The question, what is neoliberalism, is an important question right now. Especially with Trump in office, questions about extreme capitalism and the end of Democracy seem to be cropping up daily. Asking this question and dealing with the answers in a constructive manner will clearly be important to our future prosperity and will surely have a large effect on what society and community and civilization will look like in the future.
In the simplest sense, neoliberalism is capitalism on steroids. It is an extreme kind of unregulated capitalism that Ronald Reagan and Margaret Thatcher officially introduced to the world in the early 1980s. And since unregulated capitalism has a role in destroying the environment, causing the death of millions of species, and impoverishing entire societies it could even effect the survival of the human race
Most economists and political scientists are aware that neoliberalism is a particularly aggressive form of free market capitalism. The theory is that markets need to be totally free and unregulated to work best. Supply and demand must be free to set prices and these prices then work automatically to distribute goods where they are needed most. The result is often jobs and prosperity for everyone. All of this is sometimes called the invisible hand.
Much of this is actually true. But there are many kinds of capitalism. Some kinds of capitalism like neoliberalism are very destructive.
Since what capitalists do is try to make themselves rich but in the process sometimes make other people more prosperous also, the essence of capitalism got distilled into “Selfishness is Good,” and Greed is Good.” This is kind of true in some cases, in some kinds of capitalism like mixed economies, but it is mostly not true. In American capitalism, which is neoliberal capitalism, only the capitalists themselves get rich and no one else. Neoliberalism capitalism has currently pushed inequality in America to its highest rate in fifty years.
This “Selfishness is Good” idea is often attributed to Adam Smith. But this is not correct at all. This is not what Adam Smith said. Here is an essay I wrote on this.
Other kinds of capitalism like democratic capitalism or social democracy or mixed economies can be very beneficial. This kind of capitalism is regulated capitalism and if the profits it generates are divided equally among all people, it can create prosperity for everyone.
Many historians and economists say that because America developed a mixed economy in the postwar period after World War II, an economy where both the private sector and public sector had an important role, an age of prosperity followed. This period is often called the “Golden Age” of America.
A great book on the importance of a mixed economy for American prosperity is American Amnesia: How the War on Government Led us to Forget What Made America Prosper by Jacob Hacker. Hacker says that a mixed economy is how America got rich.
And the same kind of mixed economy happened in postwar Europe. Many economists and politicians say that the reason that the second half of the 20th century was so peaceful and prosperous, as opposed to the first half, is that social democracy became the dominant form of economics during this period. Below is a great book, The Primacy of Politics, that discusses why this was so and how it happened in great detail. I would say that this book and the one mentioned above are two of the best books I have ever read.
At one particular point in US history a mixed economy and the resulting prosperity actually happened. The period after WWII, beginning in 1945 and running through about 1970 was a prosperous period for all classes in America. It was actually the most prosperous period in US history. It was a period when many went to college for free on the GI bill, middle class real wages were at their highest point ever, and the entire middle class could afford their own home, a car and a modestly prosperous and good life. And the rich did well too, not catastrophically well as they are doing now, but they made good profits. And, says Jacob Hacker, all of this happened because Americans in the post war period realized that public regulation of private markets was essential.
Unfortunately this is not even close to true today. The neoliberals, who are now in charge of our economy say that government should never have a say in economic matters, only markets should determine the state of the economy. Neoliberals say that mixed markets are bad and will lead to the collapse of the economy.
In contrast to what actually happened between 1945 and 1970, neoliberals say that markets unregulated by government are the only true road to prosperity. They believe unregulated markets will infallibly sort out what economies need, sort out how societies can best function and the result will be a utopia where everyone is prosperous and scarce resources will be efficiently shared out to everyone in the best possible way.
Unfortunately things didn’t quite turn out this way.
The Republican Federal Bank Chairman Alan Greenspan was a staunch believer in totally free markets, right up to the 2008 crash of the American financial industry. Then he suddenly was not so much of a believer.
The 2008 crash was not a problem for big business or the big corporations. They came out of it richer than before. But not so the American middle class or the American working people. Many in the middle classes lost their homes and their jobs. This Great Recession, as it was called, was devastating for many in the middle and working classes.
The economy looks good right now (December 2019), but it’s really only good for the rich who are rolling in cash, especially after the huge Donald Trump tax cut for the ultra rich. Tax cuts for the middle class were very limited and are scheduled to completely disappear in a year of two. Unemployment is extremely low but most of the jobs available are very low-paying service jobs. Good paying manufacturing jobs are not coming back in the US no matter what Trump says.
So, getting back to neoliberalism.
As I said, the basic rule of neoliberalism is that governments should never interfere with markets. Government regulation is always wrong. Government is not the solution, government is the problem, as Ronald Reagan so neatly put it.
Another neoliberal rule is that the private sector is always more efficient than the public sector and therefore the government should never own any kind of business. This means that all industries and services should be privatized, ie be put into private hands. This also means that all profits go into private pockets rather that government pockets where it might be spent to the welfare of everyone. The welfare of everyone might include high speed trains and subways, free health care for everyone (which all other advanced countries already have), free high quality internet to everyone, national parks, and probably most importantly averting global warming.
