The political history of the Austrian School of Economics in the Interwar period

Building on recent research of the Austrian School of Economics (ASE) by scholars like Hansjörg Klausinger, Quinn Slobodian or Janek Wasserman, and attempting to address in gaps and desiderata in this field, historian David Mayer and myself have dedicated much of the last four years to identifying untackled sources and unanswered questions. The Vienna Chamber of Labour and the Institute for Historical Social Research were key partner and funders of this work.

An exploratory study published in 2021 (see below) was followed by the development of an archival research tool for this subject in 2022.

In 2023, David and I set out to dig deeper into key issues that we had identified; David into Ludwig Mises' role for the so-called Socialist Calculation Debate, and I into the controversy between the Chamber of Labour and the Chamber of Commerce preceding the foundation of the Austrian Institute for Business-Cycle Research in 1926. Both papers shall be published in 2024/25 as part of a themed issue of contemporary history Journal to be co-edited by David and myself.

In January 2025, we organize a workshop to create interdisciplinary research networks (history, economics, sociology, philosophy) on the ASE and other actors in Interwar political economy.

The Austrian School of Economics as a Political Tendency – Origins, Developments, and Networks in Austria
David Mayer / Berthold Molden, 2021

This study is concerned with the origins of Neoliberalism, or more precisely: with the societal conceptions of the third generation of the ASE and with its epistemic and political networks. Its focus lies on the development of the ASE and of its representatives with the strongest international impact, Ludwig Mises and Friedrich Hayek, during the years 1918 through 1945. This is period when the ASE reconstituted itself after the collapse of the Hapsburg Empire and, from the 1930s onwards, moved its center to the anglophone world.
The key questions of the project are: Which were Mises’s and Hayek’s fundamental attitudes towards democracy and the republic, authoritarianism and Fascism, labor struggle and revolution, as well as the role of the state in economic issues? How were these attitudes related to each other? Which political experiences in the context of their times were decisive for them? And above all: Which networks and institutional connections allowed for the dissemination of these ideas?
The analysis of the two main actors’ key writings from the interwar period shows a merely functional affirmation of democracy – they hold democracy as useful as long as it serves a reliable legal order and exerts a guarantee function for the principle of free markets. Furthermore, theirs is an idea of a “democracy of the few,” i.e., of the property-owning and entrepreneurial classes, within a concept of civilization that explicitly defines capitalism as the goal of development. The organized labor movement is seen as a force detrimental to this objective and the wage dispute of unions, in particular, is considered an illegitimate praxis of violence that has to be restricted. Hayek also vehemently argues against rent control.
In order to break the power of organized labor, Mises and Hayek ultimately consider authoritarian systems and means as legitimate. Their attitude towards Austro-Fascism and Fascist ideology in general, however, has to be analyzed against the backdrop of their own biographies such as limited career options, emigration, personal competitive relationships with colleagues etc. In both cases, ideological changes can be observed: Mises’s eloquent rejection of Austro-Fascism during his US emigration has to be juxtaposed to his role as a regime advisor in the years 1934 through 1938; and Hayek developed from a “mild Fabian Socialism” into an uncompromising campaigner against any kind of economic planning. Furthermore, the imprint left by their intellectual precursors such as Friedrich Wieser in the context of the collapsing Hapsburg monarchy is interesting.
The ASE’s conceptions of global order, which were to become highly influential in later decades, were also set during the 1920s. In this respect in particular, our study expands upon recent scholarship by Philip Mirowski, Dieter Plehwe and Quinn Slobodian. The ASE thinkers strived to establish supranational order to ensure their fundamental economic positions (free trade and free capital movement of capital, protection of investors and property). The model they had in mind was the “Austrian” version of “Eastern Central Europe.”
In conclusion, the paper drafts some essential research questions for future inquiries into the political history of the ASE.