Capital’s Regime Change and the Neoliberal Monetary Debate
Matthias Schmelzer and Joshua Rahtz in conversation with Andrew Anastasi
Participants, including Milton Friedman (center), out for a walk during the first conference of the Mont Pèlerin Society, 1947.
The Mont Pèlerin Society, founded in 1947 by economist Friedrich von Hayek, transformed the world economy. As Matthias Schmelzer argues in Freedom for Capital, Not People: The Mont Pèlerin Society and the Origins of the Neoliberal Monetary Order, at the turn of the 1970s the society commanded influence at the highest levels of international monetary policy. Debates sparked by Hayek, Milton Friedman and Ludwig von Mises emigrated from the seminar room to the halls of power, and the group’s collective – though internally contested – agenda would dominate the next half century of global capitalism.
The History and Political Economy Project has been proud to support Joshua Rahtz’s English translation of Schmelzer’s now-classic book, originally published in German in 2010. Schmelzer and Rahtz spoke with HPE Postdoctoral Fellow Andrew Anastasi about the text, its history, and the new audiences it might find in the present conjuncture. The translation is out this month from Verso Books.
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Andrew Anastasi: Congratulations to both of you on the publication of Freedom for Capital, Not People in English. Matthias, can you talk about the inception of the book? How would you characterize the political and scholarly moment you were living through as you were writing it? Which communities or conversations were crucial in shaping the development of its arguments?
Matthias Schmelzer: The book grew out of my master’s thesis at Humboldt University. The political context was quite significant—it was right after the 2008 financial crash. I was politically involved in the anti-globalization protests, particularly with a transnational network called ATTAC, which organized demonstrations in several European countries and around the world against financial capitalism and austerity.
From that experience, I became interested in the deeper historical roots of the crisis and the specific form it took. As a historian, I wanted to analyze neoliberalism as a historical project. I had first learned about the Mont Pèlerin Society (MPS), the organized collective of neoliberals on whom I focus, while studying at Berkeley with Gillian Hart, and then I connected with Dieter Plehwe in Berlin, who was already working on the Society. We formed a working group with other scholars and spent several years studying neoliberalism through the lens of this network of intellectuals, think-tank entrepreneurs, and capitalists centered around Friedrich Hayek, Ludwig von Mises, and Milton Friedman, who had called themselves neoliberals since the 1930s and held annual meetings from 1947 onwards until today.
What I found most fascinating in the archives—especially in the one in Ghent, where records of the Society’s meetings are stored—were the internal divisions within this network or thought collective. The central controversy was a technical but deeply consequential issue: what kind of monetary system to support as an alternative to the Bretton Woods system.
From the Great Depression until well into the 1960s, most economists and policymakers saw free markets for international capital and currency flows as far too destabilizing for a robust and well-functioning capitalism. But those neoliberals within and around the MPS disagreed, and the Bretton Woods order of fixed but adjustable exchange rates and strict capital controls was a major irritant to them. In their eyes, capital and exchange controls counted among the gravest threats not only to the market system but to Western civilization itself.
Zooming in on the debates and activities of this network, I argue that neoliberals deliberately sought to unleash capital against democracy. They set out to use financial deregulation and capital flows to discipline, limit and ultimately frustrate all forms of democratic decision-making at odds with the requirements of markets and profits. The book thus analyses the origins of the contemporary deregulated financial system—of flexible exchange rates and free capital flows—that continues to bring the global economy to the brink of collapse.
AA: Can you elaborate on the significance of this idea of floating exchange rates? It was a controversial topic inside the Mont Pèlerin Society, and support for it was uncommon among neoliberals and indeed anyone at the time. Could you walk us through why it became such a defining issue, and how one position came to dominance?
MS: Exchange rates, whether fixed or floating, describe how the value of one country’s currency is determined in relation to others. Under a fixed exchange rate system, like the one created at Bretton Woods in 1944, governments pledged to keep their currencies stable relative to the U.S. dollar, which itself was pegged to gold. This arrangement offered stability in international trade and finance by reducing uncertainty around exchange rates. In contrast, a floating exchange rate system allows currency values to fluctuate according to market forces such as supply and demand, without direct government intervention. Following the collapse of Bretton Woods in the early 1970s, most countries adopted floating exchange rates, marking a significant shift in the global monetary order.
