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A Glimpse of History

A Glimpse of History

The Mont Pelerin Society, founded by Hayek in 1947, debated free trade and limited government, influencing global economic shifts.

Left-wing intellectuals have discovered that a ‘thought collective’ named the Mont Pelerin Society has been quietly influential for the last few decades. They are now publishing one book after another about it, blaming the success of what they call ‘neoliberalism’ on it. Perhaps they exaggerate the Society’s influence. John Maynard Keynes claimed too much when he famously wrote: ‘The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.’ John Stuart Mill was more reasonable in holding that ideas were only influential when outward circumstances conspired with them. In the 1980s and 1990s outward circumstances certainly conspired with the ideas of free trade, private property, and limited government, the three pillars of what I have called conservative liberalism. Central planning failed ignominiously in the communist countries, whereas social democrats in the West found, to their dismay, that they could not solve problems by throwing taxpayers’ money at them.

The Mont Pelerin Society

The Mont Pelerin Society was founded in 1947 at the initiative of Anglo-Austrian economist Friedrich August von Hayek. Three years earlier Hayek had published The Road to Serfdom, an eloquent warning against socialism, not only Nazism and Stalinism, but also against democratic socialism which might unintentionally lead to a police state: if central planning was to work, individual preferences had to be manipulated and sometimes suppressed. To Hayek’s surprise the book became a bestseller, and he was invited on lecture tours to several countries, where he encountered a few like-minded people. He obtained funds to call a meeting on present challenges at Mont Pèlerin in Switzerland, attended by several remarkable thinkers, including Anglo-Austrian philosopher Karl R. Popper, Austrian economist Ludwig von Mises, American economists Frank H. Knight, Milton Friedman, and George J. Stigler, two notable Frenchmen, philosopher Bertrand de Jouvenel and economist Maurice Allais, and German economists Walter Eucken and Wilhelm Röpke. Mises was, with Carl Menger, the founder of the Austrian School in economics, to which Hayek himself belonged, Knight was the founder of the Chicago School to which Friedman and Stigler were to make significant contributions, and Eucken and Röpke were fathers of the so-called ‘Ordoliberalismus’ in Germany (named after their journal Ordo).

The participants at the 1947 meeting decided to form a society that would convene every other year or so and discuss the problems and prospects of a free society, based on free trade, private property, and limited government. The Italian economist Luigi Einaudi had been invited to the original meeting, but he was unable to attend, allowing Hayek however to include him as a founding member. Having been Governor of the Central Bank and Finance Minister, Einaudi became Italy’s President in 1948. With Alcide de Gasperi, he laid the foundations for the ‘Italian Miracle’ of the late 1940s and 1950s. In Germany, Eucken and Röpke had great influence on Konrad Adenauer and Ludwig Erhard, who jointly made the ‘German Miracle’ possible. Erhard eventually became a member of the Society. It is little noted that at the same time a ‘miracle’ occurred also in Austria, guided by yet another member of the Mont Pelerin Society, an old student of Mises, Reinhard Kamitz, Finance Minister in 1952–1960 and Governor of the Central Bank in 1960–1968.

A Photo from 1956

When Hayek visited Iceland in the spring of 1980, he invited me to the next meeting of the Mont Pelerin Society which took place at Stanford in the autumn. I became a member in 1984 and served on the Board of Directors in 1998–2004. These were years of monumental changes. Margaret Thatcher and Ronald Reagan came to power in the two largest Anglo-Saxon countries, and by their firm leadership they won the Cold War against the Soviet Union which was dissolved in 1991. After the collapse of communism in Central and Eastern Europe, politicians inspired by Thatcher and Reagan and influenced by Hayek and Friedman managed to remove barriers to the peaceful transformation of their economies into democratic capitalism. Some of these politicians, notably Mart Laar in Estonia and Vaclav Klaus in the Czech Republic, were members of the Mont Pelerin Society. The ‘miracle of post-communism’ was even more astonishing than the German, Austrian, and Italian miracles some forty years earlier. Suddenly, the countries of Central and Eastern Europe, long suffering under communist tutelage, became normal countries again.

