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Crisis after crisis is being caused by a failed ideology. But it cannot be stopped without a coherent alternative.
By George Monbiot, published in the Guardian 16th April 2016
It’s as 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 counter-productive 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 think tanks 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, Milton 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 post-war 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 embarassment, 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 Milton 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 United States 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 Daniel 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 Friedrich 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 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 Milton
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, Ludwig
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 points out in Why We Can’t Afford the Rich,
has had similar impacts. “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,
Friedrich 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 Donald Trump, for example, facts and arguments appear
irrelevant.
Tony Judt pointed out
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 think tanks, noted that “in order to avoid undesirable criticism, how the organization 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 Andrew 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 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.
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
1970s, there was “an alternative ready there to be picked up.” 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 1970s 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.
George Monbiot’s new book, How Did We Get into This Mess?, Is published this month by Verso.
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