Neoliberalism has been declared dead numerous times before the current crisis. But it never died. Others claim it never existed. If we want to move beyond it, we need to clarify what it is. Neoliberalism is a philosophy, an economic theory, a political strategy, a socio-political reality, and a failure. In all respects it does not have much to offer. Unfortunately, its past is seldomly presented and the alternatives are still in the making. It’s time to get on with them and to construct a new utopian force, a new liberalism. By Daniel Plenge
In the 28th month of life someone asked “What is this, life?”. Although that someone lives in a tribe of atheists, the next day the little human wanted to know “Who is God?”. In this spirit of puzzlement, curiosity, honest concern and experimentation the What-the-Fcuk series asks classic and current questions at the intersection of the real world and public as well as academic thought.
To talk about this thing called “neoliberalism” might seem similar to talk about yesteryear’s snow. Some remember it in a nostalgic mood, though it may be said to be of no practical importance whatsoever today. In some regions it will, due to climate change, never come back, whereas in others it can frequently be sighted still. In slightly different form it is ever-present as rain – which is in any case of practical importance.
The analogy is misleading because neoliberalism is not as clear a phenomenon as the weather. Before 2016 at least, it has even been claimed by ‘the Right’ that it never really existed, but would have been invented with denunciatory intentions. Others, often associated with ‘the Left,’ have proclaimed its death numerous times since 2007, thus presupposing its prior existence. By 2016, even the IMF finally admitted its former life.
Death, however, is a different matter. Those dying may still change their wills. And medical diagnostic is often a shaky business.
Since March, when all the governments had to ensure the survival of their societies and their economies by unprecedented fiscal and monetary means, its death has been celebrated everywhere and only seldomly been bemoaned. Even the Financial Times isn’t willing to share many tears any longer.
However this may be, it suggests that neoliberalism is a well-known and well-understood phenomenon. To the contrary, George Monbiot invited us as late as 2016 to imagine people of the Soviet Union never having heard of communism as an ideology. Though ever-present, the natives of real-existing neoliberalism may by analogy have heard the term, but would be hard pressed to define it.
Perhaps nobody is to blame here.
The academic literature seems to agree that it is nearly undefinable and paradoxical. Neoliberalism is no coherent and neat doctrine, but a heap of often unclear and contradictory views, now and again updated for contemporary political (and ideological) needs.
The journalist Chris Vielhaus tried to unify the phenomenon by calling it a big stream of thought that historically had many small rivers as its sources. The problem with neoliberalism seems to be that this is in a sense at the same time an adequate and an inadequate metaphor.
Neoliberalism became ideologically, and in a large part also in political practice, hegemonic. But the many small rivers of “paradoxical” ideas make it perhaps more adequate to say that the big stream only manifests via currents of different strengths and is, therefore, not easily pinned down.
As a consequence, there is not much that has not been called “neoliberal” in the last decades, from Merkel to Macron, “Agenda” Schröder and “New Labour” Blair, from right wing German AfD to the left wing movement Aufstehen, to Trump with his wall and protectionism, Johnson and his Brexit, Thatcher and Reagan, dictators such as Pinochet, the EU, the IMF, and perhaps even China.
What the Fcuk is Neoliberalism?
The question is worthwhile especially in our time of multiple crises. For one party, neoliberalism has been the root of all evil in a catastrophic world, a “plague of the past 40 years,” while the other side believes it, or something near enough, to be the source of everything good in the best of all possible worlds, the normal one, to quote Jürgen Klopp (see EP1 What the Fcuk is Normality?).
The first perspective is usually to be found in texts where neoliberalism is explicitly a topic. Within the Covid-crisis, the second could be found to some extent within pronouncements that the decade before would have been the most prosperous ever, a success story that was only for a short period disturbed by the financial crisis.
In such a context it would be great to have a clearer picture of what neoliberalism is, where it actually lived, what the outcomes were there, and how they are to be evaluated. Unfortunately, it is not easy to get a clear or even detailed picture.
First of all, neoliberalism is a mixture of
- seductive philosophy,
- presumptuous (pseudo-)science,
- a simplistic “one fits all” political (or pseudo-technological) program,
- a weapon within class-warfare, domestic and international,
- and in many respects a great, next to total, failure.
For short, it is an ideology in the classical sense of the word, a bunch of ideas which are partially embodied in real-world social systems. Although this is next to impossible, it is important to try to keep these levels distinct.
What types of liberalism are there?
It is a seductive philosophy by its floating on the vagueness of the words “freedom” and “liberty.”
Neoliberals claim to be the heirs of classical liberalism or, to use a different term, political liberalism, which dates back to the era of the Enlightenment. Here the basic idea is one of equality, namely equality before the law, in contrast to a multitude of unequal privileges in premodern times.
All citizens are framed as bearers of fundamental rights – meanwhile regularly institutionalised in constitutions – which also the state has to respect and defend. In this sense, at the intersection of the state and the individual, liberalism is a safety net against arbitrary, coercive interventions and, overall, a guarantor of freedom from such acts also by any co-citizen. Of course: in theory.
When rights are not equally distributed, the agenda of political liberalism is called “justice,” for instance racial equality, gender equality, international equality. If the state does not respect the rights granted to its citizens, the cause is often called “freedom,” for instance the freedom to protest against racial injustice and freedom from unconstitutional police acts.
In a broad sense, we find in this area of liberalism also an idea we could call cultural liberalism. This is the view that anybody should be allowed to choose and express his ideas, religions, lifestyles or identities as pleases him/her without having to fear anything from others who don’t share this. “Tolerate difference” is the motto and pluralism embraced. This kind of liberalism shall also thwart the tyranny of majorities over minorities.
