, where the Democratic Party hadlong since been pro-business, the British business lobby and theirallies in the worlds of intelligence, government and the military fore-saw a longer-term struggle One aim was the transformation of Britishsociety so that business would be free to do what it wanted.Government would simply be a mechanism for allocation of resources

to business Even at this stage, however, few of them saw that

government might become like a business A second aim, on which

US-based business and intelligence circles were especially keen, was

to draw the sting of socialism in the Labour Party so that it was nothreat to business interests Both of these aims were largely accom-plished in a remarkable period of political turmoil between 1979and 1997

Neutering the Labour Party was arguably a world-historicalaccomplishment, undertaken not simply by business, but by thealliance it forged with government and intelligence agencies in the

US and UK A whole network of Atlanticist foundations, think tanksand front groups was at work in the trades unions, the media andacademia to turn the left-leaning elite towards the US and awayfrom social democracy, suspicion of big business, and opposition to

of a ‘subversive opposition’ which ‘might come back to power couldonly lie in the creation of a non-subversive alternative party of

government’ (ibid.).

The interest of corporate-funded think tanks and right-wing USfoundations in an alternative to Labour was clear But the historybooks neglect to mention much in the way of trans-Atlantic connec-tions for the Gang of Four who split from the Labour Party to formthe SDP, and their co-conspirators They often miss out the well-known links of Shirley Williams with the right-wing DitchleyFoundation, or those of Robert Maclennan, a founder of the SDP,with the Atlantic Council, a pro-NATO policy group Indeed, allfour leaders of the SDP had been career-long members of the