The original Neoliberals worried that the hoi polloi would vote for policies which would benefit themselves, and by doing so, undermine the autonomous workings of the “free” market.
Today, we are in a place where the public goes out of their way to vote against politicians who promise them benefits like shorter working hours, protection from employer abuse, subsidized childcare and housing, and higher quality social services.
How did this happen? It’s an upside-down Bizarro world.
We saw this recently play out in the UK election this past Thursday. While on the surface, exiting a trade deal is not Neoliberal (we’ll talk about that in a minute), most of the rest of the Conservative platform is explicitly Neoliberal—i.e. built around austerity—and has been since Thatcher.
The Labour Party Manifesto, by contrast, was a full-on rejection of Neoliberalism. Just a few of their policy proposals:
- Banning zero-hours contracts and introducing a minimum wage of £10. Workers whose shifts were cancelled at the last minute would be entitled to compensation.
- Improving support for parents of children with disabilities.
- Ensuring the right to join a union and and end to union-busting activities.
- Building 100,000 new rental units available to all. Building 8,000 units specifically for those sleeping rough (i.e. the homeless)
- Capping rent raises to the rate of inflation, and forbidding developers to sit on land that could be put to good use.
- Free in-home care for those over 65.
- Ending the creeping privatization of the National Health Service, and increasing NHS funding by 4.3% annually. Adding prescriptions and dental care to services covered. Hiring an additional 4,500 health care workers, and budgeting an extra £1.6b for mental health care.
Yet people overwhelmingly voted for Neoliberalism instead, handing Labour it’s biggest defeat since 1935.
I saw a video from The Guardian where Labour volunteers were out canvassing voters on the day of the election. The attitude of one formerly Labour voter summed up the problem. He was asked what he wanted to see in the Labour Manifesto that wasn’t in it. “Realism,” he answered. The next defecting Labour voter lamented, “It’s a fantastic manifesto in the sense that everything’s for free. I mean, it’s crazy!”
And that has been Neoliberalism’s greatest triumph. It’s simply become the way things are. There really is No Alternative (TINA), as Thatcher famously declared. It seems that, after such a long time, people have acquiesced to the logic of Neoliberal scarcity. A better world is *not* possible. It’s unrealistic. Don’t even contemplate it.
In other words, Neoliberalism has won the war against hope.
The rich will get richer forever, with declining living standards and immiseration for the vast majority of citizens. The most vulnerable and precarious will almost certainly not survive.
If you take a wild animal and cage it long enough, it will forget what it was like to be free. Even throwing open the cage doors and giving it an option to escape, it will choose to remain in captivity. We might express this as, forty-odd years of Neoliberalism have induced learned helplessness in the population of the industrialized world. They simply cannot accept or imagine anything else. As Mark Fisher wrote in Capitalist Realism: Is There No Alternative?:
Capitalist realism as I understand it cannot be confined to art or to the quasi-propagandistic way in which advertising functions. It is more like a pervasive atmosphere, conditioning not only the production of culture but also the regulation of work and education, and acting as a kind of invisible barrier constraining thought and action.
Capitalist Realism: Is There No Alternative? (Wikipedia)
One of Neoliberalism’s most remarkable triumphs is that it has conquered the thought patterns of the working population as we’ve seen, and yet almost nobody is consciously aware that it even exists!
Does Neoliberalism exist?
Believe it or not, one of the major debates is over whether Neoliberalism actually exists or not! There are a surprising number of people who insist that there is no such thing.
This comes from the fact that people who promote Neoliberal doctrines (which I’ve described at length) almost never refer to themselves as Neoliberal. Also, they argue that Neoliberalism doesn’t have a set series of doctrines, therefore it is not an intellectually coherent program and cannot be identified by any label. For example, see:
The Myth of Neoliberalism (Colin Talbot)
Neoliberalism usually masquerades as “enlightened centrism,” and its economic ideas as “just common sense,” which stands apart from ideology. Neoliberals claim that only their opponents are ideologues.
It’s a non-ideological ideology.
Lately, some Neoliberals have taken to calling themselves “Classical English Liberals,” in response to the excesses of Neoliberalism, a term that has about as much meaning today as Mercantalist, Malthusian, or Physiocrat. This allows them to support Neoliberalism while at the same time washing their hands of its negative effects and excesses. News flash: it isn’t 1820 anymore, and we’re not debating the Corn Laws.