Notoriously, (economic) neoliberalism is in public discourse often associated with this type of cultural and political liberalism (for instance German “liberals”) and it presents itself in this costume, though equally often it teams up with conservativism or nationalism (e.g., the tea party or German AfD), which wants to restrict liberty to some practices or some groups.
For short, if you spot sheep wearing a cap with “neoliberalism” on it, suspect that it is a wolf.
Political liberalism in the sense above can also come with, say, democratic liberalism, but it does not have to. An authoritarian state may respect its laws without letting people vote for them.It can also, but does not have to, be combined with economic liberalism.
In the main the latter is a 19th century phenomenon, famous under the slogan “laissez-faire.” This variety is, to the confusion of us all, also called “classical liberalism.”
Notoriously, the idea is that “the market” should be left on its own, that it functions best if it is left undisturbed by any regulation or intervention whatsoever beyond guaranteeing property rights and the right to enter into contracts.
The main aim of economic liberals is a very weak state, the famous nightwatchman. He shall protect proprietors when the situation occurs, but otherwise he minds his own business, which is in any substantive sense neither social nor political, and of course no real commercial business. The political system and the economic system are (or should be) something different, strictly separated.
Neoliberalism is in part a different, though related and similar, philosophy or ideology and political program.
It originated at the Walter-Lippmann-Colloquium in Paris (1938) and the foundation of the Mont Pèlerin Society (MPS, 1947), when both political and economic liberalism were in crises. It had been socially, politically, and also scientifically marginal or irrelevant for three decades. But its members were successful in creating an enormous world-wide network of thinktanks and institutions to infiltrate action, sponsored by big private cash. Friedrich von Hayek (1974) and Milton Friedman (1976) timely received the so-called “Prize in Economic Sciences in Memory of Alfred Nobel,” which is awarded by Swedish bankers, but conferred upon neoliberalism the prestige of natural science.
The MPS itself, which is still active, was an elite community, but it was not homogenous. It featured at least the Hayekians or Austrians, the German “ordoliberals”, and the “Chicago Boys” around Milton Friedman. This is one reason why commentators regard neoliberalism as contradictory or paradoxical and write huge tomes in trying to disentangle all the threads without cutting them to pieces.
The Great Depression had brought the New Deal in the US in the 30s, i.e. state intervention, and the Second World War had brought planned war-economies that seemed to work. A byproduct was the invention of GDP (see the next episode). Its “growth” became the main aim not only of neoliberal politics in the post-war era until – most probably – this very day.
The birth of the Soviet Union had provided the world with an alternative to the capitalist system. John Maynard Keynes “General Theory” (1936) substituted economic liberalism or “laissez-faire” as the dominant economic view. The latter’s end Keynes had already declared in 1924.
Franklin D. Roosevelt, the 32nd president of the USA, presented in 1944, the year in which Hayeks main book The Road to Serfdom was published, his Second Bill of Rights speech. It featured some horrors for later neoliberals, ideas which reflected the spirit of the day and of the later three decades:
“We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made. In our day these economic truths have become accepted as self-evident.”
Among those rights were mentioned the rights to “a useful and remunerative job,” “adequate food and clothing and recreation,” “a decent home,” the right for farmers to prices which “will give him and his family a decent living,” “to adequate medical care and the opportunity to achieve and enjoy good health,” “to adequate protection from the economic fears of old age, sickness, accident, and unemployment,” “to a good education.”
Rights are granted by states, not markets.
You may exclaim: “Yes, that’s what everybody wants.” Wait a minute.
Hayek thought the mistake of the time was that ideas similar to Roosevelt’s “self-evident” ideas were about to become exactly that. What Hayek, the founder of the MPS, feared in his The Road to Serfdom (1944) was that any modest state intervention or “planning”, in the end the only means to guarantee substantive rights within the current system, would lead on a slippery slope to totalitarian society: economic anti-liberalism, not only actually existing communism but also Keynesian interventionism, would always and necessarily lead to political anti-liberalism in its worst form.
For short, this is a speculative and apocalyptic philosophy of history, grounded in nothing, which finds its countermeasure in a market utopia.
This confrontation of neoliberalism with Keynesianism invites the common error to believe that neoliberalism was the reinvention of 19th century “laissez-faire,” given that it shares the utopia. But this is wrong, at least in the big picture, when contradictions are put aside.
Among the beliefs of the neoliberals was the conviction that classical liberalism was not well-prepared for the task to actually realize that utopia in the 20th century. That was the reason why some “neo” liberalism was believed to be needed.
Michel Foucault was the first to notice this difference in 1979. Jeremy Gilbert summarises the difference the following way.
Put simply, neoliberalism, from the moment of its inception, advocates a programme of deliberate intervention by government in order to encourage particular types of entrepreneurial, competitive and commercial behaviour in its citizens, ultimately arguing for the management of populations with the aim of cultivating the type of individualistic, competitive, acquisitive and entrepreneurial behaviour which the liberal tradition has historically assumed to be the natural condition of civilised humanity, undistorted by government intervention.
This is the key difference between classical liberalism [economic liberalism above] and neoliberalism: the former presumes that, left to their own devices, humans will naturally tend to behave in the desired fashion. By contrast the latter assumes that they must be compelled to do so by a benign but frequently directive state.”
Neoliberalism thus propagates an activist state in disguise, not a bystander. Although it praises the spontaneous (“free”) and natural order of the market, the state has to make that market happen. Although neoliberalism posits free persons as the default state, they have to be made to behave as free persons. These are the main paradoxes.
One problem in thinking and establishing such a state is that neoliberals are relativists about values: Not only are there no values of commodities independent of ad hoc subjective evaluations made by economic agents, which are expressed in a price tag.
