Neoliberalism

= "The core neoliberal idea is that the market economy – when it functions unhindered – does not need any social correction". [1]

Description

1. Tobias Kroll:

"The core neoliberal idea is that the market economy – when it functions unhindered – does not need any social correction. “The market economy is social policy in itself,” Hans Tietmeyer explained (cf. Der Spiegel 26/1985). Today’s neoliberals in Germany see themselves in the “true” tradition of the social market economy that in their view passed through many malformations and must be brought on course. Ultimately they orient themselves in the basic idea of the invisible hand of Adam Smith… Competition is the core idea of German neoliberals. Originally intended to prevent monopolies and market power, competition has become an end-in-itself and is often presented as a normative claim to persons on the operational or company plane.

Functioning liberal markets are seen by neoliberals as a quasi-natural system and structure that can be compared with the system of planets and “the course of the stars,” not as a creation of human culture (“culture” in the sense of antithesis to nature) critically, Kroell 2010). Like planets, people rotate around market competition. The system is disturbed by state economic activity and publically administered social security that treats individuals as children… The state merely has an oversight function in this perspective, monitoring the undisturbed, trouble-free running of the perfect free enterprise system." (http://freembtranslations.net/2011/worker-solidarity-in-neoliberal-structural-change-by-tobias-kroll/)

2. Wendy Brown:

"Neoliberalism is a distinctive mode of reason, of the production of subjects, a “conduct of conduct,” and a scheme of valuation.8 It names a historically specific economic and political reaction against Keynesianism and democratic socialism, as well as a more generalized practice of “economizing” spheres and activities heretofore governed by other tables of value."

(https://erikafontanez.files.wordpress.com/2019/10/w.-brown-undoing-the-demos.pdf)

Characteristics

Neoliberal “free market” canon vs the Classical liberal canon

• Source: Why the “Miracle of Compound Interest” leads to Financial Crises By Michael Hudson (retrieved on 04/04/2011)

Neoliberal "free market" canon	Classical liberal canon
If left alone, markets settle at a fair equilibrium in which all parties have equal opportunity.	Economies tend to polarize unless governments act to prevent free lunches by vested interests.
The MV=PT formula views money as being spent on goods and services, and hence sees more money as inflating consumer prices.	Most credit is created for spending on real estate, stocks and bonds. Hence, what is inflated are primarily asset prices.
Analyzes the "real" economy as if it operates on the basis of barter without the buildup of interest-bearing and property-rent claims.	Emphasizes the distinction between the "real" economy�s S-curve expansion path and the exponential growth of debt.
Credit is invested productively, enabling borrowers to repay loans and interest.	Most bank credit is unproductive, imposing a debt burden that diverts income away from buying goods and services.
Borrowers use the loan proceeds to make enough money to pay off their loans and keep a profit for themselves.	Under a regime of asset-price inflation, loans are paid off increasingly out of new borrowing against collateral that is rising in price.
Bank lending increases investment to hire labor to produce more goods and services, supplying more output and keeping commodity prices down while raising living standards.	Mortgage credit which is used to bid up real estate prices, or financial credit to bid up prices for bonds and stocks. In the ends, loans are paid off mainly out of capital gains (asset-price inflation).
High debt leverage increases the return on equity, spurring more wealth creation.	High debt leverage increases the debt overhead, and inflates asset prices, obliging property buyers to go deeper into debt.
"Supply-side" economists claim that loans spur more investment, and hence more profits to tax.	Loans reduce tax revenues, because interest is a tax-deductible expense. This shifts the fiscal burden onto labor.
Cutting taxes on property income and capital gains lowers the cost of doing business and hence frees more income for investment.	Tax cuts free income to be pledged to creditors for higher loans to buy real estate, financial securities and entire companies. This raises asset prices.
Low wages make economies more competitive, assuming that there is no feedback between wages and productivity.	High productivity requires high wages and living standards.

