Oz Blog News Commentary

Approaching ‘pitchfork time’

December 6, 2021 - 13:23 -- Admin

I am reading ‘Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist’ by Kate Raworth1,2, and not knowing much about economics, it has been a revelation to me. Every time I read a section or two, it starts things going off in my head about a rant I should write. There are usually two reasons for this: firstly, to find out more about what caused this particular economic travesty to occur; and secondly to try to put the pieces together for my own edification. This is one of these rants, and is about whence the scourge of neoliberalism came.

One of the first diagrams attempting to illustrate the foundational dynamics of our economic system, and still present in economics textbooks and classrooms, is the Circular Flow of Income (Fig. 1), drawn by the economist Paul Samuelson in 1948 in his best-selling economics textbook ‘Economics: An Introductory Analysis’3. 

Fig. 1. Samuelson’s Circular Flow of Income Diagram4. 

The diagram was supposed to make economics more intelligible and accessible to the masses, and representsthe economy as a pipe system, where money flows between different economic agents.

In 1947, a year before Samuelson’s diagram was published, economists such as Friedrich Hayek, Milton Friedman, Ludwig von Mises and Frank Knight met at the Swiss resort of Mont Pèlerin to draft what they hoped would become the dominant economic model. Their model was inspired by the pro-market writings of classical economic liberals1  such as Adam Smith (1723-1790)5  and David Ricardo (1772-1823)6

While these economists said they were pushing back against the state totalitarianism of communism embodied by the increasing influence of the USSR, this neoliberalism morphed into a market fundamentalism1. Subsequent to the meeting at Mont Pèlerin, occurred the creation of the Mont Pèlerin Society (MPS), which is still in existence. This society is one which believes that western civilisation is in danger, partly from a view of history which denies “all absolute moral standards”, and that this has been fostered by a decline of belief in “private property and the competitive market”. They maintain that these are required to preserved ‘freedom’. Their ethos is betrayed by their assertion that the “most precious possession of Western Man, freedom of thought and expression, is threatened”7. They go further and claim that “Over large stretches of the Earth’s surface the essential conditions of human dignity and freedom have already disappeared.” They see danger in the expansion of government, ‘state welfare’ and the power of trade unions and business monopolies8.

Just reading through this drivel on the MPS website demonstrates how closely Australian coalition governments adhere to the aims of this society. This even extends to the moral panic which engendered the development of the Ramsay Centre for Western Civilisation, which is mostly about European supremacism. It is just another manifestation of the narcissistic cultural attitudes that give rise to the white blindfold view of Australian history, coupled with the certainty of those who adhere to conservative Christian religious beliefs9.

Despite not making much of an impact initially, Hayek, Friedman and others took the long view. With backing from big business and billionaires, they funded university professorships, scholarships and conferences and built an international network of ‘free market’ think tanks to spread the propaganda1. Some of these ‘think tanks’ tied to MPS through affiliations of its members include the Institute of Economic Affairs1, the Cato Institute, the Hoover Institution, the Heritage Foundation, the Reason Foundation, the Foundation for Economic Education, the American Enterprise Institute, the Centre for the New Europe, the Fraser Institute, the Mercatus Center (George Mason University), and the Heartland Institute10. Many of these and other organisations have deep ties to the malevolent climate-change denying Koch network11. Indeed, Charles Koch is a longstanding member of MPS10.

It was not until the election of Margaret Thatcher and Ronald Reagan that market fundamentalism became mainstream. When they were elected, they were surrounded by MPS members. Reagan’s election team included 20 members of MPS, while Thatcher’s first Chancellor of the Exchequer, Geoffrey Howe, was also a member1. 

While the neoliberal project was not begun in the 1940s as a self-serving racket, it fairly rapidly became one. This is demonstrated by the fact that economic growth has been markedly slower since 1980 (with the arrival of Thatcher and Reagan) than it was in the preceding decades, except for the very rich, whose wealth has continued to grow much faster than anyone else’s. Inequality in the distribution of both income and wealth, has risen since 198012.

The key point to note here is that the MPS and its network of economists and think tanks were bankrolled by big business and assorted billionaires. This is why many economists became the servants of the wealthy, and it is why, since the election of Thatcher and Reagan, many economists have been activists for decreasing regulations on business, decreasing taxation on big business and the wealthy, decreasing government spending, privatising government business enterprises, privatising government services, and smashing trade unions.

The billionaires who now run jollies up to the edge of space for their friends, have private jet aircraft, have yachts bigger than Manly ferries, and have houses the size of palaces, seem to have little concern for those demonised by modern conservative governments: the poor, disabled, unemployed and elderly. Yet it is those people, and those who are aware of the injustice of their treatment who will determine the future of the wealthy, just as they did in 1789, in France. Some of the wealthy have realised that this inequality cannot continue to increase and are trying to do something about it13. They had better hurry.


  1. Raworth, K., 2017. Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist. Random House Business. 372p.