The Re-emergence of Liberalism?
The Role of The Mont Pelerin Society.
R. Max Hartwell
The main sources for the history of the Mont Pelerin Society used in this paper are the Mont Pelerin Society Archives in The Hoover Institute, Stanford.
Between April 1 and 10, 1947, a group of liberals met in the Hotel du Parc on Mont Pelerin, sur Vevey, in Switzerland, to discuss liberalism and its decline,the possibility of a liberal revival, and the desirability of forming an association of people who shared 'certain common convictions' about the nature of a free society. The conference was the idea of F.A. Hayek who organized it, with funds provided by Dr. Albert Hunold, who raised money from Swiss sources to cover the costs of the accommodation and European travel, and by Mr. W.H. Luhnow of the William Volker Charities Trust in Kansas City, U.S.A., who financed the travel of the American participants. In the final sessions of the conference, after discussion about the naming of a permanent body, and the preparation of a 'statement of aims' and 'a memorandum of association', the participants formally decided to found The Mont Pelerin Society. Later that year, on November 6, 1947, the Society was registered as an American corporation of 65 members under the presidency of Hayek. (See Appendix I, for (a) a list of those who attended the first meeting, and (b) the list of members on incorporation.)
Who were the people who gathered on Mont Pelerin, what brought them together, and what did they discuss before deciding to form a permanent association? There were 39 participants from 10 countries: 17 from the U.S.A., 8 from England, 4 from Switzerland, 4 from France, and 1 each from Italy, Germany, Norway, Denmark, Belgium and Sweden. The representation was predominantly academic (28 of those present), and economic (as many as 20 were professional economists), although also present were three journalists, and others from the academic disciplines of law, history, political science, chemistry and philosophy. What brought them together, briefly, was a feeling of crisis-- that western liberal civilization was in grave danger from illiberal doctrines and forces--and a common allegiance to the principles of a free. society. What they discussed is not only a guide to the concerns of European and American liberals in the immediate aftermath of World War II, but also to the abiding concerns of liberals, and, as regards the Mont Pelerin Society, to the topics and discussion that have dominated its meetings from 1947 to 1985. Broadly, the questions asked and discussed were: What is the nature of liberalism and how can it be strengthened? (What are its principles? Why had it declined? Should classical liberalism be changed to meet changing circumstances? How can its principles be better known and understood?) What is 'the competitive order' and how can it be maintained? (What should governments do in economic and social affairs? About fiscal and financial policy? About trade unions? About poverty and unemployment? About agriculture?) What forces mould political beliefs? (What is the role of history in political education? And religion? What is the attraction of socialism?) What is the liberal attitude to, and solution for, social problems? (Particularly the problems of poverty and inequality?) These questions are related and all lead back to questions about the nature of the state and the role of government in a free society.
II Concerned Liberals and the Formation of the Society
The concern of those who met in 1947 was surely warranted. Their world seemed to be moving inexorably along 'the road to serfdom'.' As Popper exclaimed at the first meeting: 'The present situation is one where we nearly dispair'. Europe had been threatened with a new barbarism, by a totalitarian state in which freedom and humanity had all but disappeared. The war had been long, costly and bloody, and had been preceded by two decades of political instability and economic depression, years during which the basic structure of a liberal order had been questioned on the grounds of its apparent failure.2 'The end of laissez-faire' had been confidently pronounced by one who became the most famous economist of the age.3 The war had been won, it appeared, only by the surrender of much political and economic freedom in the interests of the war effort and victory.4 War-time camaraderie and cooperation had induced a euphoric attitude towards the benefits of community as against those of individual effort, and had encouraged a belief that a planned and regulated economy was as necessary for the peace as it had been for the war, to prevent the recurrence of the economic chaos of the inter-war years.5 In particular, unemployment, the great social evil of those years, was to be abolished, it was argued, by a managed economy using the understanding of 'the new economics' of J.M. Keynes.6 The post-war world was to be one of stability and greater equality, ensured by planning and controls. It was a noble vision, but also an unrealistic one. And, at least in retrospect, it was paradoxical that the post-war plans of the democracies aimed at imposing on the victors the kind of controlled economy that had characterised pre-war Germany. It was not surprising, at the same time, that the Germans reacted strongly against the idea of a post-war planned economy, under which they had suffered so much, and, against allied advice and pressure, instituted a remarkably free economy which was also remarkably successful, resulting in 'the German miracle'.? But that was in the future.
