We Have Never Been Neoliberal: A Manifesto for a Doomed Youth
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This is an important book, and it should be read by anyone concerned about constructing a progressive alternative to the destructive and dysfunctional politics of the present. David Tyfield, Department of Sociology, Lancaster University, UK *
Unlike in Marx’s day a spectre isn’t haunting Europe; it’s a stumbling, rambling, mindless, heartless zombie we call neoliberalism. But is this stumbling, incoherent monster really neoliberalism?
Could it be something else that we’ve missed all along? These questions are what this book is all about.
What I focus on in this book is the mess the world has been left in after the global financial system blew-up in 2007-08. Now, over six years later, we’re still in the midst of it, even if it has morphed, or decayed slowly, into something else.
A short and sweet definition of neoliberalism is that it represents a set of ideas and policies aimed at installing markets as the main mechanism for coordinating our societies. So, neoliberalism concerns the replacement of collective social action or political decision-making with individual interactions in (free) markets.
For now, it’s helpful to note that neoliberalism is generally associated with the transformation of society and economy to institute these free markets. This generally comprises five processes or policies: privatizing government services, industries and other assets; liberalizing international trade and investment; controlling inflation and supply-side dynamics rather than stimulating demand; deregulating to ‘release’ business from impediments and to enable individual’s to become more entrepreneurial; and the marketization of society through the introduction of markets and commodification throughout society.
I have started to explore in more depth the intellectual histories of neoliberalism in order to find answers to my questions. When did neoliberalism emerge? How? What has changed since then? Are we neoliberal after all?
What I want to do now is provide a brief overview of the different ways neoliberalism has been identified and defined in the academic literature. These definitions, which are all critical perspectives on neoliberalism, can be split into four groups.
The first is about what Michel Foucault calls governmentality, which involves the rationalities and political technologies of neoliberalism.
The second strand of research focuses on the influence of neoliberal ideas and morality; we could crudely call this the ideology of neoliberalism.
A third area of research is concerned with neoliberalism as a political or class project. It is most obviously associated with the work of Marxists scholars like David Harvey.
Finally, there is a burgeoning literature on neoliberalism as a process – so, rather than a set of conditions or policies and their effects or outcomes, several critics argue that neoliberalism is more properly thought of as a process of neoliberalization. That is, as the extension of market-like rule through state power.
What this brief run-down is meant to show is that neoliberalism is many things to many people.
This chapter is about the influence of the actual ideas – intellectual and moral – that neoliberals come up with.
One of the key ways that critics define neoliberalism is by referring to monetarism; this includes the theoretical ideas supporting monetary policies designed to maintain low inflation by controlling a country’s money supply.
Monetarism, in turn, is constituted by tight public spending and public spending cuts – that is, austerity.
These ideas, monetarism and tight public spending, are related to one another in neoliberal arguments, forming a key idea that has supposedly informed policy-making since the 1970s.
I’ll finish by discussing what sorts of actual policies resulted from these ideas; specifically, a massive expansion of the national public debt in countries like the USA, UK and, to a lesser extent, Canada.
Many neoliberals had direct experience with totalitarianism, having been driven out of their home countries because of their beliefs, and were driven by their moral and ideological ideas as much as economic ones.
In the name of a scientific programme, converted into a plan of political action, an immense political project is underway … This project aims to create the conditions under which the “theory” can be realised and can function: a programme of the methodical destruction of collectives.
It has been pursued as a moral and political project to denounce collective action, especially socialism, as a threat to capitalism and as a greater threat than capitalism could ever be. This is the case especially when it comes to conservative political parties.
This thought collective was centred on the Mont Pelerin Society and other sites including a range of free market and/or conservative think tanks like the Institute of Economic Affairs (UK – est. 1955).
Both economic and moral ideas are central to any understanding of neoliberalism.
It is important to note that neoliberals like Friedrich Hayek and Milton Friedman based much of their theoretical work on the argument that price stability is critical for the proper functioning of markets.
Therefore, it’s important to control inflation in order to ensure that prices remain stable.
What this meant – and still means – was that neoliberals tended to focus on monetary policy – that is, the control of the money supply and inflation as the key site of theoretical engagement with other political-economic perspectives like Keynesianism. It is also seen as the key site of government or policy intervention.
Many things that are now identified as neoliberal – e.g. privatization of national industries and public utilities, liberalization of trade and capital movement, deregulation, etc. – have one thing in common; they are premised on a particular understanding of the economy in which the stability of money and the dangers of inflation are key concerns.
Neoliberals feared that Keynesian ideas and policies would entrench an inflationary cycle as inflation was used to control rising real wages, which were rising in response to the growing political influence of workers and trades unions. It was easier for governments to use inflation to keep real wages down because wage restraints or moderation could lead to serious industrial conflicts.
