MonbiotLiberation from Neoliberalism

3 0 September 2016

t’s as if the people of the Soviet Union had never

heard of communism. The ideology that dominates

our lives has, for most of us, no name. Mention it

in conversation and you’ll be rewarded with a

shrug. Even if your listeners have heard the term

before, they will struggle to deﬁne it.

Neoliberalism: do you know what it is?

Its anonymity is both a symptom and cause of its

power. It has played a major role in a remarkable vari-

ety of crises: the ﬁnancial meltdown of 2007-8, the

offshoring of wealth and power, of which the Panama

Papers offer us merely a glimpse, the slow col-

lapse of public health and education,

resurgent child poverty, the epidemic

of loneliness, the collapse of eco-

systems, the rise of Donald Trump.

But we respond to these crises as

if they emerge in isolation,

apparently unaware that they

have all been either catalysed or

exacerbated by the same coher-

ent philosophy; a philosophy

that has – or had – a name. What

greater power can there be than to

operate namelessly?

So pervasive has neoliberalism

become that we seldom even recognise it as

an ideology. We appear to accept the proposition that

this utopian, millenarian faith describes a neutral force;

a kind of biological law, like Darwin’s theory of evolu-

tion. But the philosophy arose as a conscious attempt

to reshape human life and shift the locus of power.

Neoliberalism sees competition as the deﬁning char-

acteristic of human relations. It redeﬁnes citizens as

consumers, whose democratic choices are best exer-

cised by buying and selling, a process that rewards

merit and punishes inefﬁciency. It maintains that “the

market” delivers beneﬁts that could never be achieved

by planning.

Attempts to limit competition are treated as inimical

to liberty. Tax and regulation should be minimised,

public services should be privatised. The organisation

of labour and collective bargaining by trade unions are

portrayed as market distortions, that impede the for-

mation of a natural hierarchy of winners and losers.

Inequality is recast as virtuous: a reward for utility and

a generator of wealth, which trickles down to enrich

everyone. Efforts to create a more equal society are

both counter-productive and morally corrosive. The

market ensures that everyone gets what they deserve.

We internalise and reproduce its creeds.

The rich persuade themselves that they

acquired their wealth through merit,

ignoring the advantages – such as

education, inheritance and class

– that may have helped to secure

it. The poor begin to blame

themselves for their failures,

even when they can do little to

change their circumstances.

Never mind structural unem-

ployment: if you don’t have a job

it’s because you are unenterpris-

ing. Never mind the impossible costs

of housing: if your credit card is maxed

out, you’re feckless and improvident. Never

mind that your children no longer have a school playing

ﬁeld: if they get fat, it’s your fault. In a world governed

by competition, those who fall behind become deﬁned

and self-deﬁned as losers.

Among the results, as Paul Verhaeghe documents in

his book 'What About Me?' are epidemics of self-harm,

eating disorders, depression, loneliness, performance

anxiety and social phobia. Perhaps it’s unsurprising

that Britain, in which neoliberal ideology has been

most rigorously applied, is the loneliness capital of

Europe. We are all neoliberals now.

The term neoliberalism was coined at a meeting in

by George Monbiot

Liberation from

Neoliberalism

Alternative needed to this pervasive

zombie doctrine

It redeﬁnes citizens

as consumers, whose

democratic choices

are best exercised by

buying and selling

POLITICS

September 2016 3 1

Friedman with Thatcher

Paris in 1938.

Among the delegates were

two men who came to deﬁne the ideology,

Ludwig von Mises and Friedrich Hayek. Both

exiles from Austria, they saw social democracy,

exempliﬁed by Franklin Roosevelt’s New Deal

and the gradual development of Britain’s wel-

fare state, as manifestations of a collectivism

that occupied the same spectrum as nazism

and communism.

In 'The Road to Serfdom', published in 1944,

Hayek argued that government planning, by

crushing individualism, would lead inexorably

to totalitarian control. Like Mises’s book

'Bureaucracy, The Road to Serfdom' was widely

read. It came to the attention of some very

wealthy people, who saw in the philosophy an

opportunity to free themselves from regulation

and tax. When, in 1947, Hayek founded the ﬁrst

organisation that would spread the doctrine of

neoliberalism – the Mont Pelerin Society – it

was supported ﬁnancially by millionaires and

their foundations.