It was towards the end of World War II that a number of European liberals began worrying about the post-war world. 'Whether we shall be able to rebuild something like a common European civilization after the war', F.A. Hayek said to a Cambridge audience in 1944, 'will be decided mainly by what will happen in the years immediately following it'. 'It is only now when the forces previously concentrated on the military effort are being released',8 W. Ropke wrote in Switzerland in August 1945, 'that it is becoming apparent how great is the spiritual and moral danger threatening Europe. ... Traditions, .principles until now above all dispute, values and last-ditch convictions, have quite ceased to function as a brake or guide for humanity'.9' Hayek and Ropke both believed that, with appropriate effort, free societies could survive. Others were more pessistic, either believing that liberalism was dead, like K. Polanyi, or was doomed, like J.A. Schumpeter. Others, like W.H. Beveridge, believed that freedom could be preserved in a state in which government played an increasing role. Indeed the publication of four books, all during the war, characterise the ideological setting for the emergence after the war of the Mont Pelerin Society. These books were: Capitalism Socialism and Democracy, by J.A. Schumpeter in 1943; Full Employment in a Free Society, by W. H. Beveridge in 1944; The Great Transformation, by K. Polanyi in 1944; and The Road to Serfdom by F.A. Hayek also in 1944.10
All four books were concerned with the future of capitalism and its free market system, and each drew different conclusions. Schumpeter, while arguing that 'all the features and achievements of modern civilization are, directly or indirectly, the products of the capitalist process', believed that capitalism was giving way to socialism, not only because of inherent and irreversible trends in capitalism itself, but also as the result of the hostility roused and sustained against capitalism by the intellectuals of western society. Polanyi believed that capitalism had already died, killed by the depression of the 1930's and the second world war. Market economy, he argued, had been so socially divisive, so unnatural, that spontaneous social controls had emerged, even in the nineteenth century, to regulate and control the market-system, and to destroy laissez-faire as a philosophy and as a policy. Polanyi viewed these developments favourably as the re-emergence of age-old methods of social control of the 'weaknesses and perils inherent in a self-regulating market system'. Beveridge, who was neither prophet nor socialist, accepted the typically English view that capitalism would survive if it could be modified successfuully to provide social security, including full employment, for its population. He argued that the basic policy of postwar government should be the provision of 'freedom from want' as secured by 'a plan for social security'. It was important also, he wrote, that 'all essential liberties' should be preserved, although such liberties were not to be 'exercised irresponsibly'. He concluded that 'full employment cannot be won and held without a great extension of the State exercised through organs of Central Government'. But he also argued that 'the necessity of socialism... to secure full employment, has not yet been demonstrated', and that there was, as yet, 'no judgement on the general issue between capitalism and socialism'. Hayek was not as pessimistic as Schumpeter, who viewed the inevitablecoming of socialism without enthusiasm, nor as optimistic as Polanyi, who rejoiced in the passing of capitalism, nor as unrealistic as as Beveridge, who saw no danger to essential freedoms in the growth of government. Hayek argued that the replacement of 'the impersonal and anonymous mechanism of the market by collective and "conscious" direction of all social forces to deliberately chosen goals' would certainly lead to the erosion of political freedoms, and, if unchecked, finally to 'serfdom'. Hayek, like Schumpeter, emphasized the role of the intellectuals in historically shaping political and economic opinions'. 'In every country that has moved towards socialism', he wrote, 'the phase in development in which socialism becomes a determining influence on politics has been preceded for many years by a period during which socialist ideals governed the thinking of the more active intellectuals'. But Hayek rejected the inevitability of socialism and saw the end of the war as a time of critical choices for western civilization. In the period of reconstruction, Hayek argued, it would still be possible to choose 'the abandoned road' to liberalism rather than 'the road to serfdom'. But how could such a choice be made certain? Only, Hayek believed, by 'destructive criticism' of socialism, by 'providing a real alternative to the current beliefs', by 'the widest collaboration of all qualified to contribute and anxious to preserve free institutions', and by 'an international effort'. It was with such beliefs that Hayek began to think about an international association of liberal thinkers and supporters. He elaborated these ideas on the 28 February 1944 in a paper entitled 'Historians and the Future of Europe' read to a society of King's College, Cambridge, under the chairmanship of Sir John Clapham. In an American tour during 1945, he developed his ideas further. What was needed, he reckoned, was an organization 'half-way between a scholarly institution and a political society', a kind of 'International Academy of Political Philosophy'.11 For such a project, however, money was needed, especially if it was to be international requiring expensive travel. At this stage, two other actors joined the cast: W. Ropke and A. Hunold. Hayek's financial problem was solved, inadvertently, by the initiative of Ropke, who was as much concerned as was Hayek with the future of Europe, and by the financial skills of the Swiss business executive, Hunold.
