Search

A second transformational change in Spanish economic policy took hold from the mid-1870s as the country began to turn from free trade to protectionism and then to economic nationalism. The careers and writing of two important writers and politicians of the period, Pablo de Alzola and Santiago Alba, provide a clear picture of this key transition and the impact it had on Spain’s wider political and economic policies. Both Alzola and Alba played major roles in the evolution of Spain’s economic policy from nineteenth-century economic liberalism to twentieth-century economic nationalism. Although from different generations, these two politicians shared a strong commitment to liberal economic reform and were important political actors in shaping Spain’s response to the intense pressures of European industrialisation. Out of the bitter disputes over free trade and investment, the issue that dominated the nineteenth century, a broader debate emerged over how to mobilise the state to build a modern economy capable of competing in a rapidly industrialising continent. As progressive and strongly patriotic liberals, Alzola and Alba were close colleagues in the construction of a programme for national economic reform, part of the movement to regenerate the country in the wake of Spain’s catastrophic defeat in the Spanish-American War of 1898. Both men supported protectionism, not as an end in itself but as an essential basis for a programme of national economic reconstruction led by an active and interventionist state. Their common interest—and distinctive contribution—lay in drawing up detailed and practical plans for change and in working to build the necessary political alliances to put them into practice.

In this chapter I analyze the creative categories of the originary, directed toward the future. We will see the evolution of capitalism from the first to the second modernity, from creative youth to aging. Capitalist economy is on the decline, in crisis, or in senescence, due to the self-regulating market system of economic liberalism, the individualism enthroned by the capitalist system, and the fluid permanent change. These now dominate the increasingly urgent and necessary rhythms of technical innovation. In conclusion, current capitalism is in a phase of senescence, to the extent that the old capitalism has today become an important driver of technological innovation, but not of social innovation, which had been the main intellectual motivation behind the industrial revolution.

This chapter discusses the popular idea according to which Smith is the father of economic liberalism. First, this chapter explores the ambiguities of Laissez-faire. Its first occurrence affirms the idea that exporters must act freely to import precious metals, the only strategic commodities lacking in the country. Secondly, it retraces succinctly the history of the word Liberal and of the expression Economic Liberalism. The word liberal refers to the adversaries of the French Restauration (1815–1830) and the Economic Liberalism is a word used by the opponents to the first socialists, after the 1848 Revolution.

The utility-driven, individualist vision of the nineteenth century is subject to relevant criticism in the following century, under the influence of different circumstances: the consolidation of German nationalism; the evolving industrial structures, with consequent concentration of economic power and growth of trade unions; the Great War and, then, the difficulty to go back to pre-war societal structures and economic and monetary arrangements; the economic Depression and the pressure for a larger role of the State; and the affirmation of Marxist socialism in the Soviet Union. Philosophical developments—Croce’s idealism—emphasize the ethical contents of the liberal idea, which is seen as not necessarily coincident with economic liberalism. As a consequence of these circumstances, liberalism takes different directions: the first emphasizes the issues of market failure, wealth distribution, State presence in the economy. The second has libertarian, anti-statist accents, taking however distance from the “scientific” Neo-classical School. The third inserts powerful elements of market economy and competition into the German statist tradition. Pigou, Keynes and Beveridge can be considered as liberal economists who react to the imbalances of a liberal society: Pigou, by insisting on capitalism’s negative “externalities”, to be addressed by the State through the use of coercive devices for directing self-interest into social channels; Keynes, by facing the system’s inability to assure full employment and to address the inequality in wealth and income distribution, and by emphasizing economics as a moral science; Beveridge, by enlarging the field of liberalism through a long list of services that is up to the State budget to provide, even beyond full employment (the Welfare State). In a different direction move the economists of the Austrian School and its main exponent, Hayek. His individualistic stance, however, is far from the classical laissez-faire and the positivist, scientific attitude of neo-classical economists. A rational system of preferences, based on utility and stated in mathematical form, is not possible, given the dispersed bits of knowledge which are available, but market provides the necessary connection between “uninformed” economic agents through the system of prices. In order to operate, market competition requires absence of any central planning: only a set of basic rules intended to be instrumental to the pursuit of individual needs. The Chicago School, with Friedman, reiterates with emphasis this libertarian attitude, particularly focussing on the monetary constitution, as an instrument of stability and of keeping money out of authorities’ discretion. Ordoliberalism is a typical turn of liberalism in interwar Germany, whose influence seems however lasting and well alive in our days. The State is at the very centre of the economic system, and regulates and protects market competition. The State must act so as to de-proletarianize the social structures of capitalism, by enhancing workers’ freedom and responsibility and not imprisoning them in a welfare state. Ordoliberalism represents a strong turn towards normative, as opposed to positive, economics. As such, and similarly to the German Historical School of the previous century, it is unsuitable to be studied as a formal “model”. It’s rather a prescriptive scheme of structure and organisation of the economic system.

