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The Slippery Slopes

A dispatch from the birthplace of neoliberalism

As historic sites go, Mont Pèlerin is a far cry from Normandy, Waterloo, or the shores of Tripoli. The town that became known as the birthplace for the wide-ranging revolution in economic and social thought now called neoliberalism is a stuffy little town in the stuffy little Alpine nation of Switzerland, that famed haven for the rich and secretive.

The tinselbox of Mont Pèlerin lies in the Swiss Alps. By the time I muscled my broken-wheeled luggage through its streets on a visit not long ago, I could see only a dull greyness in all directions. It was quiet and cold, but as I turned a corner a couple of minutes away from the funicular that takes you up to the village from the lakeside town of Vevey, an old belle époque hotel finally appeared out of the mist. This was what I had come to see: the site of the inaugural meeting of the Mont Pelerin Society in 1947. Here was the place, the Hotel du Parc, where thirty-seven intellectuals, mainly economists, gathered to dream up new ways of fighting what they saw as a dangerous turn toward socialism in the postwar world. The atmosphere on the day I visited was fitting—for all the ways in which the neoliberal revolt went on to conquer our world, the saga of its origins now seems lost in the fog.

Outside the hotel’s entrance I saw the man who had answered my queries some months earlier. Yes, dear reader, I too was lost in the pixie dust, toiling away on a thesis about the early development of neoliberalism. I’d learned that the hotel was no longer open to visitors. Hence there was Edgar, my guide, a director of the real estate concern that acquired the structure in early 2008. Edgar agreed to show me the place, seemingly to mold some fresh market synergies out of my interest in the property’s wonky past. Perhaps the effort to conjure forth Mont Pèlerin’s historic mystique could help turn the old hotel into a high-value property again. Who knows for sure what Edgar was expecting?

Market Sires

Of the men who formed the Mont Pelerin Society, the best known are Milton Friedman, Ludwig von Mises, Karl Popper, George Stigler, and the one who brought them all together: Friedrich von Hayek. Hayek was something of a failed economist in the United Kingdom, but after publishing his anti-socialist manifesto The Road to Serfdom in 1944, he had become famous, especially in the United States, where a condensed version of his book appeared, appropriately enough, in Reader’s Digest. A cartoon version was distributed to every worker at General Motors. NBC recorded a radio special that featured an American actor faking an Austrian accent to sound like Hayek.

Hayek’s aim in launching the Mont Pelerin Society was to steer liberalism away from both state planning and laissez-faire. This was the 1940s, remember. After the economic breakdown in the interwar years, capitalism was discredited, democratic socialism was rising, and the consensus was that the economy needed some serious centralized planning in order to function properly. Hayek and his allies sought a new ideological clarity, adapted to a new world in which the laissez-faire approach to the affairs of the state and the economic order simply would no longer do. Hayek felt the urge to stoutly resist the proto-totalitarian do-gooders who masterminded the American New Deal; he wanted modern states to lower taxes and be put to active use to minimize popular interference in economic policy.

The 1947 confab was actually his second attempt at mustering what Hayek had called “an army of freedom fighters.” The first such gathering had taken place in Paris in 1938 and centered on the liberal American journalist Walter Lippmann’s heretically anti-New Deal arguments in the book The Good Society. The organization founded in Paris was disbanded due to the outbreak of the Second World War, but the earlier meeting meant that many of the most important participants had already had a chance to align their views. Indeed, in the years between 1938 and 1947, several of the key founding members wrote books and articles with the same basic case Lippmann had brought against the American New Deal: government planning led to totalitarian dictatorship, but at the same time, liberals needed a more robust philosophy than laissez-faire as an alternative.

The inaugural meeting took place a few weeks after president Harry Truman had announced the “Truman doctrine,” which laid out the self-awarded right of the United States to protect “free peoples” all over the world against “totalitarian regimes.” The Cold War was about to begin, but the totalitarianism that worried the attendees of the Mont Pèlerin conference was not so much the looming gray edifice of the Soviet world. No, it was, rather, the enemy within: the internal lure of state planning for the war-ravaged western societies that had already mobilized the full force of the state behind the prosecution of the Second World War. Hayek and his allies thought a new liberalism would be the only creed capable of fighting the growing tide of collectivism—Hayek’s term for socialism, fascism, and “constructivist” liberalism alike. According to The Road to Serfdom, collectivism was what led to totalitarianism—and Hayek’s dire warning found a responsive hearing from both American business leaders and the free market ideologues they employed, as well as amongst a European right wing who were not quite allowed to be conservatives anymore, due to the murky connections with fascism, and so found it opportune to instead turn to Hayek’s version of liberalism.

