Who Killed Liberalism? Remembering the Walter Lippmann-Mises Colloquium

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Adrian Shephard
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August 26, 1938: Austria was under Nazi rule, and Czechoslovakia was feared to be next. The world was on the brink of a new war. In Paris, a room full of famed economists met to discuss the future of liberalism, the ideology that had shaped the West for the previous hundred years. Held in Europe and attended mostly by Europeans, it was at the behest of an American journalist.

Walter Lippman was a co-founder of the New Republic magazine and widely seen as the intellectual bedrock of the New Deal. “Liberal” as an adjective was only beginning to refer to the soft social democratic reformism of Roosevelt, and Lippman was feted as the augur of a new era. However, his ideological underpinning continued to evolve, as he identified less with the Progressives and more with a small core of what were beginning to be called “neo-liberals.” 

Neoliberals defended some basic aspects of what could be called a “Liberal World Order” such as had existed in Western Europe after 1919: constitutional democracies, rule of law, and rejection of totalitarianism. Unlike the “latter-day liberals,” as Lippman called them, he rejected inalienable rights and laissez-faire economics. John Maynard Keynes and his idea of controlled capitalism—ending the foolishly suicidal “animal spirits” of free men and free markets—appealed greatly to Lippman and the journalist lavished praise upon him.

Ironically, however, the man known then and now as Keynes’s greatest enemy, Ludwig von Mises, was also influential among the neoliberals. But they were very selective with what they took from Mises. Economic Calculation in the Socialist Commonwealth was used to smash the idea of socialism as the ideal society. Without a price system, and the ability to economize, even a gradual path to full government planning of the economy was closed off forever. Smaller scale forms of market interventions, however, were considered not just allowable, but essential to the neoliberals despite Mises’s warning about the danger of middle-of-the-road policies. To the neoliberals—and their allies such as the Chicago schooler Frank Knight—the firm was simply a policy tool created by and for the use of the state, not a locus of human action. Mises and his student Friedrich von Hayek were still friendly with Lippman, however, and both happened to be invited to the colloquium, both having left the nation of their birth ahead of Hitler’s Anschluss.

Louis Rougier, the organizer of the colloquium, inaugurated the conference with lavish praise of the guest of honor—Lippmann—and his new book, The Good Society. After Rougier’s introduction, Lippmann took the stand and gave a speech savagely attacking classical liberalism for its perceived faults:

In the presence of the debacle of nineteenth-century liberalism, it would be futile for them to calmly await the resurrection of Mr. Gladstone, and to believe that their mission consists in repeating the formulas of the last century.

It is ironic that Lippmann singles out Gladstone since—after his death in 1898—his Liberal party, once a shining beacon of laissez-faire, had already done much of what Lippmann thought was the supposed solution to this crisis of liberalism. The rump Liberal party—relegated to third party status in 1931—was anything but classically liberal, and didn’t advertise itself as such.

When Lippmann ended his speech, discussion began. Immediately, the subject shifted to the terms to be used. The French economist Louis Baudin said “individualism” must be favored over “liberalism” for Lippmann’s vision, saying liberalism was too “poisoned” by the likes of Frederic Bastiat and his disciple, the proto-anarcho-capitalist Gustave de Molinari, and his disciple, French politician Yves Guyot, an anti-war, pro-civil liberties, and free trade extremist who could be favorably compared to Ron Paul from the 21st century. Rougier, the dean of the conference, countered that “individualism” would be connected with Stirner and the license to overpower the wills of others.

The following day, Mises—who during the previous discussion had confined himself to minor etymological points—took Wilhelm Röpke to task over the common myth of corporate concentration under capitalism. What Röpke introduced as a natural progression of cartelization and monopoly, Mises demonstrated—using Röpke’s own German homeland—to be a specific political program of coercive economic centralization. Not only had the usual suspects of government intervention succeeded in the strangulation of competition, but the German government had forced major firms to cartelize!

Hayek, too, raised an important point against the thesis that “inevitable technological progression leads to market concentration”:

If corporate concentration were due to a natural technological development, its forms should first be horizontal integration and then vertical integration. However, the most widespread forms are forms of vertical integration, and only secondarily, horizontal integration, exactly the opposite of what technological orientation suggests.

After several other discussions regarding liberal economies during war, the concept of economic nationalism (that is, protectionism), and the so-called “social question” regarding the defensibility of the welfare state (for which Mises and Hayek added brief but predictable critiques), the last major discussion was led by Alexander Rüstow. The topic: Is the decline of liberalism due to non-economic causes, be they psychological, sociological, etc.?

Rustow’s contention was that, while liberalism delivers in terms of rising standards of living, it fails to give people a sense of purpose. Spontaneous order that arises from market forces, perplexes the masses, who look for the answers to their problems in demagogues who give them a sense of unity and do away with the anxiety of choice. In this way, Rüstow argues, that liberalism has failed against the rising tide of totalitarianism. The alternative must be a strong state that—while protecting the basic structure of liberalism—gives these masses what they need, through economic intervention if necessary. Mises pointed out that both the left and right totalitarians both promise primarily, not intangible gains, but economic ones when they try to reach the masses.

In asserting for example that “cannons are more essential to them than butter”, they imply: the cannons will enable us to conquer the means to create thereafter a state of greater well-being. If they demand sacrifices of their countrymen, they reckon that these sacrifices will only be temporary in scope and will be more than offset, afterwards, by the results of a policy of this kind. Only writers and theorists extol the ideal of a life of poverty. Demagogues always dangle before the masses the prospect of an improvement of their living conditions.

Mises would go on to write a book in 1956 after the war called The Anti-Capitalistic Mentality, that takes to task many often romantic and psychological arguments against free markets.

The conference came to an end on August 30th, 1938. That morning, Rougier laid out a series of points for which there was a broad consensus. In addition to Lippman’s initial principles, that the new liberalism must protect private property and the price mechanism while also using the law as a guiding tool for this means, the state would be allowed a role in the five following areas: national defense, social insurance, social services, education, and scientific research. Mises was silent in this “consensus” as far as the transcript shows. During the afternoon session, meant to set a basis for follow-up research, however, he voiced one last, grave concern,

It is, effectively, beyond any doubt that the main problem to study will be that of the possibilities of and of the limits to interventionism. This colloquium should be prepared through the development of a report on the way in which economists have until now considered the matter.

Mises must have left the conference feeling isolated and alone, almost the last man to defend laissez-faire. Less than two years after the colloquium, Lu and his wife would take a desperate bus ride down from the Alps to get to neutral Spain as the Axis stormed across France. He would spend the rest of his life in the United States, depending on his friend Hayek during the war years to send him books bought with his London bank account in order to sell them to make a living. (The British state had banned money itself being sent abroad). But, during his time in America, he would meet a collection of stalwart men dedicated to liberalism in its old, true sense. One of those men was a young Murray Rothbard. He and a handful of others would jumpstart an Austrian renaissance in America which eventually spread to the world. Javier Milei is a deep admirer of Mises and Rothbard, and a deep hater of both socialism and its milquetoast neo-liberal cousin. The Lippmann conference may have seemingly killed liberalism temporarily, but today we are seeing its fiery rebirth. Long live liberalism!

Bibliography

Audier, S.; Reinhoudt, J. (2018). The Walter Lippmann Colloquium: The Birth of Neo-Liberalism.

Caldwell, B.; Klausinger, H. (2022). Hayek: A Life, 1899-1950.

Hülsmann, J. G. (2007). Mises: The Last Knight of Liberalism.

Schapsmeier, E. L. (1969). Walter Lippmann: Philosopher-Journalist.