At the Oslo general meeting of the Mont Pelerin Society in 2022, an American attendant, Dane Starbuck, showed me a photograph from a meeting of the Society in the 1950s. He had identified a few Americans depicted, but he wondered who the others were and when it was taken. I could immediately identify three Scandinavians. I had met two of them at meetings of the Mont Pelerin Society, Swedish Economics Professor Sven Rydenfelt and Danish activist Christian Gandil, and I also could recognise Norwegian journalist Trygve Hoff. Of course, Hayek, the founder and President of the Society, was easily identifiable. We soon found out that the photograph was taken on an excursion on 1 September 1956 at a meeting of the Mont Pelerin Society in West Berlin. It is reproduced above. As far as we could see, using various sources, in the first row from left there were: Friedrich Lutz, Bertha Ferrer Menéndez, Louis Baudin, Hedwig and Erich Eyck, Enid Goodrich, Lucy Ann Elliott (assistant to Pierre Goodrich), Edith Eucken-Erdsiek, and Unidentified. In the second row from left there were: Unidentified, Hendrik Arie Lunshof, Trygve Hoff, Christian Gandil, Emilio Menéndez, Unidentified, Albert Hunold, Leonard Read, Claire Grosse-Schulze (interpreter), John MacCallum Scott, Pierre Goodrich, Lord Grantchester (Alfred Suenson-Taylor), Ludwig von Mises, F. A. Harper, Sven Rydenfelt, Franz Böhm, Friedrich A. von Hayek, and Unidentified.

The Austrians

I found it fascinating to dig a little in the background and accomplishments of the individuals in the photograph. History is about people, not numbers. And some or even all of these people were quite interesting, not only as writers, but also as personalities. In my book on Twenty-Four Conservative-Liberal Thinkers I had devoted chapters to the two Austrians depicted, Hayek and Mises. They had both been born and brought up in the Habsburg Empire, which over time had developed into a peaceful and civilised quasi-federation of states on the Danubian basin. Brilliantly described by Stefan Zweig in Die Welt von Gestern (The World of Yesterday), it was a vast free-trade area with a common currency, solidy on the gold standard, with an economy moving slowly but surely towards increased prosperity, in retrospect a bastion of stability and liberty under the law. This was a world which was destroyed in the Great War of 1914–1918. Under the influence of Austrian economists Carl Menger and Eugen von Böhm-Bawerk, Mises (1881–1973) had become an uncompromising economic liberal. In the second week of January in 1920 he read a paper to the Austrian Economic Society in Vienna where he argued that socialism would never work in the way in which its proponents claimed. The reason was that the planners envisaged by the socialists and vested with unlimited power would never be able adequately to calculate the costs of alternative decisions, since they would not have prices freely formed in the free market to guide them. Such prices reflected relative scarcities and registered changes occurring in the economy. It was crucial, Mises argued, that capital goods (or what Marxists called the means of production) were privately owned and freely exchangeable so that information could become available about their most efficient use. Mises elaborated on this argument in a 1922 book, Die Gemeinwirtschaft (translated as Socialism in 1932).

In several scholarly and incisive papers, Hayek (1899–1992) refined and extended the argument. From being about difficulties of calculating alternative costs, it became an argument about the utilisation of knowledge in society. The only way, for example, to utilise the special local and temporary knowledge of individuals, as well as the skills and abilities specific to them, was to allow them to make decisions based on this personal and inalienable knowledge of theirs. The dispersal of knowledge required a corresponding dispersal of power down to the individual level, which implied private property and free trade. (This is of course also the argument for the Subsidiarity Principe in Catholic political thought.) To this economic argument against socialism Hayek added the political argument that concentration of power in the hands of economic planners would not only pose danger to individual liberty—a point recognised by earlier liberals such as John Stuart Mill—but that would also require the manipulation and suppression of individual preferences, and thus lead to serfdom, as already mentioned. Hayek later extended the argument in time: the cultural capital accumulated by previous generations could only be enjoyed by the present generation if it recognised and respected traditions. Prices transmitted knowledge about local circumstances, and traditions transmitted knowledge about which rules had withstood the test of time. Thus Hayek became a proponent of what I have called conservative liberalism.

The Austrian economist Joseph Schumpeter once sarcastically remarked that apparently there was a mountain in Switzerland where economists gathered to express opposition to encroaching socialism, without anyone paying attention. Nevertheless, in a thoughtful review of Hayek’s Road to Serfdom, Schumpeter commented that the author was ‘polite to a fault’. This was certainly correct. The Hayek I knew was a true gentleman, never ascribing base motives to his opponents, presenting solid arguments for his cause instead of merely playing on words. But it is evident from Bruce Caldwell’s excellent recent biography of Hayek that beneath his aristocratic, cool and detached demeanour a passionate individual could be found. In 1923–1924, he went on a study trip from his native Austria to the United States (where he attended a reception given for the American Economic Association in the White House by President Calvin Coolidge). His childhood sweatheart, Helene Bitterlich, stayed in Austria, and through a misunderstanding she married another man, as Hayek discovered to his dismay upon returning. Subsequently, and on the rebound, Hayek married another woman. In 1932, he was appointed Professor of Economics at the London School of Economics. But the love between Hayek and Helene persisted, and in 1934 they came to the conclusion that they ought to marry. Hayek’s wife however refused a divorce. After the War, Hayek and Helene decided that they could not live without each other. Again, Hayek’s wife refused, and took legal advice. Hayek now had to look for a job which made it possible for him to support his family in England while marrying Helene. He found it in the United States, at Chicago. Thus, in 1950 he spent an academic term in Arkansas where family law was permissive, obtained the divorce there, and married Helene in Vienna, whereupon they settled in Chicago. This was a costly decision, not only financially. Some of his friends in England felt that he had not treated his first wife well and they broke off all relationship with him.

