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Hayek claimed that he always made it his rule ‘not to be concerned with current politics, but to try to operate on public opinion.’ However, evidence suggests that he was a party political operative with ‘free’ market scholarship being the vehicle through which he sought – and achieved – party political influence. The ‘main purpose’ of his Mont Pelerin Society had ‘been wholly achieved’. Mises promoted ‘Fascists’ including Ludendorff and Hitler, and Hayekians promoted the Operation Condor military dictatorships and continue to maintain a ‘united front’ with ‘neo-Nazis.’ Hayek, who supported Pinochet’s torture-based regime and played a promotional role in ‘Dirty War’ Argentina, is presented as a saintly figure. These chapters place ‘free’ market promotion in the context of the post-1965 neo-Fascist ‘Strategy of Tension’, and examine Hayek’s role in the promotion of deflation that facilitated Hitler’s rise to power; his proposal to relocate Gibraltarians across the frontier into ‘Fascist’ Spain; the Austrian revival of the 1970s; the role of (what was presented as) ‘neutral academic data’ on behalf of the ‘International Right’ and their efforts to promote Franz Josef Strauss and Ronald Reagan and defend apartheid and the Shah of Iran





Chapter 1. Introduction: ‘How We Developed a Consistent Doctrine and Some International Circles of Communication’

Hayek claimed that he ‘always made it’ his ‘rule not to be concerned with current politics, but to try to operate on public opinion.’ But the evidence suggests that he was a party political operative—he targeted cabinet ministers for Margaret Thatcher to sack. ‘Free’ market ‘scholarship’ was the vehicle through which he sought—and achieved—party political influence. Two years after Mises promoted inter-war ‘Fascists’ (including ‘Ludendorff and Hitler’), Hayek complained that British ‘free’ market promoters hadn’t developed ‘economic liberalism to its ultimate consequences with the same ruthless consistency as Mises’ (a card-carrying Austro-Fascist). But the ‘main purpose’ of the post-war Mont Pelerin Society had ‘been wholly achieved. We developed a consistent doctrine and some international circles of communication. The Austrian School of Economics supported General Pinochet’s brutal dictatorship and continues to maintain a ‘united front’ with ‘Neo-Nazis.’ This chapter places their ‘free’ market promotion in the context of the post-1965 neo-Fascist ‘Strategy of Tension.’
Robert Leeson

Chapter 2. The German Historical School of Economics and the Foundations and Development of the Austrian School of Economics

Despite its status as the world’s leading school of economics during the second half of the nineteenth century, it is now generally accepted that within the contemporary mainstream, the GHSE has the ‘worst reputation’ of all the research programmes in the history of economic thought. This view has been largely shaped by Austrian School theorists. The Austrian School of Economics was originally founded on the basis of Carl Menger’s critiques of the supposed weaknesses and flaws of the German Historical School of Economics: this chapter examines how criticisms of the fundamental principles of the—as expressed by ASE theorists—influenced the formation and development of the ASE’s own fundamental principles. In addition to disputes over methodological collectivism or methodological individualism, the deductive versus the inductive method, ethical values and state intervention and the nature of ‘knowledge,’ there were emotional issues: Menger—who was truly upset by the severe criticisms directed against him and his book by GHSE theorists and their labelling of him as an ‘Austrian’ economist—went from having a high opinion of the GHSE to having a low opinion of its theorists.
Birsen Filip

Chapter 3. Before Hitler: The Expansionary Programme of the Brauns Commission

In spring 1931, Friedrich Hayek sent an article to Wilhelm Röpke, who at that time was the most authoritative member of the ‘Brauns Kommission,’ a board of experts appointed by Heinrich Bruning’s government to put forward proposals that might reduce the dramatic rise in unemployment. The Commission had just published a Report containing guidelines for an expansionary policy based on public works. This chapter provides the stylized facts that characterize the business cycle in which the Great Depression is embedded; examines the expansionary programme put forward by the Brauns Commission; Hayek’s criticism and Röpke’s defence; and explains how Heinrich Brüning’s government (30 March 1930–30 May 1932), after considering the Brauns (and Lautenbach) Plans, decided to continue with their deflationary policy. Adolf Hitler became Chancellor in January 1933.
Antonio Magliulo

