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Conference Paper Hitotsubashi University Tokyo, Japan March 21, 2015 Draft – Do Not Cite or Circulate

World Federation against the : 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 but its critics. In the following, I will talk in particular about two of the fathers of the neoliberal intellectual movement, Wilhelm Röpke and . 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 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 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, 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 ” (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 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 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 . 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 .

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 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: 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 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 ,” “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 " 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.

4 The project of government, then, was to create conditions in which people, through innumerable small actions, could perform collectively as much like that “omniscient dictator” as possible. The problem with dictatorship, in other words, was not the fact of excessive power but that of knowledge. No dictator could know everything. Only the collective knowledge of the participants in a could approximate that omniscience.

For Mises, Hayek and Röpke, the enactment of the welfare state was an extension of a cluster of trends that hindered the greater knowledge of the price system from organizing human affairs: these included social reform, protectionism, planning, and the attempt to make the “crisis-proof.”

For Hayek, the problem of the welfare state was that it required a universal yardstick of individual preference for planners to make decisions of allotment and allocation. As he put it in 1938:

the idea that a completely planned or directed economic system could and would be used to bring about distributive justice presupposes in fact the existence of something which does not exist and has never existed: a complete moral code in which the relative values of all human ends, the relative importance of all the needs of all the different people, are assigned a definite place and a definite quantitative significance. 14

This subjectivist position echoed that used by Lionel Robbins in his criticism of welfare economics, reflecting Robbins’s own deep commitment to Austrian principles in the 1920s. 15

In this sense, the well-known knowledge problem in planning a welfare state was compounded by the underrated fact of the neoliberal anti-economism, in the sense of skepticism about the ability to place dollar amounts on human fulfillment. In a stinging criticism of the Beveridge Report (which he called derisively the “Beveridge Plan”) from

14 F. A. Hayek, Freedom and the Economic System (Chicago: University of Chicago Press, 1939), 21. 15 Roger Backhouse and Tamotsu Nishizawa, "Introduction: Towards a Reinterpretation of the History of Welfare Economics " 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. On Robbins’s Austrian self-understanding in the early 1930s see Susan Howson, Lionel Robbins (New York: Cambridge University Press, 2011), 210.

5 summer of 1943, Röpke wrote that the problem was that “all of us, including economists, have become used to thinking almost entirely in terms of monetary income.” 16 His complaint about the welfare state was that it was too materialistic, and thus represented a continuation of 19 th century excesses of rationalism that he saw launched by the French Revolution.

Röpke wrote in his 1943 that:

The decisive question is this: can the modern system of mechanical and obligatory mass welfare offer an ersatz for the warping of existence that proletarianization brings, for the lack of property, the scantiness of resources and both the material and immaterial uprooting? The answer can only be a decisive no. 17

It is important to see, in this sense, that the core criticism of neoliberals was not that economic redistribution would be bad but that it would not be enough --that the core of human experience lay in the process of pursuing individual interests, in Hayek’s view, or in a sense of belonging and security in Röpke’s.

Tamotsu Nishizawa and Roger Backhouse conclude their volume based on the last version of this conference by saying that "the study of welfare was the arena in which ethical judgements from Christianity, humanism or other sources were brought to bear on the analysis of .” 18 The case of Röpke shows that the opponents of the welfare state applied Christianity in their analysis as well. In his article on the Beveridge Plan, he says either we “allow everyone to become proletarians,” and the Beveridge Plan is a “giant step” in this direction, Or we “make the proletarians into property-holders and effect that which the 1931 papal encyclical called the redemption proletariorum .” For the neoliberals, one of the welfare state’s first errors, in other words, was that happiness could be measured.

What is to be done?

16 Wilhelm Röpke, "Der Beveridgeplan," Schweizer Monatshefte : Zeitschrift für Politik, Wirtschaft, Kultur 23, no. 3-4 (Jun/Jul 1943): 160. 17 Ibid., 170. 18 Backhouse and Nishizawa, "Welfare Economics, Old and New," 232.

