Notes adapted from George Monbiot’s ‘How Did We Get into This Mess?’
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 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.
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 to
totalitarian control. 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 remarked on 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 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 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. 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
reregulate 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 entrepreneurs. They claim to have earned their
unearned income.
These anonymities and confusions mesh with the namelessness
of modern capitalism: the franchise model which ensures that
workers do not know who they work for; 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.
Neoliberalism’s triumph also reflects the failure of the left. When
laissez-faire economics led to catastrophe in 1929, Keynes
devised a comprehensive economic theory to replace it. When
Keynesian demand management hit the buffers in the 70s, there
was an alternative ready. But when neoliberalism fell apart in
2008 there was … nothing. This is why the zombie walks. The left
and centre have produced no new general framework of
economic thought for 80 years.