Hayek fought against business interests capturing the Mont Pelerin Society. He lost.
Far from its origins as a politically-independent intellectual gathering, under the corporate-friendly influence of Milton Friedman, the Society became just another libertarian think tank.
Beginning in the 1920s, US business interests1 planned and implemented a movement to change the way people thought about government. The central message of the campaign was that government was bad and inefficient at providing services, while business was more efficient and cost-effective in their delivery.
Despite some political wins, the evidence of government willingness to deliver service where business wouldn’t, and to do so efficiently, was too strong for business interests to counter effectively. The line about government inefficiency was a lie, and business interests knew it.
At first, so did the American public. They were highly skeptical of business claims to have the public’s interest at heart. Decades of exploitation by business and their open campaigning against workers rights and protections had left a bad taste in the public’s mouth.
The American public, however, loved freedom. The country’s blood and history ran thick with it. So business changed the focus of their campaign. They worked hard to equate the idea of free markets and unregulated business as synonymous with freedom itself. State intervention necessarily curtailed not just business, but individual freedom and liberty. If any state intervention in economic affairs was tolerated, the result would inevitably be a loss of individual freedoms.
But the public was slow to be convinced, due in no small part to the catastrophic economic effects of the Great Depression and the hugely-popular government response, known as the New Deal. Business hated the taxes, worker protections, regulations, and wealth redistribution of the New Deal. Their single-minded focus was to dismantle the state apparatus that made it possible. Doing so politically meant “educating” the American public about the benefits of business freedom.
This education involved a huge propaganda campaign, including the founding of think tanks, political organizations, and lobbying groups. They worked over the next few decades to embed their rhetoric about government inefficiency, business efficiency, and freedom deep into the public consciousness.
By the end of the 1930s, their propaganda had provided them with a number of rhetorical tools with which to politically fight the New Deal, but direct political involvement was still viewed skeptically and often failed (as evidenced by the failure of the American Liberty League to prevent FDR’s reelection). Business needed a strong intellectual and political foundation from which to argue in order to engage directly in the political arena. They needed to gain an intellectual stamp of approval for the idea that economic freedom and political freedom were inseparable. Amidst the turmoil of World War II and the growing threat of socialism, they searched for a free-market oracle and found their prophet in Friedrich Hayek.
The Road to Serfdom and the road to Mont Pelerin
Hayek was a student of Ludwig von Mises. Mises was famous in economic circles for his arguments about the superiority of free markets over planned ones, due to the greater information about the value of goods and services—as indicated by prices—that free markets provide. Centralized planning distorts the price information in the economy. Without this information, the market cannot respond efficiently to changing demand and will therefore fail. He also argued that free markets and individual freedom were critically linked, and that without free markets, states would descend into authoritarianism.
While Mises argued for the necessity of free markets for individual freedom, Hayek’s book, The Road to Serfdom, published in 1944, made this argument much more accessible to a wide audience. Hayek argued simply and forcefully that without capitalism, or economic freedom, there can be no political freedom.
Hayek reasoned that the free-market system, based on private property, is the guarantor of our political freedom, because markets distribute power: individuals making free choices in the marketplace every day hold power in their hands and prevent its concentration in centralized government.2
Hayek’s thesis was an intellectual and sophisticated restatement of the propaganda campaign that business interests had been running for two decades. Moreover, business interests had soured on Mises, and so were eager to adopt Hayek’s thesis and his explicitly political position.
As a result, US business courted Hayek and worked to spread his fame and influence by, among other things, arranging for a visiting professorship at the University of Chicago. By the time of his visit to the US for a book tour (arranged by Harold Luhnow, who had helped found the first libertarian think tank, the Foundation for Economic Education (FEE)), Reader’s Digest had already published a condensed version of his book which was a caricature of his original argument, conflating his warnings against leftwing socialism with Nazism, a rightwing movement.
