Did the Scots Invent Neoliberalism?
On 13 May 1988, prime minister Margaret Thatcher addressed the Scottish Conservative and Unionist party conference in Perth. In the speech she launched a campaign to ‘strengthen the Union by winning back Scotland for the Conservative and Unionist cause’. Thatcher went on to say:
Mr. President, I’m sometimes told that the Scots don’t like Thatcherism. Well, I find that hard to believe—because the Scots invented Thatcherism, long before I was thought of. It is more than two hundred years since Adam Smith, David Hume, Adam Fergusson and others first set out their ideas of a world in which wealth would be generated and spread ever more widely. They saw that it’s not Government which creates wealth—it’s people. That People do best when they pursue their own vision. And that a wise Government will harness the efforts of individuals to improve the well-being of the whole community. So they proposed to restrain Government and to liberate men and women. Mr. President, those are the ideals I hold most dear. And they had their origins in the Scottish Enlightenment.
In making this claim it is unlikely that Margaret Thatcher was aware that nine years earlier leading French philosopher Michel Foucault had made a very similar claim. In March and April 1979, Foucault concluded a series of lectures at the College de France on neoliberalism by identifying Adam Smith, David Hume and Adam Ferguson as the ‘inventors’ of what he called English liberalism. It was on the foundations of this English liberalism , so Foucault argued, that neoliberalism was built.
Since Thatcher did not become prime minister until May 1979, Foucault was unable to connect neoliberalism with Thatcherism. However, it is now widely accepted that Thatcherism was a form of neoliberalism. [For example see David Harvey ‘A Brief History of Neoliberalism’(Oxford, 2006) pp 56-63]
In which case, since the very different figures of Margaret Thatcher and Michel Foucault both identified the Scots as the ‘inventors’ of neoliberalism making a counter-argument will be difficult. Difficult but, I hope, not impossible. However, in making this counter-argument I will be drawing on some obscure corners of Scottish history. In particular, my starting point will be the Lowland Clearances which preceded the more familiar Highland Clearances.
2. From Local to National History
During and since the referendum campaign I have noticed many people commenting that they were never taught Scottish history at school. I was fortunate since ‘Changing Life in Scotland 1760 to 1830’ was the topic I had to study for O Grade history at Kirkcudbright Academy in the 1970s. Looking back however, it would have been even more interesting if connections had been made between Scottish and local history during the period covered. It was only after I returned to Galloway after 20 years in England that I began to discover the connections as I read my way through the local history section of Castle Douglas Library.
One of the discoveries I made was that what we had been taught at school to call the Agricultural Revolution is now described as the Lowland Clearances during which a whole class of farm workers- the cottars- disappear from Scottish history. Unlike the dramatic Highland Clearances, the Lowland Clearances were a ‘silent revolution’ which did not lead to rural unrest- apart from in Galloway. Here in 1724, the beginnings of Scotland’s eighteenth century agricultural revolution were met with an armed uprising by cottars and tenant farmers who had been evicted from arable farms to make way for cattle farms. The uprising lasted for several months and was only suppressed after a regiment of dragoons was sent to Galloway.
Inspired by the Galloway Levellers, I began digging deeper into local history. One surprising discovery is that in the 1780s a small group of young men from Galloway became apprentices to a textile machine maker (also from Galloway) who was based near Bolton in Lancashire. In the 1790s four of these young men moved to Manchester where they soon became leading cotton spinners. One of this group was John Kennedy (1769-1855) who promoted the Liverpool-Manchester railway and was a judge at the Rainhill Locomotive Trials in 1829 which were won by George and Robert Stephenson’s with their famous ‘Rocket’.
Kennedy’s business partner was James McConnell who married Margaret Houldsworth. Her brother Thomas owned a rival cotton spinning business and later became an MP for Manchester. Her other brother, Henry moved from Manchester to Glasgow where he set-up Scotland’s first steam powered cotton mill in 1801, using machinery supplied by Kennedy and McConnell. Then in 1836, with financial help from his brother Thomas, Henry Houldsworth bought Coltness estate near Wishaw in Lanarkshire. Beneath the estate were rich seams of coal and ironstone which provided the raw material for the Coltness iron works which Henry established.
