Neoliberalismtheideologyattherootofallourproblems

Financialmeltdown,environmentaldisasterandeventheriseofDonaldTrumpneoliberalismhasplayed
itspartinthemall.Whyhastheleftfailedtocomeupwithanalternative?

NoalternativeRonaldReaganandMargaretThatcherattheWhiteHouse.Photograph:RexFeatures

Friday15April201612.00BST
LastmodifiedonWednesday31August201613.38BST
ImagineifthepeopleoftheSovietUnionhadneverheardofcommunism.Theideologythatdominatesour
liveshas,formostofus,noname.Mentionitinconversationandyoullberewardedwithashrug.Evenif
yourlistenershaveheardthetermbefore,theywillstruggletodefineit.Neoliberalism:doyouknowwhatit
is?

Itsanonymityisbothasymptomandcauseofitspower.Ithasplayedamajorroleinaremarkablevarietyof
crises:thefinancialmeltdownof20078,theoffshoringofwealthandpower,ofwhichthePanamaPapers
offerusmerelyaglimpse,theslowcollapseofpublichealthandeducation,resurgentchildpoverty,the
epidemicofloneliness,thecollapseofecosystems,theriseofDonaldTrump.Butwerespondtothese
crisesasiftheyemergeinisolation,apparentlyunawarethattheyhaveallbeeneithercatalysedor
exacerbatedbythesamecoherentphilosophyaphilosophythathasorhadaname.Whatgreater
powercantherebethantooperatenamelessly?
Sopervasivehasneoliberalismbecomethatweseldomevenrecogniseitasanideology.Weappearto
acceptthepropositionthatthisutopian,millenarianfaithdescribesaneutralforceakindofbiologicallaw,
likeDarwinstheoryofevolution.Butthephilosophyaroseasaconsciousattempttoreshapehumanlifeand
shiftthelocusofpower.
Neoliberalismseescompetitionasthedefiningcharacteristicofhumanrelations.Itredefinescitizensas
consumers,whosedemocraticchoicesarebestexercisedbybuyingandselling,aprocessthatrewards
meritandpunishesinefficiency.Itmaintainsthatthemarketdeliversbenefitsthatcouldneverbeachieved
byplanning.

Attemptstolimitcompetitionaretreatedasinimicaltoliberty.Taxandregulationshouldbeminimised,public
servicesshouldbeprivatised.Theorganisationoflabourandcollectivebargainingbytradeunionsare
portrayedasmarketdistortionsthatimpedetheformationofanaturalhierarchyofwinnersandlosers.
Inequalityisrecastasvirtuous:arewardforutilityandageneratorofwealth,whichtricklesdowntoenrich
everyone.Effortstocreateamoreequalsocietyarebothcounterproductiveandmorallycorrosive.The
marketensuresthateveryonegetswhattheydeserve.
Weinternaliseandreproduceitscreeds.Therichpersuadethemselvesthattheyacquiredtheirwealth
throughmerit,ignoringtheadvantagessuchaseducation,inheritanceandclassthatmayhavehelped
tosecureit.Thepoorbegintoblamethemselvesfortheirfailures,evenwhentheycandolittletochange
theircircumstances.
Nevermindstructuralunemployment:ifyoudonthaveajobitsbecauseyouareunenterprising.Never
mindtheimpossiblecostsofhousing:ifyourcreditcardismaxedout,yourefecklessandimprovident.
Nevermindthatyourchildrennolongerhaveaschoolplayingfield:iftheygetfat,itsyourfault.Inaworld
governedbycompetition,thosewhofallbehindbecomedefinedandselfdefinedaslosers.
Amongtheresults,asPaulVerhaeghedocumentsinhisbookWhatAboutMe?areepidemicsofselfharm,
eatingdisorders,depression,loneliness,performanceanxietyandsocialphobia.Perhapsitsunsurprising
thatBritain,inwhichneoliberalideologyhasbeenmostrigorouslyapplied,isthelonelinesscapitalof
Europe.Weareallneoliberalsnow.
***

