The assumptions and logic of neoliberalism

There is no such thing as society.  There are only individuals, and their families.      ==Margaret Thatcher

∞∞∞

Neoliberalism is the philosophy that economic freedom is the primary freedom, economic growth is society’s primary goal and the for-profit corporation is the ideal form of organization.

It is the justification for privatization, deregulation and the economic austerity being imposed on governments by lending institutions.

What follows is my attempt to understand the thinking behind neoliberalism.  I welcome comments, especially from those who think I am wrong or unfair.

17149339-Abstract-word-cloud-for-Neoliberalism-with-related-tags-and-terms-Stock-PhotoGovernment is by definition coercive.  All governmental authority is ultimately backed by armed force.  The role of government should be limited to protection of life and property and enforcement of contracts.   

Private enterprise is by definition free choice.  Privatization by definition increases freedom.  All income deriving from the private sector, and not involving force or fraud, is earned income.

Most people are good judges of their individual self-interest and bad judges of the common good.   People generally make good decisions as consumers and poor decisions as voters.  Consumer choice is more meaningful than the right to vote.

Free markets, though the law of supply and demand, coordinate individual choices without the direction of any particular people or group of people.  The free market is more impartial and just than any system of planning or regulation could be.

A capitalist dictatorship that protects property rights is better than a socialist democracy that attacks property rights.

Economic growth is the key to increasing economic well-being.  Growth is produced by capital—that is, by investment in machines, factories and other human-made goods that generate new wealth.  

In a free enterprise economy, capital is invested by private individuals based on the law of supply and demand.  Whatever diminishes the ability of individuals to accumulate wealth or respond to the signals of the free market diminishes capital and retards economic growth.

Money spent on welfare and charity may temporarily alleviate distress, but it will not cure poverty.  Only capital investment and economic growth will do that. 

Capital investment and economic growth should take precedence over public education, public health, the environment and other so-called pubic goods, because they are the means of generating the wealth that pays for the public goods.

Banks, investment firms and financial markets are the key institutions of society.  They must be preserved in order to support investment and economic growth.

Monetary obligations are absolute.  Any person, organization or government that borrows money has an absolute obligation to pay it back, no matter what the sacrifice.  People who don’t repay their debts or fulfill their contracts are parasites on the system.

Inequality is a good thing.  To break up accumulations of wealth that have been acquired by legitimate means is not only unjust because it destroys the just reward for achievement.  It destroys the capital by which new jobs and wealth are created.


The for-profit corporation is the model all other societal institutions.  Universities, charitable organizations, even churches should follow the corporate model of serving the maximum number of customers at the lowest cost relative to revenue.  All other criteria are subjective opinion based on personal preference.

The sole duty of corporate executives is to maximize revenue and profit by lawful means, because revenue and profits are the measure of the corporation’s contribution to society, and because revenue and profits, unlike so-called social goals, are measurable and quantifiable.

To this end, it is the duty of executives to minimize costs, including wages.

All human values can be expressed in terms of money.  There is no measure of value except the relative willingness to spend money or time (whose value is measured in money) for a given purpose.  This includes religion, culture, patriotism and moral beliefs.

The measure of your sympathy for the poor is your willingness to spend your own money or time to benefit the poor.  You have a perfect right to do so if this is your preference, but others have an equal right to follow their own preference.  The same is true of all feelings and belief systems.

Distinctions of race, religion, national origin, age, gender, sexual orientation and other individual human characteristics are irrelevant to public policy and economic choices.   Employees should be judged solely on their fitness to do the work.  Consumers should be judged solely on their spending power.

There should be no barriers to global free trade or to immigration.  Goods, services, money and people should freely move to where they are most wanted.

Beware of altruists.  The safest assumption about anyone is that he or she is working for their own benefit.  Those who say otherwise are almost always either hypocrites or fools.  People who claim to be working for the public good almost always have a hidden agenda, whether they are aware of it or not.

Is neoliberalism a form of liberalism?

Neoliberalism has its roots in classical liberalism, which arose in the 18th and 18th centuries.  Classic liberals say that the purpose of government is to protect human rights, including religious, intellectual, political and economic freedom.

reagan-thatcherClassical liberalism came to be supplanted in the early 20th century by a belief that government regulation and welfare could, if well thought out, enhance human freedom by giving individuals more choices.   A graduate of a public school or university, for example, has more options than a person unable to afford an education.