Ten years later, Henry Houldsworth established the Dalmellington iron works in Ayrshire. Part of the finance for this venture was provided by James Murray, Henry’s son-in-law. James’ father was George Murray who with his brother Adam was one of the Galloway-Manchester cotton spinners.
As well as the Galloway-Manchester, cotton-iron connections, I also found a Liverpool connection. William Ewart senior was a Galloway born merchant in Liverpool where his business partner was John Gladstone from Biggar. William Ewart’s son William became an MP. William Ewart junior was a supporter of the Anti-Corn Law League and a keen advocate of free-trade. William Ewart senior was godfather to John Gladstone’s son William Ewart Gladstone the famous Victorian prime minister.
To this group can be added another significant player, Galloway born economist John Ramsay McCulloch who was described by Friedrich Engel’s as ‘the English bourgeoisies’ favourite political economist’ in 1844.
However, before discussing the role these Scots played in the creation of ninettenth century ‘English liberalism’ we need to go back to the early eighteenth century and take up the story of the Galloway Levellers again.
In 1723, the year before the Levellers uprising began, the Honourable Society of Improvers in the Knowledge of Agriculture was established in Edinburgh. Its patron was John Dalrymple, second earl of Stair and its secretary was Robert Maxwell of Arkland in Galloway. Amongst the Society’s members were John Clerk of Penicuik, Patrick Heron of Kirroughtrie in Galloway and James Steuart of Coltness. Of these, Patrick Heron of Kirroughtrie was one of the landowners who attempted to negotiate with the Galloway Levellers and John Clerk’s brother was a customs officer in Kirkcudbright at the time and kept his brother Clerk informed of events through a series of weekly letters. The troops sent to quash the Levellers were the earl of Stair’s dragoons. Members of the Society were therefore very aware of the events in Galloway.
Although Galloway was quiet the following year, cities across Scotland were not. An attempt to raise the duty paid on malt, essential for beer making, led to riots. The worst of these took place in Glasgow where the rioters had control of the city for two weeks in 1725 before General Wade was able to restore order with his troops.
Tucked away in the ‘Select Transactions’ of the Society of Improvers, edited by Robert Maxwell and published in 1747 is ‘An Account of the Society’s Endeavours to Promote our Manufactures’. The Society began these endeavours in November 1723, focussed on promoting the linen industry in Scotland. Work on this idea continued through 1724 and 1725. In 1726, a ‘Bill for Encouraging and Promoting Fisheries and other Manufactures and Improvements in that part of Great Britain called Scotland’ was laid before Parliament. The ‘Select Transactions’ includes the complete text of this Bill.
The Bill was supported by prime minister Robert Walpole but opposed by English members of parliament who objected to the costs involved. Walpole replied that it would be cheaper than maintaining 6000 troops in Scotland to maintain order. Walpole’s fear was that so far the Union of 1707 had failed to stimulate the Scottish economy and that this was being exploited by the Jacobites to stir up resentment against the Union. While Glasgow and Dumfries had been hostile to the Jacobites in 1715, if nothing was done to increase employment and prosperity in the Presbyterian west of Scotland, this could change. Indeed, if there had been popular support for the Jacobites in southern Scotland in 1745, the Jacobites might well have succeeded.
Between 1727, when the Board of Trustees for the Improvement of Manufactures and Fisheries was established, until state regulation of the linen industry was abolished in 1823, Scottish production of linen rose from 2.2 million yards in 1728 to 36 million yards in 1822. Although since 1780 the linen industry had been overshadowed by the rapid growth of Scotland’s cotton industry, the Board of Trustees successful improvement of the linen industry laid the foundations for the rise of cotton.
The significance of the establishment of the Board of Trustees is that it operated through the era of the Scottish Enlightenment as a successful example of state intervention in the Scottish economy. When the Board’s origins in the work of the Society of Improvers is taken into account a further significant factor emerges. In 1723 the Union of 1707 had not delivered an economic boost for Scotland. Since key members of the Society like the second earl of Stair and Sir John Clerk were supporters of the Union and opponents of the Jacobites, they were very aware that without some form of state support and intervention in the Scottish economy, the future of the Union was at risk.
Of course the Union might still have survived without state support for the Scottish linen industry in the eighteenth century, but it is interesting that the movement towards Scottish independence was boosted in the late twentieth century by Margaret Thatcher’s antagonism to state intervention and support for key Scottish industries.
