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Neoliberalism and Authoritarianism - A Symbiotic Pair

by Sebastian Dittrich
Rightwing populist parties mix the conventional authoritarian political style with neoliberal economic ideas emphasizing the free unregulated market and the sleek but strong state. For Hayek, the value of a political system is measured by how well it secures liberal freedoms. Interest-groups like unions allegedly threaten democracy and force a socially just redistribution policy on the wealthy minority.

By Sebastian Dittrich

[This 2001 study is translated abridged from the German on the Internet,]

I. Introduction

Rightwing populist parties of a new type are arising in several European countries since the middle of the 1980s. Corporatist economic policy in the tradition of Italian fascism is alien to them like Hitler’s National Socialism. Instead, they mix the conventional rightwing authoritarian political style with neoliberal economic ideas emphasizing the free unregulated market and the sleek but strong state.

In his book “The Radical Right in Europe: A Comparative Analysis,” the political scientist Herbert Kitschelt tackled the question about the genesis of this peculiar ideological connection. His conclusion is that these parties are the product of “political entrepreneurs” who bring together authoritarian and neoliberal approaches to fill the "niches” in the “political market” arising in the transition to post-industrial society (Kitschelt 1995). He called that kind of approach a “winning formula.”

The goal of this study is to seek for other reasons on another plane. Why do rightwing populist politicians who are persons with values and worldview positions trust neoliberalism? What could be the motivation for the combination beyond an attractive election tactic? What are the starting points of neoliberal theory?

The relation of neoliberal theory to authoritarian political styles should be analyzed first. What are “authoritarian political styles” or “authoritarianism”? What authoritarian elements appear interesting? The relation of neoliberal theoreticians to democracy and democratic principles should be explored.

For illustration, the Pinochet dictatorship in Chile shows what neoliberal policy can look like in power and how select neoliberal theoreticians laid the groundwork.

How “peculiar” is the mixture of neoliberal and authoritarian approaches?

2. Authoritarianism Defined

Dieter Nohlen’s “Lexicon of Politics” defines “authoritarianism” as a “political style stressing the authority of a person or office” (Nohlen 98). For this study, I would like to expand this definition and understand authoritarianism as a political style transformed by dominant organizations and structures. This means the massive restriction of participation possibilities, the concentration of organizational power on a certain person, group or elite and finally the suppression of the opposition.

On the state plane, authoritarianism means a political style that trashes the legitimation of democratic power, for example through violent overthrows of regimes under circumstances seen as legitimate, massively limiting or abolishing the right to vote, the power undermining democratic structures and ignoring democratic principles, and eliminating political opposition with repressive means.

3. Neoliberal Theory

3.1 What is Neoliberalism?

The word “neoliberalism” shares the fate of many terms that are used excessively in general political discussions like a coin passed from hand to hand that loses its once clear character and becomes faded and more vague with time. Making things worse, the debate is dominated by two radically different definitions…

On one side, neoliberalism is attacked as a model of social Darwinism and market radicalism while the other side decries the development of the term to a “bugbear” and “swearword” and understands it as a description for a socially-restrained market economy. Milton Friedman and Friedrich August von Hayek represent the first and Ludwig Erhard, Wilhelm Ropke and Walter Eucken the second.

Both fractions are actually right. They only speak past one another, as happens so often. In their 1938 colloquium, rejection of monopolies was common to them. The planned economy was regarded as the worst form of monopolism. The goal of rehabilitating the market economy and competition as the economic control mechanism were underlined. The market economy was discredited after the worldwide economic crisis in the 1930s. In this theory, the task of creating and maintaining the conditions of competition comes to the state. Active intervention of the state in economic courses as in Keynesianism is clearly rejected.

The variant of neoliberal theory around Walter Eucken that prevents negative effects, fights monopolies in the form of cartels, trusts and big businesses and protects equal opportunities and social justice through state redistribution is known as “Ordo-liberalism.” The inequality of possessions is seen and criticized as a main obstacle for realizing the social balance of starting conditions in economic competition (Brockhaus 1968). The social market economy is the model here, not the market economy of the liberalist ideal of a past era and not only “the free play of forces” that Ludwig Erhard described as “neoliberal.” Representatives of this line understood neoliberalism as a “third way” between capitalism and socialism (Brockhaus 1968).

