To Schmitt, the division between dominium and imperium was more fundamental than the purely po­ liti­cal distinction of foreign and domestic. The most impor­tant border did not halve the world like an orange into East and West, or North and South, but preserved overlapping ­wholes in suspension, like an orange's pith and peel. “Over, ­under and beside the state-­political borders of what appeared to be a purely po­liti­cal international law between states,” he wrote, “spread a ­free, i.e. non-­state sphere of economy permeating every­thing: a global economy.”

Geneva School neoliberals reconciled the tension between the world economy and the world of nations through their own distinct geography. Their global imaginary was sketched by the erstwhile Nazi jurist Carl Schmitt in 1950. Schmitt proposed that ­there was not one world but two. One was the world partitioned into bounded, territorial states where governments ruled over ­human beings. This he called the world of imperium, using the Roman ­legal term. The other was the world of property, where ­people owned ­things, money, and land scattered across the earth. This was the world of dominium. The doubled world of modern capitalism coalesced in the nineteenth ­century. The ubiquity of foreign investment had made it routine for ­people to own all or part of enterprises in countries where they ­were not citizens and had never even set foot. Money worked almost anywhere and could be exchanged into and out of major currencies at the fixed rates of the gold standard. Contracts ­were enforced universally by written and unwritten codes of business conduct. Even military occupation did not affect private property. Unlike earlier eras of plunder, the land or business was still yours ­after the ­enemy army had swept through. To Schmitt, the division between dominium and imperium was more fundamental than the purely po­ liti­cal distinction of foreign and domestic.

Schmitt meant the doubled world as something negative, an impingement on the full exercise of national sovereignty. But neoliberals felt he had offered the best description of the world they wanted to conserve. Wilhelm Röpke, who taught in Geneva for nearly thirty years, believed that exactly this division would be the basis for a liberal world order. The ideal neoliberal order would maintain the balance between the two global spheres through an enforceable world law, creating a "minimum of constitutional order" and a "separation of the state-­ public sphere from the private domain."

In a lecture he delivered at the Acad­emy of International Law at The Hague in 1955, Röpke emphasized the importance of the division while also pointing to its paradox. “To diminish national sovereignty is most emphatically one of the urgent needs of our time,” he argued, but “the excess of sovereignty should be abolished instead of being transferred to a higher po­liti­cal and geo­ graph­i­cal unit.”

An advantage of militant globalism as an explanatory category is its attention to the question of scale, which is neglected in many treatments of neoliberal thought. As the following chapters show, the world frame was not incidental to the prescriptions of many neoliberal thinkers.

The normative neoliberal world is not a borderless market without states but a doubled world kept safe from mass demands for social justice and redistributive equality by the guardians of the economic constitution.

Less frequently observed is the turn of this group away from statistics and business cycle research by the end of the 1930s. I argue that they concluded that the world economy was sublime, beyond repre­sen­ta­tion and quantification. This conclusion turned them away from the documentation and analy­sis of the economy as such and ­toward the design of institutions necessary to sustain and protect the sacrosanct space of the world economy.

Hayek began to realize in the 1930s that the dispersal of knowledge throughout an entire market economy was so complete that no individual could ever gain a functional overview of it. The shock of the 1930s brought with it the realization that the world economy was basically unknowable. Any task of reconstructing the relationship between the two worlds—of many nations and one economy—­would have to be a proj­ect of redesigning the state and, increasingly ­after 1945, of redesigning the law. The essence of this proj­ect was multitiered governance or neoliberal federalism.

It was clear to the intellectuals of the 1930s that the choice was not between a governed nation and an ungoverned world economy. One of the surprises in the narrative I pres­ent may be to find thinkers like Hayek and Mises, who are commonly described as libertarian, speaking matter-­of-­factly about the need for vari­ous forms of international and even global governance. The withering away of the relative influence of national states was always to be accompanied by the corresponding strengthening of supranational institutions. The core of ordoglobalism is its own version of what Polanyi called re-­embedding the market. The crucial difference between him and the neoliberals is the ends to which the market is being re-­embedded. For Polanyi, it was to restore a mea­sure of humanity and social justice. For neoliberals, it was to prevent state proj­ects of egalitarian re­distribution and secure competition, alternatively defined as the optimal functioning of the price-­ signaling system.

Despite their apparent victory, however, Geneva School neoliberals throughout the twentieth ­century ­were haunted by a vision of a world disintegrating. Sometimes accused of having a smug confidence in the resilience of capitalism, they instead ­were troubled by the possibility that the global conditions that sustain a cap­i­tal­ist world economy ­were fundamentally ­under threat. The dominant emotion felt by the neoliberals at the heart of my narrative was not hubris but anxiety. They expended all of their efforts in attempting to design fixes to stabilize what they saw as a precarious arrangement.

The International Chamber of Commerce (ICC) was an eco­nom­ ically internationalist body that sought to document and propagate the idea of a single world economy. The ICC gathered international economic statistics and advocated for the removal of barriers to trade and the ­free movement of capital. Immediately following the First World War and the dissolution of the Habsburg and Ottoman Empires, Mises and his circle thought it looked like a good partner. Mises himself was a delegate to the ICC, and the first generation of Austrian neoliberals all worked at the Vienna Chamber of Commerce. From the beginning, the doctrine of neoliberalism reflected an intermingling with the needs of its patrons in the business community.

By the late 1930s, though, the core of the neoliberal movements responded to the rise of what they called economic nationalism, especially in Central Eu­rope, by denying that the economy could be seen at all. Hayek's position that the economy could not be apprehended by the senses was inconsistent with the emerging field of macroeconomics, but it also realigned the proj­ect of neoliberalism: from talking about the economy to talking about the framework that encased it.

In the course of the war, the sacred nature of private property across borders was ­violated; the space of the private cap­i­tal­ist was desecrated. Private accounts ­were now part of state knowledge, rendered as inputs into a comprehensive plan for allocating the nation’s resources. Nowhere was the collapse of the division between public and private more catastrophic than in the sites of successful socialist revolutions: the Soviet Union in 1917, the Bavarian Soviet republic of 1918, and the Hungarian revolution ­under Bela Kun. But the era ­after the First World War saw everywhere a ­great exposure of corporate secrets—­business had to be made vis­i­ble, and for its own good.

From the liberal perspective, three ­factors empowered the domain of politics against that of the economy ­after the war. First, popu­lar sovereignty was strengthened by the generalization of universal male suffrage in Eu­rope and North Amer­i­ca, making it more difficult to maintain the gold standard through domestic adjustments borne by ordinary ­people. Second, the war left a legacy of what liberals saw as misguided confidence in the power of governments to allocate resources. It is no coincidence that one of Hayek and Mises’s most impor­tant antagonists in Vienna was Otto Neurath, a man who had created a moneyless plan for the Bavarian Republic. Since the war, an economy directed by central authorities looked like a ­viable alternative. Third, the resolution of the war in the peace treaties of Versailles and St. Germain validated the idea that the nation was the most impor­tant category for organ­izing ­human affairs. To the group that would become the neoliberals, the era ­after 1918 was marked by an attempt to reestablish what they saw as the correct balance between the public world of government and the private world of property and contract. Concretely, this translated into a series of proj­ects of cap­i­tal­ist internationalism.

Beginning the story of neoliberalism with the Stubenring in the 1920s rather than with Mont Pèlerin in 1947 deflates the self-­heroizing narrative of lonely embattled intellectuals and reveals the world in which ­future neoliberals formed their princi­ples. It also shows how their writing began with straightforward policy prob­lems rather than abstract contemplation. … Though Mises claimed that “no other calling was more desirable to me as that of a university professor,” in many ways the Chamber of Commerce remained his most characteristic milieu, and his policy suggestions remained remarkably consistent. He began his ­career in Austria in the last years of the Habsburg Empire, advocating strenuously for lower corporate taxes on industry, and ended it in the last years of the First Austrian Republic, arguing for the same. … Even if he is remembered for his work on social philosophy and theories of money and credit, Mises earned his livelihood for much of his adult life as a forthright advocate for the needs of business, including with the Chamber of Commerce in the 1920s and 1930s, and the National Association of Manufacturers (NAM) and Foundation for Economic Education ­after his emigration to the United States.