ThetermneoliberalismwascoinedatameetinginParisin1938.Amongthedelegatesweretwomenwho
cametodefinetheideology,LudwigvonMisesandFriedrichHayek.BothexilesfromAustria,theysaw
socialdemocracy,exemplifiedbyFranklinRooseveltsNewDealandthegradualdevelopmentofBritains
welfarestate,asmanifestationsofacollectivismthatoccupiedthesamespectrumasnazismand
communism.
InTheRoadtoSerfdom,publishedin1944,Hayekarguedthatgovernmentplanning,bycrushing
individualism,wouldleadinexorablytototalitariancontrol.LikeMisessbookBureaucracy,TheRoadto
Serfdomwaswidelyread.Itcametotheattentionofsomeverywealthypeople,whosawinthephilosophy
anopportunitytofreethemselvesfromregulationandtax.When,in1947,Hayekfoundedthefirst
organisationthatwouldspreadthedoctrineofneoliberalismtheMontPelerinSocietyitwassupported
financiallybymillionairesandtheirfoundations.
Withtheirhelp,hebegantocreatewhatDanielStedmanJonesdescribesinMastersoftheUniverseasa
kindofneoliberalinternational:atransatlanticnetworkofacademics,businessmen,journalistsandactivists.
Themovementsrichbackersfundedaseriesofthinktankswhichwouldrefineandpromotetheideology.
AmongthemweretheAmericanEnterpriseInstitute,theHeritageFoundation,theCatoInstitute,the
InstituteofEconomicAffairs,theCentreforPolicyStudiesandtheAdamSmithInstitute.Theyalsofinanced
academicpositionsanddepartments,particularlyattheuniversitiesofChicagoandVirginia.
Asitevolved,neoliberalismbecamemorestrident.Hayeksviewthatgovernmentsshouldregulate
competitiontopreventmonopoliesfromforminggavewayamongAmericanapostlessuchasMilton
Friedmantothebeliefthatmonopolypowercouldbeseenasarewardforefficiency.
Somethingelsehappenedduringthistransition:themovementlostitsname.In1951,Friedmanwashappy
todescribehimselfasaneoliberal.Butsoonafterthat,thetermbegantodisappear.Strangerstill,evenas
theideologybecamecrisperandthemovementmorecoherent,thelostnamewasnotreplacedbyany
commonalternative.
Atfirst,despiteitslavishfunding,neoliberalismremainedatthemargins.Thepostwarconsensuswas
almostuniversal:JohnMaynardKeynesseconomicprescriptionswerewidelyapplied,fullemploymentand
thereliefofpovertywerecommongoalsintheUSandmuchofwesternEurope,topratesoftaxwerehigh
andgovernmentssoughtsocialoutcomeswithoutembarrassment,developingnewpublicservicesand
safetynets.
Butinthe1970s,whenKeynesianpoliciesbegantofallapartandeconomiccrisesstruckonbothsidesof
theAtlantic,neoliberalideasbegantoenterthemainstream.AsFriedmanremarked,whenthetimecame
thatyouhadtochange...therewasanalternativereadytheretobepickedup.Withthehelpof
sympatheticjournalistsandpoliticaladvisers,elementsofneoliberalism,especiallyitsprescriptionsfor
monetarypolicy,wereadoptedbyJimmyCartersadministrationintheUSandJimCallaghansgovernment
inBritain.
AfterMargaretThatcherandRonaldReagantookpower,therestofthepackagesoonfollowed:massivetax
cutsfortherich,thecrushingoftradeunions,deregulation,privatisation,outsourcingandcompetitionin
publicservices.ThroughtheIMF,theWorldBank,theMaastrichttreatyandtheWorldTradeOrganisation,
neoliberalpolicieswereimposedoftenwithoutdemocraticconsentonmuchoftheworld.Most

