How To Move a Nation
Could a chicken farmer and two economists change British history?
1946: Recently demobilized from Britain's Royal Air force, highly decorated fighter pilot Antony Fisher finds in the Reader's Digest a condensation of F.A. Hayek's classic critique of socialism, The Road To Serfdom. It confirms his own worries about his country's tilt toward socialism.
Traveling to London, Fisher seeks out Hayek at the London School of Economics (LSE). "What can I do? Should I enter politics?" he asks. With Fisher's war record, good looks, gift for speaking, and excellent education, it is no idle question.
"No," replies Hayek. "Society's course will be changed only by a change in ideas. First you must reach the intellectuals, the teachers and writers, with reasoned argument. It will be their influence on society which will prevail, and the politicians will follow."
1949: Ralph Harris, a young researcher from the Conservative Party, gives a Saturday afternoon lecture in a small village in southeastern England. Fisher—now a farmer—is present and loves what he hears. Taking Harris aside after the meeting, he explains his ideas for an organization to make the free-market case to intellectuals. "One day," he says "when my ship comes in, I'd like to create something which will do for the non-Labour parties what the [socialist] Fabian Society did for the Labour Party."
Harris is excited. "If you get any further," he says, "I'd like to be considered as the man to run such a group."
1953–57: In 1953 Fisher starts what is to become the highly profitable Buxted Chicken Co., the first attempt at factory farming in Britain. By September 1954, it is showing a profit, and he can begin to think more about starting a free-market institute.
In November 1955, Fisher and two friends sign a trust deed establishing the Institute of Economic Affairs. Looking for someone to run the IEA, Fisher remembers Harris. They have not communicated since that first meeting in 1949. Harris is now 31 and, after seven years teaching economics at St. Andrews University in Scotland, is writing editorials at the Glasgow Herald. In June 1956, the intellectual Harris meets the businessman Fisher in London. On the promise of a starting budget of £1,000 and a part-time salary of £10 a week—the same starting salary as Buxted Chicken's general manager—Harris agrees to become the new Institute's general director on January 1, 1957.
Also in the summer of 1956, the embryonic Institute interests economist Arthur Seldon in writing a paper on pensions. A former socialist and the son of a cobbler from London's East End, Seldon had become a classical liberal while studying at the LSE. Within weeks of reaching London, Harris meets Seldon and an extraordinarily fruitful partnership begins.
1987: It is early January and cold. Some 30 years have passed since Ralph Harris—now Lord Harris of High Cross—left Scotland. Today, sitting in the offices of the IEA in London—so close you could hit a cricket ball through Parliament's windows—he reviews the list of 250 major corporations that support its work; it has a budget approaching $1 million and a staff of a dozen. For the past decade, its ideas have clearly been in the ascendancy. Some commentators have gone so far as to call the IEA's cramped offices the home of the new orthodoxy.
South of London in his home in rural Kent, Arthur Seldon, now 70 but as active, creative, and productive as ever, also reviews a list. It is a list of over 300 titles he has produced and more than 500 authors he has nurtured and developed for the IEA. On his coffee table lie copies of the Institute's glossy bimonthly magazine Economic Affairs and a new book, The Unfinished Agenda: Essays on the Political Economy of Government Policy in Honour of Arthur Seldon, containing chapters by 11 internationally renowned economists including Milton Friedman, F.A. Hayek, James Buchanan, and Gordon Tullock.
Six thousand miles west, in downtown San Francisco, Antony Fisher enters the offices of the Atlas Economic Research Foundation, which he established in the 1970s to aid and encourage the formation of new institutes around the world. Now a full-time think-tank entrepreneur, he too has a list—36 institutes in 18 countries, all based on the IEA model.
On the walls of the former house where IEA has its offices hang the portraits of famous economists, most notably Hayek, Friedman, and Ludwig von Mises—but also John Maynard Keynes. And hanging there, too, is Keynes's famous statement that "the ideas of economists…are more powerful than is commonly understood." It is from here that the IEA team has steered market ideas from total heresy to partial orthodoxy—at least in certain quarters.
Looking back to his decision 30 years ago to give up a secure, well-paid job to risk his future and that of his young family in the service of an unpopular cause, Harris laughs so loudly the tape jumps. "I was mad!" he says, and one can almost believe him. "I did not calculate the risk at all! Fisher's enthusiasm and my desire to return to London and do something were sufficient."
