<nettime> Guardian > Monbiot > Neoliberalism -- the ideology at the root of all our problems

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Neoliberalism -- the ideology at the root of all our problems

     Financial meltdown, environmental disaster and even the rise of Donald
     Trump -- neoliberalism has played its part in them all. Why has the left
     failed to come up with an alternative?


George Monbiot
Friday 15 April 2016 07.00 EDT


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?

Inequality is recast as virtuous. The market ensures that everyone gets
what they deserve. 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

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.

It may seem strange that a doctrine promising choice should have been
promoted with the slogan 'there is no alternative' 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.

Neoliberalism was not conceived as a self-serving racket, but it rapidly
became one 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.

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 nouveau riche were once disparaged by those who had inherited their
money. Today, the relationship has been reversed 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.

***

For all that, there is something admirable about the neoliberal project,
at least in its early stages. It was a distinctive, innovative
philosophy promoted by a coherent network of thinkers and activists with
a clear plan of action. It was patient and persistent. The Road to
Serfdom became the path to power.

The left has produced no new framework of economic thought for 80 years.
This is why the zombie walks 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.

Every invocation of Lord Keynes is an admission of failure. To propose
Keynesian solutions to the crises of the 21st century is to ignore three
obvious problems. It is hard to mobilise people around old ideas; the
flaws exposed in the 70s have not gone away; and, most importantly, they
have nothing to say about our gravest predicament: the environmental
crisis. Keynesianism works by stimulating consumer demand to promote
economic growth. Consumer demand and economic growth are the motors of
environmental destruction.

What the history of both Keynesianism and neoliberalism show is that
it's not enough to oppose a broken system. A coherent alternative has to
be proposed. For Labour, the Democrats and the wider left, the central
task should be to develop an economic Apollo programme, a conscious
attempt to design a new system, tailored to the demands of the 21st
century.

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