For his part, Hayek was pleased with his increased visibility and the attention that The Road to Serfdom brought him. But he was not interested in becoming a public intellectual figure or in being involved in explicitly political ventures or policy debates.
He was, however, very interested in founding an intellectual society where philosophers and economists could discuss the threats posed to the Western order by socialist governments and movements. The social and political environment at the time was often outright hostile to defenders of liberalism, and Hayek sought a space where people could feel comfortable hashing out their free-market ideas and critiquing the rise of centralized planning and socialism.
Hoping to use his intellectual authority to further their political agenda, US business interests made Hayek’s dream a reality. In 1947, a group of academics, scholars, intellectuals, and several businessmen met in Geneva, Switzerland for the inaugural meeting of the Mont Pelerin Society (MPS). The meeting was bankrolled by a number of business interests, including the FEE, the Earhart Foundation, and the William Volker Fund, which covered the costs of the American delegation.
Hayek was in a bind. Without business money, he could not have his meeting. But he worried, very sensibly, that inviting a number of businessmen to the meeting would compromise its objectivity and integrity, and would lead to popular criticism and attempts to discredit his society. Harold Luhnow of the Volker Fund, however, was reluctant to be financially involved unless he could be in charge of the meeting. They reached a compromise whereby Hayek would invite Luhnow and Jasper Crane (a former DuPont executive and member of the FEE) to attend the meeting as observers, but their names were to be omitted from the public record of attendees (Crane did not attend but sent a representative).
The meeting itself was as free-spirited and wide-ranging as any group of academics and scholars tends to be, as evidenced by the meeting transcripts. While all agreed that the post-WWII moment was a time of crisis, not everyone agreed on the best way to address the crisis or what a successful political strategy would consist of. Free markets were considered essential, but no one advocated for unregulated free markets, and there was no consensus on how much state intervention was acceptable or in which social and economic matters the state should intervene.
Hayek pushes back
Hayek’s vision for the MPS was for a space of free inquiry where he and his colleagues could interrogate and refine their free-market ideas. It was crucial that this space be free from political influence or agenda. But Luhnow, Crane, and others were very wary of financially supporting an organization that they could not control. Their agenda was explicitly political, as evidenced by the founding and continual support of think tanks and political groups. They were able to direct the affairs and strategies of these political organizations.
On the contrary, the businessmen feared that intellectual organizations would prove insufficiently loyal in the political arena and that their unrestrained agenda would mean that they advanced arguments that did not necessarily help the political cause.3
The letters between Hayek and Crane written in the early years of the Society, reinforce this delicate dance between business interests and Hayek’s desire to maintain intellectual freedom.
Crane, who had become deeply interested in the ideological opportunities that might be afforded by the Society, wrote to Hayek in disappointment after he had received reports from the first meeting of
“accepters of collectivism” at Mont Pèlerin: “Are you quite sure that all of the American members, as I know some of them to be, are quite dependable?” Hayek responded with a warning against the “tendency to create an unreasoning orthodoxy which treats traditional liberal principles as a faith rather than a problem on which reasonable people may differ.” But Crane was not impressed by the call to intellectual diversity. He argued that “the membership should be as far as possible composed of people who are sincerely devoted to the principle of human liberty,” and urged Hayek to “scrutinize” future recruits with “great care.”4
Despite his misgivings, Crane joined the MPS, but he became further disillusioned over the next few years, as he feared the ideological purity of the Society was compromised.