According to neoliberals like Hayek, however, the inflationary pressures from these wage demands of trades unions would ratchet up with no end in sight, meaning that the stability of money would be eroded leading to the collapse of markets as they would no longer be able to function properly.
Governments would have to step in and assert control over wages and prices, raising fears about totalitarianism.
Monetary policy relates to the money supply; literally the amount of money in an economy.
What monetarists expect is that controlling the money supply will control price inflation since it will mean that no more money is allowed into circulation.
Neoliberals want to institute monetarism because it involves letting markets function ‘to find’ the ‘correct’ price of money (i.e. interest rate) rather than governments setting interest rates in pursuit of government policies, whether this is full employment or inflation control.
While monetarism was a powerful idea to beat Keynesianism with, it proved an utter failure when policy-makers attempted to implement these ideas as policy.
As an idea, monetarism failed. When there were attempts to implement it, this did not lead to price stability.
Attempts to tighten government spending represent another example of how neoliberal ideas have failed to be translated.
Even governments like those of Reagan and Thatcher failed to cut public spending as originally desired.
Like Reagan, Thatcher sought to cut taxes immediately upon her electoral victory.
What followed was the decimation of British industry as whole sections of the British population were thrown onto the (employment) scrap heap as unemployment stripped communities of jobs and resources.
Raising unemployment was an extremely desirable way of reducing the strength of the working classes.
More specifically, it was very much tied to existing political preferences like reducing government spending and privatizing state-owned enterprises as part of a wider attack on the electoral base of the Labour Party.
The capture of the money supply by private (and unregulated) banks has meant that governments have essentially lost control of their ability to reduce their public debt by inflating their economies.
It has created a system of state-sponsored transfers of money from taxpayers to financial investors, whether these are financial elites or individual policy-holders.
“Instead of being taxed to pay for public goods, the wealthy loaned governments money to finance deficits”.
What is important to remember is that inflation was not curtailed by monetarism, which was not successfully implemented; rather, it was curtailed through the expansion of the public debt.
What resulted was the tying of ourselves to a massive Ponzi-scheme in which we became dependent on ever rising asset prices as asset-inflation came to replace price-inflation.
My purpose here, as elsewhere in this book, is to illustrate how we need to rethink neoliberalism – so, rather than assume that it is the cause of the global financial crisis, I want to argue that we might need to find another cause altogether. Put simply, my contention is that neoliberalism has not driven political-economic change over the last 40 years, it has merely legitimated it.
The aim of this chapter then is to illustrate this claim with a simple question: how did we get to a situation during the GFC where there were corporations ‘too-big-to-fail’ when the original neoliberal thinkers actually held antithetical views of such corporate monopolis and concentrations of economic power?
How have monopoly levels changed over time? What has this meant for our economies? These are critical questions, especially as they relate to the increasing concentration of economic power in fewer and fewer hands and the corresponding emergence of financial institutions that are ‘too-big-to-fail’.
Neoliberalism didn’t promote the rise of corporate monopolies, championed by a new wave of radical thinking bubbling up from the offices of economists and others at the University of Chicago; instead, existing corporate monopolies led neoliberals to seek ways to defend corporate monopoly against attacks by New Deal advocates, socialists and the likes.
The point of the discussion above is to highlight the fact that financialization involves more than the top 1%. Institutional investors represent the money of ‘Joe and Jane Public’ invested in their pensions, savings accounts, insurance funds, and so on. It is not just the top echelons of society who are invested (socially, politically, personally) in the financialized transformation of society.
What has happened in the US, UK and Canada has necessitated the enrolment of broad swathes of society; the working and middle classes are tied into the extension of home ownership, pensions and other financial assets. We are all complicit in the financialization of the economy, whether or not we have been directly responsible for the imposition of particular ideas, policies or other activities.
So when we talk about businesses being too-big-to-fail , what we are really talking about is the systemic inter-dependencies that engender and reinforce instability. *
The dominance of corporate monopolies and the concentration of financial assets in the hands of a few massive institutional investors have contributed to the systemic instabilities that led to the GFC, and which we continue to face.
What matters is that we are supposed to be living in democratic societies where the decisions of the populace determine the various policies we end up living under. If we lose power over our lives, we lose power whether or not someone else is making benign or malign choices.
In this chapter, I focus especially on the changes that have happened to corporate governance over this period of time because I want to highlight possible targets for activism, protest and dissent.
Neoliberalism is not one thing, one policy, one regime. The intellectual project of Hayek, Friedman and the like was replaced by more specific state projects pursued by Ronald Reagan, Margaret Thatcher and Brian Mulroney.
This was then superseded by an attempt to resolve the negative consequences (e.g. unemployment) characteristic of centre-left governments in the 1990s, especially those of President Bill Clinton and Prime Minister Tony Blair, providing support for the important argument that neoliberalism does not equal conservatism.