With their help, he began to create what

Daniel Stedman Jones describes in 'Masters of

the Universe' as “a kind of neoliberal Interna-

tional”: a transatlantic network of academics,

businessmen, journalists and activists. The

movement’s rich backers funded a series of

think tanks which would reﬁne and promote the

ideology. Among them were the American

Enterprise Institute, the Heritage Foundation,

the Cato Institute, the Institute of Economic

Affairs, the Centre for Policy Studies and the

Adam Smith Institute. They also ﬁnanced aca-

demic positions and departments, particularly

at the universities of Chicago and Virginia.

As it evolved, neoliberalism became more

strident. Hayek’s view that governments should

regulate competition to prevent monopolies

from forming gave way, among American apos-

tles such as Milton Friedman, to the belief that

monopoly power could be seen as a reward for

efﬁciency.

Something else happened during this transi-

tion: the movement lost its name. In 1951,

Milton Friedman was happy to describe himself

as a neoliberal. But soon after that, the term

began to disappear. Stranger still, even as the

ideology became crisper and the movement

more coherent, the lost name was not replaced

by any common alternative.

At ﬁrst, despite its lavish funding, neoliberal-

ism remained at the margins. The post-war

consensus was almost universal: John Maynard

Keynes’s economic prescriptions were widely

applied, full employment and the relief of pov-

erty were common goals in the US and much of

western Europe, top rates of tax were high and

governments sought social outcomes without

embarassment, developing new public services

and safety nets.

But in the 1970s, when

Keynesian policies began to fall apart and eco-

nomic crises struck on both sides of the

Atlantic, neoliberal ideas began to enter the

mainstream. As Milton Friedman remarked,

“when the time came that you had to change …

there was an alternative ready there to be

picked up.” With the help of sympathetic jour-

nalists and political advisers, elements of

neoliberalism, especially its prescriptions for

monetary policy, were adopted by Jimmy Cart-

er’s administration in the United States and Jim

Callaghan’s government in Britain.

After Margaret Thatcher and Ronald Reagan

took power, the rest of the package soon fol-

lowed: massive tax cuts for the rich, the

crushing of trade unions, deregulation, privati-

sation, outsourcing and competition in public

services. Through the IMF, the World Bank, the

Maastricht treaty and the World Trade Organi-

sation, neoliberal policies were imposed – often

without democratic consent – on much of the

world. Most remarkable was its adoption among

parties that once belonged to the left: Labour

and the Democrats, for example. As Daniel

Stedman Jones notes, “it is hard to think of

another utopia to have been as fully realised”.

It may seem strange that a doctrine promis-

ing choice and freedom should have been

promoted with the slogan “there is no alterna-

tive”. But, as Friedrich Hayek remarked on a

visit to Pinochet’s Chile – one of the ﬁrst nations

The rich persuade

themselves that they

acquired their wealth

through merit, ignoring

education, inheritance and

class. The poor begin to

blame themselves.

3 2 September 2016

in which the programme was comprehen-

sively applied – “my personal preference

leans toward a liberal dictatorship rather than

toward a democratic government devoid of

liberalism.” The freedom neoliberalism offers,

which sounds so beguiling when expressed

in general terms, turns out to mean freedom

for the pike, not for the minnows.

Freedom from trade unions and collective

bargaining means the freedom to suppress

wages. Freedom from regulation means the

freedom to poison rivers, endanger workers,

charge iniquitous rates of interest and design

exotic ﬁnancial instruments. Freedom from

tax means freedom from the distribution of wealth that

lifts people out of poverty.

As Naomi Klein documents in 'The Shock Doctrine',

neoliberal theorists advocated the use of crises to

impose unpopular policies while people were dis

tracted: for example, in the aftermath of Pinochet’s

coup, the Iraq war and Hurricane Katrina, which Milton

Friedman described as “an opportunity to radically

reform the educational system” in New Orleans.

Where neoliberal policies cannot be imposed domes-

tically, they are imposed internationally, through trade

treaties incorporating “investor-state dispute settle-

ment”: offshore tribunals in which corporations can

press for the removal of social and environmental pro-

tections. When parliaments have voted to restrict sales

of cigarettes, protect water supplies from mining com-

panies, freeze energy bills or prevent pharmaceutical

ﬁrms from ripping off the state, corporations have

sued, often successfully. Democracy is reduced to

theatre.

Another paradox of neoliberalism is that universal

competition relies upon universal quantiﬁcation and

comparison. The result is that workers, job-seekers and

public services of every kind are subject to a pettifog-

ging, stiﬂing regime of assessment and monitoring,

designed to identify the winners and punish the losers.

