World Federation Against the Welfare State: Hayek and Röpke Think Global Before 1945

Conference Paper Hitotsubashi University Tokyo, Japan March 21, 2015 Draft – Do Not Cite or Circulate World Federation against the Welfare State: Hayek and Röpke Think Global before 1945 Quinn Slobodian Wellesley College It has fallen to myself and a couple of others at this conference to speak not about the proponents of the welfare state but its critics. In the following, I will talk in particular about two of the fathers of the neoliberal intellectual movement, Wilhelm Röpke and Friedrich Hayek. I will do so by way of an insight from geography, asking questions about the welfare state and scale. Because I think it is only when we think about the space between the nation and the world that the neoliberal critique can be grasped. The welfare state, two historians observe, is often “understood as quintessentially a national phenomenon or as a set of uniquely national projects.” 1 Insofar as transnational aspects are recognized in the period before 1945, it is in the traffic of models: the movement of social-scientific knowledge from place to place, and occasionally the activity of a fledgling international organization like the International Labor Organization (ILO) formed in 1919. The national focus is not coincidental. In fact, it follows from the tools of economic policy and knowledge themselves. As is now widely acknowledged, the idea of “the economy” itself as an object to be observed, modeled and engineered only arose with the tools of national income accounting. 2 Röpke himself pointed out in 1937 that macroeconomics encouraged the national frame of policy, including what he called “self- contained national income theory.” 3 The nation-state was the assumed if not the explicit 1 Chris Pierson and Matthieu Leimgruber, "Intellectual Roots," in The Oxford Handbook of the Welfare State , ed. Francis G. Castles (Oxford: Oxford University Press, 2010), 40. 2 Timothy Mitchell, "Fixing the Economy," Cultural Studies 12, no. 1 (1998): 82-101. See also Daniel Speich Chassé, Die Erfindung Des Bruttosozialprodukts: Globale Ungleichheit in Der Wissensgeschichte Der Ökonomie (Göttingen: Vandenhock & Ruprecht, 2013). 3 Wilhelm Röpke, Economics of the Free Society (Chicago: Regnery, 1963), 125. container for Keynesian economic policy and the distribution of the welfare state’s social services and benefits.4 The breakthrough of scale, we are told, comes with Bretton Woods in 1944. The institutions of the World Bank and the IMF allowed, for the first time, the potential for the international generalization of expansionary state spending policy in the interests of full employment accompanied by social services and robust forms of organized labor. The system of fixed but adjustable exchange rates combined with aid transfers would make “embedded liberalism” (Ruggie) a reality; the welfare state, in short, could go global. 5 This somewhat Whiggish iteration—from the national to the planetary—has enabled a series of redemptive and normative narratives in the realms of both scholarship and politics. One thinks here of the stirring title of Elizabeth Borgwardt’s 2005 book A New Deal for the World: America’s Vision for Human Rights and the rather nostalgic impression it leaves--written, as it was, in the Bush years--of an America that once relied more on aid and training than Bradley fighting vehicles to assert itself overseas.6 The most common version of this narrative comes in the topos of the “global New Deal.” To name a few examples from the last two years, British prime minister Gordon Brown, the UN Conference on Trade and Development, Oxfam, and the head of the AFL-CIO 4 It is important to note from the outset that the protagonists at rendering the world into numbers were not the neoliberals but more those of the left, including Jan Tinbergen, Gerhard Colm, Jacob Marschak, and Oskar Lange. See Philip Mirowski, Machine Dreams: Economics Becomes a Cyborg Science (New York: Cambridge University Press, 2002). Marcel Boumans, How Economists Model the World into Numbers (New York: Routledge, 2005), chapter 2. 5 John Gerard Ruggie, "International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order," International Organization 36, no. 2 (1982): 379-415. 6 Elizabeth Borgwardt, A New Deal for the World: America's Vision for Human Rights (Cambridge, Mass.: Belknap, 2005). Kiran Patel is currently preparing a manuscript with this title. For uses in the scholarship see Peter Baldwin, The Politics of Social Solidarity: Class Bases of the European Welfare State, 1875-1975 (New York: Cambridge University Press, 1990), 108. Michael E. Latham, The Right Kind of Revolution: Modernization, Development, and U.S. Foreign Policy from the Cold War to the Present (Ithaca: Cornell University Press, 2010), 6-7. Nils Gilman, Mandarins of the Future: Modernization Theory in Cold War America (Baltimore: Johns Hopkins University Press, 2003), 276. Claus-Dieter Krohn, Intellectuals in Exile: Refugee Scholars and the New School for Social Research (Amherst: University of Massachusetts Press, 1993), 144. 