The line described as “Chicagoism” or “libertarianism” and authoritatively proclaimed by Friedrich August von Hayek gives the greatest priority to the right of ownership and denounces every kind of state redistribution. “Chicagoism” sees the state’s only task in enforcing contracts, freedom rights and ownership laws. For Hayek, monopolies must be fought. He saw its most dangerous variant in state enterprises, the “labor monopoly” (Schui 1997) of unions and in the unions themselves. Already in the 1940s, he understood social democrats and social liberals as “intellectual allies” of state socialism and counted them as “main enemies of the free world” (Niesen 98). He described “social justice” as “empty and meaningless.” For him, justice was not a “justification for correcting market results” (Principles of a Liberal Social Order – quoted by Schui 2000). He understood tax progression as “discrimination against the well-to-do.” He welcomes and did not criticize unequal distribution of social wealth. In an interview, he explained unequal distribution of any extent as “simply necessary” to spur the less wealthy to more work (Wirtschaftswoche 2/6/1981).

In the same interview, he rejected efforts to balance the North-South wealth gradient. “There is only one brake against over-population. Only the people who can feed themselves can multiply,” Hayek said literally. Hayek rejected state engagement for equal starting conditions in the market. Strengthening the state was a greater evil than unequal opportunities (WoZ 3/18/99).

Both lines are contradictory in central points. Not surprisingly, one of the two variants held to be the “only true” neoliberalism does not hesitate imputing the most evil motives to the other side. So the Neue Zuricher Zeitung newspaper decried the “spreading conceptual forgery” and “perfidious reinterpretations” (NZZ 4/11/1998).

The Hayek definition of neoliberalism prevails today in most countries. The Austrian Hayek by birth studied economics, law and politics, taught in London, Freiburg and even Chicao where he influenced the “Chicago School.” Respect for this economic and social-philosophical theory grew with the support from Pinochet’s Chile, the Great Britain of Thatcherism and the US of the Reagan era. In 1974, Hayek was awarded the Nobel Prize for Economics. Many theoreticians with sympathies for his ideas like Milton Friedman copied him. Milton Friedman is the most important representative of neoliberalism today.

This line of neoliberal theory became the political-economic paradigm of most states with the end of Keynesianism in the 1970s and 1980s and the collapse of state socialism (Nohlen 1998). Hayek’s ideas on “neoliberalism” and “neoliberal” are underlined in this study.

3.2 Hayek’s Concepts of “Spontaneous Order” and “Cultural Evolution”

A summarized presentation of Hayek’s philosophical ideas is necessary to make his relations to democracy and authoritarianism understandable. The concepts of “spontaneous order” and “social evolution” are essential.

With Hayek, a “spontaneous order” appears without the actors striving to create or organize this order. The individual only submits to generally acknowledged rules and norms and strives for the best-possible individual success. Such an order cannot have a general goal. The spontaneous evolutionary development of this state is the aim and goal. According to Hayek, the whole society should be organized in this way, not only the economy. Therefore, he is the enemy of political efforts to reform society as a whole or give it a goal like social justice or full employment. For Hayek, these things can only be produced as a kind of bonus or giveaway of the spontaneous order. According to Hayek, an active political-economic incursion in market processes or social reforms must lead to a totalitarian society sooner or later. Thus, the preservation of a “spontaneous order assumes that actors with these goals or at least the capacity to realize these goals are robbed of these possibilities and constrained”…

In Hayek’s self-regulating “free society,” a state has only two functions. Firstly, it must lay down the generally accepted rules to which members of society submit out of humility toward evolution and not out of insight. Secondly, it must ensure freedom of contract and freedom rights equal for everyone. For Hayek, the value of a political system is measured by how well it secures the “liberal freedoms” and how much the (well-to-do) individual accepts responsibility toward social goals.

