By Claire Connelly
Neoliberalism is an economic idea that has driven the world to the brink of disaster. People say the economic system has failed but this is wrong — the system has worked perfectly according to the rules on which it was created.
This is not the world we signed up for.
After what feels like almost half a century of conflicts, wars, coups, financial crises, increasing inequality, volatility and disasters that have led to the crashing of whole economies and nations, (Venezuela, Greece and Puerto Rico come to mind), democracy is out of vogue. Its legitimacy as a solution to poverty, inequality, corruption and conflict is seriously in question.
Democracy is an unfulfilled promise we seem to have given up on altogether. The audacity of hope.
Shares of gross domestic income in the US dropped from 52.6% in 1929 to 42% in 2015, according to economic research by the Federal Reserve Bank of St Louis.
It is out of this spirit of cynicism and despair that neoliberalism — a misguided economic idea — has spread its pernicious influence, not just across the economy but every aspect of modern life.
Ironically, developed economics are the living, breathing death of hope.
This sense of impotence and hopelessness helps explain the elevation of Donald Trump, Britain’s withdrawal from the European Union, the rise of white supremacy movements and the apathy and complacency which helped bring them to power.
This is the story of neoliberalism’s 30-year-plan to replace democracy with a market-based society.
Neoliberalism has deliberately positioned itself both as the cause of our despair, and the solution. Its formlessness is its genius and the thing that makes it a formidable enemy.
Neoliberalism has deliberately positioned itself both as the cause of our despair, and the solution. Its formlessness is its genius and the thing that makes it a formidable enemy.
That sense of disillusionment you feel, the alienation, your sudden aversion to and suspicion of outsiders, or just complete and utter confusion and anxiety, is not a side-effect. It is very much by design.
“Fear & Loathing” is no longer a term of subversion — it is a tool of control.
What is Neoliberalism?
Neoliberalism is an anti-human economic prescription for life. It is an ideology which denies the existence of community, society and even humanity, reducing life on earth into decimal points on a balance sheet. It is a series of ones and zeros in a computerised market system in which we exist only to serve the financial ends of multinational corporations. Any benefit, financial or otherwise that we derive from work is purely coincidental. Paraphrasing economist Bill Fink, Neoliberalism believes that markets are more efficient than humans can ever be. It believes corporations can do no wrong, and celebrates inequality, claiming it encourages productivity because people envy the rich and try to emulate them.
Neoliberalism is a form of economic nihilism, an ideology designed to rationalise our humanity. An anti democratic system that thrives on our confusion, despair and desperation. All that is left now is the pursuit of profit.
Neoliberalism is a form of economic nihilism, an ideology designed to rationalise our humanity.
The neoliberal supporters rejoice that profits have ballooned since the Global Financial Crisis and they don’t care that these returns have not resulted in any significant improvement in employment, economic recovery or in wages and income security.
I can think of no better description than the one offered by economist Will Davies who describes neoliberalism as “the dependence of the state to pursue the disenchantment of politics by economies”.
Neoliberalism’s means are very different from its ends. Its proliferation has required a coordinated strategy of propaganda, deception and double-speak, encouraging people to vote and act against their own best interests. They have sacrificed their legal and political rights in favour of complete capitulation to the market.
It is a highly organised propaganda machine that presents itself as an economic model for society which values small government and free markets. But don’t be deceived — in reality — creating the ideal market society has required a massive expansion of state powers and regulation to meet its needs.
Famed economists such as Milton Friedman and Friedrich Von Hayek, along with other luminaries, created the intellectual bedrock for an ideological movement to which its adherents apply a zeal and an attachment which borders on religious.
They claimed that the liberty and freedom of the individual can only be attained by free markets, free trade and a strong institutional framework of private property rights.
This removes any responsibility for the government over the wellbeing of its citizens and implies it should confine itself to national security (military, defence, police), the avoidance of inflation through the pursuit of fiscal austerity, the administration of the legal systems required to secure private property rights and to guarantee the proper function of the ‘free market’ — by force if necessary.
It further demands the creation of markets in areas where they did not exist previously, such as education, healthcare, the environment, prisons and social security / welfare.
Neoliberalism professes a blind adherence to the market as some omnipotent, all-seeing all dancing, corporate, economic deity that is the only structure equipped to make objective decisions, safe from the dangers of the implicit biases that govern democracy.
Global capitalism has been operating under this radical ideology for the better part of thirty years. And it all started in a ballroom in Switzerland in 1947.