The chapter scrutinizes the structuration of sovereign debt and state power in Germany after the end of the First World War, under democratic as well as under dictatorial rule. It argues that the history of German public debt practices in this period cannot be understood without taking the intermingling logics of national politics and international finance into account. Two aspects are highlighted: the blurring lines between state agency and market interests, and the growing importance of intermediary institutions and financial mediators. The findings show that the power of the state was measured decreasingly by the amount of subscriptions of public bonds by individual citizens. The most powerful asset of the state became its differential, sometimes even coercive impact on the capacity of (national as well as international) market actors to realize their goals. These developments transcended the caesura of 1933 and question normative narratives that connect parliamentarian representation, economic liberalism and sustainable debt.

Bergounioux underscores the centrality of the question of the state throughout the history of French socialism. His chapter demonstrates that ideological debates have been bitter and unceasing. Socialist thinking was forged through criticism of the liberal state: its initial aim was to transform the state entirely, mostly through a different organization of society. Then came a gradual acceptance of the state—accompanied by demands for its democratization—from the late nineteenth century onwards and their public offices increased. From the 1980s on, the socialists no longer viewed the national state as the essential player in the country’s modernization. They incorporated an element of economic liberalism, but without abandoning the idea of a regulatory role for the state.

According to Schumpeter, the roots of economics are to be found in social philosophy and in the concrete business experience of daily life, particularly in eighteenth-century’s Britain. The discussion of economic activity takes different turns in Britain and Germany: in the former, intermingling those two roots, it is based on an individualistic point of view; in the latter, on the State as the centre of social and economic life. Adam Smith, philosophically motivated by Moderate Enlightenment, is seen as the founder of the Classical School of political economy, and the embodiment of a “cosmopolitan” economic liberalism, valid at any time and place. Later in the nineteenth century, political economy is heavily influenced by positivism, and economic phenomena are studied similarly to natural sciences. The attention of the neo–classical economist is focused on individual’s marginal utility, and the whole equilibrium of the economic system is explained in mathematical terms, as with Walras and Pareto, implicitly supporting a conservative view of society. In Germany, the central role of the State finds a Hegelian basis and political economy is characterized by an accentuated historicism, through the works of the protectionist List, and of the exponents of the Historical School of Economics, in a sort of economic “nation-building”. The centrality and development of the nation, and an insistence on social reform in a non-Marxian approach, are emphasized within a framework of path-dependence. The same Hegelian root can be found in Marx and his historical materialism. Social classes, already present in the analysis of the Classical School and then disregarded by neo-classics, are seen in a totally different, confrontational perspective, resulting from society’s capitalistic structure: a structure to be deterministically overcome by the proletarian revolution or by the fall of the capitalist’s rate of profit.