3.3 Criticism of Neoliberal Pluralism

By “pluralism,” neoliberal theoreticians (Eucken, Ropke, Rustow and Bohm) mean a pluralism of interests within the state, not opinion pluralism. They speak of a “sick” pluralism when interest-groups are allowed to influence the state and apply pressure or control to bring about state redistribution in their favor. One interpretation of the state views the state similar to the market as a competitive field on which different groups seek influence and political-economic advantages. Rustow describes this as “pathological” or “perverse.” Competition in the state should occur around the question what best serves the well-being of the general public. The state as a whole has to be impartial and independent of the pressure of interests in favor of the common good and first gains its legitimation in this way. This “common good” or public interest cannot be achieved either through the addition of particular interests or by adjustments or compromises between different interest groups.

A governmental praxis that runs counter to these ideas leads to a “pluralistically degenerate” and totalitarian democracy. Such a praxis represents a danger for the state authority for two reasons. Firstly, the state through these relations loses “the dignity of an institution serving the general public” with which all groups and sectors of the governed society could identify. Secondly, the state is increasingly robbed of important skills through the power of interest groups…For Hayek, labor protection laws “overburden” the state’s functions.

The liberation of democracy from this “degeneration,” the removal of the interference of interest-groups on state conduct, is one of the most important goals of neoliberals. While Eucken as a representative of the Ordo-liberals identified interest-groups mainly in big industry as dangerous for the impartiality of the state, Hayek sought and found them more in the unions. Allegedly, unions make the state into their spoils and force a socially just redistribution policy on the wealthy minority.

3.4 Neoliberalism and Democracy

For Hayek, democracy is not an ultimate and absolute value. Rather, he considered it as a mere means, a method of gaining power that says nothing about the goal and substance of the regime. He did not see it as a social ideal or procedure that could be applied to other areas like education or the workplace.

He recognized some advantages like the peaceful political competition, the peaceful replacement of an earlier majority opinion by a newer opinion with less danger of abuse of power… According to Hayek, democracy does not offer any guarantee for safeguarding peace because the right to vote gives people a collective freedom but does not include individual freedom…

In Hayek’s conceptions, neither democracy and totalitarianism nor dictatorship and liberalism exclude one another. While a democracy can develop into a “totalitarian democracy” (Hayek), destroying freedom or a “plebiscite dictatorship” that curtails or even sweeps away basic liberal rights like the right to own property, a dictatorship can act on the basis of liberal principles and often maintain freedom. Democratic and authoritarian regimes are understood here as equivalent in realizing liberal principles.

Modern democracies become the target of Hayek’s criticism since they tend to adopt social goals and expand their acting radius into the economy. They decay to mere bones of contention between organized interests, to “haggling democracies” (Hayek). In that way, they represent a permanent danger for Hayek’s liberal freedom rights, for the spontaneous order of society and for cultural evolution.

Hayek and other neoliberal theoreticians are ruled by the fear that the population could infringe the right to free control over property by using the universal franchise. So Wilhelm Ropke said: “Whoever strips fundamental institutions like property and economic freedom of their importable character and drags them to the polls destroys the preconditions of liberal democracy.” Therefore, the guarantee of liberal freedom rights is decisive for neoliberal theoreticians – not universal political participation…

The transformation or liberation of democracy from its “pluralist degeneration,” the transformation of the state into a neutral institution separated from society presupposes the elimination of the most important interest-group of unions in financing the state. How this “elimination” can appear in practice can be seen in the Pinochet dictatorship. For Hayek, interest groups partly suspend competition and therefore threaten the market economy, hinder “cultural evolution” and ultimately put the survival of humanity at risk. A neutral state inevitably assumes that positions in the state and the parties are filled with persons held to be comparatively neutral and impartial by neoliberals…

The characteristics of a completely reconstructed neoliberal society could be formulated as follows:

- The economy must be privatized and deregulated as much as possible. The state has to completely withdraw from the economy.

- Unions and other social groups that want a redistribution of social wealth or another kind of state intervention in the economy must be deprived of all influence in the state.