The Germans and Swiss

While Ludwig von Mises and Friedrich August von Hayek certainly were the most formidable thinkers in the photograph, many other eminent scholars, writers, and men of affairs, were depicted. Four came from Germany. Franz Böhm (1895–1977) supported the German ‘ordoliberalismus’ of Eucken, Röpke, and Erhard. Before the Second World War, he taught economics in Freiburg, until he was, as an outspoken critic of Nazi policies, in 1938 banned from teaching. He only escaped arrest after the failed attempt to assassinate Hitler in July 1944 because the Nazis confused him with a namesake, a Catholic priest, whom they arrested. After the War, Böhm taught economics in Freiburg. He was also a member for the Christian Democrats of the German Bundestag in 1953–1965 and head of the German delegation for reparations negotiations with Israel. Edith Eucken-Erdsiek (1896–1985) was the widow of Walter Eucken who died prematurely in 1950, but she was also a philosopher and writer in her own right and the author of several books, one of which was a collection of essays on eight people who had made their mark on the twentieth century, Otto von Bismarck (although he died in 1898, he certainly cast a long shadow into the future), Vladimir Lenin, Joseph Stalin, Benito Mussolini, Adolf Hitler, Winston S. Churchill, Franklin D. Roosevelt, and Charles de Gaulle. Erich Eyck (1878–1964) was a German Jew who practised law in Berlin, but emigrated to England in 1937 and became a British citizen. In the 1940s, he wrote a very informative biography of Otto von Bismarck in three volumes, and later a history of the ill-fated Weimar Republic. His conclusion, after a careful study of original sources, was that there was nothing inevitable about the demise of classical liberalism in Germany. Led by the cynical and authoritarian (albeit brilliant) Bismarck, Germans took the wrong turn.

The fourth German, Friedrich Lutz (1901–1975), was an economist who worked with Walter Eucken in Freiburg, but in 1937 he moved to the United States in 1937 with his wife, Vera Smith, who is not in the picture. She had been Hayek’s student at the London School of Economics and written an interesting dissertation on central banking and the free banking alternative. In 1953, Friedrich Lutz returned to Europe as Professor of Economics at the University of Zürich. A distinguished economist, he was the President of the Mont Pelerin Society in 1964–1967. Albert Hunold (1899–1980) was quite a different character. A man of affairs who had held various jobs in his native Switzerland, he had become a committed liberal by reading the works of Mises. He used his good connections with the Swiss business community to raise funds for the initial conference of the Mont Pelerin Society, of which he became the first Secretary. An energetic and decisive man, he arranged the Berlin conference almost all by himself. Some members, especially from the United States, however disliked his authoritarian style and sectarian mentality and he was forced to resign as Secretary in 1960 and shortly thereafter he left the society.

The Americans

Two of the Americans in the photograph were founding members of the Mont Pelerin Society, Leonard Read and F. A. Harper. Read (1898–1983) had been the General Manager of the Los Angeles Branch of the United States Chamber of Commerce. Having become a fervent free trader under the influence of Mises and Ayn Rand, he established in 1946 the Foundation for Economic Education, one of the first free market think tanks in the world. Read spoke and behaved like a businessman and was an effective fundraiser. He wrote several popular books and composed one famous parable, ‘I, the Pencil,’ where he described the division of labour, crucial for attaining prosperity. Floyd Arthur Harper (1905–1973) was long Professor of Agricultural Economics at Cornell University. He was also a committed economic liberal, and in 1946, when the university officials would not allow him to assign the writings of F. A. Hayek to classes, he quit and joined Read’s Foundation for Economic Education. In 1961, he founded the Institute for Humane Studies which focuses on identifying young scholars with conservative-liberal views and promoting their career. I attended the summer courses of the Institute many times, both when it was located in Menlo Park in California and after it had moved to Fairfax in Virginia, and they were intellectually exciting, especially in drawing my attention to thinkers neglected at universities, such as Benjamin Constant, Herbert Spencer, and William Graham Sumner.