remarkablewasitsadoptionamongpartiesthatoncebelongedtotheleft:LabourandtheDemocrats,for
example.AsStedmanJonesnotes,itishardtothinkofanotherutopiatohavebeenasfullyrealised.
***
Itmayseemstrangethatadoctrinepromisingchoiceandfreedomshouldhavebeenpromotedwiththe
sloganthereisnoalternative.But,asHayekremarkedonavisittoPinochetsChileoneofthefirst
nationsinwhichtheprogrammewascomprehensivelyappliedmypersonalpreferenceleanstowarda
liberaldictatorshipratherthantowardademocraticgovernmentdevoidofliberalism.Thefreedomthat
neoliberalismoffers,whichsoundssobeguilingwhenexpressedingeneralterms,turnsouttomean
freedomforthepike,notfortheminnows.
Freedomfromtradeunionsandcollectivebargainingmeansthefreedomtosuppresswages.Freedomfrom
regulationmeansthefreedomtopoisonrivers,endangerworkers,chargeiniquitousratesofinterestand
designexoticfinancialinstruments.Freedomfromtaxmeansfreedomfromthedistributionofwealththat
liftspeopleoutofpoverty.

NaomiKleindocumentedthatneoliberalsadvocatedtheuseofcrisestoimposeunpopularpolicieswhilepeoplewere
distracted.Photograph:AnyaChibisfortheGuardian

AsNaomiKleindocumentsinTheShockDoctrine,neoliberaltheoristsadvocatedtheuseofcrisestoimpose
unpopularpolicieswhilepeopleweredistracted:forexample,intheaftermathofPinochetscoup,theIraq
warandHurricaneKatrina,whichFriedmandescribedasanopportunitytoradicallyreformtheeducational
systeminNewOrleans.
Whereneoliberalpoliciescannotbeimposeddomestically,theyareimposedinternationally,throughtrade
treatiesincorporatinginvestorstatedisputesettlement:offshoretribunalsinwhichcorporationscanpress
fortheremovalofsocialandenvironmentalprotections.Whenparliamentshavevotedtorestrictsalesof
cigarettes,protectwatersuppliesfromminingcompanies,freezeenergybillsorpreventpharmaceutical
firmsfromrippingoffthestate,corporationshavesued,oftensuccessfully.Democracyisreducedtotheatre.

Anotherparadoxofneoliberalismisthatuniversalcompetitionreliesuponuniversalquantificationand
comparison.Theresultisthatworkers,jobseekersandpublicservicesofeverykindaresubjecttoa
pettifogging,stiflingregimeofassessmentandmonitoring,designedtoidentifythewinnersandpunishthe
losers.ThedoctrinethatVonMisesproposedwouldfreeusfromthebureaucraticnightmareofcentral
planninghasinsteadcreatedone.
Neoliberalismwasnotconceivedasaselfservingracket,butitrapidlybecameone.Economicgrowthhas
beenmarkedlyslowerintheneoliberalera(since1980inBritainandtheUS)thanitwasinthepreceding
decadesbutnotfortheveryrich.Inequalityinthedistributionofbothincomeandwealth,after60yearsof
decline,roserapidlyinthisera,duetothesmashingoftradeunions,taxreductions,risingrents,
privatisationandderegulation.
Theprivatisationormarketisationofpublicservicessuchasenergy,water,trains,health,education,roads
andprisonshasenabledcorporationstosetuptollboothsinfrontofessentialassetsandchargerent,either
tocitizensortogovernment,fortheiruse.Rentisanothertermforunearnedincome.Whenyoupayan
inflatedpriceforatrainticket,onlypartofthefarecompensatestheoperatorsforthemoneytheyspendon
fuel,wages,rollingstockandotheroutlays.Therestreflectsthefactthattheyhaveyouoverabarrel.

InMexico,CarlosSlimwasgrantedcontrolofalmostallphoneservicesandsoonbecametheworldsrichestman.
Photograph:HenryRomero/Reuters

ThosewhoownandruntheUKsprivatisedorsemiprivatisedservicesmakestupendousfortunesby
investinglittleandchargingmuch.InRussiaandIndia,oligarchsacquiredstateassetsthroughfiresales.In
Mexico,CarlosSlimwasgrantedcontrolofalmostalllandlineandmobilephoneservicesandsoonbecame
theworldsrichestman.