3. The Scottish Enlightenment and the Origins of Liberalism
The Union of 1707 created an anomaly. While the centre of political power moved south to London, only a few Scottish landowners, like the dukes of Buccleuch, were wealthy enough to live in London. However, the remaining landowners were still influential through the Commissioners of Supply (local government) which the Union had not affected. The Church of Scotland retained its autonomy, as did the Scottish universities. Along with the Convention of Royal Burghs and the persistence of the Scottish legal system, the shadowy outlines of a Scottish state endured thus giving members of Scotland’s ruling elite limited but real power within ‘that part of Great Britain called Scotland’.
I believe that it was the uncertainties and ambiguities of their new situation which forced the more intellectual members of the Scottish elite to think more deeply about the nature of society, about the economy and about political power. These philosophical speculations were given an extra edge in the aftermath of the Jacobites final defeat in 1746. As the Jacobites advanced south, there was panic on the streets of London and Scots were portrayed as barefooted barbarians and destroyers of civilisation. It was only after 1746 that the Scottish Enlightenment really took off and the Age of Improvement began.
What occurred was an elite led, top-down attempt to modernise and civilise Scotland and the Scots. Across Lowland Scotland landowners began sweeping away the physical signs of the old Scotland by rationalising the farmed landscape. The Military Map of Scotland made by William Roy in 1755 captures the beginnings of this process. It shows, dotted across the Lowlands, the houses of large landowners surrounded by neat chequerboard patterns of square fields bounded by hedges and dykes. Over the next fifty years, estate by estate, county by county, the square or rectangular fields of improved farms spread out over the landscape. The old fermtouns were swept away and new stone built steadings replaced them. New villages and towns were built, 86 in Dumfries and Galloway alone. These in turn were linked together by a network of new roads, improving and speeding up communications.
Significantly, this transformation was brought about not by the actions of the British state, but by Scotland’s civil society. However, the actions of the British state did facilitate the process by providing opportunities for Scottish merchants, soldiers and even doctors to make huge fortunes as what was to become the British Empire expanded across the globe. Many of the improving landowners were not members of the traditional landowning elite but had bought their estates with wealth gained overseas. By improving their new estates and, in the process themselves, the newly rich could disguise the origins of wealth gained through crude and brutal exploitation and become ‘gentlemen’.
Across Dumfries and Galloway and the rural south of Scotland, the late eighteenth century landscape of Enlightened Improvement survives. In central Scotland it is overlaid by a very different landscape, a landscape shaped by the Industrial Revolution. While it has been argued, for example by Joel Mokyr in ‘The Enlightened Economy’ [Yale, 2010] that the Industrial Revolution was a product of the Enlightenment I am not so certain.
Although the first of James Watt’s steam engines began working in 1776, they were used as pumping engines. It was not until the 1790s in Manchester that steam was used to directly power cotton spinning machinery. For Friedrich Engels, writing in 1844, it was this combination of steam plus cotton machinery that began the Industrial Revolution and Engels was the first to use the term in an British context.
Freed from reliance on water power and close to sources of coal, the cotton industry grew rapidly in Manchester. The opening of the Liverpool and Manchester railway in 1830 removed transport problems caused by the slow and expensive canal network, leading to further growth. But then the cotton manufactures encountered another problem. During the Napoleonic Wars, farmers and landowners profited from the high price of wheat. When prices fell in 1815, their dominance in the unreformed House of Commons and in the House of Lords led to the passing of a law to keep corn (wheat) prices high by excluding imported wheat. High corn prices, it was argued, led to high wages which in turn pushed up the production costs of cotton. After several years of struggle, in 1845 the Manchester based Anti-Corn Law League succeeded in getting the 1815 act repealed. From 1845 until 1914, ‘free trade’ became the cornerstone of economic policy in the UK, supported and promoted by the ‘Manchester School’ of English (British) liberalism.
In the mid-nineteenth century, France Belgium, Prussia, Sweden, Spain, Norway, Holland, the Hanseatic league, Switzerland, Austria and the German principalities adopted free-trade polices. However, beginning with France in 1875 and soon followed by Germany, enthusiasm for free-trade began to wane and measures to protect domestic industries from ‘unfair’ competition were introduced. In the USA, the slave-owning, cotton producing states favoured free-trade while the more industrialised northern states were protectionist. The victory of the northern states in 1865 was therefore also a victory for protectionism.