The idea that neoliberalism is a process means we lose any concrete sense of who is responsible for the implementation of market-based mechanisms, instruments and incentives.
In one case it might be city officials, in another global business elites, in another do-gooder conservationists, and so on. Consequently there is no target for our ire, or at least no easy target for our ire, which might explain why popular movements have recently focused on the top 1% – whether the top 1% are symbolic or concrete is beside the point, at least they’re a target we can all identify.
So, rather than making broad claims about society (macro) or specific claims about individuals (micro), my argument is that we can identify key organizations and their impacts on society without losing sight of what is responsible (e.g. corporations) or succumbing to the idea of our helplessness in the face of overwhelming odds.
It is not market-like rule we have seen emerge over the last 30-40 years, it is the opposite, or monopoly-like rule.
Assets are central to the corporate dimension of our economies because businesses are defined by their assets, as well as liabilities – moreover, corporations and other businesses are themselves assets to their investors.
What assetization has involved is the rising dominance of asset-holder interests over all other interests when it comes to organizing and running corporations.
This dominance of asset-holder interests is known as shareholder value maximization, an “ideology” that underpins corporate governance and the drive to ramp up share prices.
Corporations are not ‘real entities’ but instead a ‘nexus of contracts’ in which the interests of shareholders, as owners of (investment) capital (but not the firm itself), is paramount.
Intangible assets now represent 80% of the value of the biggest businesses, a reversal from the 1970s when tangible assets represented 80% of this value.
The rise of intangible assets has driven policy-making in many countries towards the notion of knowledge economies. As a result neoliberal ideas are tied to this rise of intangible assets.
One reason they are related is that corporate monopolies are enabled and reinforced by intangible assets as emerging intellectual property rights (IPRs) mean that such assets are now easier to enclose behind private property rights.
What has happened is that corporations have been turned into assets whose value needs to keep rising forever; this is because their share value represents the assets of institutional investors who are dependent on these rising asset values to ensure returns for their constituents (e.g. pensioners, savers, insurees, etc.).
What we have to appreciate is that the economy is not a ‘real’ thing waiting out there for us to discover and explain by observing what happens when people engage in economic activity. The economy is a construction of our daily decisions and – this is vital – the ideas we use to explain the reasons, effects and relationships about these decisions.
What I wanted to get across in this chapter is that thinking about neoliberalism as a process misses two major things: first, it leaves us with little concrete sense of who is responsible for implementing neoliberal ideas and policies, second, it ignores a key agent of political-economic change over the last half century, the corporation.
Corporations have effectively become like the state,massive monopolies, controlling the allocation and distribution of resources within and between countries around the world, as well as the lives and livelihoods of millions of workers, customers, etc.
These massive corporations dominate employment, revenues, assets, profits and various other indicators we use to represent healthy economies.
Corporate monopoly and restructuring has led us to become more governed rather than less governed, although in this case it’s supposedly private organizations rather than the state doing the governing.
In this chapter I focus on the target of recent popular criticism, namely the top 1% of income earners and wealth holders.
Basically, I’m going to make the point that the top 1% have not got where they are without our help; sometimes this has been conscious and sometimes it has been unintentional.
I’m not giving leftist activists, teachers and scholars a free pass on this front, we have all been complicit.
From this analysis I end the chapter with a manifesto for change.
I want you, as the reader, to go away with a more optimistic sense of what we can do to change the world, rather than simply be overwhelmed by the image of ‘neoliberalism’.
At every point in our lives we can find holes, gaps, weak spots, spaces where we might wage a guerrilla defence against the ‘free’ market and, more crucially, against monopoly, or even where we might mount outright assaults on the bastions of corporate power.
What we have here is an inequality that boggles the mind. It’s no wonder that people are so angry, although why they weren’t angry before the global financial crisis (GFC) is worth thinking about.
We have to ask, what would make governments take notice of a majority rather than the top 1%? Without debt, our economies would largely cease to function since it would lead to severe limits on house purchasing and consumption – the two driving forces of the UK, USA and Canadian economies.
The state is deeply implicated in all that has happened; it has heavily subsidized the assetization of our economies.
Asking what might make governments rethink their policies is critical, in my opinion.
It’s the ideas, interests and demands of the top 1% that currently dominate politicians’ and policy-makers’ minds; it’s not the needs of the majority, or of proponents of alternatives to capitalism, or even of conservatives demanding an end to government intervention and central banking.
What can we do about it? Is neoliberalism responsible? Is it all the fault of the top 1%? My answer to the last of these is that it’s not, we all bear some responsibility in one way or another – well, in one way specifically.
As people in the US, UK and Canada increasingly bought into the home-owner dream – now nightmare for many – from the 1970s onwards, they also increasingly bought into a set of ideas about how our economies should be run; that is, keep wage-inflation low, bump up asset-inflation and home-owners win every time – well, until recently.