While there is some debate on what is or is not Neoliberal, the same can be said for literally any intellectual movement. The fact that I could write two posts about Neoliberalism, and the fact that its thought patterns can be explicitly defined and its intellectual history traced out, means that, yes, there is such a thing as Neoliberalism, whatever the people who subscribe to its doctrines and promote its ideals choose to call themselves. For more on this debate, see:
Yes, neoliberalism is a thing. Don’t let economists tell you otherwise (New Economics Foundation)
As we’ll see below, we can very tell Neoliberals by the rhetoric they use, as well as the polices they propose.
Chris Dillow thinks that maybe calling Neoliberalism a coherent system is a bit too much, and perhaps Neoliberalism is just descriptive of what we’re living under, rather than a proscriptive set of policies. He also considers much of its “philosophy” as rationalizations for policies that make the rich richer—the actual goal of such policies:
I’m not sure about that word “system”. Maybe it attributes too much systematization to neoliberals: perhaps unplanned order would be a better phrase. But it’s better to think of neoliberalism as a bunch of arrangements (“system” if you remove connotations of design) rather than as an ideology. Ed has a point when he says that almost nobody fully subscribes to “neoliberal ideology”: free market supporters, for example, don’t defend crony capitalism.
And it’s useful to have words for economic systems. Just as we speak of “post-war Keynesianism” to mean a bundle of policies and institutions of which Keynesian fiscal policy was only a small part, so we can speak of “neoliberalism” to describe our current arrangement. It’s a better description than the horribly question-begging “late capitalism”.
This isn’t to say that “neoliberalism” has a precise meaning. There are varieties of it, just as there were of post-war Keynesianism. Think of the word as like “purple”. There are shades of purple, we’ll not agree when exactly purple turns into blue, and we’ll struggle to define the word (especially to someone who is colour-blind). But “purple” is nevertheless a useful word, and we know it when we see it.
If neoliberalism is a system rather than an ideology, what role does ideology play?
I suspect it’s that of post-fact justification…
On Neoliberalism (Stumbling and Mumbling)
The Shock Doctrine
Neoliberalism is typically implemented via shocks, either natural or artificial. I can discern three basic kinds of shocks: political, economic, or natural.
Political shocks are man-made, and include coups d’etat, military invasions, or legislative stalemates such as debt ceiling crises, for example. Economic shocks include things like sovereign debt crises, or an episode of inflation (or hyperinflation). Natural shocks include hurricanes, tsunamis, volcanic eruptions, and other natural disasters.
Initially, Neoliberalism was applied in the United States due to the debt default crisis in New York City in the 1970’s. Politicians refused to step in, and let the city die: “Ford to City: ‘Drop Dead'”, read the famous headline in the New York Daily News. The city’s debt restructuring was the rollout of Neoliberalism according to David Harvey’s book on the topic.
The next major rollout, and the one that people often use to define its start, was the military coup d’etat in Chile. Neoliberal economists from the University of Chicago—the so-called “Chicago Boys”—were tasked with restructuring Chile’s economy along Neoliberal “market-based” principles. Those opposed to this agenda found themselves persecuted and, of course, murdered.
This unleashed a familiar pattern of Neoliberalism the world over – faster economic growth combined with staggering inequality. Branko Milanovic recently wrote a good summary of this process:
Chile indeed had a remarkably good record of growth, and while in the 1960-70s it was in the middle of the Latin American league by GDP per capita, it is now the richest Latin American country…
While Chile leads Latin America in GDP per capita, it also leads it terms of inequality. In 2015, its level of income inequality was higher than in any other Latin American country except for Colombia and Honduras. It exceeded even Brazil’s proverbially high inequality. The bottom 5% of the Chilean population have an income level that is about the same as that of the bottom 5% in Mongolia. The top 2% enjoy the income level equivalent to that of the top 2% in Germany. Dortmund and poor suburbs of Ulan Bataar were thus brought together…
Such extraordinary inequality of wealth and income, combined with full marketization of many social services (water, electricity etc.), and pensions that depend on the vagaries of the stock market have long been “hidden” from foreign observers by Chile’s success in raising its GDP per capita.
Chile: The poster boy of neoliberalism who fell from grace (globalinequality)
As a result, Chile today is one of the many locations around the world where protestors are clashing with the state.
The shock which inaugurated Neoliberalism in the Anglo-Saxon world was the persistently high inflation of the 1970’s. This was brought down by the Federal Reserve raising interest rates (the cost of money) to staggeringly high rates in order to induce a recession and unemployment. It was thought that this was necessary to bring down inflation. The official who presided over this—Paul Volcker—died last week, causing many people to revisit this affair.
