Neo this and Post that – Part Two

Posted in: Politics Matters | 2

no choice!

This post is the second in a small series under the heading of Neo this and Post that.¹ Its focus is on a term that is now garnering a lot of mass media attention, particularly since the recent election of President-elect, Donald J. Trump. So much has been said and written about Neo-liberalism that it is difficult to discern its fundamental origin and characteristics, as well as, its various applications to things in the real world.

 

It might seem odd to start by stating what neoliberalism is not, but for the sake of greater accuracy, it is vitally important. Firstly, it shares nothing with what is termed classical liberalism. That is the original expression of liberal ideas first espoused in the late 17th c. by John Locke or adopted and applied by the founding fathers of the USA. Secondly, it is antithetical to earlier 20th c. versions of liberalism often referred to as business or welfare liberalism.

 

Neoliberalism is a term which has been used to account for different social and economic ideas at different times throughout the 20th c. Its more common usage emerged in the late 1970’s when it was used to describe a set of largely economic policies that were a revision of 19th c ideas associated with laissez-faire economic liberalism. The post WWII growth in prosperity and the expansion of the provisions of the modern welfare state reflected the successes of labour over capital. The rise in affluence of an expanding middle class in western societies also contributed to more demands for services from government at the same time as basic rights of citizens were made available to an ever-widening constituency. But such a trajectory of rapidly rising affluence coupled with a endless list of services from government would ultimately prove unsustainable.

 

The transformative shock to the system would come in the form of an energy crisis – ironically, one initiated by overseas producers of that most important of commodities to the global capitalist economy, namely oil. When, in October 1973, the Organization of Arab Petroleum Exporting Countries [OAPEC] invoked an embargo against America for its support of Israel in the Yom Kippur war, it realigned the historic relationship between producer and consumer in favour of the producer and gave impetus to the reassertion of capital over labour. Various Western governments struggled with rapidly rising costs for oil and undertook several methods to transition to the new reality.

One of the casualties of this crisis, not immediately apparent, was the largesse of government in the form of social welfare provisions. As the effects of the crisis widened – inflation, higher unemployment – the clamour of labour demands to maintain their two and a half decades long gains crashed head-long into governments increasingly frightened by the burden of financing those same gains. It turns out that in any version of a wage and prices freeze policy, the only thing governments can truly affect is wages!

 

The realignment spawned by the oil crisis of 1973 quickly gave rise to and legitimacy for neoliberal ideas. Many of those ideas would find practical expression in a multitude of policies enacted by governments over the next four decades. Some of those neoliberal goals were/are [in no particular order]

  • privatization of state-run industries and businesses
  • deregulation [of almost everything especially the banking industry]
  • reduction of government spending to enhance the role of the private sector in the economy
  • fiscal austerity
  • free trade
  • tax cuts
  • increased defence spending [especially in the USA]

 

The economic “gurus” providing a theoretical justification for many of the above policies are primarily Friedrich Hayek and Milton Friedman. Voluminous literature has been written on both these men and their respective theories so I will only add that what is important to highlight here is that they shared a vision of the merits of the unfettered free market economy as the best possible world. In his most famous work The Road to Serfdom,  Hayek advanced the notion that individual freedom is inseparable from, and enhanced by, economic freedom. His constant criticism is levelled at all versions of collectivist planning [socialist/communist/fascist] seeing them as impossible to achieve and coercive of individual freedom to choose.

We have seen before how the separation of economic and political aims is an essential guaranty of individual freedom and how it is consequently attacked by all collectivists. To this we must now add that the “substitution of political for economic power” now so often demanded means necessarily the substitution of power from which there is no escape for a power which is always limited. What is called economic power, while it can be an instrument of coercion, is, in the hands of private individuals, never exclusive or complete power, never power over the whole life of a person. But centralized as an instrument of political power it creates a degree of dependence scarcely distinguishable from slavery.

While it is undoubtedly true that “gurus’ do not usually choose their disciples, it is perhaps fair to say that they often get the kind of disciple they deserve. In the practical world of politics, two leaders would emerge in the early 1980s to establish the modern foundation for neoliberal policies. They are Margaret Thatcher in Britain and Ronald Reagan in the United States.

Thatcher and Reagan photo
Photo by www_ukberri_net

 

Margaret Thatcher was a most formidable person and her political legacy, subsequently referred to as Thatcherism, changed not just the face of British politics, but with her neoliberal allies elsewhere, the very trajectory of the global capitalist world we currently inhabit. As Hugo Young wrote,

Thatcher advocated greater independence of the individual from the state; an end to allegedly excessive government interference in the economy, including privatization of state-owned enterprises and the sale of public housing to tenants; reductions in expenditures on social services such as health care, education, and housing; limitations on the printing of money in accord with the economic doctrine of monetarism; and legal restrictions on trade unions.²

Her closest international ally was Ronald Reagan, President of the USA from 1981-1989. Together, they recast the 1980s into a neoliberal reality. In addition to their shared values concerning the role of the state in general and especially as it relates to the operations of the economy, they were kindred spirits in their relentless antagonism against the Soviet Union. Reagan clearly expressed his views with statements like the following:

Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
In this present crisis, government is not the solution to our problem; government is the problem.
The most terrifying words in the English language are: I’m from the government and I’m here to help.
General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and Eastern Europe, if you seek liberalization: Come here to this gate! Mr. Gorbachev, open this gate! Mr. Gorbachev, tear down this wall!
The rise to dominance of what is more commonly referred to as “Reaganomics“, a supply-side view of economics, is centred around the benefits of a trickle-down theory. The idea is that with a lower tax burden and increased investment, business can produce (or supply) more, increasing employment and worker pay. The last 35 years of following this practice has lead to massive inequity in wealth. In the USA it is really the 0.1% of the 1% everyone talks about who own a staggering 22% of the total wealth!  Combine tax breaks for the rich with a mantra of free trade in which the illusion is that deregulated business environments would create greater global wealth ostensibly for all, the famous ‘all boats will rise’ notion, and you have a neoliberal’s dream reality.
Neoliberal theory argues that a free market will allow for
  1. efficiency
  2. economic growth
  3. income distribution
  4. technological progress

What you really get from these kinds of actions are a shift from a tax-financed state to a debt-financed one. There is little evidence to support the benefits of trickle-down economic theory. Indeed, from its inception, critics slammed it for being a form of “voodoo economics”. What it accomplished for certain is the greater concentration of wealth into the hands of the capitalists ultimately at the expense of labour. Capital profits, labour suffers!

 

Thatcher’s war against the trade unions throughout the 1980s was highly successful, as was Reagan’s deregulation of business interests which contributed to the emergence of the vile “right to work” movement which gained increased traction and now is enacted in 26 states in the US. Furthermore, their original efforts to reshape the global economic landscape were expanded, perhaps surprisingly, throughout the 1990s under a Labour Prime Minister, Tony Blair and his Democratic Presidential counterpart, Bill Clinton.

Blair secured the victory of the battle fought by his seeming opponent Margaret Thatcher in her attack on the British welfare state. …Clinton achieved a dismantling of social services surpassing the right’s wildest dreams. Speaking a neoliberal language that made the state just another market actor, Clinton realized the victory of Reaganism.³

 

Greed for ever higher levels of profit maximization flourished in a neoliberal economic world and led to the tragedy of the 2008-2010 global recession from which many would argue we still have not truly recovered. Absurd levels of government debt in the trillions of dollars as well as crippling individual debt have been accrued in an artificially maintained low interest rate environment where printing more money by central banks is the preferred response to address systemic problems actually inherent in fundamental neoliberal theory.

 

The most recent use of the term neoliberalism has been as a critique for globalization. It seems laughably ironic that the very attributes associated with neoliberal economic policies that are part and parcel of globalization, like free trade, would now be used to discredit the negative consequences of their very implementation. All those millions of people globally disadvantaged and left behind these past 35 years by advancing a neoliberal agenda have become the modern stormtroopers of a rising backlash of nationalistic resentment against establishment elites who appeared blind and deaf to the frustrations and sense of abandonment they experienced. In the depths of hopelessness, cries for attention and help turn to anger at the lack of change. Inaction or inability to make things better for them breeds resentment and distrust of democratic leadership. It might seem trite and shallow, but nonetheless accurate, to state that the “revenge of the deplorables” emboldens authoritarian demagogues in their rise to power everywhere.

This may indeed be the end of neoliberalism as a viable economic model as many like Cornel West are saying, “The neoliberal era in the United States ended with a neofascist bang”.  What comes next is definitely undecided. It could be an ever-darkening descent into some neofascist dystopian future or a once in a generation chance to redefine a truly post-capitalist world in which all can share. Stay tuned!

 

NOTE: I have added materials on neoliberalism to the bibliography found at http://paulswhyte.com/politics-matters/bibliography-for-neo-and-post-blogs

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  1. see the first post here at http://paulswhyte.com/politics-matters/neo-this-and-post-that
  2. https://www.britannica.com/biography/Margaret-Thatcher 
  3. Democracy and other neoliberal fantasies, Jodi Dean, 2009, p. 7

 

Speak up! But since I cannot hear you, tell me what you think in the comment field below.

 

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2 Responses

  1. Roger Albert

    Good one, Paul. I’d like to say that the world was simpler when we were grad students, but I don’t think it was. In fact, the neologisms we are subjected to these days are undoubtedly not designed to obfuscate and confuse, but that is often the effect they have. That’s not much different than the sociologists and political economists of the 70s and 80s who bent over backwards trying to ‘modify’ Marxism or conservatism to make them more ‘modern’, to bring them more in line with ‘reality’ as they saw it. They were masters of the neologism and Max Webered everything in sight. 😉 Sorry.
    Rog
    Man, there’s so much to talk about. What fun!

    • Paul

      When words are used to communicate ideas, there should be a premium on clarity, but I agree with you that even when neologisms are created for precisely that purpose, they are often quickly misused and abused. Neo is one of those prefixes that gets attached to all manner of ideas, hence my 2 blogs. The very sense of ‘newness’ belies a reworking of something else to dress it up in modernity and fit the present reality. Sometimes, the neologism is deliberately meant as a pejorative, but subsequently appropriated as a badge of honour like for instance, neoconservative! In this current political environment, the dawning of the Trump era, I fear that words devoid of comprehension by many people are being employed as destructive missiles against all manner of perceived enemies. Why has there not been more universal outrage at this bullying and insensitive trend? Where has civility in public discourse gone?

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