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By Louis Menand
“Neoliberalism” has been called a political swear word, and is blamed for almost every socio-economic ills we have, from banking disasters and inequality in the source of income to the informal economy and demagogic populism. However, for 40 years, neoliberalism has been the main economic doctrine of the U. S. government. Is this what got us into the mess we’re in?
What is “neo” in neoliberalism is actually what is retro. This is contradictory, because in the 1930s, politicians like Franklin D. Roosevelt appropriated the term “liberal” and came to constitute sets of policies such as the New Deal and, later, the Great Society. The idea of collective bargaining would ensure that staff can only produce the goods that the economy produces.
These mid-century liberals were not opposed to capitalism and private enterprise. On the contrary, they believed that strong systems of government and unions made capitalist economies more productive and equitable. They sought to save capitalism from its own mistakes and excesses. Today we call those other people progressives. (Those on the right call them communists. )
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Neoliberalism, in the American context, can be understood as a reaction opposed to mid-century liberalism. Neoliberals claim that the state deserves to play a smaller role in managing the economy and meeting public needs, and oppose barriers to the free exchange of goods and labor. Their liberalism is, infrequently consciously, a return to the “classical liberalism” they associate with Adam Smith and John Stuart Mill: laissez-faire capitalism and individual licentiousness. Hence retroliberalism.
The label “neoliberal” has been attached to a diversity of political species, from libertarians, who tend to be programmatically anti-government, to New Democrats like Bill Clinton, who embrace the political goals of the New Deal and the Great Society, but there are better tactics to achieve them.
The clinical literature on neoliberalism tends to concentrate either on the intellectual genealogy of the neoliberal idea (which began, more or less, in Europe in the 1930s) or on the political history of neoliberal policies (which began in the 1970s). According to them, neoliberalism (they prefer the term “market fundamentalism”, which characterizes George Soros) represents the triumph of decades of lobbying in favor of companies. They also tell the intellectual history and political history of neoliberalism, so their book is, in fact, three stories stacked on top of each other. This provides a very thick volume.
The story of lobthroughing is smart to know. Most voters are very susceptible to the suggestion that someone might take away their non-public freedom, and that is what pro-corporate propaganda has warned them about for over a hundred years. Propaganda has taken many forms, from college textbooks funded through corporate teams to popular entertainment like Laura Ingalls Wilder’s “Little House on the Prairie” books, which pontificate the lesson of self-reliance. (The books were touted as autobiographical; however, Oreskes and Conway say Wilder, with the assistance of his daughter, absolutely distorted the facts of his family circle’s history. )
According to Oreskes and Conway, the repeated message of this lobbying is that economic and political freedoms are indivisible. Any restriction on the former is a risk to the latter. This is the “great myth” of its title, and they show us, in detail, how many other people have spent a lot of time and cash to put this concept in the minds of the American public. ention. ” They have a political purpose. They believe that one of the functions of government has been to correct market errors and, if government is discredited, how will it correct what could be the biggest market failure of all: climate change?
Oreskes and Conway recommend that we can get a sense of what we are facing due to the pandemic. Millions of Americans seemed unaware of what government officials were telling them about COVID, or viewed public fitness measures like vaccines and mask mandates as attacks on their freedom. (There was also some anti-vaccine hysteria. )
When comparing the U. S. reaction. In the U. S. with that of other countries, Oreskes and Conway recommend that 40% of COVID deaths in that country could have been avoided if Americans had trusted science, government, and everyone else. They say years of criticizing science (the subject of his previous book, “Merchants of Doubt”) and anti-government messaging have taught Americans not to. Now, when public officials propose policies to combat climate change, other people will be told, and many will.
The concept of linking economic freedom to political freedom, or corporate freedom to non-public freedom, was not imagined by lobbyists. This is the central guiding principle of the biblical texts of market fundamentalism, “The Road to Serfdom” through Friedwealthy A’s “Capitalism and Freedom. “Hayek and Friedman were educational economists; they were awarded the Nobel Prize in 1974 and 1976 respectively. But his featured books are not educational. They are controversial, rich in claims and deficient in evidence. However, both books remained in print. They pressed buttons.