In 1949, Crane wrote an angry letter to Hayek about a paper by Frank Knight, “The Determination of Just Wages,” which Knight had written for the Society’s annual meeting… The paper argued, among other things, that wealth was becoming progressively more concentrated in the United States, a point that Crane denounced as an idea “which stems from Karl Marx.” To make matters worse, Knight had written that “nineteenth century liberalism naively over-emphasizes freedom,” a point Crane found “really shocking:” as he concluded, “Unless we uphold the sanctity of the individual and cherish moral ideals, we are lost.”5
Hayek’s commitment to the intellectual independence of his society resulted in difficulty raising funds. None of the business organizations that founded many of the original American libertarian think tanks wanted to touch MPS, as it was anything but a sure bet. Still, Crane didn’t give up on the society. In 1956, following Eisenhower’s reelection, he wrote to Hayek to urge him to organize an American meeting of MPS. For Crane, it was high time “the American public, and particularly the thinking people, would learn… of the widespread advocacy of the liberal philosophy and its strong intellectual foundations.”6
With Crane’s fundraising help, Hayek was able to organize an American meeting of the MPS. Crane pressed Hayek to include businessmen on his roster of attendees, stressing that
“While the membership of the Mont Pelerin Society is and should be predominantly academic, I believe a small admixture of dedicated businessmen is desirable. As the European members get to know them, or I suppose I should say us, they may lose some of their distrust of capitalists.”7
While Hayek was reluctant to cede control of the meeting to Crane, he was indebted to him financially for raising the money. The result was that Crane took a much more active role in shaping the speakers and topics of the meeting than Hayek wanted, to the degree that other members of MPS complained to Hayek about Crane’s interference. Crane continued however, very carefully and with the quiet help of the FEE, to infiltrate and influence the program of the American meeting and the makeup of MPS and to pressure Hayek to invite and include many businessmen and corporate representatives.
Little by little, MPS was losing its independence.
Friedman ascendant
By the time Milton Friedman became president of the MPS in 1970, the intellectual and ideological slant of the free-market movement represented by MPS had shifted drastically. Hayek represented the old guard, epitomized by explicit advocacy for the free market but willing to concede that some state intervention was necessary, even desirable.
Friedman, while he began his career in this frame of mind, came to harden much more along rightwing ideological lines. While he rejected the libertarian identifier due to its semantic similarity with libertinism, he embraced wholly the libertarian ideology. Indeed, especially in his popular works such as Capitalism and Freedom (the American version of The Road to Serfdom) and his public speaking and advocacy, he is the quintessential libertarian, adopting wholesale the propaganda that business had been seeding the public consciousness with for decades. He rejected the cautious and more nuanced and moderate approach of Hayek and the old guard
While his predecessors’ work was ingrained with a sense of caution at the knife’s edge of catastrophe, Friedman’s was infused with Cold War dualisms. If pure communism was defined by the government’s total subsumption of the market mechanism, its most perfect contrast would be defined by a refusal to interfere with the market’s invisible decrees.
While Hayek had also been hesitant to play the role of public intellectual, Friedman took to the public stage and relished in the fame it brought him. As a result, he was heavily promoted by business interests who arranged speaking tours, book contracts, and other opportunities for Friedman to spread his libertarian free-market gospel.
When Friedman assumed the presidency of MPS in 1970, the Society’s membership consisted mostly of economists and various businessmen. This was far from the original vision that Hayek had for the Society. He mourned the loss of philosophers and the surge of economists, arguing that practical application was not what the Society was meant to engage in. Friedman, however, argued that the Society, and the intellectual movement in general, should be concerned, first and foremost, with developing ideas for practical political application.
The old guard had truly fallen.