Financialisation,asAndrewSayernotesinWhyWeCantAffordtheRich,hashadasimilarimpact.Like
rent,heargues,interestis...unearnedincomethataccrueswithoutanyeffort.Asthepoorbecome
poorerandtherichbecomericher,therichacquireincreasingcontroloveranothercrucialasset:money.
Interestpayments,overwhelmingly,areatransferofmoneyfromthepoortotherich.Aspropertypricesand
thewithdrawalofstatefundingloadpeoplewithdebt(thinkoftheswitchfromstudentgrantstostudent
loans),thebanksandtheirexecutivescleanup.
Sayerarguesthatthepastfourdecadeshavebeencharacterisedbyatransferofwealthnotonlyfromthe
poortotherich,butwithintheranksofthewealthy:fromthosewhomaketheirmoneybyproducingnew
goodsorservicestothosewhomaketheirmoneybycontrollingexistingassetsandharvestingrent,interest
orcapitalgains.Earnedincomehasbeensupplantedbyunearnedincome.
Neoliberalpoliciesareeverywherebesetbymarketfailures.Notonlyarethebankstoobigtofail,butsoare
thecorporationsnowchargedwithdeliveringpublicservices.AsTonyJudtpointedoutinIllFarestheLand,
Hayekforgotthatvitalnationalservicescannotbeallowedtocollapse,whichmeansthatcompetitioncannot
runitscourse.Businesstakestheprofits,thestatekeepstherisk.
Thegreaterthefailure,themoreextremetheideologybecomes.Governmentsuseneoliberalcrisesasboth
excuseandopportunitytocuttaxes,privatiseremainingpublicservices,ripholesinthesocialsafetynet,
deregulatecorporationsandreregulatecitizens.Theselfhatingstatenowsinksitsteethintoeveryorganof
thepublicsector.
Perhapsthemostdangerousimpactofneoliberalismisnottheeconomiccrisesithascaused,butthe
politicalcrisis.Asthedomainofthestateisreduced,ourabilitytochangethecourseofourlivesthrough
votingalsocontracts.Instead,neoliberaltheoryasserts,peoplecanexercisechoicethroughspending.But
somehavemoretospendthanothers:inthegreatconsumerorshareholderdemocracy,votesarenot
equallydistributed.Theresultisadisempowermentofthepoorandmiddle.Aspartiesoftherightand
formerleftadoptsimilarneoliberalpolicies,disempowermentturnstodisenfranchisement.Largenumbersof
peoplehavebeenshedfrompolitics.

Slogans,symbolsandsensationDonaldTrump.Photograph:AaronJosefczyk/Reuters

ChrisHedgesremarksthatfascistmovementsbuildtheirbasenotfromthepoliticallyactivebutthe
politicallyinactive,theloserswhofeel,oftencorrectly,theyhavenovoiceorroletoplayinthepolitical
establishment.Whenpoliticaldebatenolongerspeakstous,peoplebecomeresponsiveinsteadto
slogans,symbolsandsensation.TotheadmirersofTrump,forexample,factsandargumentsappear
irrelevant.
Judtexplainedthatwhenthethickmeshofinteractionsbetweenpeopleandthestatehasbeenreducedto
nothingbutauthorityandobedience,theonlyremainingforcethatbindsusisstatepower.The
totalitarianismHayekfearedismorelikelytoemergewhengovernments,havinglostthemoralauthoritythat
arisesfromthedeliveryofpublicservices,arereducedtocajoling,threateningandultimatelycoercing
peopletoobeythem.
***
Likecommunism,neoliberalismistheGodthatfailed.Butthezombiedoctrinestaggerson,andoneofthe
reasonsisitsanonymity.Orrather,aclusterofanonymities.
Theinvisibledoctrineoftheinvisiblehandispromotedbyinvisiblebackers.Slowly,veryslowly,wehave
beguntodiscoverthenamesofafewofthem.WefindthattheInstituteofEconomicAffairs,whichhas
arguedforcefullyinthemediaagainstthefurtherregulationofthetobaccoindustry,hasbeensecretly
fundedbyBritishAmericanTobaccosince1963.WediscoverthatCharlesandDavidKoch,twoofthe
richestmenintheworld,foundedtheinstitutethatsetuptheTeaPartymovement.WefindthatCharles
Koch,inestablishingoneofhisthinktanks,notedthatinordertoavoidundesirablecriticism,howthe
organisationiscontrolledanddirectedshouldnotbewidelyadvertised.
Thewordsusedbyneoliberalismoftenconcealmorethantheyelucidate.Themarketsoundslikeanatural
systemthatmightbearuponusequally,likegravityoratmosphericpressure.Butitisfraughtwithpower
relations.Whatthemarketwantstendstomeanwhatcorporationsandtheirbosseswant.Investment,as
Sayernotes,meanstwoquitedifferentthings.Oneisthefundingofproductiveandsociallyusefulactivities,
theotheristhepurchaseofexistingassetstomilkthemforrent,interest,dividendsandcapitalgains.Using
thesamewordfordifferentactivitiescamouflagesthesourcesofwealth,leadingustoconfusewealth
extractionwithwealthcreation.
Acenturyago,thenouveauricheweredisparagedbythosewhohadinheritedtheirmoney.Entrepreneurs
soughtsocialacceptancebypassingthemselvesoffasrentiers.Today,therelationshiphasbeenreversed:
therentiersandinheritorsstylethemselvesentrepreneurs.Theyclaimtohaveearnedtheirunearned
income.
Theseanonymitiesandconfusionsmeshwiththenamelessnessandplacelessnessofmoderncapitalism:
thefranchisemodelwhichensuresthatworkersdonotknowforwhomtheytoilthecompaniesregistered
throughanetworkofoffshoresecrecyregimessocomplexthateventhepolicecannotdiscoverthe
beneficialownersthetaxarrangementsthatbamboozlegovernmentsthefinancialproductsnoone
understands.
Theanonymityofneoliberalismisfiercelyguarded.ThosewhoareinfluencedbyHayek,Misesand
Friedmantendtorejecttheterm,maintainingwithsomejusticethatitisusedtodayonlypejoratively.But