The labour theory of value would, to the contrary, state that the value of a commodity equals the “socially necessary” labour that was needed to produce it, which is objective.
There are also no social values at all. For instance, Roosevelts rights listed above don’t correspond to values, according to neoliberals, nor something like the preservation of nature.
By the way, the relativist trait of neoliberalism is also to be found in the above-mentioned cultural liberalism, where it has a liberating touch. If no lifestyle, culture or identity is of “real” or higher value, then they should freely coexist and one group should not oppress the other.
The neoliberal state, therefore, is not allowed to openly pursue anything of substance, with the curious exceptions of the existence and functioning of markets themselves: “Das einzige gesellschaftliche Ziel besteht im Fortbestand des Marktes.” (“The only social goal is the continuation of the market.”)
In theory the market order is further justified by its supposed results, which are either claimed to be better than anything else, or even optimal. This means “the free market” generally produces the biggest cake by efficiently allocating resources needed for production and by distributing the output in a just manner for consumption.
Rather obviously, neoliberals put much faith on what they call “the market” at any single point in their story. It shall deliver everything to the greatest degree of efficiency.
Is this science or religion?
The economist Joseph Stiglitz, as many others, claims that their hopes in the free market rest on faith and not science. Also Mariana Mazzucato, a currently influential economist, calls neoliberalism an “ideology.”
This is remarkable because neoliberals have denied to have an ideology for decades. They said they would simply do what is right and without having any alternatives. Politics would be based on “positive science” (= value-free science), at least theirs.
Dani Rodrik criticizes more moderately that its one-treatment-fits-all political program (see below) amounts to bad economics. He claims it “too easily shades into ideology.” Others directly liken neoliberalism to religious thinking, because it would repeat the same political mantras over and over again even when it has repeatedly been shown that they are false, e.g. that cutting taxes of the rich leads to increased investment, more jobs, and bigger state revenues.
According to Philip Mirowski, neoliberals could not even agree on what the market is. But they were sure in what it would deliver, namely significant economic growth and that everybody would be better off after some time. We deal below only with the latter issue.
However, the neoliberal state is classically conceptualized as the umpire that guards the rules, but the only aim of the establishment of the rules is “competition” aka “the functioning of markets.” This may justify intervening on corporations and individuals, the components of the system, specifically the poor and unemployed, who are at its margin or outside of it.
Originally, German neoliberals (ordoliberals) and the Chicago School feared that monopolies would hinder competition and the beneficial effects of “market forces.” This was one occasion that allowed state intervention. One of the paradoxes within overall neoliberalism is that the later Chicago School gave up this supposedly central idea.
Therefore, Colin Crouch distinguishes two types of neoliberalism, one “market-friendly”, one “corporate-friendly.” Curiously, within the latter oligopolies and monopolies are allowed to in fact abolish “the market” and its “forces” (because it would be enough that monopolies emerged within competitive markets), whereas in the former this should at all costs be prevented.
How is it possible to govern via slim rules without invoking more substantive values?
For example, according to Thomas Biebricher, the EU as a non-state has become more and more the realization of neoliberals’ dreams. It is a competitive order via the single market, where member states compete for capital. Since the Stability and Growth Pact 1996/97 it restricts state budgeting to a maximum of 3 percent deficits and 60 percent public debt in relation to GDP, which is more strictly monitored since the financial crisis. This guarantees a slim budget of member states without having to legislate over specific cuts, the question of who gets what.
More direct influence is exerted within crises. Cashflows to member states via the European Stability Mechanisms after the financial crises were conditional on reforms. A similar strategy was used by the IMF in relation to the developing world in the form of structural adjustment programs (see Jason Hickel). Prerequisites were “reduction of pensions, health-care coverage, and unemployment benefits; privatization of public assets; and deregulation of labor markets.”
Thus, the union imposes or restricts substantively what happens elsewhere, ostensibly only by applying the rules. The main function of the whole enterprise is guarding the freedom of the unified market and the “competitiveness” of its members.
Here commentators find reasons for the thesis that “Neoliberalism has undermined democracy for 40 years”, because either the arrangement of the political system depoliticizes political debates by judicial means the way neoliberals want, or technocrats simply impose neoliberal policies on the basis of financial threats.
The problem of value was already formulated by Hayek. If the state would favour some value, this would lead to the same problem as in economic planning, namely arbitrary choices and intrusion into the freedom of those who disagree. The central planner has to decide what to produce, and who gets it, at least in supply chains. Such choices are, according to Hayek, in the end arbitrary, based on power, which will exclude people and restrict their freedom.
The neoliberal idea is that a state that merely guards the rules has no such problems and that everything of value can be harvested within the market. For short, this is a huge bet.
In the end, it does not work and neoliberals could never formulate a principle that distinguishes between allowed and prohibited interventions, which in practice invites the criterion of arbitrariness.
Two rather radical philosophical ideas involved here are that nothing outside of market relations has a value at all, and that no intended and thereby planned social outcome is legitimate. The former may also hold for persons who find no employer to value them on the market by paying them a wage.
The latter is nothing more than the thesis that the market knows best – it is a fundamentalist principle in foreclosing any non-corporate, societal aims, collectively realized by intending them. If at all, this is only allowed by tricking (or “nudging”) the market into a direction. (For instance, this is also the strategy of the German Greens.)
It does not need much to make three crucial observations here.
