Neoliberalism Shows Its Face

Neoliberalism is the ruling ideology of the post-Communist world, and yet no one knows what it is.

That’s the thesis of this George Monbiot column, who sheds light on the doctrine and its history. It’s a great explanation; it ties together the ideological construct of Neoliberalism with the political rhetoric which uses it as a justification, even as it denies it is an ideology at all.

Why is the private sector big business “efficient” but government spending always “waste?” Why must we turn everything over to “market forces?” Why must we always blame individuals for failure rather than systems? Why are regulations always seen as “distorting” the market? What’s up with all the “public-private” partnerships? Why should schools, hospitals, and governments be run “like a business?” Why are we forced to “shop around” for healthcare and fund our own retirements by gambling in the stock market? Why is education looked at through the prism of “return on investment?” Why have “citizens” been replaced by “consumers?” It’s all underpinned by a single ideology; an ideology maintained and elucidated by the economic priesthood:

So pervasive has Neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions, that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counter-productive and morally corrosive. The market ensures that everyone gets what they deserve.

Neoliberalism – the ideology at the root of all our problems (The Guardian)

That’s a good summary. Neoliberalism is often referred to as “free market fundamentalism,” which is a good summary of its doctrine. This article details some of the history of how it became so predominant:

Free market economists believe that markets work best when left alone, and any type of government intervention to help the economy can only have harmful effects. Even after the Great Depression, they continued to argue that the government intervention would only cause further harm, and the free market would automatically resolve the problems. However, it was obvious to all that the massive amount of misery called for urgent action. [The Quantity Theory of Money] was discredited and mainstream economists accepted Keynesian ideas, rejecting free market ideologies. US President  Franklin Delano Roosevelt (FDR) started his campaign with orthodox promises to balance the budget but converted to Keynesianism when faced with the severe hardships imposed by the Great Depression. He later said that “to balance our budget in 1933 or 1934 or 1935 would have been a crime against the American people.” In the 1960’s, the aphorism that “We are all Keynesians now” became widely accepted.

Free market ideologues like Friedman and Hayek patiently bided their time, while preparing the grounds for a counter-attack. Their opportunity came when stagflation – high unemployment together with high inflation – occurred in the 1970’s as a result of the Arab oil embargo. They skillfully manipulated public opinion to create the impression that economic problems were due to Keynesian economic theories, and could be resolved by switching to free market policies. The rising influence of free market ideology was reflected in the election of Reagan and Thatcher, who rejected Keynesian doctrines. Milton Friedman re-packaged old wine in new bottles, and the [Quantity Theory of Money] went from being a discredited eccentric view to the dominant orthodoxy… monetarists succeeded in persuading many academics and policy makers of the pre-Keynesian ideas that money only affects prices, and has no long run effects on the real economy. Central Bankers were persuaded to abandon the Keynesian idea of using expansionary monetary policy to fight unemployment. Instead, they started to focus on inflation targets. Forgetting the hard learned lessons of the Great Depression led to The Global Financial Crisis. Excess money creation for speculation led to a boom in housing and stock markets, followed by a crash very much like that of the Great Depression. Chastened Central Bankers remembered Keynes and took some actions necessary to prevent a collapse of the banking system. A deeper understanding of money could have prevented the Great Recession which followed. The truth is exactly opposite of the QTM idea that money does not affect the real economy. In fact, money plays a central role in the real economy.

The Veil of Money (WEA Pedagogy Blog)

Chris Dillow thinks that defining Neoliberalism as any sort of coherent ideology is giving it too much credit. He points out all the inconsistencies between Neoliberalism’s supposed purpose to let the Market decide, and the huge salaries and profit margins of well-connected insiders and their political cronies. “It might be that “neoliberalism” is not so much a coherent intellectual project as a series of opportunistic ad hoc uses of capitalist power.”

Most leftists, I reckon, would describe all the following as distinctively neoliberal policies: the smashing of trades unions; privatization; state subsidies and bail-outs of banks; crony capitalism and corporate welfare (what George calls “business takes the profits, the state keeps the risk”; the introduction of managerialism and academization into universities and schools; and the harsh policing of the unemployed.