theyofferusnosubstitute.Somedescribethemselvesasclassicalliberalsorlibertarians,butthese
descriptionsarebothmisleadingandcuriouslyselfeffacing,astheysuggestthatthereisnothingnovel
aboutTheRoadtoSerfdom,BureaucracyorFriedmansclassicwork,CapitalismandFreedom.
***
Forallthat,thereissomethingadmirableabouttheneoliberalproject,atleastinitsearlystages.Itwasa
distinctive,innovativephilosophypromotedbyacoherentnetworkofthinkersandactivistswithaclearplan
ofaction.Itwaspatientandpersistent.TheRoadtoSerfdombecamethepathtopower.
Neoliberalismstriumphalsoreflectsthefailureoftheleft.Whenlaissezfaireeconomicsledtocatastrophe
in1929,Keynesdevisedacomprehensiveeconomictheorytoreplaceit.WhenKeynesiandemand
managementhitthebuffersinthe70s,therewasanalternativeready.Butwhenneoliberalismfellapartin
2008therewas...nothing.Thisiswhythezombiewalks.Theleftandcentrehaveproducednonewgeneral
frameworkofeconomicthoughtfor80years.
EveryinvocationofLordKeynesisanadmissionoffailure.ToproposeKeynesiansolutionstothecrisesof
the21stcenturyistoignorethreeobviousproblems.Itishardtomobilisepeoplearoundoldideastheflaws
exposedinthe70shavenotgoneawayand,mostimportantly,theyhavenothingtosayaboutourgravest
predicament:theenvironmentalcrisis.Keynesianismworksbystimulatingconsumerdemandtopromote
economicgrowth.Consumerdemandandeconomicgrowtharethemotorsofenvironmentaldestruction.
WhatthehistoryofbothKeynesianismandneoliberalismshowisthatitsnotenoughtoopposeabroken
system.Acoherentalternativehastobeproposed.ForLabour,theDemocratsandthewiderleft,thecentral
taskshouldbetodevelopaneconomicApolloprogramme,aconsciousattempttodesignanewsystem,
tailoredtothedemandsofthe21stcentury.
GeorgeMonbiotsHowDidWeGetintoThisMess?ispublishedthismonthbyVerso.Toorderacopyfor
12.99(RRP16.99))gotobookshop.theguardian.comorcall03303336846.FreeUKp&pover10,
onlineordersonly.Phoneordersminp&pof1.99.