As Robert Gilpin observed, Bretton Woods can be described as “Keynes at home and Smith abroad.” The system promoted an open and liberal international trading order (“Smith abroad”) while also permitting domestic economic policies aimed at stabilizing national economies and ensuring growth and full employment (“Keynes at home”). In practice, this meant that while trade in goods was encouraged, countries retained the right to impose capital controls, limiting the free movement of money across borders to maintain economic stability.
Bretton Woods thus represented a departure from both the classical gold standard and free-floating exchange rate regimes, the two models later revisited and debated within the MPS. This departure highlights a key insight of international macroeconomics known as the policy trilemma or impossibility theorem, which posits that governments can only ever achieve two out of three goals at once: fixed exchange rates, an independent domestic monetary policy (focused on internal objectives like full employment), and the free movement of capital across borders. Bretton Woods managed this trade-off by prioritizing fixed exchange rates and monetary autonomy while controlling capital flows—an arrangement that shaped the postwar economic order until the 1970s.
AA: I was interested to learn that you also characterize MPS members’ positions on floating exchange rates as partly conditioned by the experiences of different generations who were socialized in distinct ways.
MS: One of the reasons the debates got so intense is because the question of what kind of monetary system to support—fixed or floating exchange rates—was tied to the core goal of achieving freedom of capital movement. Within the neoliberal camp, this freedom of capital movement was seen as extremely vital—capital controls were “congealing the blood of capitalism,” Milton Friedman and Gottfried Haberler argued. If capital couldn’t move freely, neoliberals believed this would threaten the market system and freedom entirely, being a key step on the “Road to Serfdom” (in Friedrich von Hayek’s words) and totalitarianism.
To achieve freedom for international capital, the older neoliberals who were born before the turn of the 20th century, and who had therefore experienced the disastrous events associated with floating currencies during the early 1920s, tended to favor going back to the gold standard. But the younger neoliberals, who were born after 1910 and socialized during the Great Depression and in the context of Keynesian hegemony, were almost uniformly in favor of floating exchange rates—they realized that restoring capital mobility would require moving beyond fixed exchange rates.
That rearticulation allowed them to modernize classical liberal ideas for a postwar world in which outright suppression of democracy and monetary autonomy—which existed under the gold standard—proved untenable. Eventually, this position gained traction—especially in the United States—and influenced policy shifts like the Nixon administration’s move to end the gold standard and float the dollar.
AA: In terms of your research process, I was struck by the fact that you participated in a counter-collective of historians and political scientists studying the collective of neoliberals. It also seems important that you were drawn to the fractures within the archival materials—so often, popular narratives smooth out those tensions into simplified or even teleological arcs.
MS: When I wrote this book, this kind of historical approach to studying neoliberalism was not so common. Most tended to see neoliberalism either as a historical era within capitalism or as a free-market policy package. The alternative approach which I adopted—to view neoliberalism as an intellectual project organized through the Mont Pèlerin Society—was influenced by Bernhard Walpen, whose work I would love to see published in English soon. He was a major inspiration for how to do this kind of research.
Dieter Plehwe was extremely collaborative—he shared member lists and ideas for network analysis that went beyond just mapping connections to include intellectual trajectories. Not many people had worked in the Mont Pèlerin archives, and I was probably the first to focus on this particular issue of their monetary thought. The archive has materials including agendas and speeches from every meeting, and one notices repeated themes. Together with biographical material on the members, the archives are an incredible resource for understanding how this intellectual community evolved.
AA: Josh, can you tell us about how you’ve come to understand the neoliberals, as well as the historians studying them?
Joshua Rahtz: For this translation, I wasn’t just concerned with the subtleties of the language. The priority was to convey the method and conceptual framework Matthias, Dieter Plehwe, and Bernhard Walpen had developed.
As Matthias indicated, that framework was not very familiar to Anglophone readers when the book was written. Many had adopted the idea of neoliberalism as merely a stage of capitalism or a type of economic or market fundamentalism. But the German historiography has tended to be more attuned to the internal heterogeneity within neoliberalism and the Mont Pèlerin Society.
