The Regime Under the Microscope (continued...)

Part 2.1: Neoliberalism Introduced

Mar 13, 2024

A bit of cultural theory

In my previous post, I described the attributes of neoconservatism as a political orientation toward the world. In this post, and for the following two, I’ll do the same for neoliberalism, an economic take on the world. As I said last time, I think these two ideologies function together as the bedrock of The Regime that currently dominates American society and, arguably, the globe.

Thank you for reading Rant Against the Regime. This post is public so feel free to share it.

Just to review our terms, by The Regime I mean the hegemonic forces and discourses of the day that, to a great degree, dictate our cultural moment. Thus, any given Regime of any given time period is what some people are inclined to see as Truth and other people are inclined to Rant against.

Before we begin our consideration of neoliberalism, let me remind you as well that, at the end of my last post, I asserted how I see our Regime undergoing change (as Regimes always do). Specifically, several longstanding central doctrines of neoconservatism look to be falling by the wayside. As Trump and the MAGA movement take control, the Republican Party is being pushed further along the oligarch scale toward outright authoritarianism—with, of course, the Orange Messiah cast in the triple role of Long-Suffering Victim, Much-Beloved Leader, and Long-Awaited Savior. Notwithstanding this sea change, the economic principles and policies of neoliberalism still very much fund Trumpism as the latest mutation of American conservatism.

More important, neoliberalism still very much dictates the workings of the global economy. Thus, even though old-school Republican neocons are being replaced by The Donald striving to join a worldwide rich-guy club of dictators, understanding the neoliberal mindset remains essential to our understanding of The Regime. Below, I introduce its history and basic beliefs.

Applying the theory that context is all-important!

The term neoliberalism itself is thorny. As a descriptor, it can mean various things to various people; as a label, it runs the gamut from affirming to pejorative (Iber 51). The foundation for neoliberalism is, of course, capitalism and, even more specifically, the concept of economic liberalism. That Enlightenment innovation was first analyzed by Adam Smith in The Wealth of Nations (1776) as it developed in opposition to feudalism and mercantilism. A liberal economy features free markets and private property with a minimum of government intervention, which is seen to inhibit open trade and competition. At its base, then, neo-liberalism is a reassertion of such an approach to capitalism. In theory, the self-interest of individual owners of private property, subject to contract law and participating within unhindered markets, will lead to the best social results for everyone. This formula for the common good is Smith’s famous concept of “the invisible hand.” (Or, as venture-capitalist Gordon Gekko, in the 1987 film Wall Street, famously puts it, “Greed is good.”)

Nowadays, a few centuries later, economic liberalism is the prevailing arrangement and is set against non-capitalistic systems such as socialism, planned economies, and, to a degree, protectionism. Even more particularly, however, neoliberalism is a 20^th-century movement that resurrects aspects of 19^th-century laissez-faire economic liberalism, an aggressive brand of capitalism that emphasizes principles such as deregulation, privatization, austerity, and reductions in government spending in order to enlarge the role of the private sector in social matters. Laissez-faire (translatable as “let do”) economics takes the individual to be the basic unit in society, and that individual’s “natural” right to freedom will lead to a harmonious and self-regulating social order. Government is to steer clear of commerce, allowing “free” trade and competition. The supposed laws of nature are to oversee the economic sphere.

Historically, separating neoliberalism from its 19^th-century predecessor are the two World Wars, with the 1929 Crash and Great Depression coming in between those conflicts. Emerging after World War II was an era of state-regulated compromise between capital and labor—quite the reverse of laissez-faire theory—and such policies guided European and American economics up through the 1970s. Thus, in its most intense and influential manifestation, neoliberalism didn’t find its feet as a reaction against this post-war settlement until around 1980. What this all means is that the second half of the 20^th-century is marked by the clash of contending economic models—basically forms of capitalism versus forms of socialism—out of which neoliberalism has arisen, to date, victorious.