Discussion 1: Voices

Pierre Bourdieu

What is neoliberalism? A programme for destroying collective structures which may impede the pure market logic.

by Pierre Bourdieu

"And yet the world is there, with the immediately visible effects of the implementation of the great neoliberal utopia: not only the poverty of an increasingly large segment of the most economically advanced societies, the extraordinary growth in income differences, the progressive disappearance of autonomous universes of cultural production, such as film, publishing, etc. through the intrusive imposition of commercial values, but also and above all two major trends. First is the destruction of all the collective institutions capable of counteracting the effects of the infernal machine, primarily those of the state, repository of all of the universal values associated with the idea of the public realm. Second is the imposition everywhere, in the upper spheres of the economy and the state as at the heart of corporations, of that sort of moral Darwinism that, with the cult of the winner, schooled in higher mathematics and bungee jumping, institutes the struggle of all against all and cynicism as the norm of all action and behaviour."

(cited on IDC mailing list, June 2010)

Michael Hudson

Michael Hudson:

"The term “neoliberalism” misrepresents and even inverts the classical liberal idea of free markets. It is a weaponization of economic theory, kidnapping the original liberal ethic that sought to defend against special privilege and unearned income. To classical economists, a free market meant one free of unearned income, defined as land rent, natural resource rent, monopoly rent and rent-extracting privilege. But to neoliberals a free market is one free from taxes or regulation of such rentier income, and indeed gives it tax favoritism over wages and profits.

Neoliberalism and neo-conservatism are complementary doctrines of power and autocracy combined with deregulation and dismantling of democratic law. The aim is to replace government power as used to protect the people with an oligarchic power to oppress the people.

Today, the neoliberal aim is to cripple government power, enabling a free-for-all for the financial sector. Protecting civil freedoms are also heavily signposted, but the high price of legal representation is a barrier for most. A doctrine primarily of the financial sector, the aim is to un-tax banks and financial institutions and their major customers: real estate and monopolies.

Neoliberalism is a doctrine of central planning, which is to be shifted from governments to the more highly centralized financial centers. This requires disabling public power to regulate and tax banking and finance. As a transition, ideological deregulators such as Alan Greenspan and Tim Geithner have been appointed to the key regulatory positions in the United States.

The result is a doctrine of financial war not only against labor but also against industry and government. Gaining the financial power to indebt economies at increasing speed, the banking and financial sector is siphoning resources away from the real economy. Its business plan is not based on employing labor to expand output, but simply to transfer as much of the existing flow of revenue as possible into its own hands, by capitalizing all such revenue into interest payments, on loans collateralized and pledged to creditors.

The effect is no more democratic than the Roman democracy, which arranged voting by “centuries” headed by the largest landowners – essentially an acre-per-vote, to make an analogy. In the U.S. case, votes are bought not by land as such, but by dollars – mainly from the financial sector. In the end, to be sure, most dollars come from rent extraction.

The result must be economic polarization, above all between creditors and debtors as in Rome. So the end stage of neoliberalism threatens a Dark Age of poverty/immiseration – most characteristically, one of debt peonage. And just as Rome’s creditor class and its predatory imperial expansion brought down the Roman Empire and reduced it to mere subsistence, so the combination of neoliberalism and neo-conservatism today seeks to globalize itself, spreading austerity even as it brings technological progress to sovereign debtors."

(http://michael-hudson.com/2012/07/the-weaponization-of-economic-theory/)

David Graeber

"In most of the world, the last thirty years has come to be known as the age of neoliberalism—one dominated by a revival of the long-since-abandoned nineteenth-century creed that held that free markets and human freedom in general were ultimately the same thing. Neoliberalism has always been wracked by a central paradox. It declares that economic imperatives are to take priority over all others. Politics itself is just a matter of creating the conditions for growing the economy by allowing the magic of the marketplace to do its work. All other hopes and dreams—of equality, of security—are to be sacrificed for the primary goal of economic productivity. But global economic performance over the last thirty years has been decidedly mediocre. With one or two spectacular exceptions (notably China, which significantly ignored most neoliberal prescriptions), growth rates have been far below what they were in the days of the old-fashioned, state-directed, welfare-state-oriented capitalism of the fifties, sixties, and even seventies. By its own standards, then, the project was already a colossal failure even before the 2008 collapse.