First, neoliberals simply make value choices which seem rather crude from other perspectives. It is not so that they abstain from valuation altogether. Noam Chomsky remarked that in contrast to the Bretton Woods era,
“in the neoliberal phase that followed, the US treasury department came to regard free capital mobility as a ‘fundamental right’, unlike such alleged rights as those guaranteed by the United Nations Universal Declaration [of human rights] of 1948: to health, education, decent employment and security – entitlements that the Reagan and Bush administrations dismissed as ‘preposterous’, ‘letters to Santa Claus’, mere ‘myths’.”
This is the result of a professed (but implicitly revoked) value-relativism and a purely negative lonesome-rider view of freedom, which in its extreme goes as far as favouring starvation over “dependence” on the state.
Its kernel is a combination of economic liberalism with a restriction of political rights to negatives, such as “nobody shall take your property,” “nobody shall hinder you in expressing your thoughts” and “nobody should incarcerate you without trial.” They forbid something, but they don’t say that you should be entitled for some reason to get something beyond the state’s protecting such negative right, as promised in, for example, Roosevelt’s rights.
In the radical neoliberal (or libertarian) view, cutting down or abolishing welfare is akin to liberating people, who are allegedly “free to choose” (Milton Friedman) their contractors as long as they sell themselves at the correct price. For neoliberals, unemployment is always voluntary. If you are unemployed, you want to earn too much and/or you engage in fancies about what you want to do in a life worth living – and, we might say, freely chosen. If unemployment is your choice, there is also no need for any “compensation.”
Therefore, social security, a misleading term that denotes at least food, a home and healthcare, does not have to be a social concern or even a right, but is one of individual responsibility and charity. At least as long as governments don’t legislate over labour and restrict the freedoms of employers with the aim of shielding employees. However, also Hayek talked in 1944 about some basic welfare, but certainly nothing generous.
If you exclaimed above “Yes, that’s what everybody wants,” then one philosophical response by neoliberals is that you may personally want all that, but you can (and will, if you conform to the rules and neoliberal economics would be correct) find that on the free market without some state or society calling it a “value” in order to impose something on all individuals, who may either not want it at all, may invest more than others to get it, or risk more not to have it. What is here called “value” is the other side of needs, which are not objectively given, according to neoliberals.
Not all of this is absurd. But, for short, some form of security (or “dependence” on the state) is merely valued lower than so-called “freedom” as the search for someone on whom one then is dependent (an employer or anonymous customers). That freedom might lie beyond “the market” is simply inconceivable and collectively a forbidden fruit.
However, probably all pre-capitalist cultures would never have understood that selling oneself “freely” on the market and being unbonded to anyone but “the law” amounts to freedom. And medieval peasants will have been socially more secure than many citizens of actually existing neoliberalism who are regularly only one paycheck away from misery – as the lockdowns in some parts of the world have proven.
At the bottom, neoliberals simply value competition among otherwise isolated individuals above anything else and the resultant distribution of wealth and power is justified as the outcome of this. The market is not only, as Hayek had it, the only bearer of real knowledge about value and social processes, but also a discrimination automat that is believed to be as infallible as the Pope:
“neoliberalism treats competition as the crucial and most valuable feature of capitalism. There is a simple reason for this: Through processes of competition, it becomes possible to discern who and what is valuable.”
According to Quinn Slobodian, some neoliberals even repeat the Calvinist myth that success in competition reveals the chosen one, which may have racist overtones when such inequalities are believed to be due to natural or innate characteristics. As I stated above, neoliberalism does not always or even frequently come with cultural liberalism.
Noteworthy, not only historically that isolated individual had to be created by so called “marked friendly” politics.
As some of us may remember, this worldview and value hierarchy ultimately became the program of “The Third Way,” British “New Labour” and German “Agenda 2010”, i.e. social democracy.
As neoliberals always wanted, the poor and the unemployed were to be blamed, not the structures of society or the market order. Whereas “welfare” had before more or less been seen as a right of people as such, it became conditional on forming one’s “human capital,” that is one’s person, according to the needs of the market, which became a welter of opportunities instead of a potential place of exploitation.
In Australia managing unemployment is a privatized for-profit industry.
Ideologically, taking from people their means of subsistence or forcing them to undergo absurd training-programs in “workfare” is not coercion or terror, but a reminder of their responsibility as “free” agents.
The open elitism of this ideology and educational program is revealed when Hayek, Friedman and others openly favour authoritarianism or (provisional) dictatorship to introduce or safeguard their version of freedom. The most famous example is the coup in Chile and its dictator Augusto Pinochet in 1973, who was afterwards advised by Chicago economists, with results similar to what we will witness below.
Although we should never jump too quickly from some talk of theoreticians to political reality, it has often been remarked that more often than not neoliberal policies were imposed on populations which had not voted for them nor would they have voted for them if they had been asked.
Thomas Biebricher writes:
„If it is true that the sign of our times is the rise of authoritarianism, we should not mistake this to signal the end of neoliberalism. … Neoliberalism, properly understood as capitalist markets embedded in authoritarian political forms, has far from run its course – it may have only just begun.”
Already in its post-war beginnings one of neoliberals’ horrors was that within mass societies and democracies the majority could choose something else than “freedom.”
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What is the political program of neoliberalism?
Basically the philosophy already spits out the political strategy to some extent. David Graeber summarised it succinctly in only 3 points, which I reformulate a bit with minor additions (see also here):
- Freedom from state competitors and monopolies (privatization and marketization): Governments should minimize their engagement in economic planning, it would distort the market. That is, they should only and solely plan the rules of the game with the aim of liberating “the market” and creating an investment-friendly environment, not concrete enterprises or social outcomes, and invest in infrastructure only. Government enterprises are always inefficient, private enterprises always efficient. Therefore, existing state enterprises should be privatized.