In many ways, Friedman’s career represents the culmination of the campaign begun by US business interests in the 1920s. By the time Ronald Reagan was elected, the public firmly equated freedom with free markets, and this was due in large part to the role Friedman played in spreading this idea. While Friedman maintained that he developed his ideas outside of any influence, the impact of the business interests on his career trajectory cannot be overstated. Theirs was a long-term agenda that they cultivated and implemented over decades, and they provided the ideological and financial soil for intellectuals like Friedman to plant and grow their own more sophisticated versions of the crude rhetorical tools they had honed in the 1920s and 30s
Friedman’s career as a public intellectual was initiated, cultivated, and promoted by a series of institutions designed to further the cause of free-market ideas… These organizations did not create Friedman’s ideology; he was uncowed by public controversy and fiercely protective of his independence as a scholar, and in many cases his positions represented a departure from his predecessors’ ideas and his funders’ expectations. Instead, they created an environment in which he was inspired to perceive his career in a political context and encouraged to share his perspective in a language that a general population could understand. To adopt terms that Milton Friedman would appreciate, institutions like the Volker Fund and the Mont Pèlerin Society are the venture capitalists of the intellectual world, allocating a broad dispersion of small investments with an extended time horizon and an understanding that one spectacular success can compensate for the toll of many minor failures.8
Mont Pelerin tamed
The Mont Pelerin Society began in 1947 as a way for scholars and intellectuals to freely debate their ideas about free markets and capitalist society. The Society prided itself on the diversity of thought and opinion. Hayek fought hard to maintain this intellectual independence of the Society, realizing how easy it would be to compromise its mission if it gave in to business interests.
In the end, Hayek and the Society were unable to withstand the onslaught of business interests. Their problems were financial as well as practical. They needed money to organize and fund the Society’s activities, and they needed financial and practical support to fund the activities of the Society’s scholars. The only real support available was from business interests, who had deep pockets and extensive networks. They were, however, unwilling to support without some direct input in the affairs of the Society.
While the early years were constituted by Hayek clawing back MPS’s independence from steadily and stealthily encroaching business interests, by the time Milton Friedman became president, both the economic and political temperature in the country had shifted. As a result, the most hardline viewpoints and policy prescriptions, which had been the minority view in MPS’s early years, were proffered and adopted by governments in the UK and US. The market was held to be supreme, itself the arbiter of moral outcomes in society.
These days the MPS continues the work of free market think tanks worldwide. It is perhaps not as well known as the Heritage Foundation or other big name think tanks, but its status as an independent non-partisan intellectual society seems a thing of the past, notwithstanding its members protestations otherwise. As is always the case, an organization’s transparency is evidence of the purity of its motives. The MPS does not publicly list either its members or donors (only its Board of Directors (including New Zealand Initiative’s own Eric Crampton), past presidents, and notable members), but past donors of the Society include many free market libertarian foundations and individuals, including
William Volker Fund
Foundation for Economic Education
The Sarah Scaife Foundation
The Earhart Foundation
The John Templeton Foundation
The Koch Family Foundations
Sir Antony Fisher, who founded the Atlas Network
Perhaps it was inevitable that a society dedicated to free market ideas would become wholly captured by corporate interests. After all, these same interests have made sure that the contemporary discussion of free markets bears little resemblance to the classical economics from which it derived or to the varied thought of the initial members of the MPS.
As evidenced by the repurposing of the parts of the discussions and emphasis that slotted nicely into their corporate/libertarian ideological framework, the purity of the intellectual endeavor was never important to the business interests that underwrote the MPS or intellectuals like Hayek and Friedman. Additionally, they were not overly concerned with the pushback against their influence. They engaged in the dance, poking and prodding for an opening, withdrawing when their influence became too overt. They were always playing the long game, patiently working to reshape the world and the way people saw it, “uniquely reconciled to the assumption that the nature of their impact would not be revealed until long after their ability to appreciate it had passed.”9
I refer to “business interests” throughout this essay. These interests included numerous business associations, individuals, and think tanks. I will mention specific ones where relevant. Much more detail on these interests is available in Oreskes and Conway’s book, The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market.
The Big Myth, 139.
The Road from Mont Pelerin, 747, epub.
Ibid, 759-760.
Ibid, 760.
Ibid, 765.
Ibid, 767.
Angus Burgin, The Great Persuasion: Reinventing Free Markets since the Great Depression, 310-311, epub.
Ibid, 311.
Very interesting. Thank you. Capitalism did not need to become the antithesis of equality. We had high hopes in the 50's.
Thank you. A very lucid and helpful read.
Although the information does not qualm my fears of a society degenerating into businesses with bosses and workers and not much else if we are unable to break through the wall of ignorance.