The location of the Vienna Chamber of Commerce on the Ringstrasse was heavy with symbolism and helps illustrate the milieu out of which the Austrian strain of neoliberalism emerged. … Both urban renewal proj­ects created arteries of commerce and transportation in medieval cities, building wide streets that could serve si­mul­ta­neously as sites of cultural enrichment in their opera ­houses and museums, expressions of state power in their monuments, and sites of consumption in their shop win­dows and sidewalk cafes. The wide streets would also make it harder for ­future insurgents to build the barricades that characterized the revolutions of 1848. Both designs included arsenals and barracks for the easy deployment of troops to quell domestic threats.

Richard Riedl, an economist at the Vienna Chamber of Commerce, prepared one of the most extensive reports for the ICC with two publications calling for the sinking of tariffs. At the time his was the most extensive attempt to calculate the tariff index; his calculations covered 402 commodities and fourteen countries.

The precipitating event had come six months earlier when members of the right-­wing militia Frontkämpfer marched in a heavi­ly Social Demo­cratic area. Harassed by members of the Social Demo­cratic militia, the Frontkämpfer fired into the crowd, killing a worker and a child. Six months ­later, the result of their closely watched trial was complete acquittal, enraging workers who saw it as a case of skewed standards. … Workers marched to the Parliament on the far side of the Ringstrasse from the Chamber of Commerce. The Palace of Justice became the target of their anger at the court’s verdict, and part of the crowd stormed the building and set it on fire, while ­others blocked fire trucks, cut hoses, and opened up other hydrants to reduce ­water pressure, defiantly impeding the city’s functions.

In 1927, democracy had ceased to fulfill its primary function. It did not prevent revolution. In that case, Mises believed, it was perfectly legitimate to suspend it and enforce order by other means.

The Chamber acted as a kind of alternative university. Economists of international reputation passed through it, including Lionel Robbins, Ragnar Nurkse, and Howard S. Ellis. Mises boasted that its library contained material that even the University of Vienna did not have. Government offices occasionally consulted the Chamber’s statistical material, which was superior to their own collection.

Haberler was born in 1900 to a ­family of well-­off civil servants, in the sylvan Viennese suburb of Purkersdorf, best known for its sanatorium designed by the Secession architect Josef Hoffmann. Built when Haberler was a toddler, the sanatorium was a gathering place for luminaries like Gustav Mahler, Arnold Schönberg, and Arthur Schnitzler. The clean white lines and geometry of the building reflected the artistic vision of the Secession, further embodied in the building in downtown Vienna with its golden leafy globe. Their goal was the Gesamtkunstwerk, the total work of art. Art should bring harmony and perfection to earth.

At stake for the Mises Circle was the question one member asked in 1928: Is it pos­si­ble “to build a bridge between economic theory and economic policy?” The question of the late 1920s for the Austrian liberals was: What kind of economic information was reliable and what kind of information was po­liti­cally useful?

Though the distance between the sinuous forms of Klimt and Schiele and the dry texts of economists might seem vast, Haberler and his fellow Austrian liberals ­were engaged with something similar. Their questions ­were basic, and at some level also aesthetic: How should we mea­sure the “complicated latticework of individual economic acts,” and how can we represent it visually? What face of economic actions should we pres­ent to the public? Haberler wrote in 1927 that economics was concerned not only with outward actions but also with internal motivations, ­matters of the “psyche” and the “spirit,” or Geist. For this reason, he said, economics was one of the humanities, or Geisteswissenschaften, a “science of the spirit.”

Haberler thought wages in postwar Austria must fall to restore competitiveness. He put it plainly in a newspaper article in Vienna in 1933: “The dismantlement of tariffs ­will bring pain to a series of economic sectors . . . ​but the pains of transition ­will not be long term, they ­will also definitely not be worse than the unhappiness that we have been plunged into by years of tariff addiction.” He asked the question: “How can an economy that is more poorly equipped in almost ­every re­ spect withstand the competition of an industry and agriculture working with better production conditions without protecting itself with extra-­ high tariffs?” The answer was ­simple: “The poor economy can compete with the rich when the wages and all other forms of income are correspondingly smaller.” He put it bluntly: “When we have faced the necessary consequences completely, when the standard of living has sunk low enough, income has fallen far enough, then the economy can pro­gress, business as usual. . . . ​When the skilled workers in export industry have moved into the coal mines, maybe into agriculture and other economic sectors too, whose products can be better exchanged for qualified export goods and the rest of the workers, insofar as pos­si­ble, have emigrated, then maybe all ­will be employed again, granted at a pronouncedly lower standard of living.” For Haberler, Austria was a prototypical case of small state in the storms of globalization. As he had written a few years earlier, huge countries like the United States and the British “world empire” might be able to follow policies of stabilizing the internal price level, but small countries needed to remain attractive to foreign investment and therefore had to concentrate on stabilizing their currency. ­There was no escape from the discipline of the world economy.

It was essential that policy makers not cave to popu­lar demands. A case in point was the demand for stabilization of commodity prices in the wake of the stock market crash. In 1931 Haberler wrote against the idea of stabilizing the price level for certain commodities. He acknowledged that ­under a scheme of stabilized prices “social friction is less, since the worker can then be offered rising wages and a larger share—at the expense of rentiers—in the social product,” but the outcome would be inflation. He said that he would personally rather risk the “increase of social friction” than risk inflation. ­Here he followed his mentor Mises, who complained that governments had been captive to “public opinion, which looks for salvation in low rates of interest and rising prices.” ­Because the business world desired cheap credit, governments encouraged banks to print money, but short-­term profits “in the long run must inevitably create a situation of crisis and depression.” Public pressure must be resisted by the banks, schooled by economists on the consequences of their actions. Only then could international trade based on a reliable currency standard be preserved.

Links between the Mises Circle and Geneva deepened when Haberler was appointed in May 1934, on Hayek's recommendation, to write the follow-up volume to Ohlin on theories of business cycles and the Depression. As we saw in Chapter 1, Haberler used the model of the spaceless world to build his analy­sis, equating tariffs, distances, and the actions of or­ga­nized ­labor as comparable obstacles to the optimal distribution of the world's resources. Even if he was unsuccessful in proving it scientifically, he saw it as a ­matter of fact that business cycles could be internationalized. "For a hundred years or more," he wrote, "the economic connections between most countries in the world, industrialized countries as well as agricultural and raw-­material producing countries, have become so intimate and international trade so impor­tant for the vari­ous national economic systems that a closer connection between the ups and downs of the business cycle in dif­fer­ent countries is to be expected." The "bacillus of boom or depression," he wrote, travels freely "from country to country."

In its form, Haberler's study and the conference convened to discuss it inaugurated something Robbins called the "Haberler-­like method." The method entailed group research on "a big subject" followed by a larger meeting of experts to evaluate the results. The Haberler method established a form for international collaboration and data gathering, a halfway point between abstract economics and empirical statistics with nothing less than the entire world economy as the object. It was organic and unbound to any one institution, gathering periodically to examine and exchange research results. The similarities of the Haberler method to the format of the postwar Mont Pèlerin Society ­were not coincidental.

Speaking at the International Statistical Institute in 1936, Karl Pribram, Mises's old acquaintance from Vienna who was now a leading figure at the International Labour Organization (ILO), tracked the descent of the economists from the clouds to the earth. Economists had begun with abstract notions of a "worldwide universal economic system" but had been forced by events to "work downward from lofty theorizing to the essential realities of economic life." Wrangling with the prob­lem of the ­Great Depression deepened the marriage between statisticians and economists.

On the suggestion of the French industrialist Louis Marlio, a major player in the creation of an aluminum cartel in the 1920s, the label on which the gathered thinkers settled for their shared ideology was “neoliberalism.”

Prefiguring Karl Polanyi's analy­sis of market fundamentalism in The ­Great Transformation, Rüstow said at the Lipp­mann Colloquium that "the market had become a domain of atomization" and the belief that the market "operates by itself" was a "theologico-­rational error." One-­sided focus on efficiency, profit, and productivity had led to a so­cio­log­i­cally damaging isolation and the degeneration of morality as the individual became detached from all community. In a cruel paradox, the experience of being severed from all social ties and set adrift in the world "appears from the point of view of the market economy as liberation from friction and extra-­economic drag." Without using the term "embeddedness" itself, Rüstow and Röpke effectively argued that the economy must be re-­embedded in society.

In 1933 H. G. Wells published a novel, The Shape of ­Things to Come, that purported to be the dream journal of Dr. Philip Raven, an economist in the employ of the League of Nations who met an “unexpected death” in November 1930. Raven had been dreaming of the ­future, and his journal projected the vision of the League forward. It spoke of a Central Observation Bureau—­a “complex organ­ization of discussion, calculation, criticism and forecast” and a “World Encyclopaedia Establishment” in the “­mother thought-­city”—­a transparent stand-in for Geneva.