Here was the belle époque hotel where a small group of intellectuals gathered to dream up ways of fighting the dangerous turn toward socialism in the postwar world.

At the 1938 meeting in Paris, the participants took a vote and decided to call their creed neoliberalism, and the word would crop up in their writings until well into the 1950s. Hayek, however, preferred to insist that although liberalism had to be changed, this free-market vanguard was mainly restating the principles of what he called “classical liberalism” and putting them to work in the modern world. In some ways, this meant that the question was not one between states or markets, but rather how to use the state in service of the market mechanism, which was endowed with almost magical, self-regulating properties and seen as the only possible mediator of modern economic life. And if government planners were unwilling to trust the market? There has been much debate in recent decades about whether Hayek was arguing that government interventions put society on a “slippery slope” that inevitably led to totalitarianism. Hayek himself objected to that common reading, noting that he had stated in The Road to Serfdom that collectivism was not inevitable—there were ways of turning back. Nor did he argue against government involvement in the economy per se. Hayek and many of the other neoliberals wanted a strong state to spread and enforce market solutions everywhere, but they did not want government to redistribute wealth, try to achieve some sort of “social justice,” or in other ways meddle with an economic order they claimed was natural and spontaneous. The distinction itself was slippery: policies that promoted market power were good, but policies that “interfered” would put you on a dangerous, and presumably slippery, road.

Luxe Laissez-Faire

Edgar wrapped up a phone call, and we shook hands. As he walked me to the main entrance of the old hotel, he pointed to the side of the door, saying that the hotel management was thinking about getting a plaque to commemorate the great neoliberal conclave of 1947.

In the email exchange leading up to my visit, Edgar had explained to me that the hotel was still undergoing renovations. He led me through the lobby, which had an impressive chandelier hanging from the ceiling, but also plastic sheets covering the walls and most of the furniture. We walked onto the terrace at the front of the hotel. The fog had lifted somewhat. We could just make out the contours of a boat down on Lake Geneva: a small ferry, on its way to France. Edgar explained that Mont Pèlerin was very well connected with nearby Geneva and, via that entrepôt, the rest of Europe.

Edgar’s company had been working on turning the grand structure into luxury apartments, obviously. (You didn’t think it would be repurposed into a shelter for the poor, did you?) His firm spent an enormous sum of money on the rehab job, remaking the interior and putting in an enormous swimming pool and spa center underneath the terrace where we were standing. The sheer scale of this luxe hideaway-in-the-making was impressive, but it wasn’t finished yet, and it was unclear when it would be. Sure, Hayek and company had renounced the blind dictates of state planning, but the market was not tending to their own legacy with alacrity.

Indeed, the recent gyrations of neoliberal policymaking turned out to be a prime reason why so much of the Mont Pèlerin grounds lay covered in dust and plastic tarp. Edgar delicately explained how his company was in the midst of a precarious financial situation. There had been a surge in sales around the time of the uprisings known as the Arab Spring, when members of the Middle Eastern power elite wanted a safe place to stash their family photos, but not even this well-heeled clientele had been enough to keep the project going.

I suggested that maybe the facility’s new influx of owners might want to become Swiss citizens. But Edgar pointed out that it was now easier for wealthy non-Europeans seeking the perks of an EU citizenship to get a Cypriot or a Portuguese passport. Ah well.

Added Value

We went inside to the lobby again, and Edgar showed me the charming original elevators, which looked straight out of Wes Anderson’s The Grand Budapest Hotel. There were also the original floor tiles that had been restored and put back into place on orders from some Swiss conservation authority. I stepped carefully on the intricate patterns, trying to imagine Hayek and Friedman on the same spot so many years ago.

Some weeks earlier, I had come across a photo album from the 1947 meeting in the archives of the British economist Lionel Robbins, who also attended the meeting. Now that I was here in person, I was unable to find the meeting room I’d seen in the photos. It had odd geometrical tapestries. There were sunbeams coming in from the windows, forming squares and patterns on the floor in front of the severe-looking, suit-clad intellectuals, most of them brandishing pipes or cigarettes. Edgar smartly surmised that the room in question might have been in another wing, now closed off, or else in a part of the hotel that was demolished.

Edgar offered to drive me down to Vevey, so that I could catch a train from there to Lausanne. He was very kind. On our way we passed the enormous headquarters of the Nestlé Corporation. He leaned over toward me to explain that he’d been pondering how to highlight his building’s historical importance in future sales campaigns. He admitted that it really didn’t make much sense to pay six million Swiss francs for an apartment as small as the typical one-bedrooms on the Mont Pèlerin grounds, and suggested that maybe some of my historical findings could add some value. I was a bit taken aback, but nodded politely as he went on to ask if perhaps I might be able to come back at some point, when the finances were more in order, to join a sales event and talk about my work.