That ushered in monetarism, which we covered in the first part of this series. Neoliberal economists then introduced something called the “natural” rate of unemployment (NAIRU)—how many people had to be out of work for inflation to be low enough. Full employment was no longer a policy goal anymore—unemployment was, at least it’s “natural” rate.
In Iraq, the goal was to rebuild the country along Neoliberal lines after the unprovoked invasion by the United States. The thought was that Iraq could be rebuilt through privatization and the magic of the market (including selling off the oil reserves to private energy corporations). Years later, Iraq is a failed state and, like Chile, another location of major uprisings against the government.
The 2008 financial crisis caused “austerity” to be introduced in the Eurozone. Sovereign debt crisis such as Greece led to the wholesale destruction of the welfare state to pay off creditors. This has been discussed at length elsewhere. However, the removal of control over currency by any single nation-state appears to have explicitly designed to prevent Keynesian expansionary policies during a downturn, and to force a Neoliberal agenda on sovereign governments:
…[Robert] Mundell [came] up with a weapon that would blow away government rules and labor regulations…
“It’s very hard to fire workers in Europe,” he complained. His answer: the euro.
The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.
“It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.
He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace…
Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:
“Monetary discipline forces fiscal discipline on the politicians as well.”
And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.
The Euro is a Big Success – No Kidding (Greg Palast)
Brexit is, of course, the ultimate in “manufactured crises.” While on the the surface, it may not seem Neoliberal, there has been good evidence that the crisis has been artificially designed in order to create a chaotic environment where the British welfare state, which was established after the Second World War, can be sold off to private corporations, especially American ones. This poster to Reddit sums up the Neoliberal game plan:
Here’s the playbook that’s being slowly unfurled:
Chaotic Brexit is by design. Orderly Brexit would be too legible, too accountable, and too democratic.
1. Chaotic Brexit is a gift to oligarchs: they learned how to profit from pillaging infrastructure in a chaotic transition from the fall of the Berlin Wall and they’re hungry for more.
2. Post-Brexit, UK is no longer covered by the various EU trade agreements, including those that provide critical supplies to the NHS. Due to Brexit, tax revenues fall and the UK government is left with large budget gaps in multiple areas. Don’t worry, private equity funds will happily lend them money.
3. Tories will wait 6-9 months to let pain begin hitting more and more people as shortages in supplies and personnel degrade NHS services. Let people get angry, let them suffer from disease and pain, and let them get desperate for a scapegoat.
4. Luckily, the Tories already have several scapegoats lined up: Corbyn, the EU, what’s left of unions (particularly among the NHS staff). These will be trotted out to focus outrage on other parties and the Tories will have a great solution: let the free market fix how broken the NHS has become.
5. Enter barely-regulated US pharma companies ready and happy to provide all the supplies the NHS is suffering from shortages of at massive price hikes. With the UK and NHS’ negotiating leverage severely degraded by Brexit, popular outrage, and general devaluation of the British pound, pharma companies can charge whatever they want.
Edit: Many of you have astutely pointed out that pharmaceutical companies are highly regulated. They are not wrong. The approval, production, and ongoing post-marketing safety reporting of drugs and medical devices is highly regulated (although 510k applications in medical devices do present a serious loophole) by the FDA. Compliance with these regulations is expensive and regulations have been modified over time to guard against new forms of health risks. However, drug pricing in the USA’s “free market” is poorly regulated and this has led to price increases substantially greater than the rate of inflation for many commonly-used and generically-produced drugs, such as insulin or epinephrine auto-injectors, which has placed considerable financial strain on healthcare providers and consumers. This is the basis of the above statement regarding “barely-regulated US pharma” companies, which are currently lobbying against Medicare-For-All and Congressional efforts to rein in runaway drug prices. Remember to vote.
Another Redditor adds:
The term for this is called Managed Decline, and its been Conservative policy since the Thatcher era.
– The victims of managed decline include:
– British Rail
– British Telecom
– The Gas and Electric Boards/National Grid
– Parts of the NHS
– Entire cities like Glasgow or Liverpool
– Nationalised heavy industries including coal mining, ship building and steelworking.
– The probation service, and some prison services.
Please don’t let the NHS be another notch on it’s belt.
That plan was revealed by a series of leaked documents. The British upper class looked across the Atlantic and saw the obscene fortunes made by American oligarchs presiding over a precarious, demoralized and disempowered citizenry, and desired that system much more than the European continental system, with it’s high taxes and worker protections. The United States is the goal. By removing itself from the Eurozone, Conservatives believe, they can rebuild Britain more along the American model, and therefore the remove obstacles to hollowing out society to increase their riches:
That’s not an accident, says conference presenter Lucas Chancel of the World Inequality Lab. He notes that during this period, both the U.S. and Europe were exposed to globalization and changing technology. But the U.S. experienced a much sharper rise in inequality.
