NEOLIBERALISMO

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Neoliberalism – the ideology at the root of all our problems (George Monbiot,
2016).

Imagine if the people of the Soviet Union had never heard of communism. The
ideology that dominates our lives has, for most of us, no name. Mention it in
conversation and you’ll be rewarded with a shrug. Even if your listeners have
heard the term before, they will struggle to define it. Neoliberalism: do you know
what it is?
Its anonymity is both a symptom and cause of its power. It has played a major
role in a remarkable variety of crises: the financial meltdown of 2007-8, the
offshoring of wealth and power, of which the Panama Papers offer us merely a
glimpse, the slow collapse of public health and education, resurgent child
poverty, the epidemic of loneliness, the collapse of ecosystems, the rise
of Donald Trump. But we respond to these crises as if they emerge in isolation,
apparently unaware that they have all been either catalysed or exacerbated by
the same coherent philosophy; a philosophy that has – or had – a name. What
greater power can there be than to operate namelessly?
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 counterproductive and morally corrosive. The market ensures
that everyone gets what they deserve.
We internalise and reproduce its creeds. The rich persuade themselves that
they acquired their wealth through merit, ignoring the advantages – such as
education, inheritance and class – that may have helped to secure it. The poor
begin to blame themselves for their failures, even when they can do little to
change their circumstances.
Never mind structural unemployment: if you don’t have a job it’s because you
are unenterprising. Never mind the impossible costs of housing: if your credit
card is maxed out, you’re feckless and improvident. Never mind that your
children no longer have a school playing field: if they get fat, it’s your fault. In a
world governed by competition, those who fall behind become defined and self-
defined as losers.
Among the results, as Paul Verhaeghe documents in his book What About
Me? are epidemics of self-harm, eating disorders, depression, loneliness,
performance anxiety and social phobia. Perhaps it’s unsurprising that Britain, in
which neoliberal ideology has been most rigorously applied, is the loneliness
capital of Europe. We are all neoliberals now.
The term neoliberalism was coined at a meeting in Paris in 1938. Among the
delegates were two men who came to define the ideology, Ludwig von Mises
and Friedrich Hayek. Both exiles from Austria, they saw social democracy,
exemplified by Franklin Roosevelt’s New Deal and the gradual development of
Britain’s welfare state, as manifestations of a collectivism that occupied the
same spectrum as nazism and communism.
In The Road to Serfdom, published in 1944, Hayek argued that government
planning, by crushing individualism, would lead inexorably to totalitarian control.
Like Mises’s book Bureaucracy, The Road to Serfdom was widely read. It came
to the attention of some very wealthy people, who saw in the philosophy an
opportunity to free themselves from regulation and tax. When, in 1947, Hayek
founded the first organisation that would spread the doctrine of neoliberalism –
the Mont Pelerin Society – it was supported financially by millionaires and their
foundations.
With their help, he began to create what Daniel Stedman Jones describes
in Masters of the Universe as “a kind of neoliberal international”: a transatlantic
network of academics, businessmen, journalists and activists. The movement’s
rich backers funded a series of thinktanks which would refine and promote the
ideology. Among them were the American Enterprise Institute, the Heritage
Foundation, the Cato Institute, the Institute of Economic Affairs, the Centre for
Policy Studies and the Adam Smith Institute. They also financed academic
positions and departments, particularly at the universities of Chicago and
Virginia.
As it evolved, neoliberalism became more strident. Hayek’s view that
governments should regulate competition to prevent monopolies from forming
gave way – among American apostles such as Milton Friedman– to the belief
that monopoly power could be seen as a reward for efficiency.
Something else happened during this transition: the movement lost its name. In
1951, Friedman was happy to describe himself as a neoliberal. But soon after
that, the term began to disappear. Stranger still, even as the ideology became
crisper and the movement more coherent, the lost name was not replaced by
any common alternative.
At first, despite its lavish funding, neoliberalism remained at the margins. The
postwar consensus was almost universal: John Maynard Keynes’s economic
prescriptions were widely applied, full employment and the relief of poverty were
common goals in the US and much of western Europe, top rates of tax were
high and governments sought social outcomes without embarrassment,
developing new public services and safety nets.
But in the 1970s, when Keynesian policies began to fall apart and economic
crises struck on both sides of the Atlantic, neoliberal ideas began to enter the
mainstream. As Friedman remarked, “when the time came that you had to
change ... there was an alternative ready there to be picked up”. With the help
of sympathetic journalists and political advisers, elements of neoliberalism,
especially its prescriptions for monetary policy, were adopted by Jimmy Carter’s
administration in the US and Jim Callaghan’s government in Britain.
After Margaret Thatcher and Ronald Reagan took power, the rest of the
package soon followed: massive tax cuts for the rich, the crushing of trade
unions, deregulation, privatisation, outsourcing and competition in public
services. Through the IMF, the World Bank, the Maastricht treaty and the World
Trade Organisation, neoliberal policies were imposed – often without
democratic consent – on much of the world. Most remarkable was its adoption
among parties that once belonged to the left: Labour and the Democrats, for
example. As Stedman Jones notes, “it is hard to think of another utopia to have
been as fully realised.”
It may seem strange that a doctrine promising choice and freedom should have
been promoted with the slogan “there is no alternative”. But, as Hayek
remarkedon a visit to Pinochet’s Chile – one of the first nations in which the
programme was comprehensively applied – “my personal preference leans
toward a liberal dictatorship rather than toward a democratic government devoid
of liberalism”. The freedom that neoliberalism offers, which sounds so beguiling
when expressed in general terms, turns out to mean freedom for the pike, not
for the minnows.