- Freedom from state regulation (deregulation): An investment-friendly state should limit spending, first of all to cut taxes, and guarantee the stability of the currency, limit the possibilities for deficits and accumulation of debt, liberalize the labour market, deregulate everything because regulation is superfluous and only a cost factor. It only stifles the initiative and innovative genius of entrepreneurs. In a free market, the consumer gets exactly what he orders.
- Freedom of capital (free trade): Free trade across borders in a single global (or at least regional) marketplace is always good for all participants and yields always the best results compared to varieties of protectionism (e.g. import substitution industrialisation in the “developing” world) as long as each focusses on his “competitive advantage;” governments should not distort the international market. This includes the freedom of capital flows.
- Freedom of the poor, the unemployed, the not so well-off, and also the employed (individualisation of risks): All sorts of government measures to benefit the poor, the unemployed, the not so well-off or those who need special securities (e.g. children) are counterproductive because, firstly, they distort the market, e.g. price support for foodstuffs and fuels, free or supported healthcare or education, welfare without insurance, or guaranteed pension funds; and, secondly, they make people dependent. After some shock therapy, they would be better off without it and, in addition, independent (free) participants in the market. Labour unions should be weak or inexistent.
Of course, and to the contrary, in every crisis anti-neoliberals call for the opposite of this, and if governments in crises have to implement contradictory policies, this is interpreted as a sign of the near end of neoliberalism.
This is the philosophy and its political program. But what about reality?
Did neoliberal governments follow their program? Were budgets and deficits cut? Did privatization increase the common good? Did deregulation occur? Did free trade bring profits for all, internationally and nationally, as promised, and a boom in economic growth?
Neoliberalism is a ghost because neither has the utopian dream ever been realized, nor do neoliberal governments realize the total playbook. Therefore, David Harvey wrote that it is hard to draw a full map of neoliberal policies and their successes and failures. What can be found rather quickly in books which quote specific studies is always restricted to some countries in some years, whereas the judgements within journalism are often general but also unexplicit.
However, if we browse a bit, parts of the mosaic show the following. But this yields nothing near a complete picture. I make use here primarily of a great book by Ray Kiely.
Already in the reign of Thatcher “state spending increased in real terms for every year but two of her premiership,” which is in contradiction with the program. The top tax rate was in harmony with the program cut, first “from 83 to 60%” and then to 40%, as well as social spending. “The effect was an erosion of benefits for individuals but an increase in aggregate spending as more people became dependent on social security,” when, contrary to theoretical expectation, unemployment went up. The result of the neoliberal fight against poverty was an increase from 13 per cent in 1979 to 22 per cent in 1990. Again, the results were the contrary to the promise.
Reagan’s reign similarly “saw an unprecedented increase in the country’s budget deficit from 1981 to 1988.” The top tax rate was cut “from 70 per cent to 50 per cent in 1981, and then down to 28 per cent in 1986.” The fate of the hope that tax cuts would be compensated through massive growth was disappointment. The reality was a massive increase in the federal deficit, “from $700 billion in 1981 to over $3 trillion once Reagan left office.” Similar stories can be told about later and recent Republicans.
There was no job miracle, but a rise in jobs paid below poverty level, and poverty increased overall. In both cases, spending in defence increased. It seems to be something like a law that in neoliberal governments state expenditure increases against professed intentions to do the opposite.
With the privilege of hindsight and with a general perspective Joseph Stiglitz judged at the end of 2019 that the promise had been not only economic growth, but faster economic growth and benefits for all, including the poorest:
“The elites claimed that their promises were based on scientific economic models and ‘evidence-based research’. Well, after 40 years, the numbers are in: growth has slowed and the fruits of that growth went overwhelmingly to a very few at the top. As wages stagnated and the stock market soared, income and wealth flowed up, rather than trickling down.”
That is, even if the aims of neoliberal politics are taken for granted, it was a failure. The boat of wealth was not levelled significantly in comparison with pre-neoliberal days, and the story that wealth would trickle down from the top without taxation is usually (or even always?) false.
Even the IMF wrote in 2016, still in a defensive rather than admissive tone: “The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.”
Without discriminating between individual countries, the numbers we find are the following.
The world economy grew in the 60s by 3,5%, within the 70s, the crisis decade of Keynesianism, with 2,4%. With the beginning of the neoliberal era the rate was 1,4% in the 80s and 1,15 in the 90’s. (David Harvey). For the 00s and 10s we get 2,87 and 2,97 if we rather quickl draw on World Bank Data.
Whereas the last period may be invoked by fans of neoliberalism to argue that its politics worked in relation to the first half of the neoliberal era, its critics can argue that the times of Keynesianism are still unsurpassed. The figures for the German economy, one of the global success stories in the view of many, are 2,9 % in the 70s, 2.6 % in the 80s, 1.6 % in the 90s, and 0,9% in the 00s.
There are, though, three general problems with GDP. The first is that it is unclear what exactly, if anything, it measures. Second, part of the growth rates especially after 2000, dependent on the country, should be due to increases in financial industries, i.e. they contribute to numbers but don’t produce anything, so they are misleading in comparison to other times. The third is that, dependent on both, but also many other values, it is questionable whether GDP-growth is to be valued positively at all – and at all costs.
All those who care about ecology and the planet could invoke the ecological foodprint of post-war capitalism in general and actually existing neoliberalism specifically in order to argue that it has been unsustainable since the 70s.
What about inequality?
For instance, based on a OECD study, Colin Crouch tells us that 47% of growth in the US between 1979 and 2007 went into the pockets of 1% of society. The figure for the UK is 26%. These are usually judged to be the most neoliberal of “Western” countries.
Ray Kiely is worth an extensive quote about inequality in the US:
“In the US, the top 1 per cent income group increased its share of national income from 8 per cent in 1979 to 18 per cent in 2007, and if capital gains are included, then the figures are 8.5 per cent (1979) and 23.5 per cent.