6 So how was the welfare state to be countered concretely? How to attack this “Beveridge Plan” that, in Röpke’s words was “a remedy that extends the hollowing out of individual existence which characterizes proletarianization even further”?19

Röpke saw the welfare state as incompatible with a liberal world economy for two major reasons, both of related to his central analytical category of “integration”—a category that he was among the first to introduce into economic thought. 20

For Röpke, one could identify economic integration in a given geographical space through a few indicators: a single payments community allowing robust flows of trade, investment, and migration culminating in the progressive equalization of factor prices. The pre-1914 world economy had achieved this goal. The “international legal, monetary, and moral framework” had acted as “the equivalent of the world state.” 21

The paradox was that increased economic integration even in his idealized form of the first age of globalization, had led to social disintegration—or in the term he used most frequently, leaning on Ortega y Gassett, “proletarianization.” The goal was to recreate global integration without producing populations of “uprooted and proletarianized nomads.”

Röpke’s alternative to the Beveridge-style welfare state involved the government in a role of strong legal enforcement, but devolved increased responsibility of care to employers and communities—following roughly the principle of subsidiarity which was, in fact, first laid out in the papal encyclical from 1931 that Röpke fulsomely praised.22 Strong anti-monopoly legislation—and when he said monopoly he always included trade unions as one such monopoly--would increase competition, thus lowering prices for consumers,

19 Röpke, "Der Beveridgeplan." 20 See Ludolf Herbst, "Integrationstheorie Und Europäische Einigung," Vierteljahrshefte für Zeitgeschichte 34, no. 2 (1986): 169. Fritz Machlup, A History of Thought on Economic Integration (London: Macmillan, 1977), 5-6. 21 Röpke, Economics of the Free Society , 90. 22 Gerhard Albert Ritter, Der Sozialstaat: Entstehung Und Entwicklung Im Internationalen Vergleich , 2. ed. (Munich: R. Oldenbourg, 1991), 79.

7 and raising overall prosperity. Decentralization would be aided through programs encouraging home ownership, independent farms and the financing of small industries. 23

Röpke also saw a role for paternalistic owners. Recalling earlier experiments of New Lanark and Port Sunlight, he used the example of the Bally shoe factory in Switzerland, which sold its workers small cottages adjacent to the factory as well as small plots for farming. Such “rooted” workers, he believed, would be both more fulfilled and, ultimately, more productive.

Röpke saw the inverse of his imaginary in the quintessential advocate of the “global New Deal,” the ILO. Röpke recounts a conversation he had with a member of the ILO in the 1930s. He said:

Your Office is an expression of one of the worst diseases of our society, the name of which is ‘proletariat.’ You think that you can effectively combat this disease with higher wages, shorter working hours and as comprehensive a system as possible and you consider it your task to extend…such a policy…to as many other production branches and countries as possible…Should it not quite generally be your final and highest goal to make yourself superfluous by promoting deproletarization instead of continuing to move in the old rut?...How about taking a greater interest than heretofore in peasant family farms, the support of artisan and small traders, the technical and organization possibilities of loosening up large-scale enterprises, the diminution of the average size of factories, worker’s settlements and similar projects? 24

To Röpke’s mind, the first error of the ILO was the same as that of both Marxists and classical liberals—and indeed of the welfare state’s designers themselves--they made money the measure of man. 25 He was attacking what he saw as the materialism of the “global New Deal” before it even existed.

In Röpke’s vision of the post-1945 order, the New Deal would have to be defeated. He used martial metaphors:

23 Röpke, Economics of the Free Society , 200. 24 The Social Crisis of Our Time , 224. 25 "Der Beveridgeplan," 160.

8 The fortress of American protectionist policy can only be taken after the fortress of the New Deal has been taken, and after all of the theories of the ‘mature economy,’ of ‘deficit spending’ and ‘full employment’ have been cleared out, and the monstrous misuse of power of the large interest groups, including farmers and labor unions, has been dammed.

