LECTURE 13. NEOLIBERALISM

1. Economic ideas of the founder of neoliberalism L. Mises

Both the neoclassical direction in economic theory and neoliberalism are rooted in the economic views of A. Smith. It was his principle of the “invisible hand”, the belief that the realization of a person’s selfish interest in the field of economic activity will lead to public welfare and the requirement for non-interference of the state in the economy arising from this point of view that formed the basis of the concepts of representatives of neoliberalism. The essence of the theoretical provisions of economic liberalism can be reduced to the fact that liberals recognize and emphasize the existence of an obvious connection between individual freedom, private property and the level of economic efficiency of a given society. They insist that no one has the right to violate someone else's freedom, including economic freedom. These ideas are based on the political philosophy of liberalism, the credo of which is the famous principle of “laissez faire”, which can be interpreted as the right of people to do what they want, giving them the right to be themselves in economic activity and religion, culture, everyday life and thoughts. And individualism, which became the basis of European civilization, according to one of the prominent representatives of the neoliberal trend, F. Hayek, is not selfishness and narcissism, it is, first of all, respect for the personality of one’s neighbor, it is the absolute priority of the right of every person to realize himself in this world.

According to representatives of the liberal trend in political economy, it is freedom in the sphere of economic activity that is the main and necessary condition for rapid economic growth, where for a balanced development of society, in principle, the operation of the mechanism of a free market and free competition is sufficient, automatically establishing equality between supply and demand. The role of the state in the economy should be reduced to a minimum, they see the main and, in fact, the only task of state structures in creating and maintaining the conditions necessary for the favorable development of free competition, which means creating equal opportunities for everyone. Government intervention directly in economic processes is unacceptable; and if it happens, then it is done, according to representatives of both liberal and neoliberal directions, exclusively in the interests of the state apparatus.

1. Economic ideas of the founder of neoliberalism - L. Mises

At the origins of the revival of classical liberalism in the twentieth century was the famous economist and philosopher L. Mises (1881-1973), an Austrian by birth, who, however, spent a significant part of his life in the USA, where he taught a course in economic theory at New York University. Initially, the subject of Mises' economic interests were the problems of money circulation, but later his interests shifted to the sphere of analyzing the logic of individual human labor activity and considering the motives that prompt a person to work, in particular psychology, morality, and instincts. The influence of institutionalism is clearly visible in these issues.

Mises pays considerable attention to the analysis of the functioning of various economic systems, consistently considering three options for the economic structure of the modern world: a purely market economy, a "spoiled market" and a non-market economy. When analyzing the functioning of the market system, he studies the problems of evolution, the place and role of such an important institution for the market economy as private property. In his opinion, it is private property that is "a necessary requisite for civilization and material well-being", and its social function is that it contributes to the optimal use of resources and ensures the sovereignty of consumers. From the point of view of Mises, only private property can be the basis of rational economic activity, since the individualistic incentives generated by it ensure the maximum use of resources. Mises comprehensively examines the role and functions of money in a market economy, their historical evolution, the problems of inflation and the gold standard, the problem of savings and investment, interest, explores the problem of the ratio of wages and taxes. However, in this topic, we are primarily interested in Mises as a prominent representative of the neoliberal trend, a defender of the idea of ​​economic freedom.

Analyzing non-market economic systems, by which he primarily means the socialist system, Mises confirms his conclusion about the "logical and practical impossibility of socialism", denying it a rational organization of the economy. In his opinion, the establishment of a socialist system means the elimination of a rational economy. He defends this point of view in one of his most famous works, which is called "Socialism" (1936). Mises criticized, first of all, the central link in the economic system of socialism - planning. As you know, from the representatives of utopian socialism to Marx, one of the main accusations of the capitalist system was that the anarchy of production, in which the producer only learns about the need for his products in the market, leads to a senseless waste of society's resources. And planning, in their opinion, excluding the anarchy of production, will prevent the waste of the productive forces of society. Undoubtedly, the popularity of the "idea of ​​planning" is associated with an understandable desire to solve common problems as rationally as possible, so that it is possible to foresee the consequences of the actions being taken. However, Mises categorically opposed this thesis, because, in his opinion, it is under socialism, where there is no mechanism for competitive bidding for resources and where the buyer does not have to pay the value of the best alternative to their use, resources will be used inefficiently and thoughtlessly. Planned regulation of the economy excludes the possibility of market pricing principles, without which it is impossible to measure the contribution of various factors of production to the value of consumer goods. In turn, this makes efficient use of resources impossible. Under socialism, a system of arbitrary evaluations dominates, which gave Mises reason to call socialism "a system of planned chaos."

Mises also drew attention to the fact that the strengthening of the role of the state will inevitably lead to the strengthening of the role of the bureaucracy. In addition to the traditional negative consequences of bureaucratization (corruption, reduced efficiency of social production), Mises singles out such a phenomenon as the emergence of a certain type of person for whom "following the usual and outdated is the main of all virtues", and the "suffocation" of innovators, who are the only carriers of the economic progress. In this matter, his views are close to those of J. Schumpeter.