2 have all called for a “global new deal.” 7 Other than the not-irrelevant fact that it is apparently politically possible to call for a “global New Deal” but not a “global welfare state,” it is notable how the progressive discourse unconsciously echoes the evolutionary scale shifts at the heart of what Tamotsu Nishizawa and others have called the “ethico- historical” approach to economics: the movement from the nation to the world is figured in temporal terms as a positive evolution: a development or a progression.8 By contrast, when the neoliberal critique of the welfare state comes on strong in the 1970s, it is represented as moving in the opposite direction: dissolving the nation-state down to its composite individuals—or maybe, in the conservative version, down to its local communities. It is not for nothing that Margaret Thatcher’s 1987 declaration that “there is no such thing” as society is so talismanic for critics of neoliberalism. She appears in this statement to have given up the game, let the mask slip. Because neoliberals are against scaling up, this argument goes, they must be against progress. But how would it change the storyline if we realized that neoliberals started with the world? That the conceptual territory of the global is first staked out not by the forces of the left or social democracy but by its opponents? Neoliberals Started with the World The neoliberals inherited their worldview first from the classical liberals, adopting a perspective that embraces all of the world’s wealth and resources. This is explicit in their own writings. Ludwig von Mises wrote in 1916 that “from a purely economic standpoint, the largest possible expansion of the economic region, that is the free trade region, is to 7 Brown seeks 'new deal' with Obama, BBC News , 1 Mar 2009; “Oxfam seeks 'new deal' on inequality from world leaders,” BBC News , 18 Jan 2013; Bruce Vail, “Rejecting TPP, AFL-CIO’s Trumka calls for ‘Global New Deal,’” In These Times , March 25, 2014; UNCTAD, Trade and Development Report (Geneva: United Nations Conference on Trade and Development, 2014), 61. As a side note, for those of us who fear our work is never read, it’s heartening to see that UNCTAD pegs much of their restored faith in the moment of the mid-1940s on Eric Helleiner’s recent book on Forgotten Foundations of Bretton Woods . 8 Tamotsu Nishizawa, "The Ethico-Historical Approach Abroad: The Case of Fukuda," in No Wealth but Life: Welfare Economics and the Welfare State in Britain, 1880-1945 , ed. Roger Backhouse and Tamotsu Nishizawa (New York: Cambridge University Press, 2010). 3 be strived for; and the largest region is the entire inhabited surface of the earth.” 9 Röpke wrote in 1937 that "the highly modern economic system encompasses not alone a single city, however great, not alone a country however vast, but…the whole terrestrial globe.” 10 The First World War had left a new global consciousness in its wake, expressed most starkly by a raft of new compound “world” words in English, often imported from German: “world affairs,” “world politics,” “world government,” “world literature,” “world history” and, most notably, “world economy.” Röpke began his 1943 book with the self-evident statement that “we are constantly aware of the earth as a whole.”11 He was part of a cohort that not only labeled the Great Depression (as it’s still known in German) the “world economic crisis” but called the entire period from 1914 to the 1940s the period of the “world crisis.” 12 Neoliberals may have started with the individual—as in the Austrian theory of subjective value—but they also started with the world. Global talk was not idle rhetoric. It had normative ramifications. In economic terms, the goal of economic activity was the most rational use of the world’s resources. Röpke wrote in 1938 that: There will be always an optimum scheme of the world distribution of productive resources based on the most rational localization of the different branches of production—a scheme which an omniscient dictator of a socialist world community would have in mind were he to re-arrange world production on the most rational lines. 13 9 Ludwig Mises, "Vom Ziel Der Handelspolitik," Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916)., 580. 10 Röpke, Economics of the Free Society , 3. 11 The Social Crisis of Our Time (Chicago: University of Chicago Press, 1950), 2. 12 "International Economics in a Changing World," in The World Crisis , ed. Geneva Graduate Institute of International Studies (London: Longmans, Green and Co., 1938). 13 Röpke. Investigation into Postwar Agrarian and Industrial Protectionism. Outline of the First Special Research Program (Natural changes in the scheme of the international division of labor). Nov 1937. RF, 104, 944.

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