After WW1 there was a period of economic recovery but the Great Depression which followed saw even the UK give up free-trade in favour of a protectionist system of ‘imperial preferences’. Combined with the rise of fascism and communism it seemed that economic liberalism was dead. But, as Foucault argued, the same period saw the birth of what was to become neoliberalism after WW2. The key moment identified by Foucault was a conference held in Paris in August 1938, inspired by the work of Walter Lippman in the USA.
As well as Lippman himself, the meeting was also attended by Wilhelm Röpke and Alexander Rüstow from Germany and Austrian School theorists Friedrich Hayek and Ludwig von Mises. Participants from France included Raymond Aron, Robert Marjolin, Louis Rougier, and Jacques Rueff and entrepreneur Ernest Mercier. Hungarian born but UK based Michael Polanyi was another participant. Participants from France included Raymond Aron, Robert Marjolin, Louis Rougier, and Jacques Rueff. Walter Eucken, the founder of German neoliberalism, called ordoliberalism, was invited to the conference, but was not given permission to leave Germany.
Significantly, based on his experiences as a journalist, Lippmann argued that policy makers could ignore public opinion and even dismiss it. Lippmann believed that public opinion is incoherent, ill-informed and lacks an organised or coherent structure. Effectively, Lippmann was arguing for a tightly controlled and limited form of democracy. Eucken’s contribution was drawn from his writings, where he argued that the state has the task of providing the political framework for economic freedom, in contrast to Adam Smith’s doctrine of ‘laissez-faire’. For Eucken, the essence of the market was competition rather than exchange To facilitate market competition, the state should maintain legal and institutional frameworks, including the maintenance of private property, enforcement of private contracts, liability, free entry to markets, and monetary stability. However, the state should not direct or intervene in the economic processes of daily practices, as occurs in a centrally planned economies.
Necessarily, since his lectures were delivered before the elections of Margaret Thatcher in the UK and Ronald Reagan in the USA, what Foucault called neoliberalism is not quite the same as today’s neoliberalism. However, by locating the origins of neoliberalism in the 1930s rather than the 1970s, Foucault’s work challenges the tendency, especially in Scotland, to simplify its complex history by equating neoliberalism with Thatcherism.
4. Scottish Influence on English Liberalism
Finally, from my own research, I have found a Scottish link which connects Adam Smith’s ‘laissez faire’ liberalism with Foucault’s ‘English liberalism’. In his book ‘Why Europe Grew Rich and Asia Did Not: Global Economic Divergence , 1600-1850’ (Cambridge, 2011), Prasannan Parthasarath highlighted a significant lecture given to the Manchester Literary and Philosophical Society by John Kennedy in November 1815. Kennedy’s lecture was on ‘The Rise and Progress of the Cotton Industry’ and Parthasarath noted that Kennedy drew on Adam Smith’s work to explain the success of the British cotton industry. This was the first time Smith’s work had been used in this way.
This marked a significant change since in the final quarter of the eighteenth century the cotton manufactures of Lancashire had favoured and benefited from protectionist policies which cushioned them against Indian competition. It was only after improvements pioneered by Kennedy and others increased the quality and lowered the cost of their cotton that Smithian free-trade was adopted by the Manchester cotton barons. One result was that the flow of the cotton trade was reversed.
Textile manufactures in the Indian subcontinent suffered grievously with the rise of Lancashire and the rapid growth in exports of British cotton yarn and cloth. By 1820 the English [British] East India Company had terminated its cloth trade and closed down the network of factories that had been purchasing Indian cloth for nearly two centuries. [Parthasarath 2011, p.153]
In addition to John Kennedy, the work of the Galloway born economist John Ramsay McCulloch (1789-1865) provides an important link between the liberalism of the Scottish Enlightenment and that of the Victorian era. Described by Engels in ‘The Condition of the Working Class in England’ as the ‘English bourgeoisies’ favourite political economist’, McCulloch edited The Scotsman from 1817 to 1821 before publishing ‘ The Principles of Political Economy’ in 1825. Unable to secure a university position in Scotland, McCulloch moved to London where he became professor of Political Economy at University College in London from 1828 to 1837. In 1838 he was appointed Controller of Her Majesty’s Stationery Office, a position he held until his death.