Raven recorded that the breakthrough for this vision had been first the ­Great War, ­after which the idea of “worldwide order” became a “working conviction” for many but ­really took hold ­after the “financial storms of the years 1928 and 1929,” which gave “the World-­State prophets the courage of their conviction”—­“they had arrived at the realization that ­human society had become one indivisible economic system.”

Robbins sought a form of ­human social organ­ization that would clarify the distinction between the po­liti­cal and economic realms and dissolve the small, discrete collective of mutual identification—­the miners or the Papuans—in a larger unity. Like Bonn, he saw the British as having provided such a transnational frame ­until 1931. The “open door policy” meant “that ­those parts of the Empire which ­were administered from at home ­were administered as if in trust for the world as a ­whole,” he wrote. “So long as foreign goods ­were admitted ­free and foreign investment and foreign settlement not discriminated against, the En­glishman was not eco­nom­ically better off than the foreigner ­because his country had wide possessions . . . ​The administration of the free-­trade Empire is not,” he said, “one of ­those episodes of history of which En­glishmen need be ashamed.”

Where they differed was in the diagnosis of the outcome. Where Marx saw increasing immiseration, Mises saw the road to prosperity rudely interrupted by the tariff wars of the 1870s in response to the first ­Great Depression, then the rupture of the ­Great War, and the return of trade obstacles that followed.

It is not often noticed that Mises staged the famous socialist calculation debate of the interwar period not at the scale of the nation but at the scale of the world. He claimed that a hy­po­thet­i­cal "general director of the world economy" was redundant ­because "what would happen ­under ideal world socialism by order of the general director of the world economy is achieved in the ideal of the ­free world economy by the reign of competition." In a market system, companies, capital, and workers migrated of their own accord to better-­yielding conditions. To fail to migrate would be to fail and, ultimately, to starve.

Under full ­free movement of ­people and goods, ­there are nations whose areas would be more densely and ­others more thinly settled. This relative overpopulation must be dissolved now through movements of migration. … Mises saw the earth as a vast territory of varying natu­ral endowments that needed to be exploited as thoroughly as pos­si­ble through the mobility of capital, ­labor, and commerce. The drive ­toward productivity was axiomatic. He called it the "fundamental social law" of capitalism "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."

In his 1942 book International Economic Disintegration, which was the culmination of the proj­ect begun at Annecy in 1936, Röpke laid out a dynamic reminiscent of Robbins and Hayek by arguing that the international order had been undermined by the distorting demands of special interests empowered by popu­lar democracy. He summarized this point at the Walter Lipp­mann Colloquium when he said, "It is not enough to say that economic nationalism is the result of a lack of intelligence among leaders; it is economic interests and professional groups that engage in nationalist policy, it is special interests that dissolve the State."

In 1937 Walter Lipp­mann wrote that "the Good Society has no architectural design. ­There are no blueprints." He leaned heavi­ly on the work of Mises and Hayek, who had written two years earlier that "we are not intellectually equipped to improve the working of our economic system by 'planning.' " Ironically, the response of the neoliberals to this insight was to immediately begin creating designs, blueprints, and plans, not at the scale of the nation but at the scale of the region and the world. The federation plans of Hayek, Robbins, and Mises ­were designed as prophylaxis—­using institutions to suppress the emergence of special interest demands by design. One of the most critical special interests to suppress was the nation itself.

I have argued in this chapter that neoliberalism was born in part as a critique of national sovereignty. To neoliberals, nations ­were shifting, provisional, without claims on this or that patch of earth. The po­liti­cal identifications produced by nations led to a disruption of the balance between the economic and the po­liti­cal spheres as participants in ­democracies recklessly turned government bud­gets into reservoirs of personal enrichment.

What did the neoliberals pose against the nation? Not only the world economy but the individual. In 1931 LSE economist William H. Hutt coined the term “consumer sovereignty.” Hayek ­adopted the term in 1935, and Bonn used it in 1933. For Hutt it was a solution to the demands of national sovereignty. As the term implied, it was not the nation-­state represented by legislatures that was sovereign but the individual within it. Hayek wrote that socialists, who allocated resources from above, ­were demanding the “abrogation of the sovereignty of the consumer.” He followed his Austrian pre­de­ces­sor Carl Menger by seeing the true creative force in the economy as ­those who ­either accept or reject a price, and by rejecting a price, produce a new one. At a time when nation-­states ­were claiming more and more of something called “sovereignty,” Hayek pickpocketed the term and reassigned it from the nation to the individual consumer.

His target was specifically the expansive “Declaration of Rights” published by the author and public intellectual H. G. Wells in 1939, a list of eleven articles including the right to education, food, health care, and employment. Hayek did not object so much to the material provisions. His own proposal included ele­ments of a basic social safety net and even countercyclical state spending. As libertarians ­later lamented, The Road to Serfdom called for “the security of a minimum income” and “a comprehensive system of social insurance.” What galled Hayek was Wells’s combination of the language of rights with a program of centralized economic decision making. For Hayek, rights talk could not work alongside state direction of production and ­labor.

Hayek defended the language of individual rights, but only insofar as ­those rights ­were negative: the freedom to move one’s ­labor and capital where one saw fit. The rationale was based less on natu­ral law than on utilitarianism: individual choices guided by competition would solve the riddle of the complexity of the market and ensure the best pos­si­ble division of ­labor and allocation of resources.

Hayek and Wells moved in the same circles in 1930s Britain—an academic and cultural elite that felt obliged to rethink the foundations of a postwar world. ­There was a shared sense of duty among Austrian elites like Hayek, Mises, Hans Kelsen, and Hersch Lauterpacht, who had trained to serve what was now a vanished empire, and British elites like John Maynard Keynes, Lionel Robbins, Edwin Cannan, and James ­Meade, who ­were seeking to reform a still-­living one.

Hayek's language of negative rights and the power to say no can give a false impression of a passive or inactive state in his normative global order. Yet creating and securing such an arrangement required proactive engagement. Hayek himself was explicit that the international power needed "an authority capable of enforcing [the] rules."

Heilperin’s vision of order was multilateral but also unilateral: it brooked no deviations from the strictures of ­free trade. It was not only that he brushed away the complaint of infringement on sovereignty. Consistent with the Geneva School position of militant globalism developed since the 1930s, diminishing sovereignty was the exact point. He wrote directly that it was necessary to “subordinate” national objectives to international order. He echoed the federalist vision of Mises, Robbins, and Hayek when he argued that “the importance of national bound­aries . . . ​must be radically and drastically reduced.” They must become “mere administrative demarcation lines,” and national governments must “have only limited powers over their populations.” In its strong form, this would require what he called “geopolitics in reverse gear,” reengineering national bound­aries to actively diminish their capacity for self-­sufficiency.

Heilperin’s demands for a muscular ITO that would bind nations to ­free trade and potentially shrink them to increase de­pen­dency on world trade was the first example of a postwar neoliberal utopia being articulated in full.

The ICC opposition to the ITO was a surprise. The organ­ization had been close to the U.S. State Department during and immediately ­after the war. It stood ­behind Secretary of State Cordell Hull’s push for ­free trade, and the American Council of the ICC had been one of “the keystones of bipartisan support” for his program. When the Havana Charter came up for a resolution, the reflexive inclination of many ICC members was to follow their pattern of support for the U.S. State Department by signing it. Yet, as the official history of the ICC (written by a former member) recounts, Heilperin found a crucial ally for his opposition in Philip Cortney, an acquaintance of Mises who joined the MPS in 1953.56 Cortney led the opposition and managed to convince the ICC executive committee to oppose the State Department on a major issue for the first time. The scene repeated itself at the international meeting when Cortney again led the opposition to the ITO against the British committee, who ­were disposed to sign the agreement. The decisive moment came when the chairman of the committee, Ernest Mercier, a French industrialist who had attended the Walter Lipp­mann Colloquium and was also member of the MPS, said he would tender his resignation before accepting the resolution. The resolution died on the floor.

By exchange control, Cortney meant what is better known as capital controls: the right to change money from one currency to another, specifically with the goal of transferring the money over a national border. The right to use capital controls was included in the framework of the IMF at Bretton Woods, a fact that Heilperin condemned as one of its crucial failings.