Rather than simply trying to make up for unequal pay through tax-code redistribution, Europe’s economy delivers more equitable paychecks from the outset. Economists call this strategy “pre-distribution.” Chancel suggests that the Europeans accomplish this through policies and institutions that improve workers’ bargaining power — such as strong labor unions and higher minimum wages. And they push to make workers more productive, for example through broad-based access to education and health care.
Whether U.S. voters will embrace such policies is an open question. But it’s clear that rising inequality has made America exceptional — and not in a good way.
The natural disasters that engender Neoliberalism include Hurricane Katrina, which hit New Orleans in 2005, and hurricane Maria, which hit Puerto Rico in 2017. Rather than rebuild what was there, the “wiping out” of existing infrastructure allows redevelopment to be structured along Neoliberal principles–privatization and selling of formerly public lands and assets to privateers and cronies. The costs of rebuilding causes budget shortfalls and debt crises that can be used to foist these “cost saving” measures on an unwilling public, especially since cities and provinces do not have control over the currency they use.
Hurricanes Irma and Maria left Puerto Rico in tatters, but it would be a mistake to blame the weather for Puerto Rico’s suffering; Puerto Rico was put in harm’s way by corrupt governments doing the work of a corrupt finance sector, then abandoned by FEMA, and is now being left to rot without any real effort to rebuild its public services so that they can be privatized and used to extract rent from the island’s residents.
What Neoliberalism is not.
I originally meant to illustrate Neoliberalism by contrasting it with anti-neoliberal policy proposals. One comment about the Labour Manifesto, above, was, “a complete broadside against Neoliberalism.” Yet, as we saw, this broadside failed, and Neoliberalism will continue unabated, in fact even stronger than it was before.
In the United States, only the dissident wing of the Democratic party supports anti-neoliberal proposals, particularly Bernie Sanders. Most of the other candidates, to one degree or another, are Neoliberal.
Elizabeth Warren, for example, describes herself as “capitalist to her bones,” and simply wants a “fairer” form of capitalism. In her view, if we get closer to the perfect competition envisioned by economic textbooks, she believes, the magic of the market will sort things out. In other words, the problem isn’t capitalism per se, but rather it’s that we have “bad” capitalism (crony capitalism) instead of the “good” kind. She favors an activist government to correct “distortions” in markets, not to bypass them altogether.
Andrew Yang is campaigning on the idea of a Universal Basic Income. Whether or not that is Neoliberal is debatable. I would argue that it is, however. One of UBI’s proponents was one of the major architects of Neoliberalism—Milton Friedman (as Yang himself often points out). The reason Friedman favored a UBI scheme was because it would allow for the welfare state to be scaled back, because people could just take their checks and go out shopping in markets for everything that they needed. As we’ve seen, this is consistent with Neoliberal ideology. While Yang has stated he does not wish to eliminate targeted social programs altogether, he has been coy on this point.
In other words, UBI is the ultimate voucher system.
Perhaps this can be best illustrated by a field guide to tell whether politicians are Neoliberal. Here’s a useful guide to the words and phrases Neoliberals use:
- If a politician uses the term “affordable” they are Neoliberal.
- If a politician talks about “choice” they are Neoliberal.
- If a politician talks about how the “private sector” can solve important problems rather than governments, they are Neoliberal.
- If a politician calls for means testing, they are Neoliberal.
- If a politician calls for vouchers, they are Neoliberal.
- If a politician talks about “public/private partnerships,” they are Neoliberal.
- If a politician touts “private charity” as the solution to social problems, then they are Neoliberal.
- If a politician considers the budget deficit an existential crisis and harps about the debts we owe “to our grandchildren/China,” they are Neoliberal.
- If a politician constantly talks about all the stuff “we can’t afford” then they are Neoliberal.
- If balancing the budget is their highest (or only) priority, they are Neoliberal.
- If a politician talks about lowering taxes or “tax credits” they are Neoliberal.
- If a politician constantly bashes government—particularly without evidence backing the claims—then they are Neoliberal.
- If a politician talks in terms of “win-win,” they are probably Neoliberal.
- If they decry “interference” in the markets, they are Neoliberal.
- If they want to channel the public’s money into the stock market, they are Neoliberal.