In August 1945 Ropke, of the Graduate Institute of International Studies in Geneva, circulated widely a 'plan for an international periodical'. His motivation was remarkably like that of Hayek. The war, he argued, had shaken 'western forms of life to their very foundations', so that the intellectual, economic, social and political situation in Europe was one of 'confusion and disunion'. He saw two threats to western civilizaiton -- 'totalitarianism', which, in the political systems of Hitler and Mussolini, had been defeated, and '*collectivism', which was already giving new forms to socio-political life. Collectivism, Ropke argued, posed a 'mortal threat' to Europe's cultural inheritance, and, along with 'mass civilization' and 'materialism', had already led, in many eyes, to 'the collapse of the intellectual, moral and socio-philosophical foundations of the Occident'.12 There was in Ropke's circular the same sense of crisis, and the same felt need for urgent action, as in Hayek's pronouncements. Ropke stressed 'the urgent necessity of combining throughout Europe all the intellectual forces prepared to resist the perils', and the need for an institution 'which can be used as a clearly visible and effective platform for discussion with the double purpose of clarifying and working out ideas and making known the results'. He concluded that: 'There can be no better forum open to western humanism and the forces of freedom than an international periodical'. He contacted a formidable list of formidable people, including Hayek, and began negotiating with publishers about the costs of publication. Assisted by Dr. A. Hunold, a large number of business firms were approached, and by June 1946 20,000 francs had been collected. This was not enough for a periodical, but Ropke's correspondence had revealed the existence of a large enough number of convinced liberals to support some international effort along the lines proposed by Ropke and Hayek. At this point Hunold suggested that the money already raised for the periodical could be used to finance Hayek's proposal, made in Zurich in November 1945, for a meeting of two or three dozen outstanding liberals, first, to discuss the basic problems of a economic order and of building the intellectual foundations of a new liberalism, and then to form an international society for 'regenerating the ideas of classical liberalism and in order to refute the growing danger of socialism'. With Hunold's encouragement, and Ropke's agreement, Hayek went ahead with planning the meeting at which the Mont Pelerin Society was formed.
Hayek's letter13 to those invited to the meeting outlines clearly what he had in mind: the formation of a sort of 'International Academy of Political Philosophy'; 'to formulate a statement of common principles on which the work of the organization is to be based and which would have to be used in invitations to others to join'; 'to work out the principles which would secure the preservation of a free society will be possible only among men who share certain common convictions'; 'our purpose is not to spread a given doctrine, but to work out in continuous effort, a philosophy of freedom which can claim to provide an alternative to the political views now widely held'; 'our goal.. .must be the solution not of the practical task of gaining mass support for a given programme, but to enlist the support of the best minds formulating a programme which has a chance of gaining general support'.
After many sessions and much debate at the meeting, the type of programme Hayek wanted was embodied in 'a statement of aims' which still remains the official platform of the Mont Pelerin Society. It is worth quoting in full:
'A group of economists, historians, philosophers and other students of public affairs from Europe and the United States met at Mont Pelerin, Switzerland, from April lst to 10th 1947 to discuss the crisis of our times. This group, being desirous of perpetuating its existence for promoting further intercourse and for inviting the collaboration of other like minded persons, has agreed upon the following statement of aims.
The central values of civilization are in danger. Over large stretches of the earth's surface the essential conditions of human dignity and freedom have already disappeared. In others they are under constant menace from the development of current tendencies of policy. The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power. Even that most precious possession of Western Man, freedom of thought and expression, is threatened by the spread of creeds which, claiming the privilege of tolerance when in the position of a minority, seek only to establish a position of power in which they can suppress and obliterate all views but their own.
The group holds that these developments have been fostered by the growth of a view of history which denies all absolute moral standards and by the growth of theories which question the desirability of the rule of law. It holds further that they have been fostered by a decline of belief in private property and the competitive market; for without the diffused power and initiative associated with these institutions it is difficult to imagine a society in which freedom may be effectively preserved.
Believing that what is essentially an ideological movement must be met by intellectual argument and the reassertion of valid ideals, the group, having made a preliminary exploration of the ground, is of the opinion that further study is desirable interalia in regard to the following matters:
1) The analysis and explanation of the nature of the present crisis so as to bring home to others its essential moral and economic origins.
2) The redefinition of the functions of the state so as to distinguish more clearly between the totalitarian and the liberal order.
3) Methods of re-establishing the rule of law and of assuring its development in such manner that individuals and groups are not in a position to encroach upon the freedom of others and private rights are not allowed to become a basis of predatory power.
4) The possibility of establishing minimum standards by means not inimical to initiative and the functioning of the market.
5) Methods of combating the misuse of history for the furtherance of creeds hostile to liberty.
6) The problem of the creation of an international order conducive to the safeguarding of peace and liberty and permitting the establishment of harmonious international economic relations.
The group does not aspire to conduct propaganda. It seeks to establish no meticulous and hampering orthodoxy. It aligns itself with no particular party. Its object is solely, by facilitating the exchange of views among minds inspired by certain ideals and broad conceptions held in common, to contribute to the preservation and improvement of the free society'.14
III The Revival of Liberalism
The common objective of those who met at Mont Pelerin in 1947 was undoubtedly to halt and reverse current political, social, economic and intellectual trends towards socialism, and to ensure the revival of liberalism. The facts of history seemed obvious and were not in dispute: the rapid growth of government, the increasing intervention by the state in economic and social life, the decline of 'the competitive order', the misuse of history as propaganda to further illiberal doctrines and policies, the growth of industrial and labour monopolies, monetary instability and the trade cycle, mass unemployment and the continued persistence of poverty. The theory of classical liberalism had allowed an important role for the state -- defense, the maintenance of law and order, and the provision of some public works -- but appeared to have no obvious or adequate solutions, in terms of its fundamental philosophy, for a variety of social and economic problems that all western governments had attempted to solve by state intervention. That intervention, so often illiberal in spirit and operation, had weakened, and in the long run would probably destroy, the competitive order and liberal political systems that had been created in the eighteenth and nineteenth centuries under the inspiration of the enlightenment and classical liberalism. The twentieth century, indeed, had not been a happy one for liberalism. The outstanding change in the nature of the state had been the growth of government.15 The change had been one from a world in which government had played a relatively small role to one in which the government was all-important. If there is, as J.S. Mill argued,16 'a circle around every individual human being which no government . . . ought to be permitted to overstep', and if there are 'large departments of human life from which it [government] must be unreservedly and imperiously excluded', then that circle by 1947 had become much smaller and those departments few in number.