- The universal franchise must be restricted to tame the democratic sovereign and/or transformed into an unequal franchise so the voters can be “reasonable” and “responsible” to neoliberals.

- The most important functions in the state and parties must be filled with representatives of the social elite and other persons who appear unbiased and responsible to neoliberals.

- “Liberal freedom rights,” above all economic freedom and freedom of ownership must be anchored with an unchangeable character in the respective constitutions.

The relation of neoliberalism to democracy could be described as rather distanced. Despite the mentioned advantages, the neoliberal theoreticians see democracy as a danger for the freedom rights they propagate. As power concentrations influencing the state, competing interest groups should be robbed of their influencing possibilities. The participation possibilities of the people should be massively restricted and these cuts in political-economic power should be anchored in the constitutions of the states. Altogether, an elite- or expert-rule is installed… Groups with the goal of social justice are called anti-civilization, a threat to society’s basis of existence…

Neoliberal Praxis – The Example of Chile

A coup occurred on September 11, 1973 that was prepared long beforehand. In 1970, a “Unitad Popular” formed out of socialists, social democrats, communists, left-Christians and left-liberals gained power in the Chilean government through free elections and began socialist reforms of the economy. With the support of the American CIA, the military under General Augusto Ugarte Pinochet eliminated the constitutional government. The presidential palace was destroyed by air attack and President Salvatore Allende murdered. Other leading government officials were arrested, wide parts of the constitution abolished, Congress dissolved and heavy censorship imposed and all political parties prohibited. Over 30,000 persons were imprisoned and interned in soccer stadiums. More than 10,000 Chileans were killed; thousands banished to foreign countries and over a million forced to flee. The actual liquidation of the Chilean left was completed with the removal of political critics from the universities. Pinochet’s justification for all this was the “war against communism.” Little by little, power was concentrated in Pinochet’s hands.

At first, the military junta had no clear political concept because it was more a reaction to Allende than a developed counter-project. The new political-economic decision-makers were just as inexperienced as most of the new governing personnel. After brief experiments with a “mixed economy,” they took up concepts of a group of economists known as the “Chicago Boys.” Around a hundred persons formed around Milton Friedman and Friedrich August von Hayek at the University of Chicago from 1957 to 1970 who were neoliberal and occupied important positions in the economy, the press and the universities. In the Pinochet government, they gained great influence. Many economic ministers, finance ministers and labor ministers came from their circles. Thanks to the elimination of leftists, they could realize their ideas practically problem-free. State enterprises were privatized in the shortest time. Customs barriers were radically dismantled, all state production subsidies, above all for food, were abolished and public expenditures were drastically slashed. All resistance was suppressed, unions were denied the right to vote, the right of assembly, the right to strike, the right to industry-wide organizing and the right to collective bargaining. The dictatorship secured the necessary conditions for Chile’s economic labor experiment.

The attitude of the “Chicago Boys” to the Chilean dictatorship and to authoritarian procedures was undoubtedly positive on account of their strong involvement in the regime. In the “El Mercurio,” a governmentally-controlled Chilean newspaper, a member of the 1976 group proclaimed “the real freedom of the person is only guaranteed with an authoritarian government that exercises power by means of norms that are the same everywhere. How did the neoliberal theoreticians Friedman and von Hayek react to Pinochet’s rule and the intrigues of their pupils?

5. Conclusion

According to this study, it is hardly surprising that rightwing populist parties use neoliberal arguments and approaches and mix them with authoritarian approaches. A striking inclination to authoritarian political styles can be imputed to neoliberalism. Directly or indirectly, Friedrich August von Hayek fulfilled all the authoritarian criteria described in Part 2. His urge to restrict the people’s possibilities of participation is obvious in his theory… and in his open support of a brutal military dictatorship. From this view, neoliberalism is classified as “authoritarian liberalism” by Tullney and Wolf… The variety of starting points for rightwing extremist politicians is alarming (e.g. Chile, Thatcherism and Reagan). Social Darwinism, the open rejection of union organizations and points of contact for racist ideas are found alongside democracy criticism and elitism...
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