The share of national income going to the richest 1 per cent of Americans has doubled since 1980, from 10 per cent to 20 per cent, and the share going to the top 0.01 per cent – some 16000 families with an average income of $24 million – has quadrupled, from just over 1 per cent to almost 5 per cent.
From 1993 to 2000, the top 1 per cent of income earners captured 45 per cent of total pre-tax income in the US, and in the 2002-06 period, the figure was as much as 73 per cent.
In 2010 alone, 93 per cent of the additional income created in the US went to just 1 per cent of taxpayers, and 37 per cent went to the top 0.1 per cent.
Thomas Kochan has estimated that while productivity, household income and average hourly wage rates increased more or less at the same rate from 1945 to 1975 in the US, since then, although productivity increased from 200 in 1975 to 400 in 2010, wages remained at their 1975 level of 200. From 1973 to 2006, the average annual income of the bottom 90 per cent fell in real terms – from $31 300 to $30 700 at 2006 prices. …
In the US in 2016, around 1.5 million households (involving 3 million children) live below the extreme poverty line, double the number in 1996, and an estimated 6.7 million households used a foodbank or other food charity in 2014.”
The official poverty rate in the USA in 2017 was 12,3 percent, which amounts to 39,7 million people. This is supposed to be the richest country in the world.
Similar numbers can be found for the UK. At the end of 2018, Philip Alston of the UN visited the country and reported 14 million people in poverty and 1,5 million people in “total destitution.” He judged that poverty was due to political will.
A common phenomenon reported in journalism is that taxes are cut for the rich and increased for lower income groups. George Monbiot summarized recent European history in 2013:
“Throughout the OECD countries taxation has become more regressive: the rich pay less, the poor pay more. The result, the neoliberals claimed, would be that economic efficiency and investment would rise, enriching everyone. The opposite occurred. … The neoliberals also insisted that unrestrained inequality in incomes and flexible wages would reduce unemployment. But throughout the rich world both inequality and unemployment have soared.”
Where it has not so much soared, informality of jobs and precariousness are the prices paid in addition to sinking or constant wages (see Kapitalismus, Fcuk Off!?).
Such numbers are used by David Harvey to argue that neoliberalism was highly successful, if and only if one interprets it as an intended strategy to fight a class war. As the figure below shows, within the Keynesian era, increases in productivity were matched by increases in hourly wage. With the onset of the neoliberal era, that connection was cut.
Was international free trade good for “the South”?
Also in relation to the so-called developing world the balance sheet is suboptimal, to say the least. The developing world experienced a growth rate of 3.2% in the 60s and 70s, which changed in the period from 1980-1999 to 0,7 %.
When it comes to the deregulation of international financial markets, even the IMF formulated a pessimistic cost-benefit analyis: “Although growth benefits are uncertain, costs in terms of increased economic volatility and crisis frequency seem more evident.”
This simply means that though long-term investments are positive, the free flow of capital leads to increases in short-term speculation, which ends up in crises when suddenly cash flows across the borders without any regulations. Joseph Stiglitz sees in this a common opportunity for open blackmail:
“The effects of capital-market liberalisation were particularly odious: if a leading presidential candidate in an emerging market lost favour with Wall Street, the banks would pull their money out of the country. Voters then faced a stark choice: give in to Wall Street or face a severe financial crisis. It was as if Wall Street had more political power than the country’s citizens.”
This is another example of anti-democratic politics imposed from outside of regular politics.
Especially disastrous was the “shock therapy” in the former Soviet Union, i.e. the rapid introduction of capitalism or the free market.
“The immediate aftermath of shock therapy was nothing short of a disaster, with declines in gross domestic product (GDP) of 11.6 per cent (1990) and 7.2 per cent (1991) in Poland, 4.3 per cent (1990) and 10.2 per cent in Hungary and 7 per cent in both the Czech Republic and Slovakia in 1992. In the first six months of 1992, Russia saw a decline in average real income of around 40 per cent. … One might also note here the terrible social cost of the transition, and the United Nations Children’s Fund’s (UNICEF’s) identification of an excess mortality figure for Russia, Ukraine, Bulgaria, Hungary and Poland of 800000 between 1989 and 1993.” (Ray Kiely)
According to Jana Hensel, drawing on the historian Philip Ther, the development in different post-Soviet countries shows the direct opposite of neoliberalism to be true. The more states kept under their control, the better off their citizens were.
What about international poverty?
One central task of development policies has been the eradication of poverty. And for some time in the last years the media reported spectacular successes based on the World Bank. It claimed the number of people in extreme poverty would have fallen from 1.9 billion in 1990 to 736 million in 2015. This was part of the narrative that we live in the best times ever, and that there is nothing to worry about concerning the future.
Philip Alston, UN Special Rapporteur on extreme poverty (the guy above who had visited the UK), criticized recently that the international poverty line (IPL) of $1,9, on which the World Bank relies, would be scandalously low. If that line is raised to $5,5, hardly enough for basic food, then poverty fell from 3,5 billion to 3,4 billion since the 90’s. Furthermore, Ray Kiely seeds doubt that, if there has been a reduction in poverty at all, it can be ascribed to neoliberal policies.
Was privatization beneficial and did deregulation occur?
It has been doubted that privatization is in any sense an “efficient” strategy. The promise was and is that businesses for profit could provide former state services with better quality and cheaper. Often it has led to poor services and cost explosion, and the refutation of one more neoliberal idea.
