The shaping of the modern liberal state


This chapter traces the emergence of the ideas of liberalism, as well as the liberal form of the modern state. Contradictory pressures will be identified, to be further explored in Chapter 5.

What is the ideal liberal state?

Thatcher (Chapter 1) claimed that there is no such thing as society. Her mentor, Hayek, belonged to the Austrian School of economics, whose members were aware of the socialist experiment of “Red Vienna” in the 1920s (Rabinbach 1985) and were explicitly anti-union, pro-globalization, and pro-monetarism. Members of this school explicitly separated facts from norms and values in the study of economics, and economic theory from history (Slobodian 2018b). They wished to defend the economy from democracy (Slobodian 2018a, 4—5, 12, 14, 30—34, 42-48, 267). Or perhaps Thatcher understood very well the power of rhetoric to change beliefs and behavior, and so to alter and weaken the institutions which she disliked, which would include all forms of“collectiv-ism.” It would be the height of irony to call Thatcher a “social constructionist,” perhaps aware of the capacity of prominent leaders to change ideas and institutions by such declarative statements, which can then alter political alignments and public conventional wisdom.

Neoliberal epistemology

In fact, there was a distinctive understanding of knowledge among Hayek and his followers (Slobodian 2018a, 223-235, 259, 264). He believed that human knowledge is surpassed by the market price system, an approach that Mirowski calls "agnotology" (Mirowski 2013, 227-230, 239, 296-298, 300, 344; Slobodian 2018a, 83,231—232,235; Rosenboim 2017,157—165).That is, human persons can and should respond to the price system, without question, to achieve efficiency. This was an epistemological position, as well as a moral one. The neoliberals did not proclaim “the individual” until after 1931, which was later

The shaping of the modern liberal state 67 defended in terms of property rights, with the market as a steering mechanism (Slobodian 2018a, 24,118,121-123,232-235,238,270,277-280).

In promoting this view, Hayek used the term “society” but argued that the knowledge communicated by the decentralized system of the market is superior to that of any individual or group of experts (Hayek 1945). He suggested that the market system is superior to expert knowledge because of “how little the individual participants need to know in order to be able to take the right action” (Hayek 1945, 526—527). He chastised the planners for naive “constructivism,” a form of hubris regarding human rationality (Slobodian 2018a, 258—262). While Hayek primarily lauded the market system for its ability to communicate information by rules and symbols which individuals may not understand, he also mentions the “inducements” for the individual,“while seeking his own interest, to do what is in the general interest (Hayek 1945, 527, 529). Hayek at times sounded like an institutionalist, such as when he emphasizes the “social process” needed to make mathematical models accurately reflect reality (Hayek 1945,

  • 520, 530). Whether he believed that individuation improves the effectiveness of these inducements, like his contemporary (Polanyi 1944), is not addressed in this context except to insist on decentralization and competition (Hayek 1945,
  • 521, 524). Rather than “conscious direction,” Hayek quoted Alfred Whitehead that “civilization advances by extending the number of important operations which we can perform without thinking about them” (Hayek 1945, 528).

Model of the liberal state

It is tempting to see a teleology towards the model of the liberal state, with principles of the protection of property rights, free speech, constitutions with separation of powers, and multi-party elections for representative bodies. The principles of liberalism have varied historically, nonetheless, and even the term itself has been used only since the beginning of the nineteenth century in France and Germany (Rosenblatt 2018, 3). Equality and free markets were not always part of the definition (Pitts 2005, 3).To be “liberal" first meant to be considerate and moral before it meant the priority of individual rights.

The origin of the term liberalism is the Latin term, “liber,” meaning free.This term differentiated a person from a slave in terms of being free from domination and possessing citizenship. But a person was only considered truly free with a “republican constitution ... and a government focused on the common good, the res publica ... [and] a noble and generous way” of behavior (Rosenblatt 2018, 9; italics in the original). During the Renaissance, a “liberal arts education” was designed to train the elite men for public service (Rosenblatt 2018, 12—15).That is, the original meaning of liberalism was associated with property and status.

The so-called liberal state was often characterized by compromise, such as the recognition of property rights (Maier 2016, 146—164) in return for legitimate procedures for taxation. Extension of suffrage in the public sphere was another mechanism to balance the enforcement of property’ rights in the labor market in the private sphere. Equality before the law eliminated the influence of aristocracy by birth but was replaced by property requirements for suffrage in nineteenth-century Europe (Rosenblatt 2018, 50—52). Electoral competition gave voice to various constituencies, but elected representative bodies had limited power.

What is termed “democracy” in contemporary literature focuses on elections rather than on the powers of the representative bodies or the strength of protection of property (Berman 2019).That is, there tends to be insufficient attention to the structure of the public/private divide (see Chapter 3).

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