Pierre Goodrich (1894–1973) was in Berlin with his wife Enid and his assistant, Lucy Ann Elliott. He was a successful lawyer and businessman in Indianapolis who owned several profitable companies, but unlike many businessmen he was an avid reader of classical literature as well as a firm supporter of the three main principles of conservative liberalism, private property, free trade, and limited government. I was pleased to see that the thirteenth-century Icelandic chronicler Snorri Sturluson was one of the authors Goodrich recommended. I argue in my book on Twenty-Four Conservative-Liberal Thinkers that perhaps Snorri rather than Aquinas deserved to be called the first Whig. In 1960, Goodrich established Liberty Fund, a non-profit organisation whose goal is ‘to encourage the study of the ideal of a society of free and responsible individuals’. This the Fund does by publishing well-chosen and well-produced books, often out-of-print classics, and holding colloquia all around the world, conducted according to rules laid down by Goodrich which were meant to stimulate Socratic conversations rather than Platonic orations. To my great benefit, I have attended many of those colloquia. Liberty Fund has played an indispensable role in keeping alive the tradition of liberty under the law. Goodrich wisely took the long-term view instead of insisting on immediate results.

The Scandinavians

The three Scandinavians in the photograph, Trygve Hoff, Christian Gandil, and Sven Rydenfelt, were voices in the wilderness in the post-war years when there seemed to be a strong consensus in the Nordic countries on extending the role of government to ensure security from cradle to grave. A founding member of the Mont Pelerin Society, Hoff (1895–1982) was not only a journalist, but also an economist who wrote a dissertation about the problems of planning under socialism. He was the publisher and editor of a popular business magazine, Farmand, where he tirelessly opposed the trend towards socialism in his country. I recently translated an interesting exchange of letters in 1941 between him and the leading socialist economist in Norway, Ragnar Frisch, on socialism and democracy. Frisch seemed oblivious to the danger to freedom from unlimited government. The exchange will soon be published in the Econ Watch Journal.

I met Rydenfelt and Gandil at the first Mont Pelerin Society conferences I attended, in the early 1980s. Shy and small of stature, but firm and fearless, Rydenfelt (1911–2005) was an unyielding defender of the free market in the decades when it was out of fashion in Sweden, always emphasising the role of entrepreneurship and innovation. At the Society’s 1956 meeting in Berlin, he became a member. He taught economics at the University of Lund and wrote several books, mostly for the general public. Denied promotion because of his views, he only became a full professor in 1991 when a conservative-liberal government had taken power. By then, he had become something of a hero to the young classical liberals and conservatives of his country. Gandil (1907–1999) was an economist with forestry as his specialty, but Hayek’s Road to Serfdom had a great impact on him. The book was widely discussed in Denmark as well as in the other Nordic countries (even in Iceland!) and the Danish business community decided to set up an information agency of which Gandil became the director. This agency was quite active in the late 1940s and early 1950s, but subsequently interest waned and it was wound up. Gandil was more of an activist than a scholar, earning the nickname Propagandil. He and the two other Scandinavians in the Berlin photograph found in the Mont Pelerin Society a welcome retreat from the orthodoxy at home.

The Others

I have not been able to find out much about the other individuals depicted. John MacCallum Scott was born in 1911. He was a barrister and the author of several travel books, and served as Secretary of the Liberal International formed in 1947, an international alliance of liberal (but non-conservative) parties. He also ran the Pall Mall Press. Alfred Suenson-Taylor, 1st Baron Grantchester (1893–1976), was a British banker, active in the Liberal Party. Hendrik Arie Lunshof (1904–1978) was a well-known Dutch journalist. In 1942, he had resigned in protest as a correspondent for De Telegraaf after the newspaper, under Nazi pressure, published an anti-semitic editorial, but after the War he became a critic of irregularities in the treatment of Dutch collaborators. Lunshof was editor of De Telegraaf in 1949–1953 and then of Elseviers Weekblad until 1965. He wrote several biographies and history books. Emilio Menéndez was a distinguished Cuban lawyer. Untainted by connections with Batista’s corrupt dictatorship, he was after the Cuban Revolution in January 1959 appointed Chief Justice of Cuba’s Supreme Court. He resigned in November 1960 and sought political asylum in the Argentinian Embassy in Havana. He was a member of the Cuban government in exile which was supposed to take power after the 1961 invasion of Cuba by anti-communists which however failed. Louis Baudin (1887–1964) was Professor of Law, first in Dijon and then at the Sorbonne in Paris. He wrote several books about money and credit, as well as an intriguing book about A Socialist Empire: The Incas of Peru, published in 1928. There he described the strange world of uniformity and rigidity which the Incas had constructed. Individual choice was completely suppressed. This was hardly a human society, more like a beehive or an anthill—an Orwellian nightmare, except that it had come about in real life, and was not the product of a writer’s fertile imagination.

(If anyone reading this recognises any of the four unidentified individuals on the photograph or can contribute more about those depicted, I would appreciate a message to my Facebook page.)

This is a repost of an article that was first published here: https://www.theconservative.online/a-glimpse-of-history

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The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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