If, on the other hand, we stop taking world leaders at their word and instead think of neoliberalism as a political project, it suddenly looks spectacularly effective. The politicians, CEOs, trade bureaucrats, and so forth who regularly meet at summits like Davos or the G20 may have done a miserable job in creating a world capitalist economy that meets the needs of a majority of the world’s inhabitants (let alone produces hope, happiness, security, or meaning), but they have succeeded magnificently in convincing the world that capitalism—and not just capitalism, but exactly the financialized, semifeudal capitalism we happen to have right now—is the only viable economic system. If you think about it, this is a remarkable accomplishment.

Debt cancellation would make the perfect revolutionary demand.

How did they pull it off? The preemptive attitude toward social movements is clearly a part of it; under no conditions can alternatives, or anyone proposing alternatives, be seen to experience success. This helps explain the almost unimaginable investment in “security systems” of one sort or another: the fact that the United States, which lacks any major rival, spends more on its military and intelligence than it did during the Cold War, along with the almost dazzling accumulation of private security agencies, intelligence agencies, militarized police, guards, and mercenaries. Then there are the propaganda organs, including a massive media industry that did not even exist before the sixties, celebrating police. Mostly these systems do not so much attack dissidents directly as contribute to a pervasive climate of fear, jingoistic conformity, life insecurity, and simple despair that makes any thought of changing the world seem an idle fantasy. Yet these security systems are also extremely expensive. Some economists estimate that a quarter of the American population is now engaged in “guard labor” of one sort or another—defending property, supervising work, or otherwise keeping their fellow Americans in line. Economically, most of this disciplinary apparatus is pure deadweight.

In fact, most of the economic innovations of the last thirty years make more sense politically than economically. Eliminating guaranteed life employment for precarious contracts doesn’t really create a more effective workforce, but it is extraordinarily effective in destroying unions and otherwise depoliticizing labor. The same can be said of endlessly increasing working hours. No one has much time for political activity if they’re working sixty-hour weeks.

It does often seem that, whenever there is a choice between one option that makes capitalism seem the only possible economic system, and another that would actually make capitalism a more viable economic system, neoliberalism means always choosing the former. The combined result is a relentless campaign against the human imagination. Or, to be more precise: imagination, desire, individual creativity, all those things that were to be liberated in the last great world revolution, were to be contained strictly in the domain of consumerism, or perhaps in the virtual realities of the Internet. In all other realms they were to be strictly banished. We are talking about the murdering of dreams, the imposition of an apparatus of hopelessness, designed to squelch any sense of an alternative future. Yet as a result of putting virtually all their efforts in one political basket, we are left in the bizarre situation of watching the capitalist system crumbling before our very eyes, at just the moment everyone had finally concluded no other system would be possible."

(http://www.thebaffler.com/past/practical_utopians_guide)

Discussion 2: Topics

Critique Summary

Wendy Brown:

"Neoliberalism is most commonly understood as enacting an ensemble of economic policies in accord with its root principle of affirming free markets. These include deregulation of industries and capital flows; radical reduction in welfare state provisions and protections for the vulnerable; privatized and outsourced public goods, ranging from education, parks, postal services, roads, and social welfare to prisons and militaries; replacement of progressive with regressive tax and tariff schemes; the end of wealth redistribution as an economic or social-political policy; the conversion of every human need or desire into a profitable enterprise, from college admissions preparation to human organ transplants, from baby adoptions to pollution rights, from avoiding lines to securing legroom on an airplane; and, most recently, the financialization of everything and the increasing dominance of finance capital over productive capital in the dynamics of the economy and everyday life.

Critics of these policies and practices usually concentrate on four deleterious effects. The first is intensified inequality, in which the very top strata acquires and retains ever more wealth, the very bottom is literally turned out on the streets or into the growing urban and suburban slums of the world, while the middle strata works more hours for less pay, fewer benefits, less security, and less promise of retirement or upward mobility than at any time in the past half century. While they rarely use the term “neoliberalism,” this is the emphasis of the valuable critiques of Western state policy offered by economists Robert Reich, Paul Krugman, and Joseph Stiglitz and of development policy offered by Amartya Sen, James Ferguson, and Branko Milanvic, among others.24 Growing inequality is also among the effects that Thomas Piketty establishes as fundamental to the recent past and near future of post-Keynesian capitalism.