This sensitivity, I think, stems from Germany’s distinctive historical development—from the late Wilhelmine era through the Weimar Republic and postwar West Germany—where different forms of neoliberalism played prominent roles earlier on, under quite different conditions, as compared to elsewhere. This historical trajectory has compelled a higher-resolution understanding of certain internal debates within neoliberalism. It’s a strength of this approach.
AA: The book tracks an activist intellectual movement as a contested and evolving project. There is an appreciation of the rhetorical prowess of key individuals, but, Matthias, you also emphasize the role played by the institutions and conferences through which positions were debated and disseminated. How would you explain why some ideas won out over others? Are there lessons here for analyzing other political formations, perhaps including today’s far-right?
MS: There are political as well as methodological lessons. Politically, it’s striking how this neoliberal collective focused on complex and internally controversial problems and worked for decades to keep their ideas at-the-ready for politicians amidst changing historical conditions. They rearticulated liberalism after the crisis of the 1930s and adapted it continuously while maintaining intellectual coherence. Progressives today could learn from this kind of long-term, transnational organizing and intellectual work.
Of course, the historical context and power dynamics were very different. Neoliberal intellectuals had strong connections to organized capital and aligned with powerful actors. But still, the method of studying neoliberalism as a networked intellectual project has gained traction over the past decade, especially in the Anglophone world. People are now pushing the history back further into the early 20th century and mapping internal cleavages beyond the 1970s—up to the present, including the challenges posed by authoritarian politics today, or by the far right’s racist variant of neoliberalism discussed in Quinn Slobodian’s Hayek’s Bastards.
AA: Seemingly radical or fringe proposals—in your book’s case, free capital movement—can become plausible through concerted intellectual and political work.
MS: Exactly. In the late 1940s and early 1950s, almost no serious economist advocated for the gold standard or for free capital movement. Capital controls were the norm. The gold standard was regarded as an anachronistic relic of the past, supported by an extremely small minority—some estimates put the figure at less than one per cent—including MPS member Murray Rothbard, who is central in Quinn’s analysis. Floating exchange rates, too, were almost universally rejected and ignored—by one estimate, only five per cent of economists supported them in the early 1950s. But while advocates of a classical gold standard remained in a minority position until the end of the 1960s, by then a clear majority of economists had become convinced of a theory arguing for floating exchange rates, backed an extension of exchange rate flexibility. What once seemed unthinkable became the new common sense—in particular through sustained efforts by this neoliberal thought collective.
AA: Ideas that seem impossible today can become organizing principles in the future. This can be a lesson for the Left as well. But of course, there are important differences.
MS: Yes, and that’s critical. Neoliberals were always in close contact with organized capital, particularly U.S. capital in the 1970s. Many of their goals aligned with elite interests—like dismantling the gold standard and liberalizing capital flows. That’s why David Harvey’s idea of neoliberalism as a “class project from above” is also a very compelling perspective. In contrast, projects for global justice, reparations, radical green deals, or degrowth involve power dynamics that are fundamentally more oppositional.
AA: We might even say they work with different logics of collective action. Let’s talk more about the translation process. Josh, to what extent did you see yourself also editing, or adapting the book for a new readership?
JR: Matthias was extremely helpful—we were in touch throughout the project and even before it began. So it was a close collaborative effort in that regard. We polished the text a bit, though my main task was getting across the ideas and outlook of the original, which will be new to most readers.
MS: I was really grateful to Josh for taking on the project. It’s not easy to have your own work translated into a language in which you can also write—and Josh did an amazing job. This process also offered a great chance for me to re-engage with material I hadn’t worked on for a while. Josh and I talked through what we might highlight in the preface to better situate the book in the current political and economic context, and we also referenced newer scholarship that has emerged since the original German edition.
AA: It is nice to know that the collaboration was so generative – especially, if you’ll permit the comparison, considering the fracases past and present over translating Marx’s Capital.
A translation always involves ferrying concepts over into a new context as well as a new language. What does it mean for this book to be arriving in English, not just in the U.S. and U.K., but into a wider English-reading world? What kind of reception do you imagine it might find in the Global South, where questions of global governance and monetary autonomy are so urgent?