In 1952 Mises observed the irony of the disavowed symmetry between Global South and North when he said, “If it is right for the British to nationalize the British coal mines, it cannot be wrong for the Ira­ni­ans to nationalize the Ira­nian oil industry. If Mr. Attlee ­were consistent, he would have congratulated the Ira­ni­ans on their ­great socialist achievement.” Röpke wrote a year ­later that “the Mossadeqs appeal to the Atlees and the Bevans, who have inspired them with the idea of nationalization.” In fact, the British case against the expropriation of Anglo-­Iranian Oil was one of the most impor­tant signals to the international business community that new standards ­were necessary for more robust protection of foreign property.

The German Society’s president, the Deutsche Bank head Hermann Josef Abs, who had overseen the expropriation of Jewish property in the Third Reich, became an international spokesperson for property rights in the second half of the 1950s. ­After the Society drafted an “International Convention for the Mutual Protection of Private Property Rights in Foreign Countries,” Abs made his case before the American Society of International Law in 1956 and, most influentially, in a San Francisco speech at the International Industrial Development Conference on October 15, 1957, in which he cited the ICC statement. The speech, titled “The Safety of Capital,” was reported in Time magazine ­under the headline “A Cap­i­tal­ist Magna Carta” in an issue that featured Ludwig Erhard on its cover.

Abs’s proposal opened an international conversation on the rights of the investor. His “cap­i­tal­ist Magna Carta” would oblige signees to abstain from “direct or indirect illegal interference” with “foreign capital” and would create an International Court of Arbitration to judge violations. Investors could turn to the third-­party court first, without using local courts. To punctuate the need for his code, Abs brought up the recent cases of the expropriation of the Anglo-­Iranian Oil Com­ pany, the United Fruit Com­pany in Guatemala, the Suez Canal, Dutch land in Indonesia, and foreign-­owned power plants in Argentina.

That an individual who had been an active participant in pro­cessing the expropriation of the property of German Jews would ­later be actively defending property was incongruous, but Abs did not act from amnesia or repentance. In his San Francisco speech he made a point of raising Cortney and Röpke’s bugbear issue of foreign holders of accounts of German banks who ­were “still waiting for a fair settlement.” Abs was the man who signed the document forgiving Germany’s massive war debt in 1953, and it is known that he did so in the belief that it was not forgiveness per se but instead a just settling of accounts for the German assets seized abroad. Abs’s campaign for investor protection was a continuation of the dogged commitment to the economic constitution dividing the public world of states from the private world of property.

A former ­legal adviser to the State Department most sharply pointed out the lopsidedness of the convention. He wondered ­whether the proposition was not “to secure a commitment from a country that it must be prepared to take food from the mouth of its ­people in order to pay compensation in foreign exchange for property taken in exercise of its eminent domain power.” He asked if this would amount to “an effort to erect ‘property rights’ over the ‘­human right’ to eat.”

One of the continuing questions regarding neoliberalism is ­whether it is a proj­ect to restore class power or a coherent ideology. We have seen that it was both. In the years ­after 1945, neoliberals worked with and alongside the International Chamber of Commerce to defend the threatened privileges of a specific class. Their imagination, however, exceeded that of their partners. Their radicalism always bore the potential of taking on a life of its own. Even though they worked with organ­izations grounded in internationalism, the globalism of the neoliberals often tended ­toward a goal that their hosts (and funders) did not necessarily share.

When in the years ­after 1945 neoliberals proposed a "good" ITO that would constrain national sovereignty and make investor rights stronger than civil rights, they ­were dismissed as dinosaurs or dreamers. Yet what was condemned by contemporaries in the 1950s as a "fallacy of nineteenth-­centuryism"—­believing the clock could be turned back to an earlier era—­has become part of twenty-­first-­century real­ity.

Defending the rights of the investor was an impor­tant early fight for neoliberal intellectuals and one they engaged in with their partners from the 1920s of the ICC. Although their campaign was framed as one for the sanctity of property rights, it is more accurately a fight for the sanctity of capital mobility. They ­were fighting, not for the right to own and stay, but for the right to sell and leave. In the aftermath of the Second World War, as international law was being rethought to accommodate the prob­lem of the stateless and the refugee, international economic law was being formulated to protect the rights of what one con­temporary called "refugee money" and the ­human right of capital flight. If, as historians argue, nobody believed that the ­human rights of the 1940s should be enforceable at the cost of state sovereignty, it is notable that many believed that the private rights of capital should be enforceable in exactly that way.

No other neoliberal defended apartheid in precisely the way Röpke did, and Röpke had resigned from the MPS by the time he made his strongest statements. Yet some other neoliberal thinkers distinguished between apartheid as a comprehensive system of racial segregation and the discrete ­matter of suffrage for the black population. They argued, as Machlup does in the epigraph to this chapter, that democracy might have to be restricted for certain ­peoples in order to preserve stability and prosperity. Restricting po­liti­cal freedom, as commonly understood, was necessary ­under some circumstances to preserve economic freedom. Prominent neoliberals, including Milton Friedman, John Davenport, and Shenfield himself, followed this logic by opposing universal suffrage in Southern Africa.

The South African government was grateful for the rhetorical ammunition. They ordered three translations and sixteen thousand copies of the book in which the article was to appear. The next year they ordered twenty thousand offprints of the article for distribution in the United States. Defenders of apartheid quoted Röpke's work in their own pamphlets.

The special danger of the New Frontier was that it was literally a global New Deal. Extending Röpke's meta­phor, one could say that the vines of the state ­were creeping outward through an expanding foreign aid program of government loans, which had drawn in the West German partner by 1960, and the more aggressive use of trade ­unions, including the establishment of the American Institute of ­Free ­Labor Development as part of Kennedy's Alliance for Pro­gress.

Röpke called foreign aid "the ­great action by which the ideas and methods of collectivist policy are carried into the world economy" and singled out economist Gunnar Myrdal as proposing the "transposition" of the modern welfare state from the Western to what Röpke called the "undeveloped" world (consciously avoiding the normative term "­underdeveloped").

Röpke condemned, in other words, the very feature that made development a consensus internationally in the 1950s: that it concentrated on increasing output without being overly prescriptive about the route used to arrive at the goal.

The hall was a paradigmatic repre­sen­ta­tion of the economist as an unerring, neutral source of information. Its central feature was a computer that would print out answers on slips of paper to questions visitors typed in. The New Republic reported, "­There is a kind of oracular infallibility to this machine that makes it more impressive than a live pundit. A group of awe-­stricken visitors punched it and read replies. What it said must be so, they seemed to feel, ­because ­after all a machine is unbiased and impartial."

While it might seem superficially odd to pair the computer and the silver-­haired Eu­ro­pean intellectual, they shared the claim of producing knowledge in a space ostensibly beyond politics.

One could argue that German-­speaking economists profited from a similar aura of "oracular infallibility" at this critical moment in the 1960s when an ambitious application of worldwide Keynesianism encountered a conservative anti-­Keynesian backlash. One of Röpke's correspondents from Venezuela, who studied with Haberler at Harvard and ­later worked with the EEC, called Röpke a "prophet." One newspaper described him as "one of the high priests of ­free enterprise" and another compared him to "a skilled medical authority." The "wise men" who advised international financial institutions and ­later helped direct programs of structural adjustment enjoyed a similar status, achieving a kind of superhuman detachment in their expertise. In 1960, the West German, American, and British central bankers sent to India by the World Bank to provide advice on its Five-­Year Plan ­were referred to as the "three wise men." The West German Council of Economic Experts (Sachverständigenrat) created in 1963, was known commonly as the Five Wise Men (Fünf Weisen).

Conversations with the Chilean senator and university professor Pedro Ibañez Ojeda about the threat of the Alliance for Pro­gress strengthened Hunold's resolve to start the new organ­ization. Ibañez was the head of the Inter-­American Committee on Trade and Protection, which provided the "infrastructure and network of connections" for Chicago-­trained economists in Chile in the 1960s ahead of their breakthrough ­after Pinochet's coup.

In 1964 Hunold wrote to Röpke from a speaking tour through the U.S. Midwest that he had to change the name of one of his lectures in Peoria, Illinois. The title—­"European Economic Integration"—­had prompted the director of the local tele­vi­sion station to ask, "Do you fellows have a racial prob­lem over ­there too?" Hunold pointed out that ­people in the States ­were preoccupied above all "with integration and segregation." In fact, the intersection of questions of race and economic order ­were at the forefront of Röpke's concerns in this period.