The second criticism of neoliberal state economic policy and deregulation pertains to the crass or unethical commercialization of things and activities considered inappropriate for marketization. The claim is that marketization contributes to human exploitation or degradation (for example, Third World baby surrogates for wealthy First World couples), because it limits or stratifies access to what ought to be broadly accessible and shared (education, wilderness, infrastructure), or because it enables something intrinsically horrific or severely denigrating to the planet (organ trafficking, pollution rights, clearcutting, fracking). Again, while they do not use the term “neoliberalism,” this is the thrust of the critiques forwarded in Debra Satz’s Why Some Things Should Not Be for Sale and Michael Sandel’s What Money Can’t Buy.

Thirdly, critics of neoliberalism understood as state economic policy are also distressed by the ever-growing intimacy of corporate and finance capital with the state, and corporate domination of political decisions and economic policy. Sheldon S. Wolin emphasizes this in Democracy, Incorporated, although Wolin, too, avoids the descriptor “neoliberalism.”26 These themes are also the signature of filmmaker Michael Moore, and are developed in a different way by Paul Pierson and Jacob Hacker in Winner-Take-All Politics.

Finally, critics of neoliberal state policy are often concerned with the economic havoc wreaked on the economy by the ascendance and liberty of finance capital, especially the destabilizing effects of the inherent bubbles and other dramatic fluctuations of financial markets. Made vivid by the immediate shock as well as the long tail of the 2008–2009 finance-capital meltdown, these effects are also underscored by the routinely widening discrepancies between the fates of Wall Street and the so-called “real” economy. They are charted by a range of thinkers including Gérard Duménil and Dominique Lévy in The Crisis of Neoliberalism, Michael Hudson in Finance Capitalism and Its Discontents, Yves Smith in E-CONned: How Unrestrained Self-Interest Undermined Democracy and Corrupted Capitalism, Matt Taibbi in Griftopia: A Story of Bankers, Politicians and the Most Audacious Power Grab in American History, and Philip Mirowski in Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown.

Intensified inequality, crass commodification and commerce, ever-growing corporate influence in government, economic havoc and instability— certainly all of these are consequences of neoliberal policy, and all are material for loathing or popular protest, as indeed, Occupy Wall Street, the Southern European protests against austerity policies, and, earlier, the “Antiglobalization” movement loathed and protested them. However, in this book, neoliberalism is formulated somewhat differently and focuses on different deleterious effects. In contrast with an understanding of neoliberalism as a set of state policies, a phase of capitalism, or an ideology that set loose the market to restore profitability for a capitalist class, I join Michel Foucault and others in conceiving neoliberalism as an order of normative reason that, when it becomes ascendant, takes shape as a governing rationality extending a specific formulation of economic values, practices, and metrics to every dimension of human life."

(https://erikafontanez.files.wordpress.com/2019/10/w.-brown-undoing-the-demos.pdf)

Neoliberalism and Democracy

Wendy Brown:

"More than merely saturating the meaning or content of democracy with market values, neoliberalism assaults the principles, practices, cultures, subjects, and institutions of democracy understood as rule by the people. And more than merely cutting away the flesh of liberal democracy, neoliberalism also cauterizes democracy’s more radical expressions, those erupting episodically across Euro-Atlantic modernity and contending for its future with more robust versions of freedom, equality, and popular rule than democracy’s liberal iteration is capable of featuring.

The claim that neoliberalism is profoundly destructive to the fiber and future of democracy in any form is premised on an understanding of neoliberalism as something other than a set of economic policies, an ideology, or a resetting of the relation between state and economy. Rather, as a normative order of reason developed over three decades into a widely and deeply disseminated governing rationality, neoliberalism transmogrifies every human domain and endeavor, along with humans themselves, according to a specific image of the economic. All conduct is economic conduct; all spheres of existence are framed and measured by economic terms and metrics, even when those spheres are not directly monetized. In neoliberal reason and in domains governed by it, we are only and everywhere homo oeconomicus, which itself has a historically specific form. Far from Adam Smith’s creature propelled by the natural urge to “truck, barter, and exchange,” today’s homo oeconomicus is an intensely constructed and governed bit of human capital tasked with improving and leveraging its competitive positioning and with enhancing its (monetary and nonmonetary) portfolio value across all of its endeavors and venues. These are also the mandates, and hence the orientations, contouring the projects of neoliberalized states, large corporations, small businesses, nonprofits, schools, consultancies, museums, countries, scholars, performers, public agencies, students, websites, athletes, sports teams, graduate programs, health providers, banks, and global legal and financial institutions.