Safely placed in my train seat just a few minutes later, I thought about what I might possibly say, in the unlikely event that I’d be invited back to speak at a sales event for failing luxury apartments with bitterly ironic historical value. How could I make the intellectual obsessions and crusades of the Mont Pelerin Society come to life in a room full of Russian oligarchs, Chinese billionaires, Arab sheikhs, and golf buddies of Donald Trump?

Perhaps I’d begin by telling them to be thankful to this odd assortment of Austrian émigré economists and conservative hangers-on. After all, the rich and successful tend to live in a fantasy world, so as to sustain the core conviction that they’ve accumulated their fortunes thanks only to their own hard work and appetite for entrepreneurial risk-taking. Taxes, laws, and the irksome public sector obeisances known loosely as “regulations” are obstructions to their destiny work of amassing more and more wealth (and thereby “creating jobs” and otherwise disbursing the blandishments of the invisible hand).

It’s a comforting story to tell yourself if you actually are rich—and with the rise of the neoliberal consensus that’s overtaken the global policy scene over the past forty years, the self-flattering image of the hardy wealth creator has passed into popular folklore as well, chiming in unison from the majestic peaks of Davos and Sun Valley.

School of Hard Landings

The Mont Pelerin Society itself still exists, of course, and throughout its remarkable career, the group has spread its influence not just among the global governing elite, but more broadly among the rest of us, as we think about the relationship between politics, society at large, and that mysterious part of it known as “the economy.” Some of the achievements of Mont Pelerin Society members include helping to set up a fake Nobel prize to raise the status of the economics profession and make their own fringe right-wing views part of its orthodoxy. Early on, they hit upon the scuzzy idea of paying university students to read their books and take classes taught by their adepts. Today their network runs to almost 500 think tanks in more than ninety countries.

Still, it’s not as if the founding members of the Mont Pelerin Society got exactly the world they wanted, either. Today, in our exceedingly networked and unequal world, the mystic cult of expertly administered complexity has a diminishing corps of ardent supporters. Amid the wreckage of 2008, and in the face of mounting evidence of elite incompetence, from the imperial U.S. errands in the Middle East to the debacles of Lehman Brothers and the Libor rate, is it really so much to ask that people have more of a say in how the economy is run?

It was, for a brief moment, as though the ones on top actually realized that they, too, were part of society.

Could I make that case to the prospective buyers of fully serviced luxury apartments in the Swiss Alps? Could I appeal to their sense of reason? Neoliberalism came about in opposition to the social democratic ideas that were dominant in 1947, and the partial implementation of neoliberal ideas in the years after 1973 is often seen as the de facto repeal of the public welfare state and the social democratic political order that sustained it. In the initial postwar social contract, capitalists continued to enjoy the licenses of ownership, and to extract generous profits from some sectors of the economy. But these profits were taxed higher than ever and the revenue was used to fund redistributionist government initiatives such as the GI Bill and Great Society protections of income supports and voting rights. It was, for a brief moment, as though the ones on top actually realized that they, too, were part of society; if they wanted to avoid uprisings and trouble from the people whose work they lived off of, they needed to give something back. Could I tell the prospective buyers that, as they enjoyed the hotel’s humidity-controlled Davidoff cigar lounge?

Why not, after all? There is no such thing as a “free” or “unregulated” market anyway, I would tell them. Surely you must understand that! Governments make it possible for businesses to function, and, taking it one step further: the economy is really just another word for society. The fabled market mechanism is no neutral arbiter of modern social life; instead it seems to often amplify existing inequalities. A world run purely on the logic of markets is a deeply unfair world. In my closing flourish, I could announce, “You guys have gotten too greedy—even for your own good!”

I leaned back in the train seat, feeling good about myself after my imaginary rant to the global one percent. I took out my phone and googled the Swiss company that owns the hotel, and found that up until very recently it had been partly owned by the son of a former Kazak politician accused of widespread corruption. His father had amassed an enormous fortune as energy minister of Kazakhstan and mayor of a large city, and then escaped to Switzerland with all of it. I woke up from my own fantasy world, and realized that neither he nor his son, nor any other prospective customer visiting the revamped Mont Pèlerin grounds would listen to anything that I might have to say to them. The fog of economic unknowing is one thing, but the early neoliberals were also keen to stress one key feature of their new world order: self-interest can be a much stronger force than reason.