The move to London brought McCulloch into close contact with leading politicians like Robert Peel who was prime minister 1834-5 and 1841-46. Peel became a close friend and McCulloch, despite disagreements over economic policies, also had a ‘cordial’ relationship with William Ewart Gladstone who was a member of Peel’s cabinet and then Chancellor of the Exchequer 1852-5 and again 1859-66. After McCulloch’s death, Gladstone became prime minister four times. Gladstone’s great rival Benjamin Disraeli attended McCulloch’s lectures on political economy in the 1830s.
Although, as Marx pointed out in ‘Theories of Surplus Value’ (1860) McCulloch did not make any major contributions to political economy as theory, through his journalism, lectures, books and influential friendships, McCulloch brought the practice of economic liberalism into the heart of the British state. In addition, through his friendship with leading cotton manufacturer John Kennedy of Galloway and Manchester, McCulloch was able to bring the Scottish Enlightenment version of economic liberalism up-to-date by including the impact of the Industrial Revolution on the British economy.
A final connection is provided by William Ewart (1798-1869). Ewart was the son of the Galloway born Liverpool merchant William Ewart mentioned above and was first a Member of Parliament for Liverpool before becoming M.P. for Dumfries. Ewart was a keen supporter of free-trade and a fierce opponent of the Corn Laws, working closely with Richard Cobden and John Bright of the Anti-Corn Law League.
In the Introduction to their book ‘Yes-The Radical Case for Scottish Independence’, James Foley and Pete Ramand noted that the 300th anniversary of the Union of 1707 passed with very little public celebration despite the fact that the Union ‘marked the beginning of two centuries of global domination’ by the Britain and its empire. Although the immediate results of the Union were slight, its long term consequences shaped world history no less than the French Revolution or the American War of Independence.
While the sun has long since set on the British Empire, a very different legacy of the Union continues to influence and shape the world today. What is now called neoliberalism has become over the past 35 years the dominant economic paradigm or belief-system. However, before advent of Thatcherism in the UK and Reaganomics in the USA, in series of lectures in 1978-79 French philosopher Michel Foucault identified an earlier form of neoliberalism. Foucault’s neoliberalism had its roots in the Great Depression of the 1930s which had created a crisis of confidence in traditional economic liberalism. Faced with the threat from the left and the right of state intervention and control of national economies, the neoliberals’ counter proposal was to deepen and extend liberalism so that the state would become the servant of the economy.
Foucault then showed that the idea that the economy should act as a limit or restraint on state power was already present in what he called ‘English liberalism’, drawing on the work of Adam Ferguson, David Hume and Adam Smith to support this claim. But as I have found, the failure of the Union of 1707 to improve the Scottish economy led to lobbying by the Society of Improvers for state supported intervention via the Board of Trustees for the Improvement of Manufactures and Fisheries. The Board played an active role in developing the Scottish linen industry from 1727 to 1823.
In England over the same period, the early cotton industry was protected from competition from India by import tariffs. Manchester’s cotton capitalists only adopted the doctrines of free-trade after the process of mechanisation allowed Lancashire cottons to be mass produced at high quality. This had a devastating impact on India’s traditional cotton industry. Beginning with John Kennedy’s 1815 lecture, the history of the English cotton industry was then re-written to fit with Adam Smith’s economic theories.
Once its history had been re-written, the huge success of the Lancashire cotton industry in the later nineteenth century was used to prove the economic superiority of laissez-faire and free-trade policies over state-led economic policies based protectionism and market intervention. This went hand-in-hand with a selective reading of Adam Smith’s work to emphasise his support for the ‘free-market economy’ while the work of former Jacobite James Steuart of Coltness was sidelined. Steuart was a former member of the Society of Improvers. Steuart favoured more interventionist economic policies in his book ‘The Principles of Political Economy’ which was published in 1767, nine years before Smith’s ‘On the Wealth of Nations’.
Margaret Thatcher was an admirer of Adam Smith and told a Conservative party conference in 1988 that it was the Scots who first invented Thatcherism. Thatcher was also a committed Unionist. But as the Society of Improvers recognised in the 1720s, unless the Union could improve the Scottish economy, it would fail. Their response was to actively promote state support and intervention in key Scottish industries. It may prove to be an irony of history that it was Margaret Thatcher’s version of Adam Smith’s liberalism which began the break up of the United Kingdom.