David Harvey’s 2005 study, A Brief History of Neoliberalism, provides an excellent overview of just that—the course of this economic theory since the second world war. As just alluded to above, coming out of the war, the macroeconomic theories of the British economist John Maynard Keynes guided the policies of the leading western economies. In a political-economic organization now referred to as “embedded liberalism,” market practices and business activities were circumscribed by a variety of state-controlled constraints and regulations. (Such practices had already formed the basis of Roosevelt’s New Deal before the war.) Harvey sums up the post-war economic environment thus:

What all of these various state forms had in common was an acceptance that the state should focus on full employment, economic growth, and the welfare of its citizens, and that state power should be freely deployed, alongside of or, if necessary, intervening in or even substituting for market processes to achieve these ends. Fiscal and monetary policies usually dubbed ‘Keynesian’ were widely deployed to dampen business cycles and to ensure reasonably full employment. A ‘class compromise’ between capital and labour was generally advocated as the key guarantor of domestic peace and tranquillity. (10)

In effect, points out David Graeber, “the white working class of the North American countries, from the United States to West Germany, were offered a deal.” If they abandoned any socialist dreams of overthrowing capitalism, “then they would be allowed to keep their unions, enjoy a wide variety of social benefits (pensions, vacations, health care ...), and, perhaps most important, through generously funded and ever-expanding public educational institutions, know that their children had a reasonable chance of leaving the working class entirely” (373). The result of this “Keynesian era” arrangement was both rising productivity and wages that lasted into the late 1970s, setting the stage for our consumer economy of today.

When this long-standing economic trend started to sour, the neoliberal project arose with its goal being to disembed capital from state controls—that is, to dismantle the Keynesian policies that had been put into place. By the late 1960s and through the mid 1970s, liberal states were facing serious difficulties with regard to economic growth and capital accumulation. The result of this economic crisis was “to polarize debate between those ranged behind social democracy and central planning on the one hand ... and the interests of all those concerned with liberating corporate and business power and re-establishing market freedoms on the other” (Harvey 13). In particular, the converging of labor and urban social movements in the advanced capitalist states signaled the emergence of a viable socialist alternative to economic liberalism. That possibility, often termed post-Marxism, was seen by the economic elites as a clear political danger. As Harvey puts it, “To have a stable share of an increasing pie is one thing. But when growth collapsed in the 1970s, when real interest rates went negative and paltry dividends and profits were the norm, then upper classes everywhere felt threatened” (15).

In short, rich and powerful people wanted to stay rich and powerful. In order to ensure their privilege, something needed to be done to combat this encroaching democratic socialism. Neoliberalism was that something.

Harvey points to the years 1978-80 as potentially a watershed period where the world order changed. This is when an early neoliberal agenda took shape “to curb the power of labour, deregulate industry, agriculture, and resource extraction, and liberate the powers of finance both internally and on the world stage” (Harvey 1). The elections of Margaret Thatcher as Prime Minister of Great Britain in 1979 and Ronald Reagan as President of the United States in 1980 brought such social-economic policies to the fore. Key neoliberal theorists in the movement were Friedrich von Hayek and Milton Friedman, along with the many members of the Mont Pelerin Society that had formed in Switzerland in 1947. This group was an early neoliberal gathering of western essentialist thinkers who worshiped private property and the free market—and who saw western civilization (meaning white, Eurocentric, capitalistic patriarchy) in peril as a result of communism and FDR’s New Deal thinking. Subsequent and influential neoliberal think tanks grew out of this movement, such as The Institute of Economic Affairs (founded 1955) in the U.K. and The Heritage Foundation (founded 1973) in the U.S. These organizations continue their efforts to sway public opinion and government policy in favor of free-range capitalism.

During the 1980s, union-busting, dismantling of the welfare state, and the “trickle-down economics” of Reagan became well established in America and Great Britain. At the same time, U.S. imperialism—meaning neoconservatism—helped spread neoliberalism globally by propping up political strongmen (for example, in Chile, Iran, and Iraq) who allowed western corporate investment in their countries. Moreover, under pressure from the Reagan administration, the International Monetary Fund and World Bank were soon purged of any Keynesian influences. By the 1990s, neoliberal theory and policy had become economic orthodoxy in the Economics Departments of American colleges and universities, with the department at the University of Chicago, since the mid-1970s, being the leading bastion of neoliberal thought. The so-called “Washington Consensus” of the mid-1990s consolidated neoliberal control and dominance. The political and economic actions and compromises of President Bill Clinton and Prime Minister Tony Blair—ironically both center-leftists—did the most to ensconce, finally, neoliberal doctrine. Bodies such as the World Trade Organization (founded 1995) and accords such as the North American Free Trade Agreement (signed 1994) pursued the primary neoliberal goal of opening up the globe to unhindered capital flow (Harvey 90-93).

Wealth, and thus political power, had begun its steady flow back up the class ladder.