What do they have in common? It’s certainly not free market ideology. Instead, it’s that all these policies enrich the already rich. Attacks on unions raise profit margins and bosses’ pay. Privatization expands the number of activities in which profits can be made; managerialism and academization enrich spivs and gobshites; and benefit sanctions help ensure that bosses get a steady supply of cheap labour if only by creating a culture of fear. Ben’s claim that neoliberalism is happy with a big state fits this pattern; big government spending helps to mitigate cyclical risk.

All this makes me suspect that those leftists who try to intellectualize neoliberalism and who talk of a “neoliberal project” are giving it too much credit…. Perhaps neoliberalism is simply what we get when the boss class exercises power over the state.”

Over-estimating neoliberialism (Stumbling and Mumbling)

Dillow points out that many recent phenomena have nothing to do with markets, and everything to do with enriching a small elite. In fact, truly free markets would compete away excess profits. But if you sell off the commons to rent-seeking investors who can depend on taxpayer money and game the system, you would see guaranteed high profits supported by state money. And if markets were run by monopolies and oligopolies where barriers to entry and regulations kept out competitors, you would see excess profits as well:

…one feature of the neoliberal era has been the soaring wages of those claim to deny the power of markets. CEOs – who are in effect central planners – and financiers who aspire to beat the market have seen their pay increase massively since the 80s. That’s not something that would have happened if market ideology has triumphed.

That’s the point of this article: High Profits Mean Capitalism is Cooked (BoingBoing):

The efficient markets hypothesis holds that high margins attract competitors, who whittle them away to next to nothing, spurring firms to innovate to create new products, services, and methods that are more efficient, benefiting the wider society. This process is the whole moral and utilitarian basis for “free market” capitalism, the idea that if you let companies compete without limitations, they will force one another to ever-greater heights of innovation, efficiency, and productivity, giving all of us more for less.

When firms — and sectors — enjoy consistent high margins, there’s something wrong. The only way that’s possible is if the companies are cooking the process: securing monopolies, conspiring to fix prices, capturing their regulators and using regulation to keep new entrants out of the market. Collectively, these activities are called “rent-seeking” and preventing them is, in free market ideology, the most important function of the state. Without an extra-industrial referee to police rent-seeking, it will grow to dominate every industry, since investors and managers and employees tend to prefer to lay down their arms and use collusion and capture to secure their positions, rather than constantly striving. Without constant vigilance, there’s no markets, only crony capitalism.

So Neoliberalism in real life has been a way of cooking the markets, a way for managers to gain control of the state. But herein lies a paradox: capitalism needs a state strong enough to maintain it, but such a strong state can by captured. “Because Markets” is just an ideological smokescreen for the looting of society, what David Harvey calls a “new enclosure movement,” where the commons is sold off to the investor class for profits, and access is restricted to those most able to pay.

No doubt libertarians would be quick to label this as “crony capitalism”–their catch-all for when the market delivers lass than optimal outcomes for the majority of people.
As for the crony capitalism charge, this Reddit user makes some good points about the use of that all-purpose, “get-out-of-jail-free” card by defenders of the status quo:

I’ve been reading a lot of comments by people who wedge the word “crony” before “capitalism,” as if it somehow constitutes a meaningful defense of the neoliberal religion.

Capitalists seek profit by almost any means necessary. If it means corrupting the state (assuming the state wasn’t corrupt in the first place…), siphoning off money from “entitlement spending,” (ex: Walmart administering food stamps or hospitals over billing patients on Medicare/Medicaid), lobbying politicians for local development subsidies for the ostensible purpose of creating jobs and revitalizing industry, etc. (basically, whatever the fuck will help them realize additional profits), that IS the essence of the system. It’s not some distorted, deviant version of it; ergo, crony capitalism is the logical outcome.

If they want to play the “well, that’s not REAL []” game, perhaps they should accept the argument that the USSR/Maoist China didn’t represent “real communism.” I’d love to see how that goes.

Second, crony capitalism is the symptom, not the problem. Laws from a century ago in America were designed to curb/regulate the problems of capitalism. Those regulations did not cause the problems themselves. (Need to stress this point over and over again, some people seriously think it was unicorns and fairies before the evulllllll gubminttt stepped in)

An apt analogy for this level of delusional thinking is if someone contracts tuberculosis and visits a doctor, who prescribes antibiotics. The antibiotics work for a while, but a few resistant strains survive and return with a vengeance. The antibiotics no longer work…of course, nobody reasonable would say “yeah, the solution is to roll back on the meds, because then the Mycobacterium tuberculosis will die off.”