He endorsed the free trade policy of then Secretary of State Cordell Hull:

The world economy can only exist in the form of a truly international community of markets, prices and payments, and this requires an interdependent, intercommunicating, multilateral economic system with an international currency system, with a minimum of import and export restrictions and with fundamentally free international traffic in the mobile factors of production (labor and capital).

Röpke did not specify how this would be preserved except to say that borders were inconsequential in a true liberal system. Nonetheless, he used the telling idea of federation to describe the world order, using an extrapolation of his beloved Switzerland to the scale of the global to say that it would be a world in which the nation-state had the function of “cantons.” 26

Although Röpke proposed a course in 1939 on the “Economics of International Federation,” his own ideas of federation were rather vague. 27 They were developed much further by Hayek, working closely with the ideas of Lionel Robbins. 28 Hayek and Robbins’s idea of federation fed off incredibly wide-ranging, and now largely forgotten, discussions from the period that would be given focus by the publication of American journalist Clarence Streit’s Union Now in 1939 but began in earnest in the pages of New Commonwealth Quarterly in 1932 and the publications of the Round Table Group at around the same time. 29 Hayek became a member of one of the leading groups, the Federal Union, in 1939. 30

26 The Social Crisis of Our Time , 236. 27 "The Economics of International Federation (1939)," in 40èMe Anniversaire 1927-1967 , ed. IUHEI (Geneva: 1967). 28 See Ian Hall and Jorg Spieker, "F.A. Hayek and the Reinvention of Liberal Internationalism," The International History Review (2014): 1-24. Milene Wegmann, Früher Neoliberalismus Und Europäische Integration. Interdependenz Der Nationalen, Supranationalen Und Internationalen Ordnung Von Wirtschaft Und Gesellschaft (1932-1965) (Baden-Baden: Nomos, 2002). 29 Clarence K. Streit, Union now: a proposal for a federal union of the democracies of the north Atlantic (New York: Harper & brothers, 1939). New Commonwealth Quarterly , was created in 1932 to debate alternative models of federation and union. See Lord Davies, New Commonwealth versus Round Table (London: The New Commonwealth, Feb 1935). On the earlier history of Victorian political notions of

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In their most common variations, federation and union were proposed as Atlantic, Anglo- Saxon or Western European configurations that could bring an isolationist U.S. back into the community of “the West” and act as a bulwark against forces of both fascism and . The focus for Robbins and Hayek was not primarily moral, racial, civilizational or political (as it was for many others), but economic.

Robbins’s 1937 book and International Order was the touchstone for these visions of neoliberal federation. The book began as a series of lectures in Geneva, where Clarence Streit himself was based at the time, and at the university where Mises— and later Röpke—worked. Robbins had been invited by William Rappard, the director of the Geneva Graduate Institute of International Studies as well as the director of the League of Nations Mandates Commission. Rappard would turn his institute into a hub of neoliberal knowledge production in the 1930s, bringing Mises and Röpke as permanent faculty, and Haberler, Hayek and Jacob Viner for stays of research and teaching.31 Robbins stayed with Mises during his time in Geneva. He was an active advocate for the Austrian School at the time, including translating Mises’s (Die Gemeinwirtschaft) himself and requesting Rockefeller funding for translations of Hayek and Haberler in addition.32

In the book resulting from his lectures, Robbins wrote that “it would be the object of a liberal world federation to create the maximum scope for international division of labor:

global order see Duncan Bell, "Project for a New Anglo Century: Race, Space and Global Order," in Anglo- America and its discontents: civilizational identites beyond West and East, ed. Peter J. Katzenstein (New York: Routledge, 2012), 33-55; For an encyclopedic overview of these discussions see Joseph Preston Baratta, The politics of world federation , 2 vols. (Westport, Conn.: Praeger, 2004). 30 Hall and Spieker, "F.A. Hayek and the Reinvention of Liberal Internationalism," 8. See also Bernhard Walpen, Die Offenen Feinde Und Ihre Gesellschaft. Eine Hegemonietheoretische Studie Zur Mont Pelerin Society (Hamburg: VSA-Verlag, 2004), 86-87. Jo-Anne Pemberton, Global Metaphors: Modernity and the Quest for One World (London: Pluto Press, 2001), 115-19. 31 Surprisingly, Rappard’s role in Geneva is almost totally overlooked in Patricia Clavin, Securing the World Economy: The Reinvention of the League of Nations, 1920-1946 (New York: Oxford University Press, 2013). See Giovanni Busino, "William Rappard, Le Libéralisme 'Nouveau' Et Les Origines De La 'Mont-Pèlerin Society'," Revue européenne des sciences sociales 28, no. 88 (1990): 205-16. 32 John Van Sickle. Officier’s Diary. 6 Feb 1931. Rockefeller Archive, FA 118, 12, 482, p. 17.