Historians have shown how the National Review tacked to the right on issues of race in the late 1950s, culminating in Buckley's 1957 editorial opposing desegregation on the grounds that whites ­were "the advanced race" and that science proved "the median cultural superiority of White over Negro." Yet they rarely note that Buckley's editorial is couched in a defense of Eu­ro­pean colonialism in Africa. Buckley defended British actions for maintaining colonial control in ­Kenya (which continued ­until 1964) as an example to the U.S. South that "the claims of civilization supersede ­those of universal suffrage," and concluded with an openly antidemo­cratic argument for white supremacy: "It is more impor­tant for any community, anywhere in the world, to affirm and live by civilized standards, than to bow to the demands of the numerical majority." Buckley's racial views "did not stop at the ­water's edge," as one scholar notes. He visited South Africa on paid fact-­finding missions in the 1960s and distributed publications supporting the apartheid government. Buckley's exhortation that "the South must prevail" also meant that whites had to prevail in the Global South.

Hutt’s opposition to universal suffrage in Southern Africa was shared by some ­others in the neoliberal camp. In 1970 Shenfield invoked “the hideous dangers of totalitarian democracy” as he argued that “the limitation of the franchise in South African circumstances is not only not wrong; it is positively desirable in the interests of all races.” “In South Africa,” he wrote, “ ‘one man one vote’ would mean disaster for all. Similar sentiments came from journalist John A. Davenport, formerly of Fortune and Barron’s, and Milton Friedman.

In its mission statement, the ARA called sanctions “an aid and encouragement to barbarism” and paid homage to the “supreme gallantry and value of Rhodesia (Zimbabwe) as an outer bastion of the ­Free World in Africa.” Into the 1980s and the rise of the divestment movement on university campuses, Davenport continued to condemn the “immoral war of aggression on South Africa” driven by the “mania of majority rule” and a devotion to “the follies of doctrinaire democracy.” In 1985 he complained directly to the White House about sanctions and received written support from the assistant to the president, Pat Buchanan.

Milton Friedman condemned sanctions against Rhodesia in two editorials for Newsweek, one of which appeared first in the London Sunday Times. In the 1976 column, published ­after he traveled to the region, he made the initially perplexing argument that " 'Majority rule' for Rhodesia ­today is a euphemism for a black-­minority government, which would almost surely mean both the eviction or exodus of most of the whites and also a drastically lower level of living and opportunity for the masses of black Rhodesians." In defining universal suffrage as "minority rule," Friedman expressed his skepticism about the practice of democracy in the United States itself.

His opposition to sanctions was also based on an abstract princi­ple: that markets succeed through "the subtlety with which they connect producers and consumers and the anonymity in which they clothe the participants." ­Because the ideal market does not discriminate by race, religion, or nationality, to interfere in pro­cesses of exchange to punish this or that po­liti­cal power through an international authority—as in the case of Rhodesia—­would be to weaken "the system of ­free markets that is our greatest source of strength." Dominium had to exist beyond the whims of diplomacy.

Hayek's public statement on South Africa echoed Friedman's. Amid widespread criticism of the visits he and Friedman paid to Pinochet's Chile in the 1970s, Hayek complained in 1977 of the "international character assassination" aimed not just at the South American nation but at South Africa too, a country he would visit for the second time the following year. While condemning apartheid in strong terms, he expressed fear that the "arbitrary mea­sures" of the UN in singling out certain nations for punishment had become one of the greatest threats to the liberal world economy. "The U.N. can only protect its influence," he wrote, "when boycotts or similar ­matters against individual countries are instituted according to set and posted rules, not when it lets itself be seduced through vote-­catching in individual cases."

What was clear was that Röpke's narrative of history was no longer one of balancing public authority and private property but had instead become one of prescribing the final victory of the Western Geist. Empire was not an era that had ended but a task to be completed.

Against the continental dream of Eu­ro­pean integration the universalists maintained fidelity to the global vision of the League of Nations, which had envisioned an Open Door policy for the world. Even though by the end of the war the consensus at the League had shifted ­toward policies of full employment and Keynesian expansion, the League retained the promise of salutary liberal internationalism in the minds of Geneva School neoliberals. Fatefully, however, the precondition for the League's success was always the goodwill and voluntary cooperation of the states involved. With no means to punish infractions by member states, and no means of compelling nonmembers to join, the liberal experiment had failed in the 1930s and its seemed doomed again ­after 1945. Many neoliberals who had been socialized in the 1920s and 1930s shared Haberler's sense of disillusionment with the large-­scale solution that would involve the willing surrender of sovereignty by nations that had no desire to surrender it. Especially in light of the "paradoxical phenomenon" whereby the supposed beacon of ­free enterprise, the United States, was itself calling for nations to make multiyear plans to consistently disperse Marshall Plan funds, Haberler saw no route that could lead the postwar Eu­ro­pean states away from planning. Although the beginnings of market liberalization in West Germany, founded in 1949, offered a praiseworthy template, ­there was no institutional fix whereby the other nations would be forced to follow the German lead.

The most vocal Euroskeptic of the 1950s was the ubiquitous Wilhelm Röpke, who enjoyed both the ear of West German economics minister (and MPS member) Ludwig Erhard and ready access to the press as a public intellectual. Röpke feared that the EEC would be an extension of the "bloc solution" of the Eu­ro­pean Coal and Steel Community created in 1952, protecting the continent's products ­behind a shared tariff wall, sheltered from foreign competition and managed collectively by a supranational bureaucracy. He felt that the "bloc" version of Eu­rope had no claim to be labeled "integration." It reproduced the precise symptoms of protectionism and state control that had characterized the 1930s. What looked like integration for Eu­rope would perpetuate disintegration at the scale of the world. Such an arrangement would "turn national autarchy to a continental one and repeat the old prob­lems at a higher geo­graph­i­cal scale."

Empire was no footnote to Müller-­Armack. He devoted an entire chapter of his memoirs to the ­matter of the associated territories. He recounted that the French and Belgian negotiators sprang association as a "surprise" condition for ratification on the final day of negotiations, which pushed the negotiation of tariffs for individual products late into the night. Müller-­Armack zeroed in on the question of bananas at the "turbulent night session . . . ​offering re­sis­tance to the very last" to the proposal that bananas from outside of the Common Market be burdened with a 20 ­percent tariff—­itself an artifact of the Italian protection of their colonial Somali banana crop. … Even ­after the negotiations technically ­were concluded, Müller-­Armack won the chance to draft a last protocol with Robert Marjolin to be included as an annex in the final version. Completed between the final negotiations in Paris and the treaty's signing in Rome, the so-­called Banana Protocol created a crack in the tariff wall of the Common Market by securing renewable access for West Germany to duty-­free bananas from beyond the protected African producers of the Eu­ro­pean empires and the French overseas territories in the Ca­rib­be­an.

French prime minister Guy Mollet's perspective on Eurafrique, by contrast, was paternalistic. In 1957 he said that "all of Eu­rope ­will be called upon to help in the development of Africa." Mollet's formulation recalled that of the ­father of the Pan-­European Movement, Richard Coudenhove-­Kalergi, who had coined the term "Eurafrique" in 1929, proposing that the common proj­ect of creating arable land and curing disease in Africa would bring Eu­ro­pean powers together. This ­angle on Eurafrique more clearly echoed the sentiment of the Berlin Conference of 1884–1885 when the Eu­ro­pean colonies expressed their unity in the common proj­ect of suppressing slavery and bringing ­free trade to Africa, in what Carl Schmitt calls the "last common land-­appropriation of non-­European soil by the Eu­ro­pean powers."

Understood in this sense, Eurafrica actually exaggerated the gap between the two continents even as it combined them in a single term. The pro­cess of the proj­ect's realization suggested the continuing asymmetry in the balance of power. Despite Senghor's demand that "Eurafrique cannot be created without the consent of Africans," the presence of Houphoët-­Boigny was the exception that proved the rule. The Treaty of Rome negotiations and debate in the French National Assembly about the treaty in 1957 happened other­wise without the presence or participation of African delegates.

For its part, the Eisenhower administration accepted Eurafrica as a con­ve­nient means to continue to promise decolonization without taking concrete steps ­toward it. Despite its professed liberalism, the United States placed highest priority on an agreement between the French and West Germans, regardless of the shape it took, and was even willing to tolerate agricultural protectionism if necessary.