Mises repeatedly emphasized in his writings that it is the free market that corresponds to democratic principles. He writes that only in a free market the consumer is the center of the economic system, "voting" with his money income for a particular product, thereby determining the structure of social production, and only in a free market economic entities maximize their well-being with the freedom to choose alternative opportunities. Freedom of choice means respect for the taste preferences of a person and, in a broader sense, indicates respect for the human person. On the other hand, the market system also implies high rates of economic growth, providing a level of well-being that could not even be dreamed of before. In this regard, Mises cannot but be concerned about the reasons for the growing rejection of this socio-economic system among various segments of the population. The reason for this, like Schumpeter, Mises sees in unsatisfied ambition. He notes that in a society based on castes and estates, it was customary to attribute bad luck to circumstances beyond the control of a person (God, fate). In the conditions of a market economy, the position of a person is determined to a large extent not by the traditional status, but by one's own efforts. And according to the logic of things, a person should blame himself first of all for his failures. For most people, this is unacceptable and therefore they look for the reason for their own unsatisfactory position in the vices (true or imaginary) of this economic system. And this seems, according to Mises, to be the breeding ground for various collectivist and socialist doctrines.

We can find the development of Mises's ideas in his student and follower F. Hayek.

2. Economic views of F. Hayek

F. Hayek (1899-1992), Austrian economist and sociologist, one of the most original representatives of economic thought of the twentieth century, whose research interests are unusually wide - economic theory, political science, science methodology, psychology, history of ideas. The breadth of his views was manifested, not least, in a kind of argumentation of long-familiar provisions of economic theory. As a representative of the neo-liberal trend, Hayek naturally acts as a consistent supporter of the market economy, remaining true to the idea of ​​the high value of the principles of economic liberalism until the end of his life. However, he considers the market not as a human invention, and not as a mechanism for the implementation of justice and the optimal distribution of resources (he is generally opposed to goal setting and has always been an implacable opponent of the reorganization of society according to pre-designed ideal models), but as a spontaneous economic order. At the same time, Hayek very clearly distinguishes between the concepts of "market" and "economy". The latter, in his opinion, implies a social structure in which someone allocates resources in accordance with a single scale of goals. This presupposes the implementation of all economic activity according to a single plan, which unambiguously describes how public resources will be "consciously" used to achieve certain goals.

The market, according to Hayek, functions fundamentally differently. It does not guarantee the obligatory satisfaction of first the more important, according to the general opinion, needs, and then the less important ones. No one individually knows the needs and capabilities of everyone, but everyone, entering into a voluntary exchange, informs everyone about his goals and capabilities and at the same time receives information about the readiness of others to contribute to the realization of these goals. According to Hayek, the market simply connects competing goals, but does not guarantee which of these goals will be achieved in the first place. By the way, this is one of the main reasons why people object to the market.

Indeed, in the economic models of both utopian socialism and scientific communism, the existence of a common scale of priorities was assumed, which determined which of the needs were to be satisfied and which were not. But this scale of priorities, and this is its essential and irremovable shortcoming, would reflect the ideas of only the organizer of the system himself.

According to Hayek, spontaneous economic order has significant advantages. First of all, it uses the knowledge of all members of society. And the dissemination of this knowledge, much of which is embodied in prices, is the most important function of the market. According to Hayek, the price mechanism is a unique way of communication, where prices act both as evidence of a certain value of a product from the point of view of other people, and as a reward for effort. Prices act as signals that motivate individuals to make efforts. Mutual adaptation of plans occurs through prices, and therefore the price mechanism is one of the most important aspects of the market order. By observing the movement of a relatively small number of prices, the entrepreneur is able to coordinate his actions with the actions of others. By the way, the A. Marshall equilibrium price is also, to a certain extent, the result of a compromise, a compromise between buyers and sellers. And precisely because the price mechanism is a mechanism for communication between people in economic processes, administrative control over prices is categorically contraindicated. Hayek repeatedly emphasizes that this function of the price system is realized only in conditions of competition, that is, only if the individual entrepreneur must take into account the movement of prices, but cannot control it. And the more complex the economic organism turns out to be, the greater the role played by this division of knowledge between individuals, whose independent actions are coordinated thanks to an impersonal mechanism for transmitting information known as the price system. Hayek draws attention to the fact that people who have the opportunity to freely react to a situation can assess the local situation better than any centralized body, that is, use the so-called local knowledge and are thereby able to ensure the inclusion of this knowledge in the general flow of knowledge circulating in society.

But the mutual adjustment of plans is not the only achievement of the market. Although the market does not guarantee the production of goods in accordance with the scale of social priorities, it guarantees that any product will be made by people who can do it at a lower cost than others.

Hayek pays much attention to the consideration of the mechanism of competition. As is known, within the framework of the Keynesian direction, competition is considered as an imperfect and extremely wasteful mechanism for achieving a balance in the economic system, and within the framework of the neoclassical direction, as a fast and efficient way of optimal distribution of resources. The originality of Hayek's position lies in the fact that he was the first to consider competition as a "discovering procedure", as a way of discovering new products and technologies that would have remained unknown without resorting to it. It is competition that forces the entrepreneur, in search of high profits, to look for new products, to use new markets for raw materials, to look for precisely those Schumpeterian new production combinations that ensure the dynamic development of the economic system. Having the opportunity to express themselves, people find fundamentally new ways to solve emerging problems, thereby a person is able to offer society something new.