Neoliberalism is not about what is often called “the common good.” In fact the idea of the Common Good is directly opposed to Neoliberalism. Robert Reich has written a wonderful book called The Common Good which describes in simple, easy to understand words the ideas of the common good and how it is radically different from the neoliberal capitalism which is the dominate economic and political philosophy in America right now. Here is link to that book.
Neoliberalism is about radically reducing social services, leashing labor, deregulating capital, and limiting the prosperity of the working class. This latter idea was deliberately built into early forms of neoliberalism and continued religiously into the present day. In the real world neoliberalism is mostly about making the wealthy more wealthy, and forget about everyone else. And it has accomplished this in spades.
Today we see rampant neoliberalism in Republican governments and especially in the Trump administration. One thing this means is more and more cuts in social services.
Just last week Trump unilaterally cut food stamps for 700,000 people. And this is planned to increase to three million and then five million people. All of these people will eventually be struck from government nutritional assistance rolls in the next few years, if all goes as the Republicans plan. Republicans say the real reason they are doing this is to save people from the awful fate of dependency on government. Real hunger and its consequences, on children especially, seems a bit more important.
All of this extreme capitalism is having an effect on the quality of life all over the world. Massive inequality abounds in American, Europe, and Asia. The rich are getting richer and the poor are getting poorer everywhere. And the main reason is neoliberalism.
Here is one billionaire, Marc Benioff, who is actually complaining about inequality. He says that “globally, the 26 richest people in the world now have as much wealth as the poorest 3.8 billion people, and the relentless spewing of carbon emissions is pushing the planet toward catastrophic climate change. In the United States, income inequality has reached its highest level in at least 50 years, with the top 0.1 percent — people like me — owning roughly 20 percent of the wealth while many Americans cannot afford to pay for a $400 emergency. It’s no wonder that support for capitalism has dropped, especially among young people.”
Benioff is worried that rising inequality might cause such a backlash that all capitalism, not just cruel neoliberalism, might be ended by a super-angry middle class. He is worried about throwing out the baby with the bathwater. And he is right. Capitalism can be good for everyone, the rich and the middle classes. But capitalism only works for everyone when it is properly regulated by government. Only when the economy is a mixed economy, controlled by both the public and the private sector, does capitalism work for everyone.
Those who most experience the current inequality are the middle classes and the working people of the advanced nations. The wages of the American working class have stagnated for the last 50 years when you discount inflation. In real dollars, working class wages have risen only a few dollars in the last 50 years. And all job security for working people has been eliminated. In the same period, the wages of CEOs and other wealthy folks have multiplied many times over.
It is hard to imagine such cruelty, but the original neoliberal revolution was knowingly designed to callously crush the working class. Back in 1947 a bunch of economists, plus some of the most wealthy people in the world, along with a few utopian philosophers like Fredreich Hayek, met at a high end resort in Switzerland, Mont Perlion, to discuss the economy. Here they came up with the ideas that were the beginnings of neoliberalism. One of these ideas was that not everyone can win, there will always be losers and the working people are expendable. Luckily their ideas were not yet mainstream ideas, as a mixed economy was in place for most of this period and the middle classes did very well in the early post war period.
The real neoliberal program began more recently, back in the late 1970s and the early 1980s when the wealthy decided the working class were too expensive and wages were cutting too deeply into their profits. So, they decided that production could be automated and moved overseas, labor unions could be quashed, wages could be cut to the bone, retirement plans disappeared into non-existence and job security cut to no more than a fond memory. This was known as the Reagan revolution in American and the Thatcher revolution in Great Britain.
Reagan called it Morning in America. But it was more like goodnight to the good times for many Americans. (Actually neoliberalism first took hold in America a little before Reagan in the 1970s partially as a response to the global oil crisis. But it was Reagan who really put the neoliberal frosting on the cake.)
One of the more recent examples of this trend is the way all sorts of companies like Uber have redefined their employees. Instead of hiring employees who have legal labor rights, they now call their hires “independent contractors” who of course have zero rights.
This trend has been growing massively all over the world in the last few years. There are big businessmen all over Asia and South America becoming instant billionaires and multi-billionaires by pushing this scam. In Asia whole new banking industries have been created to organize finance using this new idea. The guys controlling this new financial boom are the newest rich of Asia and South America. And the taxi drivers and delivery guys on bikes and motorcycles are the ones getting screwed. Big time.
Here is a great article on all of this in the New Yorker.
This is just the beginning when you ask what is neoliberalism. It turns out that neoliberalism is not only an economic idea but it also incorporates definite views on morality, religion, family, society and many other things. And it’s been this way since it’s invention at the Mont Perlion meeting in 1947.
In fact it you look at the values of modern neoliberalism closely they seem to almost identical to the values of the Republican Party.