10 and any restriction of trading between governmental areas would be totally alien to its intention.” 33 The primary role of nation-states would be security and ensuring that “the law of property and contract the world over was unified and administered on uniform principles.” 34

For Robbins, the genius of the world federation model was that it would, by its own power, begin a dynamic of what he called “deplaning.”35 The most important instrument of the planner in international trade—the tariff—would be taboo, meaning an end to the protection of infant industry or domestic agriculture. More meaningfully, it would also mean the dismantling of social services. As he said, “National planning involves not merely the suspension of laissez faire as regards movements of trade and investment. It involves also the suspension of laissez passer as regards the movements of men.” 36 The provision of benefits by the state, he observed, means the restriction of free movement— to retain control over who benefited. This was one of the reasons that the promise of equality itself was corrosive.

“We must recognize,” he said, that “the system would involve some inequality of income.” 37 Creating economic evenness at the scale of the nation only produced a misguided sense of the origin of prosperity. The contingency of individual well-being on the flows of the world economy must remain a palpable reality. Planning muffled the bracing sounds of the global. It must always be a possibility that, as he put it in 1934, the merchant might “close down his works in Lancashire to commence operations in Japan.” 38 Shared precarity could and should be the foundation of world unity.

Inspired by the work of his close friend and colleague, Robbins, it was Hayek who elaborated the free trade world federation imaginary in its most complete form. In a 1939 article in New Commonwealth Quarterly , (which has been recently—and dubiously--

33 Robbins, Economic Planning and International Order , 247. 34 Ibid., 247. 35 Ibid., 248. 36 Ibid., 37. 37 Ibid., 262. 38 Ibid., 210.

11 described by the core of the European integration project in separate works by Perry Anderson, John Gillingham and Wolfgang Streeck), he described a political model that would undermine the “solidarity of interests” that naturally cohered when groups of people had the same economic interests. 39 This article has had a rather notorious afterlife, being cited in recent years by Perry Anderson, John Gillingham and, most recently, Wolfgang Streeck as, what Streeck calls “a blueprint for today’s European Union.” 40

These claims can veer to the ahistorical, and often erase the original contribution of Robbins, but Hayek’s vision is indeed compelling. He argued that decolonization might actually work well in the sense that it would delink the political and the economic. It was the correspondence of political and economic sovereignty that produced what Hayek saw as the troubling sense of ownership that citizens felt over the products of their national territory. As he said, “in the national state, current ideologies make it comparatively easy to persuade the rest of the community that it is in their interest to protect ‘their’ iron industry or ‘their’ wheat production or whatever it may be.” 41 This sense of ownership was the condition for “planning, or central direction of economic activity, [which] presupposes the existence of common ideals and common values.”

Open economic borders would mean that constellations of interests would never be permanent nor would they become “lastingly identified with the inhabitants of a particular region.” Like Robbins, Hayek described how the free flow of trade, investment, and migration would discipline economies away from intervention. Because capital will move to find better interest rates and goods will come from places with lower prices, “The whole armory of marketing boards and other forms of monopolistic organizations of individual industries will cease to be at the disposal of state .” 42

39 F.A. von Hayek, "Economic conditions of inter-state federalism," New Commonwealth Quarterly 5 (1939), 133. 40 Perry Anderson, The New Old World (New York: Verso, 2009), 30. John Gillingham, European Integration, 1950-2003: Superstate or New Market Economy? (New York: Cambridge University Press, 2003), 28. Wolfgang Streeck, Buying Time: The Delayed Crisis of Democratic Capitalism (New York: Verso, 2014), chapter 3. 41 Ibid., 139. 42 Ibid., 135.