Arthur Seldon was more careful. Becoming part-time editorial director in June 1959, he managed to hold onto his main job as an economist for a brewing-industry association until he too became full-time in July 1961. Ever since his days at the LSE in the mid-to-late '30s, Seldon had wanted a chance "to fight back." This was it.
Government planning was in its ascendancy. Market ideas were scoffed at as oldfashioned—or worse. Recalls Jack Wiseman, a University of York professor long associated with the IEA: "One day leaving the London School of Economics a fellow economist asked if I could use a lift. I said I was going to the IEA. 'Good God,' he replied, 'you aren't one of that Fascist lot, are you?' I went to the IEA—he later became Governor of the Bank of England!"
Says Harris, "We were a scorned, dismissed, heretical minority. There was a preordained path for the state to regulate, to plan, and to direct—as in war, so in peace. If you questioned it, it was like swearing in church. At times this overwhelming consensus intimidated us, and we sometimes held back. We often felt like mischievous, naughty little boys."
It was not at all clear at first exactly what the new institute would do in the face of such widespread, deep-set hostility. The strategic choices Harris and Fisher faced were limited. British laws governing charitable institutions, as well as Hayek's advice and their own distaste for the political process, ruled out any kind of lobbying and direct involvement with public policy.
One possibility was a broad-based populist organization. Founder Antony Fisher, who admired the popularizing work done by Leonard Read's Foundation for Economic Education (FEE) in the United States, favored this approach and would regularly send Harris heavily marked copies of FEE publications. Although Harris liked much of what he read there, he felt they were not scholarly enough for the job in the U.K.
While Fisher and Harris were debating, Arthur Seldon resolved the question. In the summer of 1957, he handed in the manuscript entitled Pensions in a Free Society, which was to become one of the first IEA publications. It was well-reasoned, thorough, nonpolemical, and of interest to scholars and specialists—but also easily accessible to lay audiences.
Seldon himself believed that market ideas, through education and persuasion, would out-flank the politicians by first winning over the intellectuals and journalists, whom Hayek had once dubbed "second-hand dealers in ideas." To this day he uses a military analogy. The IEA would be the artillery firing the shells (ideas). Some would land on target (the intellectuals), while others might miss. But the Institute would never be the infantry engaged in short-term, face-to-face grappling with the enemy. Rather, its artillery barrage would clear the way for others to do the work of the infantry later on. The IEA would show why matters had gone wrong and set out broad principles, while others would argue precisely how matters should be put right. Fisher, whatever his personal preferences, stepped back and let Harris and Seldon run things.
The IEA has from the beginning concentrated on publishing papers and pamphlets for an intellectual audience, works whose sole concern—in the words of the IEA's first brochure—would be "economic truth" unswayed by current "political considerations." The goal of these efforts, the IEA said, was a society in which people would understand free-market economics "together with an understanding of the moral foundations which govern the acquisition and holding of property, the right of the individual to have access to free competitive markets and the necessity of a secure and honest monetary system."
An early problem was finding outside authors willing to put pen to paper for the fledgling Institute. "We were old hat, old-fashioned," comments Seldon, "and Ralph and I had to work on everything." After Seldon's Pensions appeared, they collaborated on books about consumer credit and advertising. The latter proved good advertising of its own. When left-wing economist Nikolas Kaldor criticized the book, recalls Seldon, "This criticism made a very favorable impression in the corporate world. Companies began asking 'How can we help?' to which we would say, 'Send us a check!'"
From the start, Harris and Seldon were adamant that they would always be independent of their financial contributors. This meant not only never seeking nor accepting taxpayers' money but also making sure all donations were "without strings." Seldon remembers warning potential corporate donors, "We shan't say what you want."
Slowly but surely the IEA began to find an audience. From the start, its books were well reviewed, not by economists but by journalists in the financial and general news press. The reviewers liked them, says Harris, because "they were not polemical but well-researched and documented. Facts and figures—not theory—won us acclaim in the early days and led to meetings with editors and journalists."
But by the early '60s, economists began to accept the presence of the maverick IEA, and a few even began to suggest titles of papers they might contribute. Founder Antony Fisher wanted to see "an IEA paper on every topic that might be discussed." The result was the Hobart Papers, named after the Institute's new address in Hobart Place.
At the time, it was doubtful that the Hobart Papers would find an audience, recalled Norman Macrae of The Economist in 1984. "I remember writing a polite review of Hobart Paper 1 in early 1960, but saying privately that the venture would probably go bust, and that only a fool would write Hobart Paper 2," he wrote in a pamphlet marking the 100th Hobart Paper. "This last proved true prophecy, because I proceeded to write Hobart Paper 2 myself."