But what has happened since 1947? If the titles of this session and this paper are to be taken seriously, then there has been a revival of liberalism in which the Mont Pelerin Society has played a role. It would be unrealistically optimistic to believe that the tide had turned significantly before the mid-1970's, or that it has turned decisively in the 1980's. It would be obstinately pessimistic, however, not to recognise the liberal revival of the last decade.17 There has been, unambiguously, a widespread change both in ideas and in policies, towards liberalism. The revival of liberalism, in terms of achieved political change, can be easily exaggerated. There are still few governments with comprehensively applied liberal policies; massive budgets have been difficult to prune and massive bureaucracies difficult to cut; regulations have been reduced here and there, but few regulatory agencies have been abolished, and life and work are still bounded by bureaucratic controls; agriculture and industry are still supported and protected, even with some retreat by governments. Nevertheless, attitudes and actions have changed perceptively. Socialism is now defended rather than accepted as a moral imperative. Liberalism is now attacked rather than ignored, and a debate about liberalism permeates the world of ideas. The change in ideas has occurred in the academies, amongst intellectuals and politicians, and in society at large, in public opinion. The rhetoric of public debate is now quite different. There has been, also, a restructuring of the platforms of political parties, some notable victories by liberalminded politicians, and, in consequence, the formation of some governments committed to more liberal policies. Disillusion with socialism has led to some spectacular conversions, so that it is not unusual for an old liberal to find himself in the company of a new liberal who was once an illiberal. To parody Harcourt's quip of 1888, 'We are all Socialists now', it can be said with some confidence today that, 'We are all liberals now'.18
In looking for the causes of these changes, it is difficult not to give considerable credit to the proliferation and success of 'liberal institutes', privately funded institutions devoted to classical liberalism and market economy.19 These institutes, of which the Center for Independent Studies is a typical example, have had an important educative function, through their publications, lectures, seminars and conferences, in influencing the ideas and attitudes of academics, intellectuals, publicists of the media and politicians, as well as the general public. It is notoriously difficult, however, to measure influence rather than power, and equally difficult to disentangle the complex relationship between changes in ideas and changes in policy. It would be misleading, therefore, to attribute too much influence to the liberal institutes; they were themselves the response to changing ideas as well as the creators and publicists of the same ideas. But timing is an important clue to influence. If most liberal institutes flourished with and after the revival of liberalism, the Mont Pelerin Society pre-dated that revival by at least two decades. Its role in these decades was arguably more important than it was later. Not only did it sustain liberalism in a period when liberal fortunes were low, it also provided the inspiration for, and often the initial leadership and membership of many of those institutes that were associated more directly with the revival of liberalism.20
But changing ideas and changing policies were in part a realistic reaction to changing circumstances, to a changing environment in which there were different problems and opportunities, and different responses.21 The expectations of a better world -- of rapid growth, redistributive justice and greater equality -- which were fostered so loudly and irresponsibly by politicians and intellectuals in the immediate post-war world, were not fulfilled adequately. Expectations were not realised and the envy created not abated. The most damaging and tragic expectations of rapid economic growth were raised, for example, in the underdeveloped countries of the world, where western advice was almost universally inappropriate and unrealistic.22 The war was followed, however, by two decades of relative prosperity during which there was both a massive growth of government and a burgeoning of the welfare state.23 Growth and welfare, it was argued, were dependent on government, on Keynesian inspired, macro-economic management of the economy -- for growth -- and on large and increasing transfer payments -- for welfare. Politicians and electorates, misled both by economists and events, came to believe that governments, by the manipulation and regulation of key economic variables, were able to produce planned and predictable changes in national economic performance without damage to incentives and productivity and without creating rigidities and rents. In the short run the vitality of the market system was able to absorb the effects of controls and to sustain increasing government expenditure, but by the mid 1970's economies everywhere were faltering and the managed, welfare state was in crisis. Governments found it increasingly difficult to fulfil electoral promises, even though government expenditures continued to increase and bureaucracies to expand. It became all too clear that governments were unable, either because of their own inefficiencies, or because of the complexity of the problems they tackled, and their unpredictability, to achieve stated obJectives.24 It was now obvious that as governments had taken on more and more responsibilities they had become less effective, and, to compound their problems, they found it increasingly difficult to finance their activities. Disillusion was directed not only at governments but at the bureaucracies that continued to grow and prosper as privileged and powerful elites.