Chapter 4. Hayek, Deflation, Gold, and Nihilism

In his early writings on business cycle theory and the Great Depression Hayek argued that business cycle downturns including the steep downturn of 1929–1931 were caused by unsustainable elongations of capital structure of the economy resulting from bank-financed investment in excess of voluntary saving. Because monetary expansion was the cause of the crisis, Hayek argued that monetary expansion was an inappropriate remedy to cure the deflation and high unemployment caused by the crisis. He therefore recommended allowing the Depression to take its course until the distortions that led to the downturn could be corrected by market forces. However, this view of the Depression was at odds with Hayek’s own neutral money criterion which implied that prices should fall during expansions and rise during contractions so that nominal spending would remain more or less constant over the cycle. Although Hayek strongly favoured allowing prices to fall in the expansion, he did not follow the logic of his own theory in favouring generally increasing prices during the contraction. This chapter explores the reasons for Hayek’s reluctance to follow the logic of his own theory in his early policy recommendations. The key factors responsible for his early policy recommendations seem to be his attachment to the gold standard and the seeming necessity for countries to accept deflation to maintain convertibility and his hope or expectation that deflation would overwhelm the price rigidities that he believed were obstructing the price mechanism from speeding a recovery. By 1935, Hayek’s attachment to the gold standard was starting to weaken, and in later years he openly acknowledged that he had been mistaken not to favor policy measures, including monetary expansion, designed to stabilize total spending.
David Glasner

Chapter 5. On the Rock: Hayek’s 1944 Proposals for the Gibraltar Economy

This chapter examines Hayek’s 1944 visit to the British colony of Gibraltar and his subsequent proposals for how Gibraltar’s economy should be organized in the post-war era. Drawing upon hitherto underused materials from The National Archives in London and the Gibraltar Government Archives, we see how Hayek conceived that several of the themes of The Road to Serfdom, published in the same year, might be put into practice. However, Hayek’s ideas were rejected. They were too controversial—Hayek proposed using market forces to relocate Gibraltarians across the frontier into Spain—and they ran contrary to what was considered good colonial governance at the time which incorporated social welfare systems and economic planning, both of which Hayek, and his proposals, stood in opposition to.
Chris Grocott



Chapter 6. The Austrian Revival

It was much more difficult to communicate ideas and establish networks before the Internet, www, e-mail, and PC. In orthodox academic circles, published journals and formal conferences played a major role in the communication and exchange of ideas—and were even more important for the development of ‘unorthodox’ schools of economics. In the 1970s, Austrian economics experienced a resurgence in the English-speaking world, especially in America—the Austrian Economics Newsletter played an important role of communicating, diffusing, and developing Austrian ideas. The first ten AEN issues reveal how the Austrian revival took place; and what its infrastructure and personalities were. They also illustrate the ideas and problems that came to characterize the resurgence in Austrian economics: dynamics, process, expectation, time, entrepreneurship, (Knightian) uncertainty, knowledge, discovery, learning, equilibration and disequilibration, spontaneous order, subjectivism, Austrian methodology and praxeology, criticism of general equilibrium, price system as a conveyor of information, monetary policy, etc. Without Hayek’s 1974 Nobel Prize combined with funding from the Institute for Humane Studies, Austrian Economics may never have been revived.
Hiroyuki Okon

Chapter 7. ‘Neutral Academic Data’ and the International Right

In 1945, the International Right regrouped, both internationally and within Europe. On the European level, two eminent Catholics—Archduke Otto von Habsburg, claimant to the Imperial throne of Austro-Hungary and Opus Dei’s candidate to rule over a united Catholic Europe, and future Franco minister and senior Opus Dei member Alfredo Sánchez Bella—founded CEDI (Centre Européen de Documentation et d’Information—European Documentation and Information Centre), a Madrid-based think tank which aimed to unite European conservative and Catholic political organizations and break the diplomatic isolation of General Franco’s Spain. In 1952–1953, the Cercle Pinay was founded as a clandestine forum of European leaders who aimed to oppose the threat of communism and promote the vision of a Catholic and conservative Europe. In the 1960s, the neo-Fascist ‘Strategy of Tension’ emerged. In Britain, various individuals associated with the Conservative Monday Club were associate with sustained efforts to undermine Harold Wilson’s Labour Government (1974–1976), to discredit Liberal leader Jeremy Thorpe (1967–1976), and to have Conservative leader Edward Heath (1965–1975) replaced by someone of a ‘more resolute approach.’ This chapter examines the role of (what was presented as) ‘neutral academic data’ on behalf of the ‘International Right.’
David Teacher

Chapter 8. Private Club and Secret Service Armageddon

By the mid-1970s, the Cercle Pinay had succeeded in creating an international contact network of groups working on anti-communist and counter-subversion propaganda. But despite such wide-ranging contacts, the various components of the Cercle network, brought together to defend the conservative cause, felt their vision of the world to be threatened as never before. Between 1974 and 1976, a paranoid feeling of apocalypse, of imminent Armageddon spread through the private clubs, the lobby rooms and the secret services throughout Europe: the Left was on the rise! In Germany, despite a barrage of smears and attack ads, Willy Brandt had triumphed in the 1972 elections; after his resignation in 1974, the new Chancellor Helmut Schmidt led the SPD towards a strong showing in the 1976 elections. In Britain, humiliated by the unions, the Conservative government fell, and Labour’s Harold Wilson won the two 1974 elections. In France and in Belgium, the Left seemed well-placed to break the electoral monopoly of the conservatives. In the Iberian Peninsula, the longstanding geopolitical stability was soon overturned: in Portugal, Marcelo Caetano’s dictatorship crumbled before the left-wing soldiers of the Armed Forces Movement; in Spain, the Generalissimo died, and democratic elections were called. This chapter documents the efforts of the ‘International Right’ to defend apartheid and the Shah of Iran and to assist the election efforts of Franz Josef Strauss and Ronald Reagan.
David Teacher

