Persuasion, Great and Intimate

I flew out to Chicago for a dinner last week on Spirit Airlines, an ultra-low-cost carrier. The price was $150 instead of the $220 I’m accustomed to paying.  The bag I carried fit under the seat and so was free. A carry-on suitcase, stowed above, would have cost $35, a checked bag $30; a bottle of water aloft, $3.  The Airbus A319 was new, the crew experienced and businesslike. The payoff came when the plane arrived late in Chicago for the return flight to Boston: because relatively few passengers were lugging on-board suitcases, the flight boarded much quicker than usual and we mostly made up for the lost time.  (I was lucky: FlightAware shows the Spirit rush-hour flight averaged more than 90 minutes late over the most recent seven days.) The net effect reminded me of the $20 buses I now take to Manhattan instead of the $100 train. (A more nuanced view of the airline is here.)

As I traveled, I read The Great Persuasion: Reinventing Free Markets Since the Depression by Angus Burgin, of Johns Hopkins University.  This is the latest of a lengthening shelf of books by intellectual historians that seek to explain the election of Ronald Reagan in 1980 in terms of the influence of ideas or money or both. To most of those writing the narrative of American politics in the 1970s, the enthusiasm for markets and reduced government that accompanied “the Reagan revolution” (or, earlier, the deregulation of transportation, under Jimmy Carter, or finance, under Richard Nixon and Gerald Ford), seemed to come out of nowhere. They were expecting, per Keynes and Schumpeter, “the end of laissez-faire.”

Burgin’s argument is that a group of market advocates formed in the late 1930s,   around a discussion of Walter Lippmann’s The Good Society, then took flight after World War II as the Mont Pelerin Society, and subsequently influenced the evolution of postwar economic and political thought. That thought isn’t new, but Burgin’s is the by far the best account of the organization’s history. The MPS was the brainchild of  Austrian economist and social philosopher Friedrich von Hayek, then in the process of relocating from London to Chicago.  He intended the organization to be “something halfway between a scholarly association and a political society.”   Thirty nine persons attended its first meeting, in April 1947, at a mountain hotel near Vevey, Switzerland, on the north shore of Lake Geneva, not far from Lausanne.

Among them were economists (Hayek, Lionel Robbins, Maurice Allais, Fritz Machlup, Ludwig von Mises, Frank Knight, Milton Friedman, George Stigler, Aaron Director); philosophers (Karl Popper, Michael Polanyi, Bertrand de Jouvenal); journalists (Henry Hazlitt, John Davenport); and activists (Leonard Read and representatives of the Volker Fund, the Kansas City, Mo., foundation that bankrolled the Americans’ participation) – a regular Who’s Who of young men (only one woman, British historian Veronica Wedgewood, was included). They would become influential theorists of the turn towards markets.

Burgin, a historian, shows that from the beginning the group comprised two factions, European traditionalists and American upstarts.  The Europeans were concerned with the difficulty of reconciling capitalism with social traditions that had evolved over the centuries. The Americans were not.  Eventually, Burgin writes, Milton Friedman got the upper hand and brought in “a more strident version” of market fundamentalism.  His predecessors’ work, Burgin writes, had been “ingrained with a sense of caution at the knife’s edge of catastrophe. Friedman’s was infused with Cold War dualisms…. Friedman’s philosophical models brooked no concessions to communism, and the America of his time found a ready audience for a philosophy that did not allow itself to be measured in degrees.”

For all his fascination with Friedman, Burgin does not pay much attention to developments in economics itself. Robert Solow, of the Massachusetts Institute of Technology, has written that Burgin tends to endow the MPS with more significance than it ever really has, whether within the economics profession or in the world at large.”  And surely Burgin stints the debates that gave rise to the Mont Pelerin Society.  He doesn’t mention the “calculation debate” about the technical possibility of planning that had preoccupied the Austrians economists since Germany’s surprisingly successful administration of its national economy during World War I; nor the controversy over the New Deal’s National Industrial Recovery Act of 1933, which was the background for the Lippmann book; nor the various crises of peacetime planning that were unfolding in Europe as the group first met.

Moreover, as a historian of ideas, Burgin ignores various more purely experiential means of persuasion by which faith in markets was renewed in the 1960s,’70s and ’80s.  There was the success of Toyota, for example, in improving standards of automotive quality.  Then, too, the Cultural Revolution in China and the Prague Spring of 1968 had powerful effects on views of political economy, in both East and West; so did the US war in Vietnam.  Populism, meaning the durable sectional rivalries within the US itself (Midwest vs. the Coasts, South vs. North) played a role as well. So did rivalries between the United States and Europe.

