The Austrian School of Thought That Packs a Massive Political Punch

OPINION | The Sydney Morning Herald | 13 August 2003


Illustration by Andy Foster

The godfather of neo-liberals would have been delighted with its progress, writes Wilson da Silva.


THEY ARE UNELECTED, privately funded and their meetings are by invitation only. Operating behind the scenes, they influence elected officials, bureaucrats and rising politicians from both sides of politics, and they populate the opinion pages of newspapers. Australia’s neo-liberal think tanks wield extraordinary influence over government policy.


They are so influential that they regard themselves as ‘the fifth estate’, as essential to democracy as the other four: government, parliament, the judiciary and a free press. Each think tank has a clear political agenda but prefers the camouflage of innocuous-sounding names such as Sydney’s Centre for Independent Studies (CIS) or Melbourne’s Institute of Public Affairs. Despite their clout, as reported in The Sydney Morning Herald this week, their membership is undisclosed and their financial backers, publicity shy.

Call it neo-liberalism, neo-conservatism or the New Right, they are about the winding-back of government from the economy and the retreat of the welfare state.

At closed meetings, you are as likely to find the Premier, Bob Carr, as you are the Prime Minister, John Howard. They may sell themselves as independent ideas factories, but they have a product to sell. Call it neo-liberalism, neo-conservatism or the New Right, they are about the winding-back of government from the economy and the retreat of the welfare state. In the case of the CIS, the traditional family is also central.


The left has nothing quite like them: not in numbers, funding or in sheer clout. That’s partly because most donors of think tanks are businesses and wealthy individuals, and few of these are interested in policy ideas espoused by groups such as the Australia Institute in Canberra, probably the country’s leading progressive think tank.


Godfather of a revolution: Friedrich von Hayek (1899–1992)

In the United States and Britain, neo-liberal think tanks have been phenomenally successful since rising to prominence in the 1970s. Margaret Thatcher was co-founder of Britain’s Centre for Policy Studies before becoming party leader, and her government’s manifesto was written by her think tank. It advocated the busting of union power, free trade, restructuring the tax system to favour families and a raft of what were once neo-conservative fetishes now considered mainstream.


The capture of the White House by the Republicans in 1980 ushered in the first wave neo-liberal revolution in the United States. Ronald Reagan’s favourite think tank was the hawkish Institute for Contemporary Studies, from where he drew Edwin Meese as attorney-general and Caspar Weinberger as defence secretary. A former chairman is the current U.S. Defence Secretary, Donald Rumsfeld.

Neo-liberal think tanks have been phenomenally successful. Margaret Thatcher was co-founder of Britain’s Centre for Policy Studies before becoming party leader, and her government’s manifesto was written by her think tank.

If there was a global godfather of this neo-liberal movement, it would be Friedrich von Hayek. The Austrian economist and social theorist was a rival of British economist John Maynard Keynes. Keynes’ interventionist ideas came to dominate policy after World War II, while Hayek’s drifted into the back rooms of history.


But he didn’t give up: in 1947, he set up the Mont Pelerin Society, a secretive group that met annually to map out a neo-liberal counterattack against the growing socialist character of post-war economies. It played midwife to scores of neo-liberal think tanks, among them the Heritage Foundation (1973) and the Cato Institute (1977) in the U.S. and Australia’s CIS (1975).


The society and its progeny have been enormously influential: of the 76 advisers in Reagan’s 1980 presidential campaign, 22 were members. And its membership include Nobel laureate Milton Friedman (a former president), Czech Prime Minister Vaclav Klaus and former New Zealand finance minister Ruth Richardson. Greg Lindsay, the executive director of the CIS in Sydney, is a former vice-president. Neo-liberal think tanks now dominate the political debate in much of the West.


Enormously influential: The Mont Pelerin Society

In Australia, as elsewhere, they ply their trade by publishing ‘independent research’ from a network of like-minded scholars whose reports invariably end up backing the neo-liberal world view. Staff and friendly scholars are paid to write newspaper articles which are submitted, usually free, to opinion pages.

The society and its progeny have been enormously influential: of the 76 advisers in Reagan’s 1980 presidential campaign, 22 were members.

By publishing reports that confirm their arguments, neo-liberal think tanks seek to mould public debate. But they also peddle influence, holding closed seminars and lectures where visiting international conservative luminaries address selected rising members of the political elite, such as last week’s CIS gathering on the Sunshine Coast.


Von Hayek would have been pleased. He died in 1992, but not before Thatcher rewarded him with a visit to Buckingham Palace, where he was bestowed with a Companion of Honour – a tribute to the most successful, if unheralded, political puppet-master of the past century.

Wilson da Silva is a Sydney journalist who has extensively researched think tanks in Australia.

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