What happens when the precepts and principles of democracy are remade by this order of reason and governance? When the commitment to individual and collective self-rule and the institutions supporting it are overwhelmed and then displaced by the encomium to enhance capital value, competitive positioning, and credit ratings? What happens when the practices and principles of speech, deliberation, law, popular sovereignty, participation, education, public goods, and shared power entailed in rule by the people are submitted to economization? "

(https://erikafontanez.files.wordpress.com/2019/10/w.-brown-undoing-the-demos.pdf)

History

George Monbiot:

"In England in 1975. At a meeting a few months after Margaret Thatcher became leader of the Conservative party, one of her colleagues, or so the story goes, was explaining what he saw as the core beliefs of conservatism. She snapped open her handbag, pulled out a dog-eared book, and slammed it on the table. “This is what we believe,” she said. A political revolution that would sweep the world had begun.

The book was The Constitution of Liberty by Frederick Hayek. Its publication, in 1960, marked the transition from an honest, if extreme, philosophy to an outright racket. The philosophy was called neoliberalism. It saw competition as the defining characteristic of human relations. The market would discover a natural hierarchy of winners and losers, creating a more efficient system than could ever be devised through planning or by design. Anything that impeded this process, such as significant tax, regulation, trade union activity or state provision, was counter-productive. Unrestricted entrepreneurs would create the wealth that would trickle down to everyone.

This, at any rate, is how it was originally conceived. But by the time Hayek came to write The Constitution of Liberty, the network of lobbyists and thinkers he had founded was being lavishly funded by multimillionaires who saw the doctrine as a means of defending themselves against democracy. Not every aspect of the neoliberal programme advanced their interests. Hayek, it seems, set out to close the gap.

He begins the book by advancing the narrowest possible conception of liberty: an absence of coercion. He rejects such notions as political freedom, universal rights, human equality and the distribution of wealth, all of which, by restricting the behaviour of the wealthy and powerful, intrude on the absolute freedom from coercion he demands.

Democracy, by contrast, “is not an ultimate or absolute value”. In fact, liberty depends on preventing the majority from exercising choice over the direction that politics and society might take.

He justifies this position by creating a heroic narrative of extreme wealth. He conflates the economic elite, spending their money in new ways, with philosophical and scientific pioneers. Just as the political philosopher should be free to think the unthinkable, so the very rich should be free to do the undoable, without constraint by public interest or public opinion.

The ultra rich are “scouts”, “experimenting with new styles of living”, who blaze the trails that the rest of society will follow. The progress of society depends on the liberty of these “independents” to gain as much money as they want and spend it how they wish. All that is good and useful, therefore, arises from inequality. There should be no connection between merit and reward, no distinction made between earned and unearned income, and no limit to the rents they can charge.

Inherited wealth is more socially useful than earned wealth: “the idle rich”, who don’t have to work for their money, can devote themselves to influencing “fields of thought and opinion, of tastes and beliefs”. Even when they seem to be spending money on nothing but “aimless display”, they are in fact acting as society’s vanguard.

Hayek softened his opposition to monopolies and hardened his opposition to trade unions. He lambasted progressive taxation and attempts by the state to raise the general welfare of citizens. He insisted that there is “an overwhelming case against a free health service for all” and dismissed the conservation of natural resources. It should come as no surprise to those who follow such matters that he was awarded the Nobel prize for economics.

By the time Thatcher slammed his book on the table, a lively network of thinktanks, lobbyists and academics promoting Hayek’s doctrines had been established on both sides of the Atlantic, abundantly financed by some of the world’s richest people and businesses, including DuPont, General Electric, the Coors brewing company, Charles Koch, Richard Mellon Scaife, Lawrence Fertig, the William Volker Fund and the Earhart Foundation. Using psychology and linguistics to brilliant effect, the thinkers these people sponsored found the words and arguments required to turn Hayek’s anthem to the elite into a plausible political programme.