For Britain it has been claimed that “from the late 1980s to the mid-2010s, while the Civil Service has been cut by one third, public spending has doubled and administration costs have risen by 40 per cent.” (Ray Kiely) Often, costs rise for customers who had been citizens before.
For example, privatization of state owned houses in England – 5 million in the early 80s, 1,7 million 2019 – resulted at some places in people having to pay 52% of their wages for rent, compared to 7% in 1981. The text reporting this has the title “The Roots of Anger” and analogous cases infuriated the German public in recent years.
According to David Graeber, deregulation, the ideological twin of privatziation, is nothing but a myth. He formulates an “iron law of liberalism”:
“any market reform, any government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork, and the total number of bureaucrats the government employs.” (quoted by Ray Kiely)
Ray Kiely refers to studies which show that “privatization has been accompanied by the enhancement of state regulation, not its rolling back.”
What, then, lies beyond neoliberalism? What is the positive story?
One lesson to be learned could be that history should matter because evidence matters. If policies are adopted again and again, but the results are “catastrophic” (David Graeber), they should not be adopted again and again, as long as we presuppose a humanist ethic. This sounds simple, but who really sticks to the idea (… and to a humanist ethic)?
As the newspapers show, since the onset of the new crisis critics often demand the opposite of generic neoliberal policies. Regulate more! Tax more! Spent more! Whether this is a good strategy in moving beyond neoliberalist injunctions is at least doubtful, although any of this is obviously appealing and I would support it. (Think of climate change, inequality, and poverty.)
If the empirical criticism of neoliberalism is correct, then it tells us what not to do. But does it tell us what to do?
Rutger Bregman rightfully argues with the economists Thomas Piketty, Mariana Mazzucato and Stephanie Kelton against the neoliberal myth industry. Basically, the ideas of these economists are that taxing the rich is alright, the state does not only consume but create, and money is not so much mined put created by pushing buttons on a computer.
Bregman further argues that this crisis is different because now there are ideas to put in the place of neoliberalism, whereas before there was only a void, that is, no real alternative.
However, debunking myths has to do with broad strategies, but it does imply next to nothing in relation to specific measures and aims. Where the neoliberal model forecloses some options, this counter-story opens others by freeing the mind from intellectual garbage.
One more problem is that this leaves open whether the outcome of inversion would be a functioning or better functioning system within contemporary circumstances, and not just, e.g., Keynesian nostalgia. If you wish or like such grand questions, is “a different capitalism”, “innovative and sustainable, that works for all of us,” possible,as Mazzucato believes?
However, Mazzucato also believes that the task is huge: „To offer real change we must go beyond fixing isolated problems, and develop a framework that allows us to shape a new type of economy: one that will work for the common good. The change has to be profound.“
There are still a lot of unknowns here. The past 70-plus years may have shown that this is more than doubtful. And what would be a capitalist system that “works for all of us”? Capitalism has over 200 years never worked “for all of us” (see Kapitalismus, Fcuk Off!? and Jason Hickel).
In the last decades, even when wages in “the West” fell or remained constant, it somewhat “worked” for a part of the people in “the West” through privatized Keynesianism, i.e. private debt, and the looting of the rest of the world, for instance “us”, the exploited workers in China, who delivered cheap stuff in often apocalyptic circumstances.
And what is the broader vision behind such a different capitalism? Since there has never anywhere been a pure form of neoliberalism, sceptics in some countries may wonder how different a different capitalism would be. They would say that neoliberalism is a fiction and we always had a “different” capitalism.
In contemporary crisis news everybody can also witness that central but broad (neo-)liberal aims that correspond to their broad strategies are almost universally shared, most centrally “growth” (besides employment). Also Greens usually make the survival of the planet conditional on growth.
If neoliberal politics are inversed, are the general aims then simply the same or do they change significantly?
All this presupposes not only technological debates about means to ends. It demands also debates about the philosophical ideas which are implied in the background.
Thanks to Chris Vielhaus we can remind us at this point that Milton Friedman claimed the fall of actually existing communism “marked the philosophical supremacy of the idea of free markets and private enterprise over the idea of collective central planning.” This is what we are told in every crisis and everytime some modest alternative is proposed.
Neoliberalism incorporates philosophical ideas about wealth as income and GDP growth, value as subjective, human nature as fundamentally competitive, inequality as just and productive, social planning as impossible, democracy and collective action as dangerous (which may include ethics), human exchange as commodified (neoliberals hardly talk about work), and of course freedom as safety from the predators near you.
Neoliberalism might be said to be a stream we are floating on not so much because it is based on grand economic science or esoteric models. It was successful within the political class because it had easy, utterly simplistic prescriptions which insinuated to lead to easy solutions (something similar holds for Keynesianism) and the best of all possible worlds, at least in approximation. And it suited the wealthy and powerful. In addition, its appeal was and is to a large part due to its seductive (elite) philosophy, not some non-existent elaborate scientific and technological strategy.
Another lesson to be learned is that philosophy matters.
The problem is that philosophising is usually judged not to be a this-worldly affair, but something for the academic citadel, which makes it instantly irrelevant. If it is practiced on the streets, it tends to quirky esotericism. The result is the same.
The returning uneasiness about neoliberalism’s potential demise in the media is probably explained by the circumstance that much of the above is kept as a secret and discussions of alternatives are left to marginal circles.
One more problem with inversing neoliberal strategies is that this might hide that the philosophy behind is to a large degree still hegemonic across the political spectrum and perhaps shared by many critics.
This is the real victory of neoliberalism. Embodied thinking can be paralyzing without being noticeable. Much of its implicit philosophy has become almost common sense, although (or because) it is hardly ever debated.
