We live in a world that prizes the competition in markets unencumbered by government intervention. The largely accepted role of government is not to provide the necessary amenities for their lives of citizens, but to allow those citizens to compete among one another, in a rapidly monopolizing playing field, to earn that which social democratic states institutionalized as part of their mode of operation. We live in an economically free world, where government safety nets are abandoned in favor of economic liberalization, and where international institutions promote austerity measures as the terms of loans without which those countries would starve out. How did we get here, and what role did America play in this process?
Neoliberalism: The ideology
Neoliberalism is an ideology that defines competition and the foundational animating force behind the human experience, and unregulated market competition as the ultimate catalyst of prosperity. Under neoliberalism, one’s identity as a citizen is overshadowed by a newly monolithic identity as a consumer. The democratic will, which animates many of our political citizens, thus expressed in the market as myriads of personal transactions, becomes the ordering mechanism through which the expression of merit is personified. The market delivers benefits and punishments, allocating them better than any centralized system could. Government attempts to limit competition thus become antithetic to personal liberty itself, therefore taxes and regulations must be minimized, and public services privatized. After all, however it is defined, freedom usually accepts no masters.
The Birth of Neoliberalism
The term was first coined in 1938 Paris by the Austrian School economists Ludwig von Mises and Friedrich Hayek. Both men sought to present an alternative to social democracy—a system introduced in America during FDR’s New Deal, and in Britain during the development of its welfare state—which they saw as a dark emanation of the same authoritarian collectivism which inspired Nazism and Communism. In Mises’ book “Bureaucracy” and Hayek’s “The Road to Serfdom,” the two present a cogent and convincing narrative of the vanquishing of individualism by government planning in a spiral leading into totalitarian control. This narrative became the beating heart of Neoliberal Ideology and inspired many wealthy adherents who came to aid Hayek in founding the Mont Pelerin Society in 1947, the world’s first organization created with the sole aim of spreading the doctrine of neoliberalism.
Neoliberalism’s Love children
Soon after the founding of the Mont Pelerin Society, Hayek began to gather a transatlantic network of academics, businessmen, journalists, and activists who were sympathetic to his ideology. Through the movement’s wealthy supporters, a series of think tanks were founded, especially in America, with the refinery and proliferation of the ideology as their aim. These think tanks became widely influential in dictating domestic and foreign policy in the US, and even more so under Republican administrations. Among them are numbered the American Enterprise Institute, The Heritage Foundation, the Institute of Economic Affairs, and Adam Smith Institute. There were also efforts to finance academic departments in universities to secure Neoliberalism hold on the academic discourse as well as to produce prestigious like-minded economists. This was the birth of the Chicago School of Economics as a neoliberal institution and resulted in Milton Friedman, the first major American neoliberal economist.
Initially, Neoliberal ideology remained as the peripheries of US economic policy, as the postwar consensus gave Keynesian economics and its prescription near-universal application. The goals of much of US and Western European economic policy were the alleviation of poverty and full employment. The application of high tax rates alongside the pursuit of positive social outcomes through the development of public services and safety nets formed the core of the politics of the developed world. But, as the 1970s rolled in, economic crises on both sides of the Atlantic allowed Neoliberalism’s headway into the mainstream.
Through the aid of journalists and political advisers, various elements of neoliberalism, chief among them its monetary policy, found expression in the Carter Administration in the US, and the Callaghan Government in Britain.
But it was only with the election of Ronald Reagan and the ascension of Margaret Thatcher that Neoliberalism truly became a force to be reckoned with, and its full list of prescriptions to the economic maladies which plagued the developed world were fully implemented. Once they took power they executed massive tax cuts for the upper economic echelons of society, substantially decrease the influence of trade unions, deregulated the economy, and privatized previously public goods. The transformation was complete. Through the IMF, the World Bank, the Maastricht Treaty, and the World Trade Organization, all ostensibly neoliberal institutions neoliberalism was often undemocratically imposed on a large portion of the world. Strangely, several left-wing parties were at the forefront of accepting this neoliberal transformation, with Labor in the UK, and the Democratic Party in the US, welcoming neoliberalism. The ideology to this day remains a staple of the US democratic party and neoliberal politicians form the largest group within the party, with the current president Joe Biden belonging to a long, almost uninterrupted, line of neoliberal ascendants to the American Presidency that started with Ronald Reagan.
Neoliberalism VS. Democracy
As Neoliberal policies were willingly adopted, or through coercion, accepted by countries around the globe, seemingly paradoxically, neoliberalism ran head-first into a confrontation with democracy. Hayek, remembering his visit to the Chilean dictatorship of Augusto Pinochet—one of the first nations in which the full neoliberal programmed was instated—remarked on his preference “towards liberal dictatorship, rather than toward a democratic government devoid of liberalism.” This marked the final departure of two definitions of freedom, economic freedom was enshrined was the heart of the neoliberal ideology and practice, while personal and political freedom, rather than being merely superfluous, became technically obsolete
Despite its promises, economic growth has been substantially slower since the 1080s, the beginning of Neoliberal reforms in the US and UK, than it was in the previous decades, except for the wealthy elite. Income and wealth Inequality rose rapidly after almost 60 years of decline. This was caused by the loss of power of trade unions, tax reductions, rising rent prices, privatization, and deregulation.
The Neoliberal Lie
Neoliberal Ideology has been, overwhelmingly, betrayed by Neoliberal practice, relegating its supposed initial aims to obscurity. Neoliberal theory envisions a world where free trade enriches all, but through monopolistic concentration of power, a paradox comes into effect: the pursuit of unrestricted free trade destroys free trade itself. Moreover, moneyed interests, which have long-entrenched themselves in the global—and have an outsized influence especially in the American—political system, have catalyzed this destruction of free trade and redirected any possible benefits of neoliberal reform into their own pockets. Modern neoliberal practice, thereby, constitutes a betrayal of whichever political elements, right or left-leaning, inspired it in the first place. However, perhaps this should be too surprising, considering the elitist origins on the ideology among the gilded, decadent halls of the Mont Pelerin society.
Neoliberalism came from very humble beginnings to dominate the world order through a series of institutions that have now become essentially monolithic in the minds of the world population. It has become so quintessential that one can scarcely image a world that is not in nature and character neoliberal, or an economy that seeks to preserve the equity of the working class. At the core of the Neoliberal impetus is the belief that market freedom is the highest attainable goal, that homo economicus is the final evolution of man. How long can a system which orders human life around market activity last? Especially in this age where skepticism of capitalism, and neoliberalism, in particular, is on the rise. It is left to see how neoliberalism will evolve going forward but it is undeniable how much it has changed our world. It has left people destitute, destroyed the economic prospects of the lower classes, and preserved the interests of established elites. Neoliberalism constructed a concept of freedom that preserves it and made it unfeasible to be free from it. It has made promises it cannot keep, and perhaps, within our lifetimes, we will see the bill come due.