Far from the wide wings liberalism, statist nationalism and Marx’s socialism occupy a strong position in twentieth century’s political economy, with a heavy influence on Europe’s great dictatorships. Italian corporativism represents an original strand of thought, partly built on the German Historical School of the previous century, partly functional to Italy’s protectionist interests, partly based on the concept of the ethical State, where the conflicting interests of all social classes are to be represented in the “corporations” and reconciled in the superior interest of the nation. This implies a dirigiste policy and the creation of a set of quasi-governmental institutions: features that—in a different political context—we find again in post-WW2 Italy. Marxism remains a static ideology—compared to the dynamism of liberalism. This is due to the fact that historical materialism is an interpretation of economic reality that does not admit deviations and, possibly, to the relatively better economic performance of the Soviet Union during the long period of Depression that afflicts capitalistic countries in the 1930s. The doctrinarian inflexibility made Marxist economists unable to deduct the appropriate inferences from changes occurring in the structure of the economy, in the modes of production. In particular, competition—which Marx had seen as capitalism’s prevalent form of market—had been superseded by monopolistic structures where capitalism’s creative destruction was a continuing source of strength (Schumpeter). The survival of “economic laws” in a socialist economy, denied by pure Marxists, was itself an object of controversy. In the end, socialist economists saw their discipline as a neutral science of economic management, reduced to a sort of social engineer and search for efficiency. “Socialism by default” is a formula that brings together two quite diverse and non-Marxist thinkers, but with a strong historical sense, which leads both to a basically wrong forecast: the fall of capitalism and the advent of socialism. Schumpeter, criticising Weber who had said that we will live with capitalism “until the last ton of fossilized coal is burnt”, believes that capitalism will die from a sort of exhaustion, not because of a revolution but as a consequence of the boredom of the bourgeoise class and the bureaucratization of giant industries, where administrators will replace the vanishing entrepreneur (as distinct from the enterprise’s owner). Polanyi’s Christian vision is critical of economic liberalism. Society as a whole, as distinct from any social class, risks self-destruction by the forces of free-market economy, where a pivotal role is played by haute finance. In a new socialist society, labour, land and money will be liberated from the constraints of the free market. This society will rely on Christian traditions, as testified by the Old Testament, the teachings of Jesus, the utopian socialism of Robert Owen.

This chapter explores a claim that the classic European state was reconstituted after World War II on the basis of a fear of democracy, and specifically a fear that the democratic constituent power might upset the liberal differentiation of the political and the economic. This reconstitution can be represented materially as an authoritarian liberalism, with politically authoritarian means pursuing economically liberal ends. An upshot of this claim is that the authoritarian economic liberalism often labelled “neoliberalism” has a longer lineage than often thought. But, what if the post-war constitutional reaction to the interwar period occluded the various crises of capitalism? What if it was based on a misdiagnosis of interwar collapse? If the threat to democracy came (and now returns) primarily from systemic capitalist inequality and its crisis-inducing tendencies rather than from anti-systemic political and social movements, then democracy may require not the defense of, but a rupture from, the post-war settlement of authoritarian liberalism.

This chapter serves as the conclusion for the book, which asks what has ‘gone wrong’ with liberalism in the twenty-first century when pro-socialist and pro-nationalist sentiment is on the rise, and the free market appears to have few vocal defenders. It diagnoses the problem in five key areas: positivism, scientism, and mathematical modelling; monetary policy and central banking; the ‘packaging’ of economic liberalism with social and political liberalism; selfishness, atomisation, and ‘being part of something bigger than yourself’; and, finally, the need to control the frame and win the language game in the battle of ideas. Along the way, it finds cause to be critical of those who have been allies in the defence of economic liberalism, such as Milton Friedman and the Chicago School of Economics and Ayn Rand and Objectivism.

This chapter considers the political influence of liberalism in contemporary Russia, pointing out some of its hidden potential. The most salient aspect here is the considerable share of the population inclined to economic liberalism. Furthermore, so-called “system liberals” exist in the Russian government and in some public and economic bodies. Openness, integration into the global economy and the adoption of international rules are both implicit and explicit imperatives of this group. This is arguably the only group in the Russian elite with a coherent mindset, ideologically motivated goals, managerial capacity and trust from the West. We may observe in the future a new coming of liberals as saviors of the Russian economy and architects of bridges to the West. But even such a hypothetical shift won’t promise a rapid democratization of Russia as a whole.