The culturalist criticism of neoliberalism claims that many people actually incorporate neoliberalism in their worldview, from the elite to the middle-class and the youth. For instance, especially young girls and women make themselves appear the way they believe “the market” of social media is demanding it. And many get sick. Parents, especially mothers, compete to be the best parents on the planet, drawing on a steady flow of pictures on Facebook as a source of implicit criteria. Job offers even from universities regularly demand “entrepreneurial personalities” while research is organised as a never ending (pseudo-)competition over funds. Schools measure their children according to various “standards,” similar to the EU’s practice of legislating about cucumbers.
As Stephen Metcalf wrote, “’neoliberalism’” indicates something more than a standard rightwing wish list. It was a way of reordering social reality, and of rethinking our status as individuals.” It has been widely learned to “think of ourselves as proprietors of our own talents and initiative, … to compete and adapt” to achieve legitimation, against others, to a share of the economy or its growth, and even happiness.
A common middle-class ideology is that to be successful you need to be flexible, a maniac in short-term and superficial networking, an entrepreneur of short-lived and irrelevant “projects” you boast with even if nobody asks you to, and everything is a challenge, because it is without alternative, even if you hate it. You have a fitness tracker and, if you don’t work, you “work out,” according to plans provided by your newest app, the neoliberal, individualized version of Big Brother. And for every bullshit there is an expert advertising to boost performance. Losers in competition are suckers.
The working-class variant is that you have no time for such nonsense because the job has to be done. This is one more lesson taught by the lockdowns.
If such stories are broadly correct, then many people, some groups (but which exactly?), not only elites, simply want a version of neoliberalism and cannot imagine anything else since they share the philosophy. But they want to tame it to their advantage, for instance on grand scale in a nationalist way, on the family-level in calling for good schools for one’s own children. The suckers shall be the others.
Accordingly, if a different goal or set of goals is suggested within the borders of mainstream media and its experts, then it is dismissed as flippancy and fancy uttered by leftie weirdos. They are, of course, also annoyed by the old questions about “the system.”
Unfortunately, not all of such scepticism is without reason.
The problem with cultural criticism is that it is often just another version of elitism, thus unconvincing as long as it has no alternative for, say, all (see Spekulationsblasen, Wunschträume und Täuschungsmanöver). If it is merely moral and general, by for example exchanging competition with solidarity, it promises to be toothless, remaining on the surface, and fragmentary.
Furthermore, such conservative (or “liberal”) argumentation against change has the facticity of the status quo on its side, and it can play with fear and experiences of failure: everything might be worse, e.g. if GDP falls or “we” are outperformed in international competition.
Noteworthy, whereas the promise had once been more wealth and ultimate freedom for all, it has shrunk to historical comparisons or procrastinating defeat.
However, neither the empirical balance sheet of neoliberal history is ever presented nor the philosophy explicitly defended. The worst about all of this is that there does not seem to be much of a serious debate at all, outside of marginal academic circles.
Here it is worthwhile to remind us with the journalist Katharina Wiegmann that to be liberal is often claimed to mean to be open to debate, argument and belief-revision.
Not everything in neoliberalism is downright false, for instance its warning that nothing of endurance and at the same time emancipating is to be expected from top-down-planning, and its anarchist stance that the state is not to all extent a trustworthy institution. Furthermore, without political and cultural liberalism there will be no positive change at all. Although the opportunities provided by open borders and "the free market" were mostly used by capital and goods, also people and with them a few ideas could travel across them.
As David Graeber remarked, the neoliberal revolution of the mind was that it reversed intellectual history by building around the notion of capitalism (“the free market”) a progressive, revolutionary or utopian force, which had before been the role of socialism:
“Capitalism became the unrealized ideal: a utopian dream of a perfectly free, self-regulating market. Socialism was the sordid reality of government regulation. All progress in human happiness and freedom could therefore be attributed to capitalism; everything bad to the lingering effects of socialism.”
In this tradition one of the open questions among those who call themselves progressives and criticize neoliberalism is whether beyond the neoliberal era should lie one of partial reformism, a new but merely different capitalism, or revolutionary system change.
If a “system of democratic and digital planning” of whole economic sectors is the aim, as George Monbiot suggests, how is it done, and how can philosophical and technical arguments by neoliberals against this be countered? If a more modest or piecemeal approach is the ticket, where does it lead?
Shall a story be developed and delivered about a different way of life, as all those suggested (or seemed to suggest) who claimed that the normal before the crisis was catastrophic? For instance, David Graeber suggested to rethink our relation to the holy cow of Western modernity, namely work. But hardly anybody follows.
The basic issue in debating a substitute for neoliberalism is the following: how could people be convinced (or convince themselves) of something like that, a new way of life, if there are no precise ideas of something like that beyond grand utopian visions (see Champagner-Kommunismus jetzt?), and it seems almost inconceivable to imagine something like that without doing it at the same time.
This may very well be the problem of all the currently existing, nonexistent or nascent social and/or ecological movements, which have at the same time to survive within actually existing neoliberalism or its remains.
Whatever the answers are, beyond neoliberalism lies a different foundational philosophy and a different vision, but also compelling stories about its realization. The issue has been formulated in a simple way by Kate Raworth. Perhaps it does not sound as cheesy when uttered by an economist: “Talking about values and goals is a lost art waiting to be revived.” It got lost to a large part within neoliberal phobosophy.
A philosophy leading strictly beyond neoliberalism would be nothing short of a new utopian force and everything else only a variant of it.
However, it could, should and probably has to be developed and spread as a new liberalism.
To test this and other claims and to find answers, future episodes of What the Fcuk are about wealth, value, work and unemployment, inequality, growth, human nature, humanism, planning, capitalism, debt and the financial system, the imperial mode of living, etc., we’ll see what happens.
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