The object of Macrae's skepticism—the first Hobart Paper—was Basil Yamey's Resale Price Maintenance and Shoppers' Choice (1960). Fisher himself had balked at the publication of this work. He thought the topic—why manufacturers shouldn't be allowed to require all retailers to sell products at the same price—overwhelmingly dull and unimportant and Yamey's treatment to be far too scholarly. He feared nobody would read it. "I can remember saying to Ralph, who sent me the draft, that it was so dull, couldn't I have 'more fun for my money,'" Fisher says. But Harris and Seldon prevailed.
Yamey's paper was an instant success, going through four editions in five years. One reason, according to Macrae, is that "it contained the newsworthy—though underestimated—figure that Britons were paying £180 million more a year on price maintained goods than they would have done in a freely competitive market."
In fact, this was one of the rare occasions when an IEA publication had an immediate impact directly on policy rather than on the atmosphere or environment of ideas. Edward Heath, a young, rising politician and president of the Board of Trade, seized on the price-maintenance issue and piloted legislation through Parliament in the face of a great deal of hostility, especially from small shopkeepers. At the height of this hostility, he had lunch at the IEA with Yamey, Harris, Seldon, and Fisher. Pointing directly at Yamey, he complained, "You are the cause of all my trouble!"
Throughout the '60s the IEA grew, adding several new series of titles. The model, later to be adopted around the world, became clear: a flow of well-written, scholarly but accessible studies in applied market economics, released to the press and sold to universities, high schools, and the general public.
Of equal importance was the IEA's emergence as a focal point, a haven, and a meeting place for a growing but still small group of market advocates. "I remember in the '60s," recalls Fisher, "at one of our poultry industry black-tie dinners, a speaker, a Socialist farmer, made a joke at my expense. He said that Antony Fisher was employing the last two economists who believed in free markets."
But there were more than two, and through the IEA, an informal network of people from academia, the media, the professions, and the business world developed. It was somewhat formalized in the late '60s with the introduction of the monthly Hobart Lunch, where newly published IEA authors would speak briefly about their work. But the network has in many ways remained an unintended, unplanned, and informal consequence of the growth of the Institute.
In the early days, both Harris and Seldon had pitched in on all fronts. But as they achieved some measure of success, a division of labor emerged: Harris would raise money, while Seldon concentrated on his authors and their products. Their personalities, says Milton Friedman today, "fitted together like hand in glove."
Harris is the PR man, bubbling and bursting with new ideas and suggestions, a salesman able to peddle the ideas and products of the Institute in any forum. Seldon, introverted by contrast, is, in Friedman's words, "a perfectionist when it comes to writing, editing and publishing, and an enormously hard worker who over the years is more responsible than any other single person for the consistently high quality of IEA publications." Says Harris, "If I'm dressing the window, it is Arthur who is stuffing good things on the shelves."
In the first half of the '70s, those shelves began to include an international element. To "classical" political economy à la Adam Smith, Seldon added publications by Hayek, leader of the Austrian school of economics; Friedman, leader of the Chicago school; and Buchanan and Tullock, leaders of the public-choice, or Virginia, school. Although their approaches differed, Seldon saw them as "all reinforcing each other and the work of the IEA."
Of these three schools—all foreign and new to most Britons—Friedman's writings on monetary policy clearly had the greatest immediate impact, coming as they did at a time of high inflation. "At the last General Election," wrote influential Conservative intellectual Jock Bruce-Gardyne in a 1978 article on the IEA, "I was confronted by a young working farmer who intervened in an argument over incomes policy at a village election meeting to say that this was all nonsense: we were suffering from inflation because we had failed to control the money supply. He had seen Prof. Friedman on television, as had many millions of others, and been deeply impressed. It was the IEA which had brought the 'wizard of Chicago' to this country for the occasion." Over the long-term, however, the Austrian view of the market as a process and the Virginia economics of politics are arguably having an even greater influence, as they slowly but steadily permeate British thought.
The early '70s also saw the first sign that the Institute's work was having an effect on policy. Edward Heath won a come-from-behind victory over socialist Prime Minister Harold Wilson in the 1970 general election—and won on a market platform. But market enthusiasts' high hopes were dashed within 18 months. Heath made a series of critical U-turns and began to inflate the currency, bail out faltering industries, control prices and wages, and generally expand the role of government.