Thatcherism and Reaganism were not ideologies in their own right: they were just two faces of neoliberalism. Their massive tax cuts for the rich, crushing of trade unions, reduction in public housing, deregulation, privatisation, outsourcing and competition in public services were all proposed by Hayek and his disciples. But the real triumph of this network was not its capture of the right, but its colonisation of parties that once stood for everything Hayek detested." (http://evonomics.com/ruthless-network-super-rich-ideologues-killed-choice-destroyed-peoples-faith-politics/)

Example

Trump as an unconcealed example of neoliberalism

Branco Milanovic:

"Modern capitalism societies are built on a dichotomy: in the political space decisions are (to be) made on an equal basis with everybody having the same say and with the structure of power being flat; in the economic space the power is held by the owners of capital, the decisions are dictatorial, and the structure of power is hierarchical. The dichotomy was always a complex balancing act: at times, the political principles of nominal equality tended to intrude into the economic space and to limit the power of owners: trade unions, ability to sue companies, regulations regarding discrimination, hiring and firing. At other times, it was the economic sphere that invaded the political: the wealthy were able to buy politicians and impose the laws they liked.

The entire history of capitalism can be readily understood as the struggle between these two principles: is the democratic principle “exported” from politics to rule in economics too, or is the hierarchical principle of company organization to invade the political sphere. Social democracy was essentially the former; neoliberalism was the latter.

Neoliberalism justified and promoted the introduction of purely economic and hierarchical principles in the political life. While it maintained the pretense of equality (one-person one-vote), it eroded it through the ability of the rich to select, fund, and make elect the politicians friendly to their interests. The number of books and articles which document the increasing political power of the rich is enormous: there is hardly any doubt that this was happening in the United States and many other countries around the world over the past 40 years.

The introduction of the rules of behavior taken from the corporate sector into politics means that politicians no longer see people whom they rule as co-citizens but as employees. Employees can be hired and fired, humiliated and dismissed, ripped off, cheated or ignored.

Until Trump came to power the invasion of the political space by economic rules of behavior was concealed. There was a pretense that politicians treated people as citizens. The bubble was burst by Trump who, unschooled in the subtleties of democratic dialectics, could not see how anything could be wrong with the application of business rules to politics. Coming from the private sector, and from its most piracy-oriented segment dealing with the real estate, gambling and Miss Universe, he rightly thought—supported by the neoliberal ideology—that the political space is merely an extension of economics.

Many accuse Trump of ignorance. But this is I think a wrong way to look at things. He may not be interested in the US constitution and complex rules that regulate politics in a democratic society because he, whether consciously or intuitively, thinks that they should not matter or even exist. The rules with which he is familiar are the rules of companies: “You are fired!”: a purely hierarchical decision, based on power consecrated by wealth, and unchecked by any other consideration.

By introducing economic rules into politics, neoliberals have done an enormous harm to the “publicness” of decision-making and to democracy. They have brought many societies to a stage inferior to that of being ruled by self-interested despots. Mancur Olson in his famous distinction between rulers who are roving or stationary bandits recounts the anecdote of a Sicilian farmer who supports a one-man despotic rule by arguing that the ruler has “an all encompassing interest”: in order to maintain his rule and maximize his own tax intake, he does have an interest in prosperity of his subjects. This is different, and much superior, Olson argued, to a roving bandit who, like the Mongol invaders, has interest only in the short-term extraction from his (temporary) subjects.

Why is a neoliberal ruler worse than the “all-encompassing-interest” despot? Precisely because he lacks the all-encompassing interest in his polity as he does not see himself as being part of it; rather he is the owner of a giant company called in this case the United States of America where he decides who should do what. People complain that Trump, in this crisis, is lacking the most elementary human compassion. But while they are right in diagnosis, they are wrong in understanding the origin of the lack of compassion. Like any rich owner he does not see that his role is to show compassion to his hired hands, but to decide what they should do, and even when the occasion presents itself, to squeeze them out of their pay, make them work harder or dismiss them without a benefit. In doing so to his putative countrymen he is just applying to an area called “politics” the principles that he has learned and used for many years in business.

Trump is the best student of neoliberalism because he applies its principles without concealment." (https://glineq.blogspot.com/2020/04/trump-as-ultimate-triumph-of.html?)

More Information

• Mirowski, P. (ed.) (2009) The Road from Mont Pelerin: The Making

of the Neoliberal Thought Collective. Cambridge, MA: Harvard University Press.