Neoliberalism and Its Discontents (1)

What follows is notes for the first part of a talk for the Rochester Russell Forum scheduled at Writers & Books Literary Center, 740 University Ave., Rochester, NY, at 7 p.m. Thursday, April 13, 2017

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

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

Neoliberalism has its roots in classical liberalism, which arose in the 18th and 19th centuries.  Classic liberals said that the purpose of government is to protect human rights, including religious, intellectual, political and economic freedom.   They fought the absolute power of kings and the privileges of aristocrats and demanded the right of individuals to determine their own fates.

Classical 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, so taxing the public to pay for public schools and universities would be a form of liberation.

Neoliberalism is a backlash against social liberalism.  Neoliberalism affirms that freedom of enterprise is the only important freedom.   Its well-known adherents include Friedrich Hayek, Ludwig von Mises and Milton Friedman.

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.  Ronald Reagan and Margaret Thatcher were both strongly influenced by the neoliberals.

Neoliberalism’s 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.

It is more of an implicit philosophy than a credo, a series of assumptions that has come to permeate our society.

What follows is my attempt to understand the logic behind these assumptions.

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Government 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 derived 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.

A capitalist dictatorship that protects property rights and upholds the free market is better than a socialist democracy that attacks property rights and undermines the free market.

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 diminishes capital and retards economic growth.

Money spent on welfare and charity may temporarily alleviate distress, but it will not cure poverty.  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.

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.

Monetary obligations are absolute.  Any person, organization or government that borrows money has an absolute obligation to pay it back.   This overrides any other obligation to self, family or community.

Inequality is a good thing.  To break up accumulations of wealth that have been acquired by legitimate means is unjust because it destroys the just reward for achievement.  It is unwise because it destroys the capital by which new jobs and wealth are created..

The sole duty of corporate executives is to maximize revenue and profit by lawful means, because they are the measure of the corporation’s contribution to society, and because they are objective and quantifiable, not matters of opinion.  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 an individual’s willingness to spend money or time (whose value is measured in money) for a given purpose.  This includes religion, culture, patriotism and moral beliefs.

Distinctions of race, religion, national origin, age, gender, sexual orientation and other individual human characteristics are irrelevant to public policy and economic decisions.   The only thing that matters about workers is their productivity.  The only thing that matters about consumers is their buying 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.

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Neoliberalism as applied to the professions means the substitution of numerical measurements and financial incentives for professional judgment.

Insurance company actuaries second-guess the decisions of physicians.  Teachers are evaluated on numerically measured learning outcomes, rather than having an experienced teacher observe their class.

Anything that can’t be measured is treated as nonexistent.  Any motivation except response to financial incentives and penalties is regarded as irrelevant.

Neoliberalism as applied to world affairs means trade treaties such as NAFTA and the proposed Trans Pacific Partnership that restrict governments from regulating business and setting standards to protect workers, the environment and public health.

All these things are regarded as impediments to the freedom of corporations to shift jobs and investment where they choose.

The only absolute neoliberal moral imperative is the absolute obligation to repay debt, even when it can’t be repaid, which is the situation now.

For example, no intelligent person thinks the debt of Greece is repayable; no humane person is pleased with the fact that Americans go from college graduation to retirement without being able to pay, or even reduce, their student debt.  Yet that debt is regarded as a sacred obligation that overrides concern for the fate of the debtors.

In the neoliberal philosophy, the financialization of the U.S. economy – the shift from investment in production to investment in debt – is not regarded as a problem.  All that matters is the financial return.  Whatever generates the greatest return is assumed to be what is best for everyone.

Neoliberalism is an example of what the philosopher Jurgen Habermas called the System World—the impersonal force of the market and the impersonal rules of bureaucracy that become a substitute for the Life World—the world of individual human feelings, desires and relationships..

Now it is not possible to do without the System World, and the Life World is not all good.  Human beings can be full of prejudice and malice, and neoliberalism is good to the degree that it reduces discrimination based on race, ethnicity, religion, gender and sexual orientation.

But neoliberalism also generates an unprecedented concentration of wealth and power.   The triumph of the neoliberal philosophy in the USA, UK and other countries since the late 1970s has not brought about an explosive growth of productivity, as promised.   Instead the mass of people are barely getting by while poverty increases.

Neoliberalism creates an economic and moral framework that reduces the mass of humanity to utility maximizers whose only value is the money they can earn as employees and spend as consumers.

The free market can be a useful means of coordinating economic activity, but it does not generate moral and ethical values.   The for-profit corporation can be a useful institution, but it is not a divine institution to be worshiped.   We need a vision of the greater good that goes beyond neoliberalism.

LINKS

What do neoliberals actually believe in? by the New Statesman.

Was the Rise of Neoliberalism the Root Cause of Extreme Inequality? by George Monbiot for Evonomics.

Neoliberalism – the ideology at the root of all our problems by George Monbiot for The Guardian.

Reaping the Whirlwind by John Quiggin for Crooked Timber.

How Universities Are Increasingly Choosing Capitalism Over Education by Henry Heller for Alternet.

Credentialism and Corruption: Neoliberalism as Lived Experience by Lambert Strether for naked capitalism.

Tags: Neoliberalism