To take two examples. By the late 1970s, British governments had piled up a formidable and varied list of failures: they had been quite unable, in six attempts, to impose an incomes policy, had lost control of public spending (especially in public sector wage bargaining), had found it impossible to achieve their economic growth and anti-inflation targets, and had failed to cure the economic problems of the depressed areas inherited from the 1930's.25 At the same time, the highly acclaimed model of social democracy, Sweden, was running into serious economic difficulty. In the 1970's the economy ceased almost to grow, unemployment increased, individual investment and production lagged, tax evasion (with marginal rates at over 60 percent) became a way of life, the Swedish kroner was devalued, profits declined and the government began a policy of massive industrial subsidies to prevent the industrial demise of important firms. Increasing budget deficits led to higher inflation, and by 1980 total public expenditure reached 66 percent of gross national product.26
The outward circumstances by the 1970s had changed, and with that ideas about economics, politics and the welfare state. In economics the failure of Keynesianism stimulated more realistic analysis of public sector economies.27 In politics, there was increasing awareness of the process whereby increasing government intervention had established vested interests, making adjustments possible only with more intervention and regulation.28 Intervention worsened the economic performance of economies and made the welfare state more difficult to finance. In varying degress all western societies ran into budgetary problems. At the same time there was increasing criticism of the welfare state, casting doubts on the thesis that it had developed as the result of a voluntary collective decision. Even its humanity was questioned as the bureaucrats who administered it, came to be seen as the custodians of undemocratic power and economic privilege. It was in these circumstances that there was a renewed interest in, and increased application of, liberal principles.
IV The Role of the Mont Pelerin Society
The title of this session is, 'The re-emergence of liberalism?' -- a question -- and that of this paper, 'The role of the Mont Pelerin Society' -- a statement. The question mark should be transferred. There has been a revival of liberalism. It is reasonable, also, to assume that the Mont Pelerin Society has played a role in that'revival, but it is difficult to judge the contribution exactly. The fate of the post-war liberal or liberal institution was one of isolation, but as that fate changed it is easy to evoke the image of the lonely liberal on a crowded stage, at first jostling ineffectually with socialists and interventionists, but gradually establishing himself in the centre of the stage commanding the attention of the audience. The Mont Pelerin Society, however, had never had a power base (it deliberately eschewed political commitments) and few publications (again by deliberate policy), and was, for many years, almost invisible except to its members.29 Its influence, therefore, could only have been through its members? A very few of these actually occupied positions of power in government where they were influential in the making of policy -- Erhard is the outstanding example30 A few, also, were so intellectually outstanding that they were able to change the content and argument of theory and practice in their subjects; for example, Hayek, Eucken, Friedman, Haberler, Stigler, Bauer and Machlup. From these distinguished society members came a stream of influential articles and books, whose impact on the world was considerable if unmeasurable. Perhaps these publications would have been forthcoming even if there had been no Mont Pelerin Society, but the loyalty of these member authors to the society was deep,and often expressed. As Hayek said in 1973: '1 am perfectly confident that each of us has been enabled to persist in his effort and to do it with more confidence and more satisfaction, because we had the comfort of knowing that we could agree about its intellectual justification at least with some other people.131 Most members, however, were followers and not innovators, convinced liberals who depended on the meetings of the society, and on the writings of its members, to strengthen and refurbish their ideas. Their numbers were greater but their influence on policy is more difficult to assess. The link between changing ideas and changing policies is a difficult one to establish, and the society, in any case, had no monopoly on liberal ideas and at no time did its membership constitute the entire liberal community. What, then, was the importance of the society for liberalism?
Whatever difficulty there is in judging the contribution of the Mont Pelerin Society to liberalism after its revival, there is no difficulty in reckoning the contribution to be large in the two decades after 1947. In those years, the important achievements of the society were, first, that it 'saved the books' (to use the words of the late Warren Nutter),32 and second, that it 'led the revival of learning', to continue the metaphor. A military metaphor might be even more appropriate. The society 'saved the flag' and 'renewed the attack'. At a time when liberal ideas were at their nadir, and were threatened with extinction, the society maintained a continuous and high level discussion about liberalism at the same time as providing a critical analysis of contemporary illiberal ideas and policies. In its meetings, also, it provided a haven to which the liberal could regularly retreat for comfort and for intellectual renewal. In a world of consensual government growth and intervention it was reassuring for the isolated liberal to be a member of an international society in which there was serious discussion about liberalism by an intellectually distinguished membership. As Friedman said in 1973: 'It has given me the opportunity that I otherwise would never had had to come to know fellow souls in other countries throughout the world who share the basic philosophy, the basic belief in freedom that we do.133 The intellectual strength of the society was important; it gave the society authority and respectability and made it impossible for critics to view it as a congregation of ideological fanatics. (See, for example, the distinguished presidents of the society, in Appendix III.) The meetings of the society, thus, were important for the ideas they generated, for the international disseminiation of those ideas, and for the comfort, comraderie and support they gave to individuals who on other occasions were generally isolated and often despised. During the period of high illiberalism, from 1947 to 1975, the Mont Pelerin Society survived and grew, and that is perhaps the most unambiguous measure of its success.