Chapter 9. The Pinochet Regime and the Trans-nationalization of Italian Neo-fascism

Operation Condor was a Latin American organization—the relationship between General Augusto Pinochet and the Italian Neo-Fascists also provides a fascinating and unique picture of Fascism’s transnational features. Firstly, it demonstrates the persistence of transnational relations between Fascists and Fascist sympathizers over decades. The influence of Fascism on Chilean nationalist movements and the link between Pinochet and Junio Valerio Borghese, who represented a myth for different Fascist generations, is illustrative. This feature ensured the survival of the Fascist transnational network, which originated from the relations that revolved around the spreading of Fascism at a transnational level, throughout several decades. A further factor fostering the survival of the network was the logistic support provided by friendly regimes to the network’s members. Former Nazi and Fascist militants wanted for war crimes as well as Italian Neo-Fascists seeking to avoid judicial prosecution in Italy were all welcomed by sympathetic regimes such as Spain, Chile and Argentina. The opportunity of finding a safe refuge in those countries also promoted regular exchanges between the interwar Fascist generation and the post-war one. This chapter examines the dynamic transnational trajectories of Fascist militants and ideas and the resilience of relations within the transnational network. The collaboration between Pinochet and Italian Neo-Fascists was mutually beneficial—in 1975, they cooperated in the attempted murder of Bernardo Leighton in Rome. In 1976, thanks to the transnational links between Latin American Juntas, Fernandez Larios and Pinochet’s agent Michael Townley obtained fake Paraguayan passports which they used to enter the US and assassinate Orlando Letelier.
Galadriel Ravelli, Anna Cento Bull

Chapter 10. Hayek on Limited Democracy, Dictatorships, and the ‘Free’ Market: An Interview in Argentina, 1977

Hayek is highly-regarded for his contributions to the development of liberal thought, particularly his work on individual freedom, economic freedom, ‘spontaneous’ order, and limited state action. He also defended dictatorial regimes, provided that they were committed to achieving the conditions of a ‘free’ market economy at the expense of unlimited democracy. This chapter examines Hayek’s rationale for supporting certain types of dictatorial regimes, based largely on the views expressed in an interview published in the Argentinean weekly magazine, SOMOS while on a one-week visit to Argentina in 1977. At that time, ‘Dirty War’ Argentina was ruled by the administration of army commander General Jorge Rafael Videla. Hayek defined ‘the condition of freedom’ as ‘a state in which each can use his knowledge for his purposes’ so as to achieve individual goals free from intervention or coercion on the part of an external authority: ‘Coercion is evil precisely because it thus eliminates an individual as a thinking and valuing person and makes him a bare tool in the achievement of the ends of another.’ By defending the practice of relying on dictatorial regimes to achieve the conditions of a ‘free’ market economy, Hayek contradicted his own concept of freedom, which he defined as ‘absence of coercion.
Birsen Filip

Chapter 11. Friedrich Hayek and His Visits to Chile: Some Austrian Misrepresentations

In spite of his reputation as a defender of freedom, Hayek did not value human rights, claiming it to be a relatively recent concept derived from combining ‘the old civil rights’ with rights derived from Marxism. His conception of freedom is a minimal form of freedom, which serves as a very useful tool in promoting the superiority of the ‘free’ market economy. His concept of freedom includes economic freedom in the ‘free’ market (with negative freedom as components) while, at the same time, excluding positive freedom and ignoring ethical and moral values. It should, therefore, come as no surprise that Hayek accepted the invitation to visit Chile during General Pinochet’s dictatorship—or that he claimed ‘personal freedom was much greater under Pinochet than it had been under Allende.’ In their efforts to preserve Hayek’s reputation by providing justifications for his decision, Bruce Caldwell and Leonidas Montes resort to providing incomplete information and concealing certain facts, while misrepresenting others. Furthermore, the discrepancies between the English and Spanish language versions of ‘Friedrich Hayek and His Visits to Chile’ (in terms of the information included and omitted) appear to have been strategic decisions based on the audiences being targeted—which suggests a deliberate and concerted effort to mislead their readers. They failed to fully enlighten their English- and Spanish-speaking readers about this ‘controversial episode’ in Hayek’s life. This chapter demonstrates that they were overzealous in their defense of Hayek: they present him almost as a naïve and saintly figure—in the face of persuasive evidence to the contrary.
Birsen Filip


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