Here is a list of neoliberal / Republican values all in one long sentence: employees have no rights and should have none; inequality is necessary and inevitable; welfare is always bad because it encourages dependency; women are inferior to men and should have no rights, not even voting rights; secularism is evil; simple traditional values like “men are naturally superior” and “foreigners are evil” should be propagated; fundamentalist Christian values trump all other values; society doesn’t exist, only individuals exist; since society doesn’t exist, social justice is impossible; attempts by government to lessen racism, sexism or nativism are bad because this is just Political Correctness or Social Engineering which never work, just look what happened when Russia tried it; state power must be weakened; government should be decreased until it is small enough to down in the bathtub; small government is always best; public institutions must be privatized; government is not the solution it is the problem; capital must be free to move anywhere in the world without regulation; markets must always be unregulated; liberty means the freedom to make as much money as possible without any government regulation, no matter how many people you injure or how many forests get destroyed (think of Martin Shkreli who raised the price of one pill of Daraprim from $13.00 to $750.00 after buying the rights to the medication . He said this a capitalist country and raising its price is my right); self reliance is always best; there are always winners and losers, this is a natural law; if you lose a job or get sick or are treated unfairly by your boss don’t expect any help from the state; militant secularists are evil; social justice is wrong headed; equality is not possible, SJW’s or Social Justice workers are evil.
The list of negative and destructive ideas that both Republicans and Neoliberals believe is almost endless. With Donald Trump as president much of this has come to the fore and we see examples of this almost daily.
For example, in 2018 the Republican Housing and Urban Development secretary Ben Carson refused to enforce the 1968 Fair Housing Act because he said it was social engineering. The Republican idea that any attempt to change society is not only bad but impossible is a consequence of the neoliberal idea that society doesn’t really exist. So Republicans use cold-war terms like Social Engineering to demean the whole idea of fixing racism or sexism or corruption.
The Fair Housing Act was originally put in place to try to end the red-lining of certain neighborhoods by real estate lenders who were attempting to keep white residential areas lilly white. The act was also intended to limit many other kinds of race discrimination and segregation in home sales and financing. The Fair Housing Act did a lot of good for a lot of people.
In the same year, Candian Prime Minister Justin Trudeau was also rebuked for Social Engineering. This was in response to his attempt to limit sexism in police and the military.
These are example of neoliberals attempting to end any and all social justice reforms . The Republicans label such reformers Social Justice Warriors and refer to them as enemies of the people.
Or take a look at William Barr, Trump’s attorney general. His ideas are a good example of Republican morality in action.
Paul Krugman mentioned Barr in an essay in the New York Times a few days ago. The essay was mainly about the fact that people in Red States, on the average, die four years younger that people in blue states. In other words life expectancy is four years less in red states than in blue states. Krugman says this happens mostly because many blue states expanded Medicaid and reduced the number of people without health insurance, while red states did not.
Krugman goes on to say that William Barr actually believes that life expectancy is lower in red states because of “the evil machinations of militant secularists.”
Krugman said that “Conservative figures like William Barr, the attorney general, look at rising mortality in America and attribute it to the collapse of traditional values — a collapse they attribute, in turn, to the evil machinations of “militant secularists.” The secularist assault on traditional values, Barr claims, lies behind “soaring suicide rates,” rising violence and “a deadly drug epidemic.””
I can kind of understand where this attitude is coming from, but it seems so out of date, and so not fact-based and so unscientific that it seems to me very unhelpful. A lot of conservatives were very stressed out by the undermining of fundamental Christianity and even by the counter-culture of the late 1960s. They feel that all the traditional morality and values they saw as the basis of Western culture were deteriorating and disappearing. Gertrude Himmelfarb, a great historian and a wonderful conservative thinker felt this way. I like her, she is often a very sensibly person, but I don’t agree with a lot of what she says. It seems clear to me that this idea of the decline of all morality is just wrong-headed. At this point we need to deal with real problems, not imaginary ones.
But times may be changing. Something has suddenly happened in the way many Americans view capitalism, inequality and neoliberalism. Suddenly economists and political scientists are starting to take a closer look at our world and realizing that we are not living in an economic utopia as the neoliberals promised. It fact, it appears we are living in a totally opposite world, in a world that is just one huge political and economic catastrophe after another. And it looks like it is getting worse. This sudden realization was mostly triggered by the election of Donald Trump, Brexit in Great Britain and the rise of a number of petty and not so petty dictators all over the world
Suddenly there has been a rash of books with titles like Democratic Capitalism, Capitalism for the People, Capitalism for the many not the few, the end of Capitalism, and Equality and Capitalism. It seems that a big, important, new book on what has gone wrong with capitalism appears almost daily. Hopefully this is a trend that is going to bring results in the real world.
I am in the middle of reading several of these new books right now. One is titled In the Ruins of Neoliberalism : the Rise of Antidemocratic Politics in the West. The bottom line in this book is that neoliberalism is in the process of destroying democracy. And that neoliberalism is behind the election of many of the new autocrats all over the world.
Another book that I am reading is The Primacy of Politics which is about how social democracy made Europe one of the best places in the world in the second half of the 20th century.
All of the above is a huge topic. It is far too big for one little essay on neoliberalism. So I plan to write several more essays on capitalism and inequality and the possible fixes in the next few weeks and months. Hopefully I can answer the question, What is neoliberalism more completely.
More information on neoliberalism