Some figures illustrate the growth of the society. Between 1947 and 1984 the membership increased from 39 to 461. The first meeting included only Europeans and Americans from U.S.A. By 1983, the coverage. had increased to include most of Europe, much of Central and South America, as well as parts of Africa, Oceania, and Asia. The first meeting had members from ten countries; in 1983 membership covered 36 countries. The U.S. membership dominated in 1983 as it had done in 1947, but there were in 1983 also large memberships in England, France, Germany, Argentine and Japan.34 The society had become truly international, and, as such, an affective information network for the circulation of liberal ideas. Momentum in the network was maintained by regular meetings, while the international character of the society was reinforced by the wide geographical spread of meeting places. Up to 1984 there were 25 general meetings and 13 regional meetings so that there were only four years from 1947 to 1984 in which there were no meetings; since 1964 there has been a meeting somewhere every year. The general meetings were held in Switzerland (5), Germany (4), Britain (4), Italy (3), Belgium (2), France (2), U.S.A. (2), Holland (1), Austria (1) and Hong Kong (1). Regional meetings have been held in Japan (1), U.S.A. (2), Canada (1), France (2), Holland (1), Spain (1), Austria (1), Sweden (1), Venezuela (1), Guatemala (1) and Chile (1). Since 1964, the society has met 25 times, of which nine meetings have been held outside of Europe. (See Appendix II.)
Another indication of the society's influence can be derived from the composition of the membership.35 A survey of about half of the membership in 1984 shows the following composition of professions: academics, 50% (of which 80% are 'economists'); businessmen, 25%; members of private research institutions, 10%; politicians 7%; lawyers, 5%, government officials 2%; others, 1%. It is significant that 40% of the membership describe themselves as economists working in universities, business and research institutes, and government. Such a weighting, in terms of a general consideration of liberalism within the society, is perhaps unfortunate, but in terms of the outside influence of the society, it is beneficial. Economists, of all academics and intellectuals who influence public policy, are the most influential. The economists of the west can be divided into two broad groups, those who argue for a large managing and regulatory role for government in the economy, and those who favour the largely unregulated market as the main determinant of resource allocation. To many, including many members, the central and consolidating idea of the Mont Pelerin Society is that of the market as a decentralising and depoliticizing institution which generates both wealth and individual freedom. Much of the discussion at the meetings of the society has been directed towards the understanding of the competitive order, and criticism of the managed economy. With the failure of Keynesianism, policy makers turned naturally to alternative systems, and the best developed and most convincing alternative was that of the liberal economists, many of whom were society members. Liberal institutes, often with links with the society, also became more influential. It is significant, for example, that in Britain the Institute of Economic Affairs, which has been so influential in changing the climate of ideas, has had long and close association with the Mont Pelerin Society. Other influential institutions in other countries can be similarly linked with the society: for example, the Heritage Foundation of the U.S.A., the Centre for Independent Studies in Australia, the Institut Economique de Paris, The Fraser Institute of Canada, and the Escuela Superior de Economia y Administration de Empresas of Argentine. The public prestige of the liberal economists of the society also increased: for example, in England, both Bauer and Harris were elevated to the peerage; Friedman, Stigler and Hayek, all presidents of the society, received Nobel Prizes in economics, and Hayek was awarded the most prestigious of all British honours, the CH.
Mont Pelerin Society economists became increasingly influential in determining the content of academic debate and the character of public policy. Friedman and Stigler are outstanding examples. Those whose voices had once seemed doomed to be unheard in the academic wilderness, now echoed down the corridors of power as well as resounding through the groves of the academies!
