NEO-LIBERAL IDEOLOGY AND POLICIES IN HISTORICAL PERSPECTIVE/177Within this framework, Walras also developed a theory
postulating a system of general equilibrium. This theory is very much
in vogue among today's neo-liberals. In such a system, society is
defined as a natural mechanism (akin to a biological organism and
the solar system) within which individuals freely ensure the most
effective allocation of resources, thereby guaranteeing optimum
economic performance.
Finally, to complete the list of references for today's neo-liberals, we
must add the quantitative theory of money. This theory can be found
in Smith's and Ricardo's work and has been around since at least the
sixteenth century. It explains price movements as being a result of the
quantity of money in circulation.
Taken together, all these references are described by some
economists as forming a 'neoclassical' synthesis. As Michel Beaud
and Gilles Dostaler have pointed out, 'Through it all, real life has per
sistently contradicted the analysis of many classical and neoclassical
economists whereby the free functioning of the markets is enough to
guarantee the full use of resources and their optimum allocation'
(Beaud and Dostaler, 1995).
Marxist scholars, beginning with Marx and Engels themselves,
refuted the different component parts of this rather eclectic body of
theoretical work - at a time when Marxism influenced a large part of
the international working-class movement.
By his own admission, Keynes himself had originally championed
the liberal cause. Yet 75 years after Marx and Engels, he developed a
radical critique of a number of the central tenets of the classical
(liberal) economic creed. In response to Smith and Say, for example
(and like Marx), he highlights the important contributions of the
mercantilists (Keynes, 1936, chapter 23). However, he stood by the
liberal creed on a number of other matters - on such key questions,
for example, as the definition of real salaries as being equal to the
marginal productivity of labour (see Beaud and Dostaler, 1995).
MORE ON THE ECLIPSE OF LIBERALISM
As a result of the crisis of the 1920s and 1930s, anew wave of critics
tackled the neoclassical creed on a largely pragmatic basis. This new
wave was international; it involved political leaders and economists
belonging to various currents: enlightened bourgeois thinkers,
socialists and Marxists. In a context of mass unemployment and