The doctrine that, Ludwig von Mises proposed, would

free us from the bureaucratic nightmare of central plan-

ning has instead created one.

Neoliberalism was not conceived as a self-serving

racket, but it rapidly became one. Economic growth has

been markedly slower in the neoliberal era (since 1980

in Britain and the US) than it was in the preceding dec-

ades; but not for the very rich. Inequality in the

distribution of both income and wealth, after 60 years

of decline, rose rapidly in this era, due to the smashing

of trade unions, tax reductions, rising rents, privatisa-

tion and deregulation.

The privatisation or marketisation of public services

– such as energy, water, trains, health, education,

roads and prisons – has enabled corporations to set up

tollbooths in front of essential assets and charge rent,

either to citizens or to government, for their use. Rent

is another term for unearned income. When you pay an

inﬂated price for a train ticket, only part of the fare com-

pensates the operators for the money they spend on

fuel, wages, rolling stock and other outlays. The rest

reﬂects the fact that they have you over a barrel.

Those who own and run the UK’s privatised or semi-

privatised services make stupendous fortunes by

investing little and charging much. In Russia and India,

oligarchs acquired state assets through ﬁresales. In

Mexico, Carlos Slim was granted control of almost all

landline and mobile phone services and soon became

the world’s richest man.

Financialisation, as Andrew Sayer points out in 'Why

We Can’t Afford the Rich', has had similar impacts. “Like

rent,” he argues, “interest is … unearned income that

accrues without any effort.” As the poor become poorer

and the rich become richer, the rich acquire increasing

control over another crucial asset: money. Interest pay-

ments, overwhelmingly, are a transfer of money from

the poor to the rich. As property prices and the

In the 1970s,

when Keynesian

policies began to

fall apart and economic

crises struck, neoliberal

ideas began to enter the

mainstream – elements

were adopted by Carter

and Callaghan

A Neoliberal “Recovery” Plan for the Eurozone

Worsening

Economic

Conditions

Reduced

Aggregate

Demand &

Stagﬂation

Rich get richer

KEY OUTCOMES

Poor get poorer

Huge

Financial

Sector

Bailouts

Harsh

Austerity

Measures

Source: Morgn Snley

POLITICS

September 2016 3 3

withdrawal of state funding load people with

debt (think of the switch from student grants to

student loans), the banks and their executives

clean up.

Sayer argues that the past four decades have

been characterised by a transfer of wealth not

only from the poor to the rich, but within the

ranks of the wealthy: from those who make

their money by producing new goods or ser

vices to those who make their money by

controlling existing assets and harvesting rent,

interest or capital gains. Earned income has

been supplanted by unearned income.

Neoliberal policies are everywhere beset by

market failures. Not only are the banks too big

to fail, but so are the corporations now charged

with delivering public services. As Tony Judt

pointed out in 'Ill Fares the Land', Friedrich

Hayek forgot that vital national services cannot

be allowed to collapse, which means that com-

petition cannot run its course. Business takes

the proﬁts, the state keeps the risk.

The greater the failure, the more extreme the

ideology becomes. Governments use neoliberal

crises as both excuse and opportunity to cut

taxes, privatise remaining public services, rip

holes in the social safety net, deregulate corpo-

rations and re-regulate citizens. The self-hating

state now sinks its teeth into every organ of the

public sector.

Perhaps the most dangerous impact of neo-

liberalism is not the economic crises it has

caused, but the political crisis. As the domain

of the state is reduced, our ability to change the

course of our lives through voting also con-

tracts. Instead, neoliberal theory asserts,

people can exercise choice through spending.

But some have more to spend than others: in

the great consumer or shareholder democracy,

votes are not equally distributed. The result is

a disempowerment of the poor and middle. As

parties of the right and former left adopt similar

neoliberal policies, disempowerment turns to

disenfranchisement. Large numbers of people

have been shed from politics.

Chris Hedges remarks that “fascist move-

ments build their base not from the politically

active but the politically inactive, the “losers”

who feel, often correctly, they have no voice or

role to play in the political establishment.”

When political debate no longer speaks to us,

people become responsive instead to slogans,

symbols and sensation. To the admirers of

Donald Trump, for example, facts and argu

ments appear irrelevant.

Tony Judt pointed out that when the thick

mesh of interactions between people and the

state has been reduced to nothing but author-

ity and obedience, the only remaining force that

binds us is state power. The totalitarianism

Hayek feared is more likely to emerge when gov-

ernments, having lost the moral authority that

arises from the delivery of public services, are

reduced to “cajoling, threatening and ultimately

coercing people to obey them”.

