“Economic Liberalism” Today


Mrs Thatcher talked of freeing the economy from state control. However, in reality she was only against particular forms of state control and regulation. It depends which class is being controlled, regulated or assisted by the state.

In 1976, the Centre for Policy Studies was founded by Alfred Sherman, Margaret Thatcher and Keith Joseph, from discussion groups which met in the previous two years (1974/5). Meetings were held throughout the mid-1970s in London and many academics and post-graduate students were invited to attend. Those who did so included F.A. von Hayek and Karl Popper,

The Centre set its aim to place Margaret Thatcher into power in the Tory Party and remove Edward Heath who had been twice defeated in his attempts to introduce legislation to curb working class struggle. Nicholas Ridley drew up the Ridley plan to defeat the miners whilst working for the Centre.

F.A. von Hayek - member of the anti-Marxist Austrian School of Free Market Economics - was one of the leading lights of the CPS. The ideas of the true pioneers - if you can call them that - of this ideology - like Hayek and Robbins, were adopted by those who took a leading part in advising the Tory Government. Hayek, himself, in the first two years of the Thatcher government was resident in Downing St., four days a week.

They claimed to base themselves upon the classical economists like Adam Smith. In fact one of the institutions, which was one of the chief protagonist of Thatcherism was named the Adam Smith Institute. Above all they were anti-working class. They declared that all intervention by the state was part of the steady advance of collectivisation of which Socialism was one aspect.

They aimed to convince the populations of the world that the Stalinist repression was an inevitable product of planned economy and a proof that no other system was possible but anarchic capitalism based on the relationships of the market and production for profit. In 1989/90 with the collapse of Stalinism, they declared there was a democratic revolution in the East and unleashed a wave of propaganda seeking to undermine the struggles of the working class and shake its confidence in its emancipation through its own rule over society.
Thatcher, with loud triumphalism, told the people of Eastern Europe and the Soviet Union that militant trade unionism, collectivism and the "nanny state" was finished; the present and the future belonged to the "free capitalist market".

The economic liberals not only declared opposition to the interventions of the state in taking over industry, but also were vocal against its interventions in free market relationship between workers and capitalists. Here of course, the hypocrisy of this ideology of 'freedom' is revealed very clearly. As always an ideology of the ruling class in society about freedom or democracy means freedom or democracy for it. So under this banner of free market relations the Tory government has used the state to carry out the legislation against trade union rights. It has restricted the freedom to strike and actively used state repression in the miner’s strike of 1984/5.

Richard Cockett gives some very interesting quotations from the 'economic liberals' setting out their antagonism to Keynes, who they denounced as seeking to evade the problem of dealing with the strength of the working class, by finding an easy road that would only pile up problems in the future.

They attacked Keynes for his premise that the biggest danger to the economy was unemployment. They declared that the greatest danger was inflation, due primarily to the working class organisations pushing up wages and creating a 'rigidity' in labour labour costs.

There had to be the destruction of the trade union strength in order to create a 'free' economic society. It was a nakedly class theory. Hayek himself made a central question of the trade unions, in a paper, which he read to a conference of the Mont Pelerin Society, which he formed in 1947.


That if there is to be any hope of a return to a free economy the question how the powers of trade unions can be appropriately delimited in law as well as in fact is one of the most important of all the questions to which we must give our attention.


It has to said that there is certainly a difference between the 'economic liberalism' of the end of the twentieth century and the ideas of Adam Smith and other classical economic liberals at the end of the 18th century. Then, capitalism was in its youth. The industrial revolution was surging forward creating a capitalist class with confidence and a future.

It was a class, which was unleashing a mighty expansion of production, engineering and scientific achievement, never seen nor envisaged before. With complete self-assurance, they concluded that this system was the last in history and entirely in accord with human nature.

Today, "orthodox" economists can explain nothing about fundamental movements in society and are not generally concerned with observing the laws of its development. Most of them search for keys in the financial and share markets, movement of credit and capital. They repudiate any scientific observation of capitalism as a whole, building abstract mathematical models or seeking psychological explanations for the crises, which shake capitalist society. So that the movement of markets and production becomes a matter of psychological analysis. The doctrines of today's "neo-liberalism" are backward, irrational and reactionary. So far as upholding the "natural individual" then it is a "natural individual" which is a self-seeking, profit hungry, money-grubbing individual who makes his riches in the most parasitic departments of capitalism, linked with speculation and uncontrollable corruption.

The men and women who determine the ruling ideology of capitalism today, under the name of freedom of the individual, are justifying the exploitative relations of a capitalist society which is spinning more and more rapidly into an anarchy which threatens humanity itself. Their attacks on the working class are propagandised with 'scientific' facts of people who refuse to find jobs that are not there, dubious statistics and selective research on everything from unemployment to the development of intelligence and bio-genetics.

The chapters in Marx' Capital on how capital was accumulated for the expansion of capitalism in Britain are filled with the facts and statistics of this change and also have the most moving accounts of the separation of the majority of the rural population from their common property and their herding into the factories. Further, a large part of that accumulation was gathered from the slave trade.

The development of the working class as a class of 'free labour' did not come about by peaceful means. Capitalism broke up the old relations in the countryside and created the industrial towns where an industrial working class crowded together under the conditions described by Engels in his Condition of the Working Class in England in 1844.

Capitalists opposed vigorously, legislation controlling 'free' workings of capitalism. In the last century, they opposed legislation against child labour, legislation on cutting down the working day to ten hours. As they argue about the minimum wage today, then also, they argued that these reforms would only mean that workers should lose their employment because the factory owners would not be able to continue. To reduce hours from eleven to ten a day, argued Senior, one well-known economist, would mean a collapse of production because it was in the last hour that profit was made.

The blind development of societies driven by profit has brought in this century, the threat that an exploitative society will bring humankind to untold devastation. The decisive factor which enabled the working class to climb out of brutal and repressive working and living conditions was the counter force of its solidarity and organisation in struggle. The relationship of Capital and Labour can never be free and equal as the capitalists own the means of production, giving them economic mastery over labour and the force of economic compulsion in a society born in violence and conflict.

Before the Second World War capitalist governments increased state intervention in the economies in their social and economic crises. The Transitional Programme of the Fourth International declared:


The necessity of 'controlling' economy, of placing state guidance over industry and of 'planning' is today recognised - at least in words - by almost all current bourgeois and petty bourgeois tendencies, from fascist to social-democrats.