Hayek wrote “Road to Serfdom” during World War II. He lived in England, after emigrating from Austria to take up a position at the London School of Economics, and his book was published in 1944. If you think about the recent global history of 1944, what would you see?They have concluded that, even if Germany were nevertheless defeated and the Soviet Union returned to its box, free-market capitalism and liberal democracy had had their day.
Hayek felt that this was what other people in England were concluding: that a state-run economy, so to speak, was mandatory to avoid another collapse. They may not have thought that would mean giving up their freedom, but Hayek warned them that it was a fatal mistake. He entrusted the e-book to “Socialists of all parties. “of personal property is the ultimate vital guarantee of freedom, not only for those who own them, much less for those who do not have them. “
Hayek asserted that there are things that governments can do that private actors cannot. Presumably, it wants legislation and courts to protect asset rights and enforce contracts; You want an army and some form of money. There are also public desires that personal businesses cannot profitably or effectively fulfill. Oreskes and Conway tell us that Hayek “was not as hostile to welfare systems as claimed. “
But Hayek made an old argument about the slippery slope. Planning is top-down and demands centralized authority, and whatever the motives for that authority, this inevitably leads to totalitarianism. “From the holy and obstinate idealist to the fanatic, there is only one step,” as he put it. They will lose their freedom, they may not even care.
“Road to Serfdom” was written at a time of geopolitical uncertainty. The option of a totalitarian future, the “Could this happen here?”it has obsessed many intellectuals, including Karl Popper, Hannah Arendt, Isaiah Berlin and George Orwell, who reviewed Hayek’s book. Hayek “is probably right that in this country intellectuals are more totalitarian than other people,” Orwell wrote. Road to Serfdom”, “one of the vital maximum books of our generation”. He spoke at the time.
Friedman’s e-book, on the other hand, turns out to have been almost comically ill-chosen. He published it in 1962, in the midst of what economist Robert Lekachman, in a widely read e-book published in 1966, called “the Keynes era. “Government systems were seen as indispensable to stimulate expansion and “aggregate demand”. Deal: more government intervention, not less.
In the UK, the post-war Labour government, as Hayek had feared, nationalised key industries and created the National Health Service, “socialised medicine”, as the warring parties called it. In 1964, Congress prohibited racial and sex discrimination in employment. A year later, he would create Medicare and Medicaid. Government spending more than doubled between 1950 and 1962. Meanwhile, the highest marginal tax rate in the U. S. The US and UK rates are approaching 90%.
It is a neoliberal’s nightmare, and yet between 1950 and 1973, the CCP has grown at the fastest pace in history. The United States and Western Europe have experienced remarkably high rates of expansion and low degrees of wealth inequality, in fact, the lowest in history. In 1959, the poverty rate in the United States was 22%; in 1973, 11%. It is also a time of “liberation. ” People felt free, exercised their freedom and sought more. They weren’t meant to feel that way. They intended to be passive and dependent. The timing would not have seemed propitious to write an all-out attack on the government.
And yet, Friedman wrote one, and he didn’t fire a shot. “Capitalism and Freedom” begins with a dismissive reaction to John F. ‘s inaugural address. “Kennedy. ” But it doesn’t matter. It’s that kind of book. )
Friedman provided a list of things he opposed: hiring control, minimum wage legislation, banking regulation, the Federal Communications Commission, the Social Security program, professional licensing requirements, “alleged” public housing, the army project, public toll roads and national parks. competitive monopolies), public schools (where taxpayers are forced to fund “basketry” classes), and progressive source of income taxes. He argued that an inheritance tax is no fairer than a skill tax. Legacy and skill are birth injuries. Why is it fair to tax the former and not the latter?
Much of Friedman’s e-book echoes Hayek. (From 1950 to 1972, they taught at the University of Chicago, Friedman in the Department of Economics, and Hayek in the Committee on Social Thought. )”A socialist society must be democratic, in the sense of guaranteeing some individual freedom,” Friedman said. And: “Economic freedom is Array. . . an indispensable means for the realization of political freedom.