Since the members formed part of an international information network for the circulation of liberal ideas, what they learned at society meetings was important, for it was at the meetings that the latest liberal ideas were presented and discussed. This is not to say that all delivered papers were important, and that all discussion was profitable, nor that all members benefited from the education that meetings provided. Attendence at meetings, nevertheless, could provide participants with a real opportunity for a comprehensive encounter with the theory, practice and problems of liberalism. And, especially before 1970, with a programme of action from the sessions on 'strategy and tactics'. An analysis of the papers given at the first twenty meetings reveal two dominant themes, as well as several subordinate themes.36 The largest number of papers were on liberalism and market economy (or the competitive order), with supporting themes on ideology, welfare and education. On liberalism discussion centred on the nature of a liberal society (with papers on democracy, the rule of law, the limits of administrative discretion, constitutions of liberty, etc.) and liberalism in relation to other 'systems' (for example, communism, conservatism, radicalism, dissent, Christianity, etc.), as well as on the practical problem of how to achieve a liberal society. The market economy papers centred on the essentials of a competitive order, as well as on a number of specific economic problems (taxation and fiscal policy, international trade and exchange rates, the gold standard, trade unions and wages policy, underdevelopment, agricultural and industrial policy, etc.). Also much discussed were the problems of ideology (the misuse of history to instil anti-liberal views, the attraction of socialism, the role of envy in social attitudes, the treatment of capitalism by the historians, the image of the entrepreneur, etc.) and of poverty and welfare (the liberal attitude towards poverty, the growth of the welfare state, health and education, egalitarianism, etc.). In some of these themes, distinguished specialists were particularly in demand: for example, Hayek on liberalism; Bauer and Frankel on underdevelopment; Haberler, Lutz, Friedman and Schmolders on public finance; Machlup and Hutt on trade unions; Brandt on agriculture. Other occasional speakers were also impressively influential: for example, Einaudi and Erhard, respectively on 'Democracy and Liberalism' and 'Freedom and Dissent'; Popper on 'The Role of the State in Education and Research'; Knight on 'Liberalism and Christianity'; Nutter on 'Communism and Liberalism'; von Mises on 'The Nature and Function of Profits'; and Demsetz and Alchian on 'The Economics of Property'. The custom of having copies of many of these papers available to members made the distribution of their content more effective. Indeed Hayek's original idea of the society as 'a kind of Academy of Political Philosophy' was amply fulfilled as the educative role of the meetings ensured that the liberal view, as expounded by the members of the society, was given world wide circulation.
V Conclusion: The Changed Agenda
In September 1973 a meeting was held at Montreux, near Mont Pelerin, to celebrate the twenty-fifth anniversary of the founding of the society, and to decide whether or not to disband the society or to perpetuate it. Hayek, reviewing the achievements of the society, while admiring its growth and the encouragement it gave to liberals, said, 'I did not anticipate that in the quarter century which has passed ... the society ... would still be struggling against the same problems which it was struggling at that time'.37 The society had survived and grown; the world had changed, but it had not grown noticeably more liberal. The consciousness of work still to be done was probably the most important consideration in the decision to continue the life of the society. A decade later, when the society met in Berlin, the society was even larger, and the mood was more optimistic. A prominent English journalist, covering the meeting, could detect 'no sign of gloom whatever' and headed his reporting with, 'Capitalism's gurus are still smiling'.38 The optimism was perhaps unrealistic, but the indications of a liberal revival were widespread enough to induce, in the cheerful atmosphere of a large meeting of like-minded people, a feeling of euphoria. There was a conviction that the turning point had come, and that liberalism was again a powerful intellectual force that could well become a powerful political force. Hayek had recently completed his widely acclaimed and widely discussed three volumed work, Law, Legislation, and Liberty. There were now 'liberal' governments in Britain and the U.S.A., and serious discussion everywhere about the theory and practice of liberalism. Liberal institutes were flourishing, and the Mont Pelerin Society membership had continued to grow. In 1985 we know that that euphoria was premature. We know, also, that the agenda of public discussion has changed, largely as the result of the liberal confrontation of the managed economy. For example, the lively and acrimonious debate about welfare and poverty is the result of the liberal demonstration that poverty programmes, like that of 'The Great Society', have worsened the condition of the poor, and have trapped them in an economy of dependence from which it is diffucult to escape, and from which the incentives to excape have been eroded.34 If, in the three decates after the war, the agenda for governments, and for intellectual discussion, was determined by the socialists, the agenda today is determined by the liberals.40 If in the sixties there was little questioning of the basic assumptions of the interventionist state, and concern centred on how to make intervention work more efficiently, today the interventionist state is under the closest and most critical scrutiny, and debate centres on why we should, or should not have, a more liberal society. In changing the agenda, the members of the Mont Pelerin Society have played an important role, in the generation and diffusion of liberal ideas. The role of the Mont Pelerin Society in the revival of liberalism has been, first, 'to save the books', and second, 'to change the agenda'.
The participants at the meeting of 1-10 April, 1947.
The founding members.
Meetings of the Mont Pelerin Society.
1 The title of Hayek's famous polemic, discussed below.
2 There is a considerable literature on 'the breakdown of capitalism'. Its origins were in the Marxist theory of historical evolution whereby the crises of capitalism lead to revolution and socialism. World War I and the great depression of the inter-war years were seen as proofs of capitalism's breakdown. 3 J.M. Keynes, The End of Laissez Faire, London, 1926.
4 The direction of economies by governments during World War II marked a significant change in the actual and perceived role of the state in the economy. Both market forces and democratic rights were subordinated to administrative control over wide areas of enterprise and individual freedom. To many the success of war-time governments demonstrated the success of socialism, but only by ignoring the limitations of control and the willingness of individuals to forgo freedoms voluntarily in the interests of victory.
5 See the arguments of W.H. Beveridge, discussed below. Beveridge was prepared to forgo almost all freedom in the interest of full employment.
6 Keynes' publication of The General Theory in 1936, and of How to Pay for the War in 1940, provided the basic argument for, and structure of, macro-management.
7 See, W. Eucken, Grundsatze der Wirtschafts politik, Tubingen, 1952, and, L. Erhard, Wohlstand fur Alle, Dusseldorf,, 1957, for the theory and practice of German economic policy after the war.