It’s clear from this list that the vast, vast majority of politicians in both parties in the United States at every level are Neoliberal to their core. Nor can the outdated “Left vs. Right” paradigm determine whether a politician is Neoliberal or not.
What do politicians opposed to Neoliberalism call for? Among other things:
- They want the government to play a more active role in managing the economy and in solving problems.
- They call for higher taxes on capital and wealth.
- They call for prudent restrictions on the movement of capital.
- They call for decreasing the power of financialization by enacting a financial transaction tax.
- They call for cracking down on tax cheats and offshore tax havens.
- They want universal programs available to all, rather than means-testing.
- The want the government to provide services directly to the public at cost, rather than forcing people go out and shop.
- They call for the decommodifcation of essential goods and services (e.g. health care and education), rather than trying to make them “affordable” and forcing you to go shopping for them.
- They call for guaranteed jobs programs.
- They see the country’s citizens as having certain inherent rights, unlike Neoliberalism where all you are entitled to is what you can claw forth from impersonal markets. For example, Franklin Roosevelt’s “four freedoms” is exactly the opposite of Neoliberalism.
Labor is protected by law. Abuse of labor is illegal. Health care, education and child care are decommodified. Banking is tightly regulated. The foxes do not guard the henhouse. No more socialization of profit and risk, and privatization of profits and publicly-funded innovation.
Government debt numbers are not a cause for alarm. States spend freely on their citizens. Inflation is a concern, but it is not all-encompassing. Labor is protected and is able to push for increased wages that come from productivity increases. Labor is also able to push for increased leisure time from productivity gains. Note that economists like Keynes assumed this would be the case.
In fact, Social democracy can be seen as an antidote to Neoliberalism.
Karl Polanyi, who was opposed to free-market fundamentalism, defined socialism simply as, “the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society.”
In other words, markets are an excellent servant, but a poor master. Note that this is not incompatible with private ownership, free enterprise, or even markets in general. He just believed that markets should be suborned to the common good. What a concept!
Too bad it’s just “too radical” and “unrealistic”.
BONUS: This is a good comment from Jeff Martin that I saw on Ian Welsh’s post. It makes an important point: the institutions of Neoliberalism were explicitly design to foreclose any alternatives. I touched on that a bit above with the creation of the Euro, but this adds some important points (emphasis mine):
Every aspect of neoliberalism either was explicitly developed so as to foreclose alternatives, or functions that way, consistently, owing to the systemic logic of its structures. Whether the free movement of capital, deindustrialization, regulatory arbitrage (whether between nations or utilizing supranational tribunals) , or (yes), mass migration, neoliberalism operates by means of blocking avenues of redress and socio-economically atomizing the people who might potentially unify to effectuate any reform. When neoliberals bang on about there being No Alternative, the significance is not merely rhetorical, and not a simple reference to the established order resisting change in the name of its prerogatives. Rather, every single neoliberal deform is intended – objectively intended, as in: this is how neoliberal policy functions in the political economy, regardless of what any individual neoliberal thinks about it between his ears – to prevent the re-erection of previously-existing social democratic bulwarks, or the erection of new ones.
Free movement of capital represents the perpetual threat of the capital strike: raise taxes too high, implement monetary policy in the interests of the people, nationalize or even regulate an industry in the public interest – in sum, do any of the things that are necessary for broad prosperity and flourishing – and capital can “stay on the sidelines” or leave the country.
The related offshoring regime is an effective veto on real union power. It is to unions what capital mobility is to the nation writ large.
And so on and so forth.
And the important thing, from my perspective, is that neoliberalism is not a monolithic thing, though it often functions as though it were; there is no Neoliberal Central, rather, neoliberalism is a series of overlapping and intermingled networks of financial and political power. It is not an emergent phenomenon of these networks; it *is* these networks. It is a thing like a hydra. And that’s why, in my opinion, attempting to confront the thing all at once, as if on an open plain of battle, with massed armies, for the Final Battle, will prove so futile. Instead, it is necessary to isolate each of the networks, as if in a free-fire cauldron, and concentrate fire on them. Proposing maximal openness, but of a different, or slightly different type, as a means of fighting neoliberalism is proposing coordinated resistance everywhere, all at once – the mother of all collective action problems.
At a level fairly close to the surface, the ideology of neoliberal reformists is, “To him who already has everything, more will be given; and from him from whom everything has already been taken, more will be required – but if we keep doing this long enough, it will be awesome.” I’m not sure it’s realist so much as magical realist, and that’s the problem.