On the basis of a study of Russian liberals’ retrospective accounts of the failure of perestroika, this chapter outlines some important tendencies in the evolution of the liberal ideological field in Russia between 1995 and 2005, when it experienced a severe crisis. Persistent disagreements regarding the lessons of perestroika illustrate the conflict between rival liberal currents, and also offer an indirect insight into their shared assumptions. The chapter argues that Russian liberalism evolved throughout this period in three important ways. First, economic liberalism moved to the core of the Russian liberal ideological field. Second, in the pursuit of political stability, Russian liberals embraced situational conservatism: a general celebration of evolution over revolution. Finally, while Russian liberals retained a commitment to the idea that the establishment of liberal order requires substantial moral prerequisites, they nevertheless generally eschewed moral restoration as a central objective in itself.

The success of capitalism as the predominant economic system of our times is to a large extent the result of the way in which the prevailing monetary and financial system provides individuals, businesses, economies and even states with the means of financing their activities and operations.

Ireland’s deep crisis after 2008 was most immediately produced by the bursting of a real estate and banking bubble combined with collapsing tax revenues. This was made possible by Ireland’s continuing weakness in developing indigenous enterprise and investment, its limited social contract and emergent tensions in its historical external ties with the UK, the USA and Europe. More generally, the character of Ireland’s crisis was rooted in its varied history of economic liberalism, and particularly in an aggressive liberalism of the 2000s that succeeded earlier periods of passive and activist liberalism. Finally, despite recent economic and employment growth, Ireland’s recovery remains tenuous, given the re-emergence of historical patterns and the failure to address some key dilemmas in the ‘Irish model’.

Hayek claimed that he ‘always made it’ his ‘rule not to be concerned with current politics, but to try to operate on public opinion.’ But the evidence suggests that he was a party political operative—he targeted cabinet ministers for Margaret Thatcher to sack. ‘Free’ market ‘scholarship’ was the vehicle through which he sought—and achieved—party political influence. Two years after Mises promoted inter-war ‘Fascists’ (including ‘Ludendorff and Hitler’), Hayek complained that British ‘free’ market promoters hadn’t developed ‘economic liberalism to its ultimate consequences with the same ruthless consistency as Mises’ (a card-carrying Austro-Fascist). But the ‘main purpose’ of the post-war Mont Pelerin Society had ‘been wholly achieved. We developed a consistent doctrine and some international circles of communication. The Austrian School of Economics supported General Pinochet’s brutal dictatorship and continues to maintain a ‘united front’ with ‘Neo-Nazis.’ This chapter places their ‘free’ market promotion in the context of the post-1965 neo-Fascist ‘Strategy of Tension.’

This chapter will deal with Pareto’s wide-ranging intellectual interests during the Tuscan period, characterised by his early adoption of a liberal ideological outlook. The first section will examine the political liberalism of the young Pareto, with its clear orientation towards the ideas of John Stuart Mill, including his brief but intense alliance with political activism in favour of legislation on proportional representation, of freedom of religion (Sect. 5.2) and of the emancipation of women (Sect. 5.3). This is followed in Sect. 5.4 by an initial overview of Pareto’s early economic liberalism, which he recognised as ideological in character notwithstanding the clear evidence of the disastrous consequences of state intervention in the economy revealed by economic history. Lastly, in Sects. 5.5, 5.6, and 5.7 we highlight his ongoing interest in methodological questions which can be traced back to his university years, where his wholesale endorsement of John Stuart Mill’s positivistic approach was complemented by ideas borrowed from the Franco-Belgian economist and advocate of free trade Gustave de Molinari, with whom Pareto maintained close ties, also of friendship, between the late 1880s and the mid-1890s.

This chapter interrogates the connections between liberalism as open-mindedness, tolerance of diversity, individualism, and equality; liberalization as technological modernization and the opening up of cultures; and neoliberalism as the prioritizing of market over other values. With examples from world-historical literatures from China, Europe, India, Latin America, and the Middle East, it considers engagement with western liberalisms and modernization and some recent conflicts between liberalism and neoliberalism. It concludes with some critics and theorists who have wrestled over the years with problems in liberal, liberalizing, and neoliberal societies and whose work in transcultural studies I consider important beyond their specific specialisms in Latin American, South Asian, and Islamic studies: Ileana Rodriguez, Jean Franco, Kancha Ilaiah, Joseph Massad. The chapter is an exercise in comparative political-economic languages and how we might think about literature’s global circulation under interdependent but uneven conditions of development.