8 F.A. Hayek, 'Historians and the Future of Europe', Kings College, Cambridge, 28 February 1944. Hoover Archives.
9 W. Ropke, 'Plan for an International Periodical', Geneva, August 1945. Hoover Archives.
10 The texts of Schumpeter, a pro-capitalist sceptic, Beveridge, an interventionist Liberal (of the English Liberal Party), and Polanyi, an avowed socialist, were typical of a large literature on post-war prospects and policies. All three have been influential, then and since the war, in determining the historical debate about 'what was done' and '.what should have been done' after 1945.
11 F.A. Hayek, 'The Prospects of Freedom', undated, 1945. Hoover Archives.
12 'Plan for an International Periodical', op.cit.
13 Circular Letter to prospective participants, 28 December 1946. Hoover Archives. - 33
14 The statement of aims was drafted, in the first place, by a committee consisting of Eucken, Gideonse, Hayek, Hazlitt, Iversen and Jewkes. The conference could not agree on this draft, and Robbins redrafted in the present acceptable form. Acceptance date was 8 April 1947. Hoover Archives.
15 See, W. Nutter, Growth of Government in the West, American Enterprise Institute, 1978.
16 J.S. Mill, Principles of Political Economy, 1849, Book V, Chapter XI.
17 The electoral victories of Reagan and Thatcher, on the one hand, and the more economically realistic policies even of 'socialist' governments, on the other, point to a fundamental shift in the 1980's. The change in the character and content of intellectual debate is equally revealing.
18 Quoted by D.H. Macgregor, Economic Thought and Policy, Oxford, 1949, p. 69.
19 See, for example, the list of 'market institutes' published in Economic Affairs, vol. 5, no. 2, January-March, 1985.
20 There are many examples: Harris and Seldon of the institute of Economic Affairs, Feulner of the Heritage Foundation, Lepage of the Institut de 1'Enterprise, Lindsay of the Centre for Independent Studies, Walker of the Fraser Institute, Benegas Lynch of Escuela Superior de Economia y Administracion de Empresas.
21 See G. Stigler, 'The Influence of Events and Policies on Economic Theory', American Economic Review, May 1960, for a typically sceptical view of this problem.
22 Two notable exceptions were P.T. Bauer (now Lord Bauer) and S.H. Frankel, both Mont Pelerin Society members.
23 This development can be seen in its extreme form in Sweden. From 1953 to 1978, G.N.P. in Sweden doubled, at the same time as public spending increased from under 30 to over 50 percent of G.N.P. After 1978, the growth of national product 'slowed down unrelentingly'. See 'On Social Democracy in Sweden', Economic Affairs, vol. 5, no. 1, October-December 1984.
24 The phenomenon which most confounded Keynesianism was 'stagflation', the simultaneous occurrence of inflation and unemployment, clearly impossible in the Keynesian system.
25 See, for example, G. McLennan, D. Held and S. Hall, Eds., State and Society in Contemporary Britain, London, 1984, especially chapters 2, 3, 7 and 9.
26 See 'On Social Democracy in Sweden', Economic Affairs, op.cit. The record of Holland is also instructive: growth up to 1973, after which little or no growth; rapidly increasing social welfare expenditure with 60 percent of national income passing through the public sector. Ibid, January 1984. - 34
27 In particular, the development of the theories of public choice and rational expectations, associated respectively with the names of J.M. Buchanan and R. Lucas.
28 In particular, developments in the theories of collective choice, voting behavior, bureaucracy, redistributive justice and natural law.
29 Political commitment was specifically ruled out by the original 'statement of aims' of the society. The decision about publication also came early, but not without dissent. Hayek was against 'official publications'; Hunold and Brandt, for example, favoured an active publications policy.
30 Other examples are: J. van Offelen, Sir Geoffrey Howe, Sir Keith Joseph, Enoch Powell, A. Burns, W. Nutter and A. Wallis, as well as other Germans who worked with Erhard.
31 Mont Pelerin Society Newsletter, April 1973.
32 I owe this information to J.M. Buchanan. See his paper, 'The Examined Politics and an Emergent Public Philosophy', unpublished.
33 Mont Pelerin Society Newsletter, April 1973.
34 Records of the 1947 Meeting. Hoover Archives. The Mont Pelerin Society Membership Directory, Summer, 1983.
35 Questionnaire, circulated by R.M. Hartwell to society members in 1983-84.
36 List of papers given at the first 20 meetings of the Mont Pelerin Society, prepared by C. Gandil. Hoover Archives.
37 Mont Pelerin Society Newsletter, April 1973.
38 Ibid. 39 See, for example, the debate in the U.S.A. about Charles Murray's book Losing Ground. 40 As a teacher of social history it was necessary, in the period up to 1975, to read a great deal of nonsense history (for example about the social consequences of the industrial revolution) to refute it, because such history was read widely by students and without refutation would have established an even stronger socialist consensus about 'the evils of capitalism' than already existed.