12 A global federation would, in effect, be to big to plan. World government would be small government by necessity. The loose federation would govern lightly, mostly letting the disciplining effect of economic flows determine the allocation of resources. Social legislation would be governed by a kind of legal Most Favored Nation logic, whereby fewer and fewer aspects of social life would fall under planning or regulation, as he put it, “we shall have to resign ourselves rather to have no legislation in a particular field than the state legislation which would break up the economic unity of the federation.” 43

Hayek and Robbins shared the argument that people would not accept either tariffs or redistributive policies for the sake of people geographically distant from them. Hayek asked: Is it likely that the French peasant will be willing to pay more for his fertilizer to help the British chemical industry? Will the Swedish workman be ready to pay more for his oranges to assist the Californian grower?...Or the South African miner prepared to pay more for his sardines to help the Norwegian Fisherman? 44

Robbins observed, even more pointedly: “If, for instance, the services of the inhabitants of say Scandinavia are in part devoted to providing resources to raise the productivity of the inhabitants of China, that means, as in the case of income equalization, that they get less than they might have had in order that others may get more.” 45 Reversing ’s hypothetical question about how much Western pain would be averted for the death of a Mandarin, they asked how much Western effort would be expended for the benefit of a Mandarin and concluded: very little. 46

Hayek, Robbins and Röpke were united in seeing the salutary nature of discipline by the market. Adapting a passage from the Bible, Röpke wrote in 1943 that “If competition has chastised us with whips, the collectivist state will chastise us with scorpions… Indeed, in economic life we can never do without that pitiless, yet beneficent discipline.” 47

43 Ibid., 143. 44 Ibid., 139. 45 Robbins, Economic Planning and International Order , 217. 46 On the history of this allegory see Eric Hayot, The hypothetical mandarin: sympathy, modernity, and Chinese pain (New York: Oxford University Press, 2009). 47 Röpke, The Social Crisis of Our Time , 182.

13 For Hayek, one of the beauties of the free market was there was nobody to blame. As he put it, “Inequality is undoubtedly more readily borne if it is due to accident, or at least to impersonal forces, than when it is due to design. People will submit to misfortune which may hit anyone, but not as easily to suffering which is the result of arbitrary decision of authority.” In a welfare state, the state itself would setting itself up as an inevitable scapegoat: “Once government has embarked upon planning for justice’s sake, it cannot refuse responsibility for anybody’s fate.” 48

In the neoliberal model of free trade federation, the discipline of the world economy would undermine planning and confine the nation-state to the ever less meaningful field of the political.

Conclusion

The neoliberal intellectual movement began and developed from the 1930s to the 1960s as a united front for opponents of the welfare state. 49 My talk today makes clear that the fight was fought from the beginning from the perspective of the global.

This should come as no novelty amidst the current proliferation of titles like “Is Globalization the Cause of the Crises of Welfare States?,” “Globalization and the Decline of the Welfare State in Less-Developed Countries” and “What does Globalization have to do with the erosion of welfare states?” We are, after all, in an era not only after Thatcher and Reagan but after Clinton and Schroeder.

Announcing his “Agenda 2010” that would radically diminish the social state in a speech in 2003, Schröder referred to the “storms of globalization” that produced the need for “structural reform.”

48 Hayek, Freedom and the Economic System , 18. 49 Walpen, Die Offenen Feinde Und Ihre Gesellschaft. Eine Hegemonietheoretische Studie Zur Mont Pelerin Society , 90. See also Kim Phillips-Fein, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan (New York: W. W. Norton & Company, 2009).

14 This paper shows that such rhetoric is not new. Globalization—or, to use Röpke’s term, international economic integration--was pitched against the welfare state from the beginning of the welfare state itself.

15