In retrospect, however, the 1970s must be viewed as the IEA's finest hour. Leading an established, maturing, and increasingly well-known organization, Harris and Seldon launched a barrage of timely, high-quality work. Inflation, recession, and the clear failure of big government were the background as Seldon's shells began to reach their targets, littering the landscape with shattered collectivist concepts and exploded myths, blowing apart the postwar consensus.
In 1975, the Sunday Telegraph called the IEA "the centre of useful economic activity." The London Times in 1976 said it had become the source of "a good deal of the most influential economic thinking." And in 1977, the Financial Times wrote that it was the organization to have most influenced "public economic understanding." Warned Labour Weekly: "They are the new orthodoxy and the Labour Government is by no means immune from them."
In this intellectual atmosphere, dominated by the IEA's micro-studies and macro-critiques, the opposition Conservative Party began a radical reexamination of its roots. With Margaret Thatcher as its new leader, the result was another victorious promarket election platform in 1979. This time, however, the platform didn't collapse.
Thatcher wrote to Fisher crediting the IEA with "creating the climate of opinion which made our victory possible" and rewarded Harris with a seat in the House of Lords. Impishly, Harris took it not as a Conservative but rather as an independent, or "cross-bencher." Within two years, he had established an all-party group of lords called the Repeal Group, dedicated to getting rid of legislation. Close IEA colleagues openly worry he is now concentrating on the infantry and neglecting the artillery. "He's spending too much time across the road," grumbles Seldon.
But Thatcher, he says, "has done far more than we ever expected." He points to the reform of trade-union legislation, the denationalization of many industries, the sale of over a million public-housing units, the spread of privatization in local government, the cuts in top tax rates, and the abolition of exchange controls, price and wage controls, and dividend and credit controls.
Success in the Thatcher years has had its own problems. One is the common accusation that Conservative rhetoric has become so "IEA-ish" that Harris and Seldon must be, in Harris's words, the "puppet masters." However, they have rightly been careful to keep their distance and to point out that government actions diverge from and conflict with their market analysis in many important respects. "The government keeps sidling up to us," notes Harris, "but we keep digging a trench between them and us, and we keep on with our message."
He and Seldon are also quick to point to many failures and enduring problems. "We have made no progress at all on the welfare front—health, social security, education, and much of housing. That whole sector seems to be so far wholly immune to intellectual criticism," says Harris. He believes, however, that "you can show people that a 'free' good is a pig in the poke, a swindle. In the long run we cannot lose on welfare. Education and health keep costing more and more but they can't buy off the trouble. So much emotion is tied up in all of this that it will be a bitter, bloody battle—but it will yield."
Even so, there will always be a need for the IEA "because there will always be backsliding and counterproposals from the other side. There will always be tension and a job for market liberals to do."
After 30 years, Harris and Seldon can see their work permeating all of Britain's political parties and much of academia. "Even the Labour Party," says Seldon, who believes it will never regain power, "has accepted that here is a body of work with which it has to deal." He feels that the Conservative Party is still divided between those who think "the government should run all sorts of things" and those who have accepted and embraced markets. Where this latter group has not implemented market reforms "it is for reasons they should have foreseen, such as bureaucratic and special-interest opposition," Seldon says. In the future, he sees alternating governments of Whiggish Conservatives and the Social Democratic/Liberal Party Alliance. And within the latter, this old liberal smiles and says, "Our ideas are percolating very nicely."
The fundamental change has been one of atmosphere. "Markets are no longer old-fashioned," says Seldon, "and people in the media now ask the right questions such as, 'why is (natural) gas being privatized without the deregulation to make it competitive?' That change is far more basic than the fact that Mrs. Thatcher has done a few things."
What is on the IEA's list for the near future? Seldon lists five major targets for bombardment: transport, where he wants to see studies of railroad denationalization; fuel, specifically proposals to denationalize the coal mines; health and education, which account for a high proportion of both government expenditures and employees; and, finally, local government, which he views as "inefficient, mismanaged and corrupt."
"If we tackle these five," he says, "we will be much nearer to lower taxes, more choice, the decentralization of power, and smaller government."
To what can one attribute the success of the Institute? First, there is the continuity of its work: "their hewing to a straight line of principle, without seeking to compromise in order to court short-run popularity," as Milton Friedman put it to me recently. But the Institute has not been a narrow, dogmatic church. Virginians, Austrians, Chicagoites, and market economists of no particular school (and even critics and skeptics who agonize over possible hygiene problems if garbage collection is privatized) all rub shoulders under the Institute's aegis. The IEA's success, says Chicago economist George Stigler, is "due in good part to its enlistment of many competent scholars without regard for some rigid orthodoxy."
