Neoliberalism’s failure in a time of pandemic

The United States is unprepared to deal with the coronavirus pandemic—short of hospital beds, short of test kits, short of ventilators and other medical supplies.

This is not merely because of the negligence of a few individuals.  It is the result of acceptance of the philosophy of neoliberalism.

Neoliberalism teaches that business corporations should be structured so as to keep costs as low as possible and revenues as high as possible, and that all institutions should be like business corporations.

It also teaches that accumulation of wealth by individuals and corporations is a good thing because private investment is the source of progress and economic growth.

What’s wrong with that? you may ask.

What’s wrong is what we see now—national needs neglected and the whole society put at risk.

Hospitals and other health care providers are told they must operate with maximum efficiency.  All resources must be fully utilized all the time—no empty beds, no unused equipment, no moments to relax for nurses and other staff.

This means there is no slack in the system.  It is hard to provide for the ebb and flow of illness and injury even in normal times.  In an emergency, such as this one, the health care system is overwhelmed.

Also, hospitals and other health care providers must obtain their supplies from the lowest priced source, even if that source is a sweatshop on the other side of the planet.

This means that the United States depends on China and other foreign countries for medical supplies.  If the leaders of these countries decide to limit shipments to the U.S. in order to guarantee supplies for their own people, what can we Americans do about it?

Another aspect of neoliberalism is economic austerity—the ideal that public services have to be kept to a minimum in order to lower taxes on corporations and wealthy individuals, the supposed job creators.

The International Monetary Fund imposes austerity on poor countries in economic difficulty.  In the USA, governors of states adopt it voluntarily.

Click to enlarge

Andrew Cuomo is an example, despite his image as a bold pandemic fighter.  He recently cut $2.5 billion from New York’s Medicaid budget, which includes $400 million for hospitals fighting the pandemic.  This jeopardizes $6.7 billion in federal Medicaid funds, which the state otherwise would have received.

The reason for cutting Medicaid is to keep taxes low, especially upper-bracket taxes, in order to keep wealthy individuals from leaving the state.  I don’t want to single out Cuomo.  Many governors are worse on this question that he is.

When I criticize neoliberalism, I am not criticizing business in general.  The Waffle House restaurant chain is noted for advance planning to keep open during floods, storms and weather-related disaster.  The H-E-B supermarket chain in Texas has received praise for its advance planning for the pandemic.  But the financial system, as it’s set up now, rewards neoliberal priorities.


Coronavirus: More Wheels Coming Off by Yves Smith for Rolling Stone.

Bailing Out the Coronavirus Bailout by Matt Taibbi for Rolling Stone.

Why Didn’t We Test Our Trade’s ‘Antifragility’ Before COVID-19? by Gene Callahan and Joe Norman for The American Conservative.

Austerity kills: European Commission demanded cuts to public healthcare spending 63 times from 2011 through 2018 by Emma Clancy.  [Added 4/5/2020]

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10 Responses to “Neoliberalism’s failure in a time of pandemic”

  1. whungerford Says:

    What the author describes and decries is laissez-faire capitalism, not anything liberal neo or otherwise.


    • philebersole Says:

      I didn’t make up the word “neoliberal.” The term is well-accepted. Books have been written about it.

      Neoliberals are not necessarily advocates of laissez-faire. They are perfectly comfortable with business monopoly and government subsidies.

      The hard-core advocates of laissez-faire call themselves libertarians. The honorable supporters of this school of thought are as opposed to the current round of corporate subsidies and bailouts as I am.


    • whungerford Says:

      There is nothing liberal about it:

      Neoliberalism is a policy model—bridging politics, social studies, and economics—that seeks to transfer control of economic factors to the private sector from the public sector. It tends towards free-market capitalism and away from government spending, regulation, and public ownership.

      Often identified in the 1980s with the conservative governments of Margaret Thatcher and Ronald Reagan, neoliberalism has more recently been associated with so-called Third Way politics, which seeks a middle ground between the ideologies of the left and right.


  2. williambearcat Says:

    Excellent. Efficiency ought not be the highest value.


  3. Fred (Au Natural) Says:

    What you describe is modern short term thinking. That is as much a product of affluence as anything else. Affluent people don’t want to think that their affluence is really a fragile thing. Preparation for uncertainty takes money away from things that are more immediate and fun.

    Anyone who wanted to dramatically increase our medical stockpiles a couple years ago would have been derided. We have much more important things for that money to do. Save the whales, fight global warming, fight poverty, stave off the Chinese threat, rescue Boeing, build a wall, save the children, antisocial safety net, yadda, yadda, yadda. Stimulate the economy. And once this crisis is over we’ll forget about it and return to our previous affluence and hedonism. No Boy Scouts here to “be prepared.”

    It remains to be seen if institutions will learn anything. We haven’t tried to be prepared nationally for anything since the early cold war.

    The problem is not just capitalist v. socialist but rather deeper human nature to reject uncomfortable possibilities. And of favoring immediate gratification over preparing for an uncertain cataclysm of indefinite time, nature, and duration. We simply haven’t had a real cataclysm in several generations and so we forget.


  4. philebersole Says:

    I think neoliberalism is a logically coherent philosophy that stems logically from certain widely-shared assumptions. Here’s an old post I wrote on the topic.

    That’s not to say that short-term thinking doesn’t exist. People do forget to prepare. My argument is that the economic-political system arising from the neoliberal mindset makes it impossible, or at least very difficult, to prepare..


    • Fred (Au Natural) Says:

      Was there any system in the world that was truly prepared for this except for those countries who recently took it in the shorts from SARS? Taiwan and maybe S. Korea? Japan?


    • philebersole Says:

      The problem for us Americans is not the failure to foresee a particular emergency. The problem is a systematic hollowing out of our ability to respond to any emergency.

      We hollowed out our manufacturing equipment so that we are dependent on China for basic drug ingredients and medical supplies.

      We hollowed out our public health system so that the USA, along with the UK, has fewer hospital beds per person than any other industrial nation.

      In the midst of an emergency, Gov. Andrew Cuomo of New York is planning to cut funding for Medicaid.

      None of these things is the result of neglect. They were done intentionally in pursuit of certain goals.

      Fred, you made a post on your own blog about the influenza epidemic of 1918, when a great graphic showing the contract between the death rate in St. Louis, where health authorities acted proactively, and in Philadelphia, where (among other things) they went ahead with a patriotic parade against all advice.

      As a nation in this point in history, we are 1918 Philadelphia writ large. And that doesn’t just apply to pandemics. It applies to the foreseeable climate- and weather-related disasters we are not preparing for.


    • philebersole Says:

      Here’s a link to Fred’s post with the graphic on the 1918 pandemic


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