MS: I think one obvious connection is to the question of dollar hegemony. The U.S. dollar became the central global currency under Bretton Woods, which continued in the post-Bretton Woods system of floating exchange rates and free capital movement. That arrangement gave the United States immense privileges and power. But it also created major disadvantages—especially for countries in the Global South, many of which have little or no monetary autonomy because of the global financial architecture.
I think we’re now seeing a long-term trend that could weaken the dollar’s dominance and open space for more solidaristic or pluralist monetary frameworks. Although dollar hegemony remains intact, more voices question its permanence and, with it, the ability of the United States to sustain its unparalleled geopolitical influence. This moment in time echoes the 1970s, when monetary policy reflected the rivalry among global powers and the careful management of alliances. The introduction of the BRICS currency basket and the resulting prospects of de-dollarization—coming in the wake of Brexit and the eurozone crisis—have lent new weight to forecasts of re-regionalization, often pivoting on monetary policy. Still, despite talk of deglobalization and clear signs of declining capital flows, the share of transactions conducted in dollars has remained relatively stable over recent decades. Nonetheless, the U.S. “dollar creditocracy” is increasingly threatened by the internal contradictions of quantitative easing, while the current account and budget deficits of the United States continue to exert downward pressure on the dollar and intensify resentment of U.S. unilateralism.
JR: The book focuses on the intellectual history of neoliberalism, but the implications do extend to the political economy of global finance. The “dollar-Wall Street regime,” as Peter Gowan described it, took shape in the wake of these monetary transformations. Understanding that context can be useful for those interested in the Global South.
And it’s not just about geography—it’s also about sectors of capital. The rise of finance in the U.S. came at the expense of other sectors, principally manufacturing. Judith Stein emphasized this when discussing the 1970s. If, say, China were to pursue establishing the renminbi as a world reserve currency and the further development of high finance, that might raise the prospect of a trade-off with export competitiveness. These are ongoing contradictions in the global system.
MS: The explosion of financialization since the 1970s—everything from deregulated markets to precarious labor—depends on the transformations that this book tracks. Floating exchange rates and capital liberalization weren’t just abstract ideas; they were conditions for a whole new regime of capitalism.
And we may now be at another turning point. The “Nixon shock” responded to mounting economic pressure. Today, we are witnessing a “Trump shock” with similarly destabilizing effects, threatening the very foundations of the Western, U.S.-centric, rule-based and liberal trading order at the heart of this book. Plus, new forms of money—especially digital currencies—are reshaping the landscape again. They pose serious challenges to democratic control over monetary flows, just as neoliberal reforms did decades ago.
And that’s another major point: the question of money’s form is becoming more pressing. Digital currencies—whether state-backed or private—are gaining influence and will likely play a major role in shaping our societies.
What’s interesting is that they combine features from two different historical models. On one hand, like the gold standard, they are undemocratic in the sense that they operate outside traditional mechanisms of public control. There's no democratic oversight of money creation or allocation beyond individuals buying or selling the currency.
On the other hand, like the policies of quantitative easing over the past decade, they open the door to further financialization. These new monetary technologies can deepen the logic of capital accumulation, while bypassing fiscal tools that once enabled some form of democratic redistribution or economic planning. So again, we face a new articulation of old dilemmas—ones that neoliberal thinkers grappled with as well, though from very different positions.
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Joshua Rahtz holds a doctorate in history from UCLA and teaches in Berlin.
Matthias Schmelzer is Professor for Social-Ecological Transformation at the University of Flensburg and director of the Norbert Elias Center for Transformation Design & Research. He is author of the award-winning The Hegemony of Growth: The OECD and the Making of the Growth Paradigm (Cambridge, 2016) and co-author of The Future Is Degrowth: A Guide to a World beyond Capitalism (Verso, 2022).
Andrew Anastasi is the Postdoctoral Fellow of the History & Political Economy Project. He is the editor and translator of The Weapon of Organization (Common Notions, 2020) and author of The Other Anti-War Movement: The New Left in and against the War on Poverty (under contract, University of Minnesota Press).