The Measure of All Things: How Markets Beat out Citizenship to Define Our Public Life

Article excerpt

In thm wake of the Great Recession of 2008, liberals were dismayed by the economic carnage but could at least rejoice that the dominant ideology of free markets had been exposed as fiction. The deepest vulnerabilities of unregulated capitalism had been east into sharp relief; the groundwork was now in place for a return to robust regulation of the financial sector and a broader shift to the left.

Yet as subsequent years have made clear, 2008 marked no such inflection point. The downturn helped usher Barack Obama into office, but his presidency has been defined less by liberal realignment than by the emergence of an Ayn Rand-inspired Tea Party movement that voted in a wave of conservative House members. After a moment of uncertainty, libertarian and conservative pundits recovered and blamed government regulation for the crisis. Well-connected Democratic bankers and ex-bankers helped craft a recovery plan that socialized risk, privatized gain, and did little to punish or correct the excesses of Wall Street. The passage of health-care reform was a bright spot, but the battle of ideas appeared lost. If liberals had expected conditions for a new New Deal, they found instead a backlash fiercer than the one endured by Franklin Roosevelt.

Observers of history may have been less surprised by the durability of the free-market consensus. As Daniel Stedman Jones shows in Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Polities, today's ideas about capitalism and free markets have been germinating for nearly a century, and they are not likely to disappear overnight. Originally a doctoral dissertation, Masters of the Universe retains some academic stiffness but is also shaped by the cosmopolitan career of its author, a British lawyer who has worked for the London-based think tank Demos (not connected to the New York-based Demos, which until recently was the Prospect's publishing partner). Jones uses the terms "liberalism" and "neoliberalism" in the European sense, referring to the centuries-long liberal tradition of limited government associated most closely with the 18th-century Scottish thinker Adam Smith. He picks up the story in the 1930s, the decade that saw the emergence in America of the modern Democratic Party. Roosevelt's New Deal and Britain's New Liberals were transforming the meaning of liberalism, attaching it to social welfare policies that were anathema to classical liberals.

Jones begins with a discussion of three old-school European thinkers who balked at this redefinition. All agreed that the 1930s rise of socialism, communism, and fascism represented a widespread threat, but they identified different causes and cures. In The Road to Serfdom (1944), Austrian economist F.A. Hayek cried that state expansion was endangering Western civilization--yet he advocated welfare measures that would get him labeled a socialist today. Ludwig yon Mises, Hayek's mentor, went further, calling in Bureaucracy (1944) for a stripped-down government that would refrain altogether from intervening in operations of the free market. Near the war's end, philosopher Karl Popper would take the long view in The Open Society and Its Enemies (1945), developing a historical account of the West rooted in a critique of Plato and a sharp distinction between the individual and the collective that would become a right-wing shibboleth.

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All this was mere prelude, however. It took the postwar involvement of American thinkers like Milton Friedman to yield a distinct set of neoliberal ideas, defined as "monetarism, deregulation, and market-based reforms." Unlike his gloomy predecessors, who'd been traumatized by the hideous events in Europe, Friedman saw his career unfold amid patriotic Cold War rhetoric and the unprecedented postwar economic expansion. He was optimistic by nature and far more confident in the possibilities of capitalism as both an economic and social system. …