Or as I put it, crony capitalism IS capitalism. It always has been. But since history was purged from the field of economics in favor of abstract math and ideology, we are told to forget that fact. Michael Perelman’s “Railroading Economics” tells much of this sad story. Crony capitalism is the default mode.

A trenchant example of this is the dismantling of health care and higher education in the United Kingdom. The bleeding of higher education is described in this article by Trainspotting author Ian Welsh:

As with the economy, so too with higher education; Thatcher might have set up the Student Loans Company, but it was Blair’s government who introduced tuition fees with the Teaching and Higher Education Act of 1998. This was followed by the draconian act of 2004, which increased fees from £1,000 [$1,400] to £3,000 [$4,300] pounds.

Since then, paid higher education has remained a political consensus in English politics (a Liberal Democrat pledge to abolish fees when in coalition partnership with the Conservatives was swiftly reneged upon), though not in Scotland, where remarkably, in the devolved parliament, the SNP administration still supports free tuition.

So student loans and debts are not an incidental strategy. They represent the starting point of inducting people into a life package of debt-servitude, which includes mortgage and car loans. In more innocent and economically buoyant times, we used to call this credit. In the words of leading American-Canadian critic and social theorist, Henry Giroux: “Higher education is viewed by the apostles of market fundamentalism as a space for producing profits, educating a docile labor force, and a powerful institution for indoctrinating students into accepting the obedience demanded by the corporate order.”

When the US media, such as the New York Times or the Wall Street Journal, discuss student debt, it’s from a neoliberal perspective, with the question being: how can politicians prevent the banks from losing money on these debts? The invariable answer: by tightening the screws on the debtors. The banks got the government to guarantee such loans, which gives politicians the leverage to contend that they must protect the taxpayer and make these shiftless students pay. Even if the taxpayers in question are often the parents of the indebted students.

The Wall Street Journal recently described student loans as just another example of Obama’s socialism. A fairly ludicrous contention, as the American state neither runs the education system nor provides its financing. As in the UK, tuition fees in the US have risen steeply over the last decade. The socialism is reserved for the banks who benefit from this and other scams, as they are deemed “too big to fail” by Anglo-American capitalism. For everybody actually in the education system, the story is one of privatization and financialization.

How the Banks Stole Higher Education (VICE)

And the dismantling of Britain’s National Health system is described well by this comment to a Reddit discussion of the walkout strike of England’s emergency room doctors:

Step 1: Intentionally under-fund the NHS, transforming surplus creating hospitals into debt ladden hospitals ‘un-able to manage themselves’.

Step 2: Divide the workforce, for example a bad new contract for some staff.

Step 3: Push hospitals into crisis and paint staff in a negative light to gather public support.

Step 4: Effectively degrad personal morale to initiate highly skilled migration out of the NHS to value appreciating organisations (Private Practice and Overseas health services) with aim for a critical mass of vacant positions.

Step 5: Portray the NHS as failed and ‘not a fit for modern society’.

Step 6: Sell easily saleable/profitable hospitals to private management companies.

Step 7:Split the NHS emergency and elective services and allow private companies e.g. ABC Healthcare sell priority to healthcare for a price (Need a operation? Pay or have insurance to get operation straight away and not wait 12 months until it’s an emergency).

Step 8: Engage TTIP laws to allow American medical/pharmaceutical companies to force contracts under threat of lawsuit against the British Government, Crown and People.

Step 9: Keep the worst performing assets and hospitals, and proclaim that ‘We have saved the NHS’.

Step 10: Retire and profit.

To which some commenters added:

It really is phenomenal how much and how fast the conservative government strips and cuts through all that has been painstakingly built over the years. Afterwards one can then claim to have solved the deficit issue and help your friends in the private sector, while the average Joe is left with unaffordable, inadequate services. Yay…

Yep, the strategy is called “starve the beast” and has been used for decades by US Republicans.