Neoliberalism is virtually the exact opposite of this social liberalism.  Neoliberalism affirms that freedom of enterprise is the only important freedom.

It came into widespread acceptance in the 1980s, as a reaction against the manifest failures of central economic planning and as a way to break the political gridlock of the welfare state.

Its strongest adherents are to be found among economists, journalists, financiers, Silicon Valley executives and right-of-center parties in the English-speaking world and western Europe, and in international institutions such as the International Monetary Fund, World Bank and European Central Bank, which enforce neoliberal policies on debtor countries.

Rulers of capitalist Asian countries such as Japan, China, South Korea and Singapore have been called neoliberals, but, in my opinion, they are not.   In these countries, corporations are subordinate to government policy aims, rather than vice versa.

Neoliberals are different from libertarians, who are contemporary heirs of classical liberalism.  Libertarians are strong adherents of the free market, but also of historical political and intellectual freedoms.

I do not think neoliberalism is 100 percent wrong.  The free market has its uses, and capital accumulation, under whatever name you call it, is necessary to prosperity economic growth.  My problem with neoliberalism is that it is one-dimensional, amoral and a rationalization for exploitation by corrupt elites.

Critiques of Neoliberalism

On Neoliberalism: An Interview With David Harvey by Sasha Lilley for Monthly Review.  [added 11/14/2015]

Comments on David Harvey’s “A Brief History of Neoliberalism”  by Lambert Strether for Naked Capitalism.

Neoliberalism, the Revolution in Reverse by Chris Lehmann for The Baffler.

Neoliberalism is more than economics:  It’s an approach to social organization by Bernard Bernard Bernard for Politics for People – Not Corporations.  [added 11/14/2015]

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5 Responses to “The assumptions and logic of neoliberalism”

  1. Bernard Bernard Bernard Says:

    Hi Phil. I fairly strongly disagree with the broad equating of “neoliberalism” with “free markets”. Personally I think this is why it has actually gained traction, despite it’s true MO being far more insidious.

    I’ve recently written a blog post on my “theory” of what neoliberalism is. It’s not solely mine, of course, as there are some major thinkers out there who adopt it too to varying degrees. If you’re interested, check it out: https://politicsforpeoplenotcorporations.wordpress.com/2015/10/11/neoliberalism-is-a-more-than-economics-its-an-approach-to-social-organisation/ Essentially my view is that neoliberalism is a combination of a liberalism and conservatism, despite how opposite those ideologies can seem.

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    • philebersole Says:

      Thanks for this. It is the kind of intelligent response I hoped for.

      Neoliberalism, in my opinion, is conservative in the sense that it justifies radical inequality and opposes government policies that help working people and the poor.

      Neoliberalism is anti-conservative in the sense that it attempts to substitute an economic calculus for tradition, religion, patriotism, culture and everyday morality.

      While conservatives are suspicious of change, neoliberals strongly embrace disruptive business and technological innovations and almost all forms of social change, except change in the unequal distribution of wealth and power.

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  2. Jay Says:

    In a phenomenon known as Goodheart’s Law, using a metric of performance to assign rewards and penalties degrades the value of the metric. People are incentivized to increase the metric, and inevitably come up with ways to “game the system” by manipulating the measured value without making the corresponding change that the metric was supposed to measure in the first place.

    Capitalism uses money as a metric for an individual or corporation’s contribution to society. The rest follows.

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  3. John Pennington Says:

    The modern age is creating new difficulties. Machines (mostly software) are performing an increasing part of the work needed to be done. This means more people will be out of work, in every part of the income spectrum. The same thing is behind the huge increase in profit for the owners of these machines, but stagnant earnings for everyone else. We don’t know how to deal with this. My belief is that every worker deserves at least a living wage, regardless of what work she does. I also believe we must devise some method for more justly distributing the wealth of the land. Gross inequality punishes many millions, and limitless wealth is pointless.

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    • philebersole Says:

      Our problem is not machines. Our problem is in thinking that there is some economic law that prevents labor-saving machinery from being used to produce a better life for all.

      My purpose in writing the post was to make visible the assumptions that (in my opinion) underlie this thinking.

      Liked by 1 person

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