Like Hayek, Friedman evokes the loss of individualism. Yes, he admitted, government systems and regulations may simply improve the quality of life and improve the functionality of social facilities at the local level, but, in doing so, they would “replace progress with stagnation” and “substitute uniform mediocrity for variety that is imperative to this experiment that can take tomorrow’s laggards above today’s average. “
Essentially, “Capitalism and Freedom” is an argument for privatization. The flexible market is a value system: it aligns source and demand and allocates goods and facilities to their proper value. If the state needs to participate in the business, for example, of pension benefits, it competes on a level playing field with rival providers. There will be a pension market.
Friedman had inventive concepts for tactics to use market technique, for example, allowing investors to pay school tuition in exchange for a percentage of a student’s long-term earnings. He believed that school segregation could only be solved by a voucher formula that allowed parents to which school to send their children to.
“How did this radical and non-credible book sell so well?” ask Oreskes and Conway. And he did: part of a million copies, with translations into eighteen languages. part of the television screen called “Free to Choose”, which aired on PBS.
In one episode, he explains how a pencil was born. Fabrics (wood, graphite, rubber, steel) are produced independently in countries around the world. How do they combine to make a pencil? There is no commissioner who sends orders from a central office, Friedman said, waving a pencil. That’s the magic of the pricing system. Your audience may not have known exactly what “the pricing system” is, but it’s a good show-and-tell. And they knew what a commissioner is. No one likes a commissioner.
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Another explanation for why Friedman’s e-book survived the Keynes era is that Chicago’s branch of economics has established itself well in academia. Several of his professors in Friedman’s time would also win Nobel Prizes there, adding George Stigler and Gary Becker, whose perspectives were very similar to Friedman’s. “The Economic Approach to Human Behavior”), and the legal and economic movement in jurisprudence. These paintings were not propaganda, but, as Oreskes and Conway say, they lent intellectual credibility to pro-business propaganda.
The Chicago School had its founding father: Adam Smith. Friedman had an Adam Smith tie; Stigler wore an Adam Smith T-shirt. As Glory M. Liu explains in her history of Smith’s reception in the United States, “Adam Smith’s America” (Princeton), the other people of Chicago “reinvented Smith as the original of the value mechanism. “organized through the natural, automatic, and self-generated movements of individual economic actors. “
Oreskes and Conway agree. They point out that when Stigler produced an abridged edition of “The Wealth of Nations” in the 1950s, he overlooked most of the passages in which Smith advocates regulation of industries where the unbridled pursuit of self-interest can cause social harm. The bank is one of them. What Oreskes and Conway call Adam Smith’s “Americanization” reduced him to the trope of the invisible hand.
In fact, the word “invisible hand” appears only once in the thousand pages of “The Wealth of Nations. “Smith uses metaphor to characterize the means through which an act of profit-seeking for self-benefit can serve a social good. (This concept had already been complex in Bernard Mandeville’s “The Fable of the Bees,” published in 1714. )ism, explaining how flexible industry and the hard work department created more national wealth. I was writing before the Industrial Revolution began or the fashionable concept of capitalism took hold. It is an anachronism to read him as if he were opposed to Keynes.
Stigler called “The Wealth of Nations” a “prodigious palace erected on the granite of self-interest. “of them unless the thrill of seeing it. (Becker might have called this a “fictitious value. “There are certain things that make other people feel better or worse about themselves, and those emotions are factored into the service they buy. For a free-market economist, the value is correct. )
The genuine explanation for why market fundamentalism prevailed was not that it had won the war of ideas. The post-war boom has come to an end. The economy began to worsen in the early 70s, with the oil embargo and recession of 1973-74, in which the Dow Jones lost 45% of its value. It has become prohibitive to borrow money. By 1980, the prime rate, the interest rate that banks rate for their maximum creditworthy customers, had exceeded twenty percent (it was 2. 25 percent in 1950) and inflation hovered around fourteen percent. The unemployment rate rose from 3. 5 per cent in 1969 to 10. 8 per cent in 1982. The U. S. economy was mired in “stagflation”: maximum inflation and low growth.