England’s Doctors Walk Out of Emergency Wards in First Ever All-Out Strike(Reddit)

So Neoliberalism is still destroying and dismantling the world, heading us forward to a kind of neofeudal order. And it seems unstoppable. Yet we’re finally seeing a backlash all over the world:

The greater the failure, the more extreme the ideology becomes. Governments use neoliberal crises as both excuse and opportunity to cut taxes, privatise remaining public services, rip holes in the social safety net, deregulate corporations and re-regulate citizens. The self-hating state now sinks its teeth into every organ of the public sector.

Perhaps the most dangerous impact of neoliberalism is not the economic crises it has caused, but the political crisis. As the domain of the state is reduced, our ability to change the course of our lives through voting also contracts. Instead, neoliberal theory asserts, people can exercise choice through spending. But some have more to spend than others: in the great consumer or shareholder democracy, votes are not equally distributed. The result is a disempowerment of the poor and middle. As parties of the right and former left adopt similar neoliberal policies, disempowerment turns to disenfranchisement. Large numbers of people have been shed from politics.

Chris Hedges remarks that “fascist movements build their base not from the politically active but the politically inactive, the ‘losers’ who feel, often correctly, they have no voice or role to play in the political establishment”. When political debate no longer speaks to us, people become responsive instead to slogans, symbols and sensation. To the admirers of Trump, for example, facts and arguments appear irrelevant.

Judt explained that when the thick mesh of interactions between people and the state has been reduced to nothing but authority and obedience, the only remaining force that binds us is state power. The totalitarianism Hayek feared is more likely to emerge when governments, having lost the moral authority that arises from the delivery of public services, are reduced to “cajoling, threatening and ultimately coercing people to obey them”.

Like communism, neoliberalism is the God that failed. But the zombie doctrine staggers on, and one of the reasons is its anonymity…

5 thoughts on “Neoliberalism Shows Its Face

  1. This post definitely hits the nail on how healthy markets can’t thrive without moderate regulation from states.

  2. Framing the current system as a “free” market ideology is the initial error in considering the conundrum in present economic relations. External forces similar to the magnetic fields needed to contain fusion reactions are needed to construct and maintain the abstract illusion of relationship currently called the “free market”.

    The term “free” completely obscures this fact. I would recommend the first step in a reconsideration and restructuring of the relationship of humans to each other and the world they inhabit would be to abandon the term “free market” entirely and replace it with a more descriptive phrase which exposes this series of extractive asymmetrical power relationships, creating a new way to examine the invisible hand that has had its bony fingers so firmly around our collective necks for so long now.

    Perhaps there is some poet out there with a vision clear enough and dark enough to describe the black hole of the cash nexus, that darkness with an event horizon so inexorable that it subsumes every living thing that comes within its orbit.

    We have never needed a voice for that vision more than now. When that consciousness is finally attained and expressed it will change the world. Meanwhile I strain every eye and ear of me listening for the testimony of even a flower…

  3. I like Monbiot. I remember reading his stuff years ago when it was quite off-the-wall, and I have watched it mature to the remarkable clarity we see here. I get the feeling he’s preaching to the choir, but the *clarity* is enormously valuable as a starting point.
    Neoliberalism (call it what you will) is a *faith*, and a twisted one. I have realised this only recently. It has made my thinking on these matters a lot easier. Some say contemporary life is devoid of faith. I say it ain’t that simple! I know self-identified humanists who live lives holier than mine, and I know self-identified atheists who clearly worship Profit.

  4. A more concrete thought, credit to Ran Prieur (who’s still in the ‘off-the-wall’ stage): the word ‘own’ currently has two different and confusing meanings. First there’s the ‘extractive’ ownership of those in thrall to the ‘free’ market: ‘it’s mine; I can do whatever I want with it’. That’s the ‘ownership’ of the rentier class, the ‘ownership’ that was inexplicable to the American Indians when they encountered European settlers. On the other hand there’s the idea of ‘custodial’ ownership, which includes a certain duty to improve the asset and more generally the lot of future generations. Both forms of ‘ownership’ are theoretically compatible with capitalism; only one is good for it. It takes a strong government to maintain healthy capitalism for those able to participate in it.

    • Clarification: ‘whatever I want’ has a long philosophical history as a natural source of The Good. I side with Alasdair Macintyre and Michael Polanyi: ‘whatever I want’ can indeed be a source of The Good, provided it’s aligned within certain kinds of communities of practice.

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