Within the framework of Hayek's concept of "individualism of development" is characterized by an emphasis on human creative aspiration, the desire for something new, the desire to find or create needs that no one satisfies or does not fully satisfy. This is how Hayek makes the connection between freedom and progress. In this Hayekian belief lies another argument against central planning. Since the production of an unknown product cannot be included in the plan, the system of directive planning therefore involves the reproduction of the existing structure of social production. Thus, competition is valuable precisely because its results are unpredictable and generally different from those for which one consciously strives. But this is also the reason for the desire to destroy competition, since although in general the consequences of competition are beneficial (see the views of A. Smith - author's note), they inevitably imply disappointment or frustration of someone's expectations.

One of the issues that has been and is still the subject of discussion is the question of whether the market ensures the observance of the principle of social justice. Economists with a socialist orientation argue in favor of planning that it makes it possible to distribute output more evenly and fairly. Hayek does not argue with this, agreeing that if we really want to distribute goods in accordance with some pre-established standards of well-being, then there is no other way out than planning the entire economic life. But the price for such achievements will be the destruction of freedom of choice - the choice will be made for us by others. And Hayek raises a very serious question: will not the price we pay for the implementation of someone's ideals of justice be such oppression and humiliation that the "free play of economic forces" could never give rise to.

According to Hayek, it is wrong to associate the principles of the implementation of social justice with the market order, which is ethically neutral. According to his views, justice should be evaluated in terms of the process of behavior itself, and not in terms of the final result. It is not surprising that justice in Hayek comes down to the universal equality of all before the law, which must be universal and specific. The demand for social justice, which Hayek regards as egalitarian justice, he explains by an indestructible desire to "squeeze" the market mechanism into the schemes of the desired distribution of income. The program of distributive (equalizing) justice and state control over the economy, according to Hayek's deep conviction, are incompatible with the "rule of law", since they are inevitably selective, that is, discriminatory.

According to both Mises and Hayek, the market performs an indispensable cognitive function in the process of social coordination, where it is a transmission device that makes it possible to effectively use information scattered among countless economic actors. It is natural, therefore, that the market is not only necessary, but it must also be uncontrollable and cannot be an instrument of state manipulation in order to achieve certain results. But the market system, in the opinion of these representatives of the neoliberal direction, does not doom the state to inaction, and a wide field of activity opens before it. First of all, this is the creation and improvement of legal norms - the "rules of the game" necessary for the effective functioning of the market system. In other words, creating conditions for the development of competition. But in addition to the conditions for the development of competition, in some cases the state is entrusted with the function of replacing it with other forms of regulation where necessary, in particular, in the provision of goods for collective use.

But Hayek was concerned not only with general questions of the philosophy of a market economy. He was awarded the Nobel Prize in Economics in 1974, among other things, for his work in the field of money, market fluctuations and analysis of the interdependence of economic and structural phenomena. On these issues, Hayek acts as an opponent of Keynes, believing that the policy of cheap money and creating jobs through the budget only aggravates economic problems. He writes quite sharply, with Keynes in mind, that “...we again succumbed to the admonition of the golden-mouthed seducer and were captivated by another inflationary soap bubble.” Hayek acknowledges that Keynesian governments did succeed in maintaining full employment through credit expansion and stimulating aggregate demand based on the Keynesian formula in which unemployment is a direct function of aggregate demand. But the price of these achievements was open inflation. In addition to the generally accepted conclusions regarding the negative consequences of inflation, Hayek draws attention to the fact that inflation generates much greater unemployment than that which was originally intended to be prevented. And he expresses disagreement with the thesis according to which inflation entails a simple redistribution of the social product, while unemployment reduces the latter, thus revealing the worst evil. According to Hayek, inflation itself becomes the cause of increasing unemployment, since it leads to disorientation of labor resources. There is nothing easier, he writes, than to temporarily provide additional jobs by occupying workers with activities that temporarily become attractive - attractive due to the additional expenses allocated for this. But the corresponding jobs will disappear as soon as inflation is stopped. As for artificially spurred economic growth, in many ways it means a waste of resources.

This topic examined the views of representatives of one of the directions of neoliberalism, continuers of the traditions of the Austrian economic school. However, the neoliberal direction was also developed in the works of economists in the USA, Great Britain and Germany. The most famous of them is W. Eucken (1891-1950), who played a significant role in the formation of the neoliberal direction in German economic thought. Eucken's economic ideal is a socially oriented free market economy, whose main principles are freedom of the individual, trade, entrepreneurship, free pricing, free competition. In other words, a developed commodity-money economy in the absence of monopolies. The role of the state comes down to monitoring compliance with ensuring that all members of society conduct their economic activities in accordance with existing rules and laws. The economic ideas of neoliberalism were recognized and further developed by representatives of monetarism and supporters of the theory of rational expectations.

Author: Agapova I. I.

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