Like communism, neoliberalism is the God

that failed. But the zombie doctrine staggers

on, and one of the reasons is its anonymity. Or

rather, a cluster of anonymities.

The invisible doctrine of the invisible hand is

promoted by invisible backers. Slowly, very

slowly, we have begun to discover the names of

a few of them. We ﬁnd that the Institute of Eco-

nomic Affairs, which has argued forcefully in

the media against the further regulation of the

tobacco industry, has been secretly funded by

British American Tobacco since 1963. We dis-

cover that Charles and David Koch, two of the

richest men in the world, founded the institute

that set up the Tea Party movement. We ﬁnd

that Charles Koch, in establishing one of his

think tanks, noted that “in order to avoid unde-

sirable criticism, how the organization is

controlled and directed should not be widely

advertised”.

The words used by neoliberalism often con-

ceal more than they elucidate. “The market”

sounds like a natural system that might bear

upon us equally, like gravity or atmospheric

pressure. But it is fraught with power relations.

What “the market wants” tends to mean what

corporations and their bosses want. “Invest-

ment”, as Andrew Sayer notes, means two quite

different things. One is the funding of productive

and socially useful activities, the other is the pur-

chase of existing assets to milk them for rent,

interest, dividends and capital gains. Using the

same word for different activities “camouﬂages

the sources of wealth”, leading us to confuse

wealth extraction with wealth creation.

A century ago, the nouveau riche were dispar-

aged by those who had inherited their money.

Entrepreneurs sought social acceptance by

passing themselves off as rentiers. Today, the

relationship has been reversed: the rentiers

and inheritors style themselves entrepreneurs.

They claim to have earned their unearned

income.

These anonymities and confusions mesh

with the namelessness and placelessness of

modern capitalism: the franchise model which

ensures that workers do not know for whom

they toil; the companies registered through a

network of offshore secrecy regimes so com-

plex that even the police cannot discover the

beneﬁcial owners; the tax arrangements that

bamboozle governments; the ﬁnancial prod-

ucts no one understands.

The anonymity of neoliberalism is ﬁercely

guarded. Those who are inﬂuenced by Hayek,

Mises and Friedman tend to reject the term,

maintaining – with some justice – that it is used

today only pejoratively. But they offer us no

substitute. Some describe themselves as clas-

sical liberals or libertarians, but these

descriptions are both misleading and curiously

self-effacing, as they suggest that there is noth-

ing novel about 'The Road to Serfdom',

Bureaucracy or Friedman’s classic work, 'Capi-

talism and Freedom'.

For all that, there is something admirable

about the neoliberal project, at least in its early

stages. It was a distinctive, innovative philoso-

phy promoted by a coherent network of thinkers

and activists with a clear plan of action. It was

patient and persistent. 'The Road to Serfdom'

became the path to power.

Neoliberalism’s triumph also reﬂects the fail-

ure of the left. When laissez-faire economics led

to catastrophe in 1929, Keynes devised a com-

prehensive economic theory to replace it. When

Keynesian demand management hit the buffers

in the 1970s, there was “an alternative ready

there to be picked up.” But when neoliberalism

fell apart in 2008 there was… nothing. This is

why the zombie walks. The left and centre have

produced no new general framework of eco-

nomic thought for 80 years.

Every invocation of Lord Keynes is an admis-

sion of failure. To propose Keynesian solutions

to the crises of the 21st-century is to ignore

three obvious problems. It is hard to mobilise

people around old ideas; the ﬂaws exposed in

the 1970s have not gone away; and, most

importantly, they have nothing to say about our

gravest predicament: the environmental crisis.

Keynesianism works by stimulating consumer

demand to promote economic growth. Con-

sumer demand and economic growth are the

motors of environmental destruction.

What the history of both Keynesianism and

neoliberalism show is that it’s not enough to

oppose a broken system. A coherent alternative

has to be proposed. For Labour, the Democrats

and the wider left, the central task should be to

develop an economic Apollo programme, a con-

scious attempt to design a new system, tailored

to the demands of the 21st Century.

This article ﬁrst appeared in The Guardian.

www.monbiot.com

Hayek forgot that vital

national services cannot be

allowed to collapse, which

means that competition

cannot run its course.

Business takes the proﬁts,

the state keeps the risk.