Often neoliberalism is characterized as aiming to establish a free-floating, self-regulating market completely detached from the state. Recently, historian Quinn Slobodian has offered a corrective to that view, arguing that the real neoliberal objective always has been to insulate markets and capital from the intervention of individual democratic states by way of “a specific institution-building project” involving the creation of a superseding global economic order (4-5). While neoliberal thinkers unquestionably sought to free commerce from governmental control, they accomplished this ambition not so much by pushing for market fundamentalism as by “redesigning states, laws, and other institutions to protect the market.” That is to say, the “invisible hand” of market competition needed to be accompanied by the “visible hand” of the law by way of the “legalization” and “juridicization” of world trade (6-7). If Keynesians had embedded liberalism in the state to work for the benefit of all citizens, the Mont Pelerin Society embedded neoliberalism in the multinational accord to work for the enrichment of the already wealthy.

What this arrangement recalls are the non-democratic origins of capitalism.

Capitalism developed under monarchies, mixed-monarchies, or, at best, republics with a very limited political franchise (normally only male property holders above a certain level of wealth had the right to vote). It is an economic system unambiguously designed to favor those possessing the most capital (see Chang 140-142). What is more, capitalism is joined at the hip with imperialism. The global spread of European empire and economic liberalism more or less coincide. It should be unsurprising, then, when Slobodian places neoliberalism in history as a 20^th-century reaction to the fall of 19^th-century empires. As the world de-colonized and democratic nation-states became the new reality, neoliberals looked for ways to protect dominium (the rule of property) from imperium (the rule of states), thereby keeping capital “safe from mass demands for social justice and redistributive equality” (16).

Not only does neoliberalism seek a return to laissez-faire economic practices, but also to the unfettered, undemocratic political powers of plutocracy and empire. If the behaviors of Vladimir Putin spring to mind at this point, you are exactly right in your understanding of neoliberalism.

Slobodian describes the neoliberal perspective on the 20^th century as a time when increasing democracy and equality threatened wealth. As a result, the neoliberal project became “about the development of a planet linked by money, information, and goods where the signature achievement of the century was not an international community, a global civil society, or the deepening of democracy, but an ever-integrating object called the world economy and the institutions designated to encase it” (16-17). The neoliberal backlash to the post-World War II economic settlement, therefore, can be seen as little more than a grand scheme to install a global economic order devoted to optimizing profits—that is to say, to enabling the rich to get richer. Notes Slobodian of this process, “The fix was found, time and again, in a scale shift for governance, including in the League of Nations, international investment law, blueprints for supranational federation, systems of weighted franchise, European competition law, and ultimately the WTO itself” (20). With the protections of 19^th-century empire gone, capital required a new way to be safeguarded. Such security came in the form of markets legally protected, under the law for a “world economy,” from the 20^th-century democratic state. For neoliberals, the added prefix “neo” signifies this new and different way to configure the non-economic conditions enabling a liberal economic system (6).

Finally in this thumbnail sketch of the history of neoliberalism, for all the bluster about its being the ne plus ultra of capitalistic achievement, neoliberal policy did not yield high levels of economic performance in the United States or Great Britain during the 1980s. Harvey points out that the “overall result was an awkward mix of low growth and increasing income inequality” (88). As the world economy moved into the 1990s, wide-open, deregulated, innovative financial markets along with the increasing global mobility of capital and goods became increasingly the means to make and to concentrate wealth into the hands of the privileged few (90-93). Capital was free to roam the globe in search of the cheapest labor, with predictable results. Since 1980, the link between productivity and wages has been severed. As Graeber notes, “productivity rates have continued to rise, but wages have stagnated or even atrophied” (375).

The inevitable results of this trend in lower wages has been increased job insecurity, the loss of benefits and job protections, diminished or absent state safety nets for workers, a significant decrease in personal savings coupled with a dramatic increase in household debt, and—as is to be expected—larger and larger segments of the population falling into poverty.

At the same time wages flattened, workers were guided, if not forced, to turn to financial markets in an effort to create their own economic security, such as with 401(k) retirement accounts. Such a state of affairs amounts to a gigantic swindle. In effect, regular people now hope to cash in on profits created by their own exploitation. Under neoliberalism, a tremendous amount of market wealth is created on the back of consumer debt. Meanwhile, corporate and shareholder profits soar. Participating in financial markets fueled substantially by one’s own financial liabilities is indeed a mug’s game.