Scholars often use overly broad characterizations of Global South countries as adherents to the ideology of de­pen­dency theory, which supposedly privileged the protection of infant industry above all ­else to diversify the economy. In that narration, the exceptions are ­those countries with especially close ties to the United States—­Japan, Taiwan, and South ­Korea—­whose export-­oriented industrialization models are usually seen as prefiguring the direction in which development would go once the Third World snapped out of its dependency-­theory-­driven delusions. Looking at the response to the Haberler Report, one sees that the truth is less black-­and-­white. In fact, developing countries ­were advocates of both protection and liberalization at the same time. They followed a policy of “both-­and” rather than “either-or.” It was not a protectionist imaginary against a free-­trade imaginary, with the developing world as atavistic advocates of the failed 1930s world. Rather, weaker nations used all policy tools available to them, including GATT. In the case of the Haberler Report, developing nations used the master’s tools against him by suggesting that Eu­rope and the United States adhere to their own much-­preached liberal princi­ples. The Haberler Report shows that the rise and spread of neoliberal ideas can be understood only through its piecemeal adoption by Global South nations as a development strategy.

Euroskeptic neoliberals not only pined for the return of a “liberalism from below,” lost since 1914, but also backed the search for a neoliberal fix to secure the open world economy. In a report about the Eu­ro­ pean Common Market submitted to the U.S. Congress months before the Treaty of Rome came into force, Haberler emphasized the need to strengthen GATT as a “watchdog” against Eu­rope. “It is before GATT,” he wrote, “that US and the interests of other outsiders (e.g. ­those of the other American states and Japan) can be best defended.” In a key move, Haberler spoke on behalf of not only the United States but also “outsiders.” In a piece written in a festschrift for Erhard the same year, Haberler spoke similarly about the outsiders, including “Latin American countries, which are much poorer than Eu­rope,” that ­will be injured by Eu­ro­pean trade discrimination “and had no reason to accept this injury calmly.” Eu­rope itself may profit, Haberler argued, “but the world economy as a ­whole loses.” “The question about an alternative to discriminatory integration policy is easy to answer. The alternative is: overall trade liberalization [as advocated by GATT].”

Beginning in the early 1960s, Hayek began to suggest using the drafting of constitutions as a way to anchor economic freedoms against the attempts of legislatures to enact protectionist or redistributive policies. He had begun this effort in The Constitution of Liberty, which he wrote while he was at the University of Chicago, but this book was still extremely pessimistic about the possibilities of supranational organ­ization: “The moral foundations for a rule of law on an international scale seem to be completely lacking still, and we should prob­ably lose what­ever advantages it brings within the nation if ­today we ­were to entrust any of the new powers of government to supra-­national agencies.”

Mestmäcker was the key figure in theorizing the repercussion of the Rome treaty as a model of governance in Hayekian terms. Born in 1926, he was a ­whole generation younger than the original cohort of the Geneva School. Part of the so-­called Flakhelfer generation, his defining young experience was not of the First but of the Second World War, and the ­Great Depression would have been only a dim memory from childhood. Mestmäcker studied with Böhm at the University of Freiburg and paid homage to the work of his mentor throughout his ­career. One scholar calls him the "leading representative of the second generation of ordoliberals." His professional position was at the University of Saarland, but he was special adviser to the Eu­ro­pean Commission from 1960 to 1970. Mestmäcker saw the goal of "undistorted competition" in Eu­ro­pean Community law as "po­liti­cally the most impor­tant effect of the appreciation of the ­legal shapability of the economic system, which in Germany was first recognized by Walter Eucken and Franz Böhm." It managed to combine the ordoliberal attention to law with Hayek's idea of "competition as a method of discovery." Mestmäcker claimed to take from Böhm the idea that ­every economic order is the outcome of a po­liti­cal decision. He was the most impor­tant figure in combining Hayek with Böhm and scaling up the economic constitution to the suprastate level.

Mestmäcker wrote that Eu­ro­pean Community law offered “for the first time” a means to fend off “economic power and government impotence” and “expand territorially the sphere of effectiveness of public power.” What this permitted was the separation of public and private law, providing market actors a forum beyond their own state to make their appeals—­directly now to the community level.

The vertical ­legal relationship created from the individual to the Eu­ro­pean Court of Justice created an ave­nue to elude deviant exercises of national sovereignty and secure the ­human right to trade.

Used first by Eucken and Böhm in the 1930s, the concept of an economic constitution had two meanings. It was both descriptive of a given so­cio­log­i­cal real­ity and normative of a desired ­legal order. Ordoliberals did not mean “economic constitution” primarily in the literal form nor did they assume that it had to be embodied in a founding ­legal document. The fact explains why Böhm gave no par­tic­u­lar attention to the debates about the West German Basic Law in the 1940s. In the minds of neoliberals, the Basic Law was not an “economic constitution” ­because it did not embody a decision establishing a specific economic order, but instead was the outcome of compromise between more liberal and social demo­cratic positions. What was necessary for a genuine economic constitution was the unity of vision for an economic order, as defined first against the compromises of the Weimar Republic.

Böhm described it as "a normative order of the national economy" that must come into being through the exercise of a "conscious and aware po­liti­cal ­will, an authoritative decision of leadership." He used martial meta­phors that are worth quoting at length, declaring that "­there is no longer any space for a ­silent growth, for an orderly formation of ­things out of the lap of the economy itself, that is, from the bottom up. Social Babels built of such ­great height and at such an accelerated tempo produce an unholy confusion of languages ­unless the idea of order that alone can represent the ele­ment of unity illuminates the totality down to its last details, ­unless the idea of order is based on the sentence: every­thing at my command!"

Maintaining competition meant resisting the fallacy of the po­liti­cal neutrality of economic pro­cesses and of mechanistic visions of the economy as capable of being fine-­tuned and tweaked for dif­fer­ent outputs. Competition was not an object, a structure, or an endpoint. It could not be seen. "Uncertainty," Hoppmann put it, "is the prerequisite of freedom." "­Because of the 'openness of the historical pro­cess,' " all that was pos­si­ble to facilitate the ongoing reor­ga­ni­za­tion of ­human life effected by competition was to formulate minimally restrictive rules enshrined in binding law. Citing Hayek, he said that we ­were left with the choice between a "teleocratic" or purpose-­governed order that stymied the promethean character of competition or a "nomocratic" or "law-­governed" social order that encased competition with all its consequences.

The constitutionalists took from Hayek the importance of institutional design and the idea of competition as a discovery pro­cess. What they could not find in his theory was attention to the turning point—­the moment of crux where the new constitution was put into place. What ­those same thinkers ­adopted from Böhm and Schmitt was a clear sense of how that happened: it was through the moment of decision.

Mestmäcker solved Hayek’s prob­lem by conceiving of the Eu­ro­pean Court of Justice as "the guardian of the EEC Treaty" and the Treaty itself as Hayek’s call to bind the state through "constitutionally guaranteed ­legal princi­ples." The constitutionalists narrated Eu­rope as a realization of Hayek’s vision of a nomocratic society protecting the division between private law beyond the interference of demo­cratic governments alongside the public law of states.

Thus, only in its elaboration by neoliberal constitutionalists in the 1960s did the EEC offer a realization of the double government dreamed of by Hayek since the 1930s. Mestmäcker, in par­tic­u­lar, offered a crucial bridge between the ideas of the first generation of Geneva School neoliberals and thoroughgoing theories of multilevel governance—­a link more often asserted than proven by scholars. What is crucial is that Mestmäcker went further. In the Treaty of Rome as self-­executing constitution and the Eu­ro­pean Court of Justice as guardian, he pioneered a model of supranational governance that had not only liberal princi­ples at its core but a mechanism of enforcement capable of evading contamination by demo­cratic claims-­making.

The universalists had the advantage of purity but they lacked the mechanism of enforcement. Haberler intended his 1958 GATT report as a weapon against the growing protectionism of Eu­rope and a clarion call to liberal order. It had the opposite effect. When the Global South used the Haberler Report to demand more market access, the Global North refused to implement ­free trade and cut subsidies. Instead they took the nonliberal path of less re­sis­tance and began granting preferential treatment to developing countries in the 1960s. They could thereby continue to subsidize their own production while also granting better market access to the products of developing nations. The colonial association clauses in the Rome treaty "had breached the wall" of postwar liberal norms, as one scholar put it, and the wave of preferences that followed veered from the GATT credo of nondiscrimination. The result was what Gunnar Myrdal called (approvingly) a "double standard of morality in international trade"—an expectation of reciprocity between industrialized nations and "special and differential treatment" between North and South.

To neoliberals, it was the historically inflected model of Eurafrica, not the spaceless world of Haberler's League of Nations imaginary, that became the template for the 1960s.