Freedom from trade unions and collective bargaining means the freedom to
suppress wages. Freedom from regulation means the freedom to poison rivers,
endanger workers, charge iniquitous rates of interest and design exotic financial
instruments. Freedom from tax means freedom from the distribution of wealth
that lifts people out of poverty.
As Naomi Klein documents in The Shock Doctrine, neoliberal theorists
advocated the use of crises to impose unpopular policies while people were
distracted: for example, in the aftermath of Pinochet’s coup, the Iraq war and
Hurricane Katrina, which Friedman described as “an opportunity to radically
reform the educational system” in New Orleans.
Where neoliberal policies cannot be imposed domestically, they are imposed
internationally, through trade treaties incorporating “investor-state dispute
settlement”: offshore tribunals in which corporations can press for the removal
of social and environmental protections. When parliaments have voted to
restrict sales of cigarettes, protect water supplies from mining companies,
freeze energy bills or prevent pharmaceutical firms from ripping off the state,
corporations have sued, often successfully. Democracy is reduced to theatre.
Another paradox of neoliberalism is that universal competition relies upon
universal quantification and comparison. The result is that workers, job-seekers
and public services of every kind are subject to a pettifogging, stifling regime of
assessment and monitoring, designed to identify the winners and punish the
losers. The doctrine that Von Mises proposed would free us from the
bureaucratic nightmare of central planning has instead created one.
Neoliberalism was not conceived as a self-serving racket, but it rapidly became
one. Economic growth has been markedly slower in the neoliberal era (since
1980 in Britain and the US) than it was in the preceding decades; but not for the
very rich. Inequality in the distribution of both income and wealth, after 60 years
of decline, rose rapidly in this era, due to the smashing of trade unions, tax
reductions, rising rents, privatisation and deregulation.
The privatisation or marketisation of public services such as energy, water,
trains, health, education, roads and prisons has enabled corporations to set up
tollbooths in front of essential assets and charge rent, either to citizens or to
government, for their use. Rent is another term for unearned income. When you
pay an inflated price for a train ticket, only part of the fare compensates the
operators for the money they spend on fuel, wages, rolling stock and other
outlays. The rest reflects the fact that they have you over a barrel.
Those who own and run the UK’s privatised or semi-privatised services make
stupendous fortunes by investing little and charging much. In Russia and India,
oligarchs acquired state assets through firesales. In Mexico, Carlos Slim was
granted control of almost all landline and mobile phone services and soon
became the world’s richest man.
Financialisation, as Andrew Sayer notes in Why We Can’t Afford the Rich, has
had a similar impact. “Like rent,” he argues, “interest is ... unearned income that
accrues without any effort”. As the poor become poorer and the rich become
richer, the rich acquire increasing control over another crucial asset: money.
Interest payments, overwhelmingly, are a transfer of money from the poor to the
rich. As property prices and the withdrawal of state funding load people with
debt (think of the switch from student grants to student loans), the banks and
their executives clean up.
Sayer argues that the past four decades have been characterised by a transfer
of wealth not only from the poor to the rich, but within the ranks of the wealthy:
from those who make their money by producing new goods or services to those
who make their money by controlling existing assets and harvesting rent,
interest or capital gains. Earned income has been supplanted by unearned
income.
Neoliberal policies are everywhere beset by market failures. Not only are the
banks too big to fail, but so are the corporations now charged with delivering
public services. As Tony Judt pointed out in Ill Fares the Land, Hayek forgot that
vital national services cannot be allowed to collapse, which means that
competition cannot run its course. Business takes the profits, the state keeps
the risk.
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. Or rather, a cluster of
anonymities.
The invisible doctrine of the invisible hand is promoted by invisible backers.
Slowly, very slowly, we have begun to discover the names of a few of them. We
find that the Institute of Economic Affairs, which has argued forcefully in the
media against the further regulation of the tobacco industry, has been secretly
funded by British American Tobacco since 1963. We discover that Charles and
David Koch, two of the richest men in the world, founded the institute that set up
the Tea Party movement. We find that Charles Koch, in establishing one of his
thinktanks, noted that “in order to avoid undesirable criticism, how the
organisation is controlled and directed should not be widely advertised”.
The words used by neoliberalism often conceal more than they elucidate. “The
market” sounds like a natural system that might bear upon us equally, like
gravity or atmospheric pressure. But it is fraught with power relations. What “the
market wants” tends to mean what corporations and their bosses want.
“Investment”, as Sayer notes, means two quite different things. One is the
funding of productive and socially useful activities, the other is the purchase of
existing assets to milk them for rent, interest, dividends and capital gains. Using
the same word for different activities “camouflages the sources of wealth”,
leading us to confuse wealth extraction with wealth creation.
A century ago, the nouveau riche were disparaged by those who had inherited
their money. Entrepreneurs sought social acceptance by passing themselves off
as rentiers. Today, the relationship has been reversed: the rentiers and
inheritors style themselves entre preneurs. They claim to have earned their
unearned income.
These anonymities and confusions mesh with the namelessness and
placelessness of modern capitalism: the franchise model which ensures that
workers do not know for whom they toil; the companies registered through a
network of offshore secrecy regimes so complex that even the police cannot
discover the beneficial owners; the tax arrangements that bamboozle
governments; the financial products no one understands.
The anonymity of neoliberalism is fiercely guarded. Those who are influenced
by Hayek, Mises and Friedman tend to reject the term, maintaining – with some
justice – that it is used today only pejoratively. But they offer us no substitute.
Some describe themselves as classical liberals or libertarians, but these
descriptions are both misleading and curiously self-effacing, as they suggest
that there is nothing novel about The Road to Serfdom, Bureaucracy or
Friedman’s classic work, Capitalism and Freedom.