What I’m claiming is that inequality is directly tied into rising home-ownership.
Sometimes people find it quite threatening when I tell them I don’t want to buy a house, especially when I outline why this is so.
To me it’s more than strange that we all buy into the mass hysteria of home-ownership; it’s also socially unjust.
However, this housing delusion is not as simply as it may first appear: First: A mortgage does not mean you own a house nor does it mean you have an asset. Second: The gains in the house prices you expect from buying a house are not as significant as you may first think.
Rising house prices have actually done little better than other long-term investments once inflation is taken into account.
We’ve basically ended up in a political-economic system that militates against rising real wages and rising livings standards for the poorer members of society because to do so would threaten the value of the assets (e.g. houses, pensions, etc.) of the wealthier members of society. And here I’m not talking about the top 1%, I mean the nearly 70% of households that are owner-occupiers.
Ultimately, we are left with the majority of people concerned more with making sure that no one threatens rising asset values and makes sure that the value of those assets rises faster than wage-inflation – that is, our salaries and wages.
The transformation of our economies since the 1970s has been built on a delusional narrative of housing ownership, alongside other assets. This delusion necessitates stagnant real wages in order to ensure that house price inflation rises faster than general inflation.
This brings me to the main purpose of this chapter. *
Future generations of American, Brits and Canadians will be paying off the public, private and corporate debts built up over the last few years as a consequence of the bailouts of all the financial institutions and their employees, executives and shareholders.
It will be you, the so-called “millennials” born in the last two to three decades who will bear the brunt of the adjustment – on top of which you will face possible environmental catastrophe and fossil fuel bubble unless our governments get off their collective arses and do something about it, and soon.
Don’t buy into this crap, you don’t have to. On the one hand you can become willing dupes in the Ponzi scheme that is the housing market, and on the other you can become indentured serfs through student loans.
My suggestion is really rather simple. Refuse to pay interest, refuse to borrow money to finance your lives, stop the cycle of credit. That’s my suggestion for future generations; opt out of debt-bondage and servitude. That’s it – not very earth shattering, is it? *
Stop borrowing money, stop getting into debt, stop paying interest on those loans, and then see what happens.
The real problem is lack of work, however.
Young people coming onto the labour market since the GFC are screwed, to be blunt about it. Doubly screwed, in fact, since you’ll face pressure to pay back your student loans while working in low-paid and often temporary positions; if you’re lucky enough to find work at all, that is.
It is important to note that we’ve all ended up tied into the assetization of our economies. We are now dependent on our housing, pensions, savings and insurance premiums for our standards of living.
Changing the current financial system poses real threats to all sorts of people, not just the top 1%.
It will probably mean lots of things that have become unpalatable to the dominant narrative of ever-rising asset values and rising wealth. But, at heart, what it means is that we have to separate our interests from those of the top 1%, and we have to do it actively and concertedly because no one else will do it for us.
It’s not about asking someone else for something or demanding they give up what they have, it’s about changing your expectations, desires and choices in order to make what you want happen. You should be telling the rest of the world that you no longer want to sustain the collective delusions that brought us to the brink of financial collapse; rather, you want to remake the financial system by moving your position within it, whatever that may be.
More simply, it should say ‘we will not pay the interest you need to maintain your economic system’. Just say no to paying interest!
The starting point for this book was that much of the literature and debate about neoliberalism has missed, ignored or misunderstood the importance of corporations, and other business organizations, in the economy. *
We don’t live in a free market society, let alone a neoliberal one where the market mechanism has replaced every other social institution.
Most economic activity actually takes place inside economic organizations and not within markets. This is a crucial point when we discuss neoliberalism, yet isn’t really considered by critical thinkers.
What has really characterized the last few decades are rationalities, ideas, policies and processes that have been about freeing-the-monopolies, not promoting free markets.
As corporate monopolies have come to dominate our economies, they have been roundly cheered on by supposedly neoliberal thinkers who reversed their criticism of corporate monopoly.
This brings me to the final point I want to make in this book. As I said above, one question worth asking right now is; if we were and are not neoliberal, are we going to become * neoliberal now as a result of the GFC?
What if, accepting that neoliberalism hasn’t taken over the world already, we then consider what happens if neoliberalism does actually take over the world now. What would the world look like if it was dominated by markets and not large corporations? The short answer is not better than now or the recent past.
I’d like to end on a positive note and so will turn to Karl Polanyi for why things will work themselves out in some acceptable form.
He wrote about the unconscious and unplanned popular response to the damage caused by unfettered capitalism. It’s what we’re seeing now in countries throughout the world.
People will only take so much shit before they revolt, and the amount of shit they are drowning in right now is too much. What has happened since 2007 has left us all with a nasty taste in our mouths and, hopefully, a desire to do something about it.