NEO-LIBERAL IDEOLOGY AND POLICIES IN HISTORICAL PERSPECTIVE/183It was only in the middle of the 19 70s, when Hayek's works figured
prominently in the readings that Keith Joseph [Thatcher's
economic adviser and participant at Mont-Pelerin meetings] gave
me that I really grasped his ideas. It was only at that point that I
considered his arguments from the point of view of the type of state
dear to Conservatives (a limited government based on the rule of
law), as opposed to the point of view of the type of state to be
avoided (a socialist state where bureaucrats ruled unchecked).
(Thatcher, The Path to Power, 1995; quoted in Udry, 1996)ROBERT LUCAS AND THE DENIAL OF INVOLUNTARY
UNEMPLOYMENT
The neo-liberal counter-revolution has added a whole new
dimension to reactionary ideas.
According to Robert Lucas, who describes himself as a partisan of
'new classical macroeconomics', involuntary unemployment does
not exist. For Keynes, the existence of involuntary unemployment
was a given. However, according to Lucas, unemployment is caused
by the choices a worker makes between work and leisure. Lucas
argues that any economist seeking to understand changes in the
labour market must postulate that workers make rational choices
between the amount of work time and leisure time. In other words,
an unemployed worker is a person who has chosen to increase leisure
time, even if this means his or her revenues fall or disappear.
In line with the classical orthodoxy targeted by both Marx and
Keynes, Lucas argues that there is a natural rate of unemployment,
and that it is counter-productive for governments to seek to influence
this rate with pump-priming job-creation measures.
Lucas is a professor at the University of Chicago; in 19 9 5, his con
tribution to the neo-liberal offensive was rewarded with the Nobel
Prize for economics.
He and his colleagues made a radical critique of Reagan's policies,
rightly arguing that they had strayed from monetarist orthodoxy.
They approved Reagan's monetarist plans to reduce the money
supply; but said that tax cuts and high military spending - which
could only widen the public deficit - were incompatible with this
objective. They backed cuts in social spending and opposed the
increase in military spending.