This chapter analyses the defining transition that took place in Ethiopia from a command, centralised socialist economy to a market-oriented and neoliberal regime. In particular, it provides an understanding of institutional mechanisms and processes through which Chinese investment was then able to penetrate Ethiopia and establish various networks of state and society linkages. The chapter links the economic and political transition that happened when the EPRDF regime took power in 1991 to the emergence of new social forces with links to state institutions. The main argument of this chapter is that the reform period ushered in by the change of government in 1991 gave rise to a particular variant of Ethiopian neoliberalism whose form and character were shaped by pre-existing social relations and political structures. As the capitalist transition was emerging out of the political and social context in Ethiopia, the internationalisation of Chinese capital was simultaneously beginning to be a key feature of the global political economy. It is the intersection of these two forces that have shaped neoliberalism in Ethiopia. Rather than calling it a ‘facade’, the book regards the political and economic liberalism that was instituted by the EPRDF to be essentially a particular variant of neoliberalism. Chapters 3 and 4 are thus interlinked in deconstructing the political transformation and evolving state-society relations in Ethiopia, including the changing sphere of ethnocentric politics, from the socialist Dergue to neoliberal and developmental EPRDF regimes. One interesting discovery is that China went through a very similar transition during the same decades, though in a more profound manner and in a much larger scale. Thus, the penetration of Chinese capital in Ethiopia is not a historical coincidence.

From the 1830s on, the frustration of expectations expanded to encompass economic liberalism, as the liberal regime also appeared to be incapable of fulfilling the predicted egalitarian socioeconomic order. The persistence of pauperism was taken to be the main evidence of that failure. As a consequence, some liberals began to critically scrutinize the economic theory of liberalism, as codified by the classical political economy, and to advocate the need to reform the economic regime of free competition. In the course of this process, however, some critics went a step further, denying liberal economic theory of any scientific value and redefining the nature of the economic activity. According to them, the economic sphere was, contrary to the idealist individualist view, an autonomous and self-regulated domain beyond conscious human control. Such a realm constituted an objective structure governed by its own laws and with the power to causally determine people’s subjectivity and behaviour, and social organization as a whole. This second variant of the modern concept of society as economic structure was finally formulated by the so-called historical materialism, embodied in the work of Marx and Engels.

Participants analyze how liberal economies—and liberal societies—can best prepare for the prospect of waging a future war. Participants discuss raw materials, efficient production, and technological obsolescence. The possible weaknesses and strengths of a liberal economic system are contrasted with those of a centrally planned economic system in the context of both the preparation for war and wartime production.

Participants analyze the “social” question; the relationship between economic liberalism and the well-being of the masses; the phenomenon of mass unemployment; and what liberalism can offer the most deprived classes. Here, too, a divergence appears between a more classical wing and a more reformist one, with regard to the solutions favored by the participants.

The third chapter of this book deals with the impact the idea that people should above all strive for ever more money and wealth has had on society (ies), especially at two levels, namely: the level of an ever increasing greed money use has led to (despite attempts by key historical figures in philosophy and religion to avoid this), and, the level of the true meaning of ideologies, especially “economic liberalism” and “economic neo-liberalism” which have attempted to justify this kind of unbridled greed (and which have in this way mainly contributed to a globally spread model of society wherein egoism prevails).

At the end of 2011, the Republic of Korea (hereinafter Korea) became the ninth country to join the “one-trillion-dollar trading club,” departing from the ranks of newly emerging countries to join the ranks of trade giants. After reaching the $100 million mark in 1964, Korea’s exports grew more than five thousand times in 47 years, making it the seventh-largest exporting country in the world. Its economic development model has been characterized as export-oriented industrialization (EOI).