Nixon, Ford, Carter. . . It seemed that no management knew how to prevent bleeding. Government spending and top marginal tax rates, which seemed to work well in the 1960s, now appeared to be obstacles to recovery. The Chicago school’s technique has gained strength. The conundrum is that such a summarized and conceptualized concept of effective market action has emerged amid so much market imperfection in the real world.
It helped that in 1980, a true believer was elected president. Ronald Reagan had shifted to flexible market theology in his years as a spokesman for General Electric from 1954 to 1962, not only hosting “General Electric Theatre,” broadcast every Sunday prime time on CBS, but preaching the gospel of flexible business and the magic of markets to G. E. workers. factories across the country. ” Government is not the solution to our problem,” he said in his inaugural address. “The government is the problem. ” These are words that the authors of “Road to Serfdom” and “Capitalism and Freedom” lived to hear. The UK, under Margaret Thatcher, undertook a parallel overhaul of welfare state economics (crazy there, as there was more to undo for Thatcher).
One of the first things Reagan did as president was to break up the air traffic controllers union, whose members, federal employees, had gone on strike. He ignored the strikers and the union was decertified. Yet even if Reagan’s pro-market spirit was voluntary, his political flesh was weak. In 1988, he awarded the Presidential Medal of Freedom to Milton Friedman.
As Oreskes and Conway point out, deregulation actually began under Jimmy Carter, Reagan’s predecessor. Carter, with the help of arch-liberal Edward M. Kennedy, deregulated the airline, railroad, and truck industries. Deregulation continued after Clinton’s election in 1992. The government and Clinton pushed a neoliberal technique into foreign trade, the beginnings of what we now call globalization.
In 1993, Congress ratified the North American Free Trade Agreement (NAFTA). In 1996, it passed the Telecommunications Law, opening up the communications sector. And in 1999, he repealed the Glass-Steagall Act, a depression-era law that prohibited advertising banks from engaging with securities companies (“investment banks”).
These policies were pursued with the confidence that market liberalization increases productivity and competition, lowers prices, and that markets regulate themselves better than managers can. But some of its accidental effects would still be felt today. NAFTA has had a net positive effect on the economies of the signatories (Canada, Mexico, and the United States), but it has also made it less difficult for American brands to move their factories to Mexico, where hard labor is cheaper, causing serious social and economic damage in parts of the United States. of Trump’s electorate were people, or the youth of people, whose lives and communities were affected by NAFTA.
The telecommunications law included a clause, Article 230, that exempted Internet operators from liability for third-party content posted on their sites. The consequences are well known. And the weakening of Glass-Steagall, as well as the easing of banking supervision through Federal Reserve Chairman Alan Greenspan, were blamed for the 2008 currency crisis and the Great Recession that followed, a crisis that, according to Oreskes and Conway, cost the public twenty-three trillion dollars.
However, the neoliberal era was not a triumph for Friedman’s approach. Market-friendly policies were combined with state investment and government guidance. Clinton would possibly have subscribed to many neoliberal principles, however, one of the first projects of his administration was a physical care reform where the government was to give each and every citizen a “physical care safety card,” much like socialized medicine.
NAFTA and the Telecommunications Act involve many regulatory requirements. The government monitors how the business is going, it simply withdraws. As with freedom of speech and religious freedom, it is the state that creates the social area in which economic freedom can be exercised. Without government, we are in a state of nature, where coercion, freedom, is the norm.
There is a blind spot in “The Great Myth. ” The authors are exhaustive in demystifying the basicist view of the “magic of the market” (although the basicisms are not difficult to discredit and many of their criticisms are familiar). But what exercises them is the equation that pro-business propagandists have made between flexible markets and political freedom: “the claim that America was founded on 3 interrelated basic principles: representative democracy, political freedom, and flexible enterprise. “Oreskes and Conway call this “a fabricated claim. “Is it?