In his presidential address to the American Economic Association in 1964, Haberler described the EEC as an "imminent danger to worldwide integration." The man who took Röpke's chair in Geneva, Gerard Curzon, called the American decision to allow the colonies in the Common Market "a case of original sin which was to cost the US dearly ­later on." True to Haberler's warning from 1958, the message of Eurafrica had been that "if the GATT could be ignored by its principal author for raison d'état it was not difficult to predict that ­others would soon do likewise."

"At first every­one ­will seek for himself what seems to him the best path," he wrote, "but the fact that such a path has been used once is likely to make it easier to traverse and therefore more likely to be used again; and thus gradually more and more clearly defined tracks arise and come to be used to the exclusion of other pos­si­ble ways. ­Human movements through the region come to conform to a definite pattern which, although the result of deliberate decisions of many ­people, has yet not been consciously designed by anyone."

In a short piece on the entrepreneur from 1947, Röpke described the entrepreneur as “the node in the enormously complicated pro­cess of the market economy: he receives the impulses that the consumers send to him and translates them into the corresponding type and volume of production.” In an extraordinary meta­phor worth quoting at length, Röpke writes that the entrepreneur sits “at a switchgear into which a thousand currents enter to be sent out again in another direction and another form. The private economic fate of the individual entrepreneur depends on the correct operation of this switchgear . . . ​and it is precisely this de­pen­ den­cy . . . ​that offers the best guarantee that he ­will operate the switchgear as conscientiously, zealously, and intelligently as the engineer of a complicated electric locomotive whom we offer the same trust and confidence ­because we know that the fate of the train is, at the same time, also his own.” By living dangerously, the entrepreneur risks the lives of ­others and therein risks his own life. Entrepreneurs, Röpke wrote, are “subordinated to the sovereignty of the market.”

Although Hayek disparaged the engineer in the sense of the scientist who believes she has sufficient overview of an entire system to build it herself, he praised the engineer in the sense of the train engineer, for reasons similar to Röpke’s. He wrote in 1945 that “the price system [is] a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities.”

One of the first activities of the new occupants was to remove and cover over murals and tilework that had decorated the building in its previous function as the seat of the International ­Labour Organ­ization (ILO). Rolled up and stashed in a gardener's cottage was a mural by Dean Cornwell; donated by the American Federation of ­Labor in 1956, the mural depicted female secretaries at walls of card cata­logues, brass bands, and elementary schoolteachers flanking a central image of a bare-­chested worker in an ironworker's apron, broken shackles dangling from his wrists.

To the GATT's director-­general Olivier Long in 1977, the art was incompatible with the spirit of his trade organ­ization. As we ­will see, rather than a world economy of ­labor, bodies, toil, and leisure, the GATT's world economy was one of price signals, rules, and, as Long declared in 1978, the "reaffirmation of the rule of law in international trade."

In 1971 the Bretton Woods system had ended in its original form when the United States unilaterally ceased exchanging dollars for gold. By 1973, responding in part to the diligent persuasion of Haberler and other neoliberals, the States let the dollar "float," allowing market demand (alongside targeted state interventions) to dictate its value. In turn, many of the world's currencies floated too, launching an era of a variety of monetary strategies ranging from flexible exchange rates to "managed floating." Si­mul­ta­neously, the end of IMF authorization for controls on capital movements brought back the "hot money" flows of the 1930s, amplified in volume by the greater global connectivity of telecommunications. New investment flows ­were available to nations worldwide, but capital flight could also be punitive if foreign investors disapproved of costly policies like building domestic welfare states through higher taxation.

The victories ­were tepid ones. The exclusion of agriculture from GATT meant that the primary exports of many Global South countries still had to compete against U.S. and Eu­ro­pean subsidies and protectionism. Yet the advocates of GATT reform saw concessions to the demands for mixed development as the indefensible core of decay in the rules-­based global economy. ­After the resolution of the oil crisis led to a vast new sea of petrodollars to be recycled through Wall Street and the City of London to lenders in the Global South, the uniformity of conditions globally became all the more pressing.

At the TPRC, Wolf criticized what he called “the desire of developing countries to create a world in which one group of countries has most of the obligations and another most of the rights.” By opting out of GATT disciplines, Wolf and ­others argued, developing countries ­were undermining the rule of law.

As a 1984 TPRC report that Wolf helped write put it, “Developing countries have been engaged in a sustained assault on the liberal princi­ples of the international trading system.” Against special and differential treatment, the goal of NIEO opponents was to promote the idea of one rule for all in the world economy.

The three most impor­tant GATT reformers in Geneva ­were all devotees of Hayekian thought. First was Jan Tumlir, the head of the research division from 1967 to 1985, remembered by some as the “resident phi­ los­o­pher” of GATT. Tumlir was born in Czecho­slo­va­kia in 1926 and studied law in Prague before emigrating in 1949. ­After two years in West Germany, he moved to the United States, where he earned a PhD in economics from Yale in 1964. He moved to the research position at GATT that year, and was also a faculty member at the Gradu­ate Institute of International Studies from 1968 ­until his premature death by heart attack at the age of fifty-­nine. The library of the Gradu­ate Institute was ­housed in the Centre William Rappard, and Tumlir's library of several hundred volumes is still ­housed as the “Jan Tumlir Legacy Collection” in the building that is now the home of the WTO.

In the 1970s Tumlir was joined at GATT by two ­lawyers with whom he would help formulate his Hayekian theory of international order. Frieder Roessler, born in 1939, was a gradu­ate of Freiburg University, where he had studied with Hayek. He arrived at GATT in his early thirties in 1973.141 Ernst-­Ulrich Petersmann, born in 1945, also studied with Hayek at Freiburg. Before joining GATT in 1981, he had worked as an assistant at the Max Planck Institute for International and Comparative Public Law in Heidelberg and for three years in the ­legal office of the Foreign Trade Department of the German Economics Ministry. In his habilitation thesis he singled out Tumlir and Hayek for their exceptional influence on his thinking. By the late 1990s Petersmann became one of the most internationally vis­i­ble prac­ti­tion­ers and advocates of the field of international economic law.

Tumlir arrived at his solution through a scale shift. He ­adopted Böhm's call from the 1930s for a decisionistic "choice" of an "economic constitution" but took the step, which the German ­lawyer had not done, of transposing this method to the international scale. In an admiring essay, Tumlir noted the scarcity of the German jurist's references to "the international matrix" and insisted that "an economic constitution is not complete without a theory of foreign economic policy and the ­legal control of it." He proposed taking Böhm's thought in two directions of practical application. The first was to develop "a theory (and binding articulation) of private rights with re­spect to foreign transactions."

Like all neoliberals, Tumlir recognized that for the market to exert its salutary discipline, it needed an extra-­economic framework. "The international system of trade and payments as such cannot exercise discipline over sovereign governments in the sense of compelling them to conform in their actions to the system's rules." Recall ­here Röpke's scoffing at the "juridicism" that implied that nations would follow codes set at an international level and litigated at the Hague, the UN, or elsewhere. Tumlir's solution was dif­fer­ent and more radical—­law would not be conducted between nations but within nations, not at the border but "beyond the border," as it would become known. The system depended ultimately not on an international effort but on an "active national effort to conform to it and so uphold it." ­Because "the pres­ent crisis [was] not economic . . . ​but po­liti­cal," the judiciary was a means of eluding the interference of demo­cratically elected entities. "The courts are the agency which can bring the internationally-­agreed rules to bear on legislative decisions," he wrote. Domestic courts, not international courts, would enforce world economic law. Courts offered the necessary wedge and the solution to the "constitutional breach" they themselves had allowed to occur.

In looking for a way to theorize a restored order, Tumlir looked in a place that superficially seems curious: Hayek's idea of stratified rules of conduct. Hayek had described a tiered system with made rules as a thin line of deliberate design resting atop the grown rules of tradition and the physiological impulses of instinct. Tumlir described the need to design rules at a series of scales "between national, regional and international systems" as a "deliberate application of Hayek's insight concerning the stratification of order."

By his own testimony, Tumlir was also influenced by the text explored above, an extract from the end of the Law, Legislation and Liberty trilogy, which Hayek delivered as a speech in Hong Kong. In June 1979, before he wrote his most impor­tant synthetic texts on international order, Tumlir wrote to Hayek about the “marvelous ending of your third volume,” which had changed his “views on a number of ­issues.” “It is difficult to imagine,” he wrote, “that anyone in this ­century or the next fifty years could provide a deeper foundation for a theory of justice and liberal order.” Tumlir signaled his ac­cep­tance of the ­cybernetic undertones in Hayek when he asserted that “an economy, national politics ­under a constitution and the international economic order can all be considered homeostatic self-­equilibrating systems.” To Tumlir, Hayek’s attention to the prob­lems of verticality and federal forms above the nations complemented the ordoliberal focus on horizontality within the nation.

