The World Trade Organization (WTO) has been criticized since its founding in 1995. Leftists claim that free trade places the Third World at a disadvantage, while President Donald Trump and paleo conservatives argue that some WTO policies threaten U.S. sovereignty. But what is the origin of the WTO and the neoliberal economic theory that underlies it? An informed study of these phenomena would help us understand the complex problems we face today. However, informed accounts of the historical and ideological origins of modern trade institutions are rare.
In Globalists: The End of Empire and the Birth of Neoliberalism, Wellesley College professor Quinn Slobodian addresses the origins of the WTO and its neoliberal proponents, tracing their ideology back to interwar Geneva School intellectuals and the Habsburg Empire. He explains the significance of key events within that time line, while providing the important and overarching insight that the very visible hand of law was as vital as the so-called invisible hand in the creation of the international market order.
Slobodian focuses on a small group of economists who had a coherent and singular drive to integrate the economies of the world. But like other scholars he devotes too little space to explaining how economic globalism assumed a quasi-religious significance for some of its early devotees.
Slobodian finds the roots of neoliberalism in Vienna’s interwar Ringstrasse, not in the Mont Pelerin Society’s meeting in 1947 cited by most scholars. Interwar neoliberals such as Friedrich Hayek and Ludwig von Mises focused on public policy, not abstract contemplation. Europe had been ruptured by World War I, the Great Depression, and a trade breakdown. Two key conferences occurred amid this chaos: in 1936 at Annecy, France, economists explored whether the concept of “world economy” warranted continuous study, while at Paris in 1938 they examined economics situated between socialism and laissez-faire, raising questions that are overlooked by today’s market evangelists.
The interwar period saw the development of four fundamental neoliberal theorems. First, the global economy is unitary and cannot be divided into nations or empires. Second, it is interdependent, because industrial nations need foreign markets for raw materials and sales. Third, it is infrastructurally homogenous, i.e., reliant on material infrastructure as well as legal and financial structures. And fourth, it is functionally heterogenous, with a greater international division of labor and a more efficient use of the world’s resources.
The most important feature of the world economy to neoliberals is that it “had a supranational force, capable of overriding attempts by individual polities to influence it,” Slobodian writes.
Globalism doesn’t displace the nation-state, in the neoliberal view. Instead, economic constitutions and legal structures govern global trade. Today, neoliberals seek “complete protection of private capital rights” using the WTO and other supranational structures to override national legislation that disrupts investment. Markets are insulated from democratic pressures via a structured settlement between the two, a supranational federation that sterilizes frontiers. Hayek’s aim was Homo regularis, not Homo economicus.
Meanwhile, U.S. economists shared “the peculiarly American quality of ignoring the rest of the world while assuming that America was a working model of it.” Geneva School neoliberals, by contrast, thought globally. Their projects were based in Paris, Geneva, and London, not Washington or New York. Hayek’s 1944 bestseller The Road to Serfdom argued for federation. World government would encase the market rather than allocate resources according to equality, social justice, and, later, Third World demands. A report by Gottfried Haberler in 1958 was a “major turning point” for “GATT and now the WTO,” though neoliberals didn’t design every institution. They had ideas, relying on Hayek’s vision of a neoliberal Utopia.
Modern libertarians praise Hayek and Mises, though both saw the need for “global governance” to preserve the market order. The international division of labor, which neoliberals speak of as if it were derived from holy writ, looms large. Shuttered factories “are not actually witnesses to the destruction of capital, of losses that must be calculated against the advantages of the division of labor,” Haberler claimed. In his estimation, “they are milestones of the economic progress produced by the international division of labor.”
Mises argued that capitalism’s “fundamental social law” is “to draw the greatest number of human beings into the personal division of labor and the whole earth’s surface into the geographical division of labor.”
Yet Slobodian does not devote serious attention to the fact that neoliberalism is a substitute religion in a postmodern world. He does note that Hayek saw St. Augustine’s Cassiciacum dialogues as the starting point for understanding order. But Hayek’s “spontaneous order” is based on markets, not on divine providence.
The neoliberals did not go unchallenged. At the Lippmann Colloquium, Alexander Rüstow criticized the belief that the market “operates by itself,” calling this a “theologico-rational error.” Rüstow and Wilhelm Röpke maintained that, in order to have a humane economy, individuals must rediscover “community relationships,” including religion—a peripheral interest to the agnostic Mises, and lapsed Catholic Hayek. Röpke’s “social market economy” is compatible with the interests of social welfare and labor, though this point is rarely heard.
In addition to shedding new light on the origins of a movement that has amassed tremendous power and influence, Slobodian’s book could engage the imaginations of social-market proponents, inspiring them to formulate their own alternative vision of the future.
[Globalists: The End of Empire and the Birth of Neoliberalism, by Quinn Slobodian (Cambridge, MA: Harvard University Press) 400 pp., $35.00]
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