As Graeber characterizes the situation: “for many, ‘buying a piece of capitalism’ slithered undetectably into something indistinguishable from those familiar scourges of the working poor: the loan shark and the pawnbroker” (376). Prior to the COVID-19 pandemic, the most egregious neoliberal scam came in the form of the mortgage-refinancing schemes of the 1990s and 2000s that led to the market crash and resulting recession of 2008. The subprime mortgage crisis demonstrated fully—yet again—how capitalism is not a formation of democracy but ultimately a system of power and exclusion (see Graeber 381). The resulting taxpayer bailout of banks considered to be “too big to fail” has been seen as not only the consolidation of the capitalist class, especially its financial wing, but as something of a neoliberal coup against the U.S. republic and its citizens (see Dienst 23-32). Although the causes of the 2008 crash are clear (the basic culprit is the financial instrument of the derivative, discussed in my next post), those in power remain unwilling to do anything meaningful to correct the problems. As Dienst describes the situation: “It is as if the system itself wants to be seen as ‘too big to fail,’ it being understood that bigness is the best defense against government regulation and popular unrest alike” (31). Dienst sees us, therefore, as currently being locked into what he terms a “regime of indebtedness” (28).

So what?

Under these neoliberal circumstances, one is hard-pressed to spot economic or social justice on the horizon. Always advocating tax-cuts for the wealthy and cuts to social programs such as Social Security and Medicare, Republicans since Reagan have pushed doggedly for the neoliberal economic order described above. Meanwhile, moderate Democrats, such as Obama and Biden, work to pull economic policies back toward Keynesian principles while progressive Democrats, such as Elizabeth Warren, Bernie Sanders, and Alexandria Ocasio-Cortez, promote plans and programs driven by even more clear-cut socialist underpinnings and goals.

This economic-theory tug-of-war is fierce, nasty, and ongoing. While it’s difficult to predict which viewpoints might prevail or how the battle might settle out, one thing is clear. Big Money has always been hard to beat. And when it comes to neoliberalism, Big Money is the elephant-in-the-room, the 500-pound gorilla, and the Big Kahuna all rolled into one. The one thing neoliberal economics does supremely well is create wealth inequity.

Before we get too deep in the “So What?” question, though, we must explore in more detail the basic operations of this economic formation known as neoliberalism. I’ll warn you, as we walk this troubled landscape, we will be getting a bit into the fiscal weeds.

Works Cited and Consulted

(For the rise of neoliberalism, see Harvey 19-31 and generally his chapter one. For other accounts of the takeover by neoliberalism starting around 1980, see also Dienst, chapter one; Graeber, chapter twelve. For full-length studies of right-wing economic theory and practice starting in the 20^th century, see Mirowski and Plehwe; Burgin; MacLean. For a readable and detailed twenty-three point refutation of neoliberal free-market economics, see Chang. For an excellent thumbnail sketch of what neoliberalism is and how it came to dominate the world currently, see Monbiot 217-221. For a bit more detailed outline of what is termed “The Neoliberal Habitat,” see Zuboff 37-41. For a recent, in-depth analysis of the subprime mortgage crisis, see Tooze.)

Burgin, Angus. The Great Persuasion: Reinventing Free Markets since the Depression. Harvard UP, 2015.

Chang, Ha-Joon. 23 Things They Don’t Tell You About Capitalism. Penguin, 2011.

Dienst, Richard. The Bonds of Debt: Borrowing Against the Common Good. Verso, 2011.

Graeber, David. Debt: The First 5,000 Years. Melville House, 2011.

Harvey, David. A Brief History of Neoliberalism. Oxford UP, 2005.

Iber, Patrick. “Worlds Apart: How Neoliberalism Shapes the Global Economy and Limits the Power of Democracies.” The New Republic, May 2018, pp. 51-54.

MacLean, Nancy. Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America. Penguin Random House, 2017.

Mirowski, Philip, and Dieter Plehwe. The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective. Harvard UP, 2009.

Monbiot, George. How Did We Get Into This Mess? Verso, 2017.

Slobodian, Quinn. Globalists: The End of Empire and the Birth of Neoliberalism. Harvard UP, 2018.

Tooze, Adam. Crashed: How a Decade of Financial Crises Changed the World. Viking, 2018.

Zuboff, Shoshana. The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power. PublicAffairs, 2019.