Petersmann also cited Hayek’s work on stratification of rules of conduct to argue that “princi­ples and rules are designed to influence individual be­hav­ior and to promote 'spontaneous order' or deliberately created 'directed ­orders' so as to enable economic agents to form reasonably correct expectations regarding the ­future be­hav­ior of individuals (including government officials) in the economic sphere.” His own definition of the global economy adhered strongly to cybernetic meta­phors. “A far-­reaching international division of ­labor among billions of ­people is pos­si­ble only by relying, to a large extent, on the informations [sic] conveyed by spontaneous market prices (as a cybernetic feedback mechanism) and on the ­free efforts of millions of ­people guided by general framework rules of private and public national and international law.”

It is striking that at the turn of the 1980s, before the role of cybernetics in Hayek’s thought had even been acknowledged by scholars, Hayek and the GATT ­legal experts ­were writing from a shared perspective on hierarchical systems of communication and conduct. In the work of the neoliberal experts in Geneva, the multitiered meta­phor that Hayek used for cognition was scaled up to rethink world economic order.

Tumlir contrasted the “weakness” of the GATT in providing an “authoritative interpretation of its rules” to the “radical” solution of the EEC in creating a “uniform Eu­ro­pean law.” Crucial was that “the common Eu­ro­pean law overrides the national law of member states.” Conceptually, he wrote, “this is the strongest pos­si­ble form of implementing a supranational order. Its rules are genuine law, fully integrated into municipal law of member States, interpreted by a single authority, and creating enforceable private claims on each member State to comply with its treaty commitments.” What was special about Eu­ro­pean law was that it was, in the ­legal jargon, “directly effective” in nation-­states. That meant that individual citizens—­and “­legal persons” (a category that crucially included corporations)—­could appeal to Eu­ro­pean law within their domestic courts; the fact that “the common Eu­ro­pean law overrides the national law of member states” and that national courts enforced Eu­ro­pean Community law made it “the most radical” approach to the prob­lem of inter-­state order. For Tumlir, the built-in capacity of the Eu­ro­pean Community in its ideal form to enforce smoothness of the transmission of price signals across the levels of the individual, the national, and the supranational made it “a nearly perfect example of an intermediate order in the Hayekian sense.”

For Tumlir, Petersmann, and ­others in the influential cohort of the draf­ters of the WTO, the goal was to scale up the “Eu­ro­pean idea” of neoliberal constitutionalism from the continent to the world economy, making the WTO into a “trade constitution” in which the Dispute Settlement Body and the Appellate Body would act as equivalents of the Eu­ro­pean Court of Justice. Consistent with the development of Geneva School neoliberalism, their idea joined the thinking of Böhm and Hayek, bringing neoliberal decisionism and a vision of the strong ­legal enforcer to the Hayekian cybernetic construct of stratified, multilevel order. Inspired by their concern about the “degeneration” of the world trade order effected by the NIEO and its potentially contagious effects, the GATT reformers sought to fulfill the spirit of Hayek’s vision by calibrating a stratified order for rules of just conduct in which prices as well as laws and rights would act as “signals and incentives for adjustment.”

The danger of Global South mobilization ­after the end of empire was that the ­will of the majority could become a new norm, even against the desires of the entrenched powers. The NIEO presented the prospect of a continuation and perhaps a completion of the pro­cess that dissolution of Eu­ro­pean overseas empires had begun: the fear was of the scandalous prospect of a decolonization of international law. The lack of "order" in the NIEO was a prob­lem to be corrected by beating back the encroachment of the UN on international ­legal practice and the establishment of binding arbitration and adjudication, including the dispute settlement mechanisms that Roessler and Petersmann would help design for the WTO. Against the attempt of the G-77 to use law for their own purposes, the Geneva School fought to reclaim law as an enforcer of private property and competition. The neoliberal program in the 1970s was not about growth, equilibrium, optimum, equality, social justice, or prosperity. It was about the reproduction of an interdependent complex system—­the defense of the totality of the world economy against an assault from nationalists that threatened to be as much of a catastrophe as the 1930s.

For the road to world economic integration, Willgerodt looked both ahead and back: “The path to the liberation of the world market from national regulation and trade barriers can be facilitated by institutions like GATT [General Agreement on Tariffs and Trade].” But he also invoked the old template of Hayek and Mises: Central Eu­ro­pean empire: “The international rule of law with curbed application of sovereignty is doubtless a difficult and unfamiliar idea for the proponents of centralist national states. The state must first forego authority over its citizens. It must also share its sovereignty downward with federal structures and bind itself upward within an international ­legal community. No doubt the international order is moving in this direction. It is in this context that the distorted judgment about the order of the long-­lived Holy Roman Empire must be taken up again.” … Such literal nostalgia for empire was rare. Another notable exception, though, was Mont Pèlerin Society (MPS) president Deepak Lal, who, inspired by the U.S. invasion of Af­ghan­i­stan and Iraq in the name of liberal democracy, wrote a paean to empire in 2004 for its ability to bring order, institute the rule of law, and “quell ethnic conflicts.” He began by eulogizing the Habsburg Empire, condemning “the ­great deterioration of opportunities that has befallen the average citizen of the successor states.”

At the root of the neoliberal idea of international order is the notion of so-­called competitive federalism, with the possibility of capital following opportunities across borders wherever they arise. In an exploration of neoliberal federalism, one scholar notes that the American Enterprise Institute set up a Federalism Proj­ect in 2000, pursuing Buchanan's proposals from the 1990s to preserve "an effective exit option in market relationships." An AEI resident scholar explained the vision of the proj­ect: "A world without borders is a world without exits. We need the exits." ­These imaginaries are far from the borderless world or zero-­state society in which neoliberals purportedly believed. What has been described in ­these pages is much less easy to dismiss as a fanciful delusion. More realistic and, at least in theory, more realizable, is ordoglobalism's vision of a doubled world: divided and encased between imperium and dominium.

My narrative has pointed to a paradox at the heart of Hayek's thought and what I have called Geneva School neoliberalism. On the one hand, the world economy had to be defended against the excesses of democracy. On the other hand, the world economy itself was invisible and beyond reason and repre­sen­ta­tion. Hayek was explicit when he wrote that "the only appropriate word" for the global market, or what he calls "the extended order," is "transcendent." In "its literal meaning," the world market "far surpasses the reach of our understanding, wishes and purposes, and our sense perceptions, and that which incorporates and generates knowledge which no individual brain, or any single organ­ization, could possess or invent."

Many critics have noted that the turn to an authoritarian solution always seems close at hand, with Hayek and Friedman’s visits to Augusto Pinochet’s Chile being exhibit A. Referring to Pinochet, Hayek said he would “prefer a liberal dictator to a demo­cratic government lacking liberalism” and that “it is pos­si­ble for a dictator to govern in a liberal way”—­while qualifying that this should be only a “temporary transitional arrangement.” Hayek’s statements recalled both Röpke’s discussion of “dictatorial democracy” in 1940 and Mises’s point in 1927 that Italian “fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved Eu­ro­pean civilization. The merit that Fascism has thereby won for itself ­will live on eternally in history.” 60 Following the logic of the lesser evil, the suppression of a disruptive force from the left periodically made support for dictators thinkable for some neoliberals. Mises wrote in 1922, “Our ­whole civilization rests on the fact that men have always succeeded in beating off the attack of the re-­distributors.”

This book has shown that the recasting of trading rights, market rights, and capital rights as individual rights was proposed by the International Chamber of Commerce (ICC) and neoliberals against the United Nations' idea of social and economic rights around 1945, incorporated as the market freedoms and market citizens of the Eu­ro­pean integration proj­ect in the 1950s and 1960s, and scaled up to the WTO in the course of GATT reform in the 1970s and 1980s.

The leading thinkers of the Geneva School ­after the assault on the WTO took neither the Pinochet option nor the recourse to a "liberal dictator" in their theorizing. Rather, they turned to the language of Pinochet's most effective opponents: that of ­human rights. The response of Geneva School neoliberals was one of co-­optation and redefinition. With echoes of Philip Cortney's postwar calls for the ­human right of capital flight, they doubled down on the very language of ­human rights scorned by Hayek to buttress their proj­ect.

It is a revealing irony that Petersmann was a critic of the language of rights in the hands of the Global South in the G-77 and advocated rights only when redefined as ­free movement of capital and goods, especially in the context of Eu­ro­pean integration.