For my money, Burgin’s real find (apparently for his, too, since his book ends with an account of it) is a 1988 essay by Milton and Rose Friedman (his economist wife and collaborator) tucked away in a Hoover Institution volume, Thinking About America: The United States in the 1990s. In “The Tide in the Affairs of Men,” they discerned a tendency of powerful social movements to begin as works of opinion, spread eventually to the conduct of policy, then generate (often) their own reversal, only to be succeeded by another tide. The Friedmans discerned three such movements in the past 250 years – a laissez-faire or Adam Smith tide, beginning in 1776 and lasting until around 1883 in Britain and the United States (with policy lagging: 1820-1900 in Britain, 1840-1930 in the US);  a Welfare State or Fabian tide, beginning around 1883 and lasting until 1950 in Britain and 1970 in the US (policy tide 1900-1978 in Britain, 1930-1980 in the US); and a resurgence of free markets or Hayek tide, beginning around 1950 in Britain and 1980 in the US, whose opinion phase was “approaching middle age” and whose policy phase twenty-five years ago was “still in its infancy.”

This is standard cycle theory, familiar to readers of Ralph Waldo Emerson, Henry Adams, Arthur Schlesinger Sr. and Jr, Albert Hirschman and a host of others, unexceptional except insofar as it portends, even in the Friedmans’ view, not exactly the end of laissez-faire, but the beginning of some new tide of emphasis on the social.  Burgin doesn’t make much of it except to note that, at the height of the financial crisis, in the autumn of 2008, “commentators on both sides of the political aisle declared that a long era in American political history was drawing to a close.”

And that leads me back to Spirit Airlines.  According to Wikipedia, the company started life in 1964 as a trucking company, made the switch to charter aircraft in 1980, not long after the Civil Aeronautics Board was abolished, and has been growing ever since in unexpected directions, and not without a strike or two. Today it is preparing a powerful move into the old North-South routes of the Americas once dominated by Eastern Airlines.

Airline safety has increased since deregulation. Prices have come down overall. The only false note in my flight last week was the hustle to offer free flights for on-the-spot Spirit credit card applications – a familiar enough ploy among airlines eager to attract certain kinds of customers. One young woman complained bitterly while we waited that her application had triggered a bad report and further damaged her credit. That had the ring of truth.  Was I witnessing an infinitesimal moment of reversal?  On my next flight, I plan to read Age of Fracture, by Daniel Rodgers.

7 responses to “Persuasion, Great and Intimate”

  1. Increase in safety has more to do with engineers, whose work is usally hampered by the suitss, both in manufacturing and airlines…

  2. “Airline safety has increased since deregulation.”

    The end of the CAB had nothing to do with increasing airline safety. The FAA still has jurisdiction over the technical details related to safety.

  3. The biggest issue with budget airline is the ‘pay to fly’ system, whereby the pilot is paying the airline to fly the plane, not the other way around. Not sure about spirit does this, but there are many examples of inexperienced pilots crashing their plane once the autopilot cuts off.

    Safety did not improve due to deregulation, but from engineering. The modren flight system can now take care of most of the flying, but when it fails, your life is in the hands of the pilot.

  4. Commercial:

    The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective by Philip Mirowski and Dieter Plehwe (Jun 19, 2009)

    An excellent source of information

  5. It’s linked in the piece, but it’s a good enough book to deserve this (admirably labeled) plug. dw

  6. Some on the Left believe the Mont Pelerin Society is the ringmaster of a vast neo-liberal conspiracy that has had a Svengali influence over economic policy since the 1970s.

    Few had even heard of the Mont Pelerin Society until the late 1990s and the internet age.
    • Lead conspirator Hayek was so little known at his death that finding extensive obituaries of him in newspapers is hard. Some may be behind pay walls.

    • None mentioned Hayek as the leader of a global cabal. His son’s obituary in 2006 was much longer mostly on the back of who his now very famous father now was.

    Despite being a colony of the vast neo-liberal conspiracy, mentioning Friedman’s name in the 1980s at job interviews in Canberra would have been extremely career limiting. Not much better in the early 1990s.

    Back in the 1980s, the much less radical Milton Friedman was just graduating from being ‘a wild man in the wings’ to just a suspicious character in policy circles.

    If you name dropped Hayek in the 1980s and 1990s, any sign of name recognition would have indicated that you were been interviewed by educated people.

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