Exclusive: Oil and Tobacco Explain Funding of Neoliberalism

The Institute of Economic Affairs (IEA) helped Thatcher's rise to power and when she became prime minister she followed their programme. This success allowed the IEA to fundraise from industry giantsincluding oil and tobacco.

Friedrich von Hayek, the architect of a Thatcherism defined by its the privatisation, tax breaks and strike breaking, would be officially recognised in December 1984. He had already received the Nobel Prize for Economics—but this was the real highlight.  

Hayek was made a member of the Order of the Companions of Honour by the Queen, on the prime minister's recommendation, for “services to the study of economics”.

The audience with the Queen was followed by a jubilant dinner with family and friends at the Institute of Economic Affairs. “I've just had the happiest day of my life,” Hayek said.

Margaret Thatcher in turn thanked Fisher, Harris, and her sponsors at the IEA during its 30th anniversary dinner at Grosvenor House in April 1987.

Fisher flew over from the United States for the auspicious occasion. He was at this point 72 years old, and finally considering retirement.

He had recently hired John Blundell, a childhood admirer of the IEA and a friend of Thatcher's, to take over as president of his US-based Atlas Economic Research Foundation.

Effective fundraiser

Blundell was then head of the Institute of Humane Studies, with a reputation as “a highly effective manager and fundraiser”.

Fisher had a lot to celebrate. Thirty years ago his ideas were at the very margins of respectability, and the free market seemed like an economist's shameful fantasy.

Yet, during the previous year alone, the government had implemented the “Big Bang”, with regulations for the savings and investment industry torn asunder. Then, in December 1986, British Gas was sold off in its entirety for £5.6 billion.

The anniversary dinner was held. Lord Blake told the dinner guests: “No single body has contributed more than the IEA to the long overdue destruction of étatisme and to the recovery of Britain.”

Finally, it was Thatcher's turn to speak. “Anyone who dared to challenge the conventional wisdom of the post-war consensus was derided, pilloried, criticised, frowned upon, and looked down upon as being either reactionary, pitiful, or ignorant,” she said.

“The IEA dared to challenge that. You did not say, as so many others did so, 'what can a few people do among so many'.”

You set out to challenge, to change public sentiment… once you, with your courage, gave expression to other views, others followed… what we have achieved could never have been done without the leadership of the Institute of Economic Affairs.”

John Blundell was in the United States at the time, but soon got hold of the gossip from the night. “I heard she was infuriated at how long the 10 men ahead of her spoke,” he told the author.

Bleeding heart

“She tried to convince Fisher that evening to allow the Tory party to take over the IEA, and he was appalled at the idea, and said 'no way!'” Lawson, it appears, did not attend.

He was, at that time, working on a project to tie aide to developing countries to Thatcherite economic reforms. As he himself said, “I was not known, for good reason, as a bleeding heart.”

Harris, the indefatigable fundraiser, made good use of Thatcher's kind words. He wrote to British American Tobacco, British Petroleum, and Esso (later to become part of ExxonMobil), asking for an increase in contributions.

“If you had been at the anniversary dinner and heard the PM say 'what has been achieved would never have been done without the leadership of the IEA, you would agree we should do all we can to strengthen its work in the decisive years ahead,” he wrote in a note to Patrick Sheehy, the non-smoking BAT chairman.

“You have been among our strongest supporters over the years, and are already entitled to share the tributes paid to our success. I question whether I dare address a further appeal to you for the fund of £600,000, to acquire the freehold of 2 Lord North Street or an alternative permanent address. Before going public, I'd like to collect pledges for at least £200,000 from a dozen or so special friends.” 

Internal documents released after legal action show that BAT agreed to pay £10,000 to the appeal. “We didn't get anything out of it except we got some ideas, and we talked about free enterprise and the market economy and things like that.”

Capitalist environment

“They got a lot of support from us,” Sheehy told the author. “The benefit to shareholders is that, in a capitalist company, you would want a capitalist environment to thrive… The less regulation the better. Although there's obviously got to be some, but it's got to be a minimum.”

British Petroleum, then 31 per cent owned by the state, agreed to donate £20,000 on top of its annual subscription of £10,000 a year. Esso paid considerably more, according to Clive Wright, who was the director of corporate affairs at the time.

The chairman, Norman Foster, attended Malborough Grammar with Harris, and the two were lifelong friends. “When I was there, we were big supporters of Hayek. We gave them a major donation when they wanted to buy the premises at Lord North Street,” Wright recalled.

“I met Ralph quite a lot at a lunch couple of times in the House of Lords. Very interesting man, very lively and in depth, very much a free thinker. The last thing I want to give you is an impression of anything improper.”

He went on to add: “We had a very strict policy that we did not get involved politically… of course we are free market company, so naturally we believe in the free market. Yes, we didn't like state control, particularly in something as sensitive as oil.”

The IEA, at the height of its influence and long before climate change was an issue, was bankrolled by Big Oil and Big Tobacco as both industries fought regulation and taxation.