Second, there is the continuity of its staff—not just of the principals, Harris and Seldon, but of their team as a whole: their assistant Joan Culverwell (January 1959 until recently); publications manager Michael Solly (May 1959 to date); John Wood (in various capacities throughout); and librarian Ken Smith (1969 to date).
Third, there has been the hand-in-glove Harris-Seldon partnership itself. Looking, as one newspaper has described them, "more like a pair of country solicitors than seasoned revolutionaries," their hallmarks have been politeness and courtesy, energy and enthusiasm, and optimism and fun.
Fourth, there is the Institute's location in the national capital of a small, highly centralized society. "We should have to imagine New York, Boston, Washington, Chicago, New Orleans, Los Angeles, San Francisco rolled into one to create some United States analogue to London," James Buchanan and Gordon Tullock once wrote in explaining the IEA's success.
Finally, the IEA has not fallen into the Fabian Society trap of dealing with only one party. Harris comes from a strongly Conservative background but now sits in the House of Lords as an independent. Seldon was initially socialist and then with the Liberal Party; some years ago he calculated that 20 percent of "his" authors had broadly left-of-center sympathies. His strategic placing of the Institute has clearly been of critical importance.
As the IEA enters its fourth decade, it is conducting a major reappraisal of its past successes and failures, its current position, and its future. After 20 years on the wrong side of the wall, the past decade has seen the institution and its authors come in from the cold. Thatcher's Britain has been a little heady for market economists. So much so, claims Hayek's biographer, William W. Bartley III, of the Hoover Institution, that there is a tendency to overrate politicians' commitment to and understanding of markets. The danger is that this will lull the Institute into thinking its battle is won and therefore lure it into more immediate policy work. The Fabian Society made such a mistake in 1945, and the vacuum it left made the IEA's task easier.
The debate within and around the Institute is critical—not just for the IEA's sake and not just for the sake of Britain's still floundering economy. The Institute serves not only as an intellectual center in the U.K. but also as a role model for fledglings in the worldwide network of such institutes.
At a Hobart Lunch I attended in May, Harris asked the assembled guests for their views on what the Institute's future strategy should be. Three positions emerged, neatly capsulizing the choices confronting the Institute.
The first is that the battle for market ideas has been won, so the Institute should concentrate on directly influencing policy by issuing position papers, giving evidence to parliamentary committees, and so on, à la the Heritage Foundation in the United States. In Seldon's military analogy, this would be to join the infantry.
The second position is that the battle might be won, but the perpetual war of ideas continues. Consequently, say advocates of this position, the IEA must keep to its proven formula of providing a steady stream of independent, scholarly, and timely analysis; it must keep on firing its shells and blowing up the enemy.
The third group agrees with the second but also argues for closer and wider links with academia. Economists may be moving toward a better understanding of markets, but hostility from historians, sociologists, and other scholars threatens to undermine the success of market ideas. The IEA should therefore reach out to people in these fields. To advocates of this position, the most important work will always be with the first and second-hand dealers in ideas—the scholars, intellectuals, and journalists—and never in immediate policy circles.
Whoever wins the strategy debate, the future of the IEA will depend on its people. The team that has made it successful is now retiring. At age 70, Seldon is no longer editorial director but editorial consultant. Harris is soon to step aside. Joan Culverwell has retired. And the ubiquitous John Wood will also step down soon. A colleague of Harris's at Cambridge in the '40s, a close friend and advisor in the '50s and '60s, the IEA's deputy director in the '70s, he is today acting editorial director during the search for a replacement for Seldon. Wood and Culverwell, says Milton Friedman, have "provided the underlying cement that has held the Institute together."
What road the Institute takes over the next 30 years will depend on the leadership it must find and the strategic direction it takes. Among the close to 50 people I talked with in appraising the IEA, there was a clear streak of pessimism. "While one may have a deep attachment to the IEA," commented one London attorney, "it's probably best to let it die—it's run its natural course." Many noted a dilution in its sense of mission and a failure to recruit and hold the next generation of leadership.
And yet, who would have predicted that a chicken farmer and two economists could hatch the radical changes they have? Whatever its future, the IEA has exceeded the wildest expectations of its founders.
John Blundell is executive vice-president of the Institute for Humane Studies at George Mason University.