As they point out, there is no mention of loose business in the Constitution. But there are mentions of ownership, and almost every challenge to government interference in the economy is based on the concept of asset rights. The editors were very sensitive about this issue. Not only did they reconcile the concept of their own patrimony with the concept of political rights; They made goods themselves a political right. And vice versa: rights were non-public goods. ” As a man is said to have a right to his goods,” wrote James Madison, “it may also be said that he has goods in his rights. “
Thus, the Fifth Amendment states that “no user shall . . . disadvantaged from life, liberty or property, without due process. “Like the rest of the Bill of Rights, it was originally intended to apply only to the federal government, however, the Fourteenth Amendment, ratified in 1868, also implemented it in the states, and the courts invoked the “due process” clause of that amendment to protect all types of basic rights not specified in the Bill of Rights. such as the right to privacy, which is the constitutional foundation of Roe v. Wade. Il is the judicial doctrine known as “substantial due process. “
Thus, the pro-corporate lobbyists were surely right to describe the lax company, that is, the laxity to do what they sought with their assets, as political laxity. In the early decades of the twentieth century, the Supreme Court used due substantive procedure to overturn government acts and systems that infringed on asset rights and what the Court called “laxity in hiring,” adding minimum wage laws, employee protection regulations, and a host of New Deal systems. Association of Fabricantes. Es, for better or worse, a component of the fabric of American society.
But this political freedom is not absolute. The drafters were adept at balancing a claim of authority with a compensatory claim. When the Supreme Court, under pressure from Franklin Roosevelt, who threatened to fill the Court, overturned the New Deal in 1937, it had some other legal mechanism. Article I of the Constitution gives Congress the power “to trade with foreign nations, and between the several States, and with Indian tribes. ” This is the “industry clause” which, since the days of John Marshall, has been widely interpreted to give Congress the force of virtually anything related to interstate commerce. Through the Commerce Clause, the courts began to reinvigorate Congress, paving the way for the systems and policies of mid-century liberalism. The constitutional authority for the anti-discrimination provisions of the Civil Rights Act of 1964 is the Commerce Clause. You cannot tell the story of the corporate war against the government without considering this legal context. Due process and the industry clause were the weapons with which the antagonists fought and, as is often the case, the Supreme Court had the last word.
What has neoliberalism produced? As for the positive aspect of the ledger: in 1980, about 40-3% of the world’s population lived in extreme poverty (as defined by the World Bank), and that figure is around 8%. Globalization has lifted one billion people out of poverty in just 40 years. now economic actors. Technological wisdom is no longer the monopoly of the world’s major powers.
Among the debts: deregulation, which aims to stimulate competition, has slowed the trend towards monopoly. Despite the telecommunications law, only 3 corporations: Verizon, T-Mobile and A. T.
The fish, with their heaps of capital, continue to gobble up the small fish. The Big Five would now be the Big Four if Penguin Random House tries to win Simon.
And, as Martin Wolf points out in his highly enlightened and intelligent critique of the global economy, “The Crisis of Democratic Capitalism” (Penguin Press), inequality is everywhere. In 2016, they were paid 347 times more. From the point of view of society as a whole: the other 3 million people who make up the richest 1% of Americans are collectively worth more than the 291 million who make up the poorest 90%.
It is the increase in inequality fostered through the neoliberal formula that poses the greatest immediate risk to civil society. Wolf doubts that the United States will remain a functioning democracy at the end of the decade. Be that as it may, the sun has set on neoliberalism. Both sides have moved closer to something akin to mercantilism; The language of the market has lost its magic. The “biennomic” implies an immense public finish; Meanwhile, a new framework—protectionists, crony capitalists, ethnonationalists and provincials, social and cultural—has rewritten party platforms. Republicans enthusiastically punish big tech and clash with “woke” companies, more determined to wage a culture war than to protect trade. People prayed for the end of neoliberalism. Unfortunately, that’s what it looks like. ♦
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