The Actual Lizard People
The Mont Pelerin Society was created on 10 April 1947 at a conference organised by the economist Friedrich von Hayek and Swiss businessman Albert Hunold. (By the end of the conference, Hunold would be appointed secretary. He also became editor-in-chief of The Mont Pelerin Quarterly magazine).
The Society was basically a union for the rich and powerful, which boasted Prime Ministers and Presidents, journalists, European and American aristocracy, economists, business people, authors and academics. It was backed and funded by The (New York) Foundation for Economic Education, and the William Volker Fund based in Kansas City which provided subsidies. Credit Suisse, then known as The Schweizerische Kreditanstalt, paid for almost all the conference costs.
As the cigar-smoke, whiskey and heady self-righteousness swilled around the ballroom lights, Hayek joined with Milton Friedman and their luminaries, including Austrian-American economist, Ludvig von Mises and noted Austrian-British philosopher, Karl Popper to form a small, exclusive club of free-marketeers, devoted to remaking the world in its image.
That night began the systematic deconstruction of Roosevelt’s New Deal which, ironically, was responsible for the greatest expansion of the American middle class up until that point, according to historian Jason A Schwarz which in turn helped bolster middle-class wealth in allied nations. The wealth created during the New Deal endowed three generations with financial and social mobility, the riches that were still being spent and created in the 60s, 70s and 80s, at the cost of a fraction of the wealth of the world’s millionaires and billionaires. The infrastructure built during the New Deal, cracking and creaking, is in use to this day.
The Mont Pelerin group would draft a ten-point statement of aims which claimed “independent freedom can be preserved only in a society in which an effective competitive market is the main agency for the direction of economic activity.”
The 10 point statement of aims concludes with: “Complete intellectual freedom is so essential to the fulfillment of our aims that no consideration of social expediency must ever be allowed to impair it”.
The decisions made in that Swiss Hotel in 1947 was the formalisation of a long running class war that is still being fought today.
Initially their progress was slow. They were in such a defensive mode, they achieved little that was tangible during the 50s and 60s, beyond an attack on the then dominant Neo-Keynesian economic management. Their first opportunity to take back real power, and shift the world towards the capitalism of the 1920s and earlier decades, came with the US-inspired overthrow of the Allende Government in Chile on September 11th, 1973 which saw hundreds killed, 200,000 people exiled, and many more tortured, kidnapped and disappeared. It is often referred to as the first 9/11.It is estimated more than 10,000 people were killed under Pinochet’s regime. Mass Chilean unemployment persisted for years after Pinochet cut government spending by 27%, with education and health hit hardest, while adopting a “pro-business package” and a move towards “complete free trade” which removed “as many obstacles as possible that now hinder the private market”.
More than 500 state-owned companies were privatised, along with kindergartens, cemeteries and the country’s social security system. The public school system was replaced by vouchers and private charter schools. More than 177,000 people lost their jobs between 1973 and 1983. By 1985, manufacturing as a percentage of the economy dropped to levels not seen since WWII. This was neoliberalism in action. Friedman deliberately plunged the country into a recession based on his untested theory. The economy contracted by 15% in its first year of ‘shock treatment’. Unemployment hit 20% (it was at 3% under President Allende). Contrary to Friedman’s predictions, joblessness and recession persisted for years. Around 74% of the average Chilean income went to buying bread, forcing households to choose between bread or milk or a bus fare to get to work. None of these economic reforms could have been “imposed, or carried out without the twin elements that underlie them all: military force and political terror”. By 1974, inflation had reached 375%.
In 1982 the economy crashed, debt exploded and hyperinflation skyrocketed, thanks to the Enron-style financial service companies which bought up the country’s assets on borrowed money, freed from all regulation, running up enormous debts of more than $14 billion. Unemployment hit 30%, ten times what it was under President Allende. Dictator Pinochet was ultimately forced to nationalise many of the financial companies to save the country from ruin. Chile’s copper mine company, Codelco, one of the few state assets to avoid privatisation was the only resource protecting the country from complete economic collapse. Supplying 85% of the country’s export revenues, it was a steady source of funds when the bubble inevitably burst.
By the end of Pinochet’s reign, 45% of the population was living below the poverty line. But over the same time period, this bloody, economic crisis saw wealthy Chileans catapulted into the ‘uber-rich’ category. The richest 10% of Chileans saw their incomes increase by 83%. The gulf between rich and poor continues to this day.
By the end of the eighties, neoliberalism exploited the opportunity given to it by an Arab-Israeli War and an oil-price driven spike in global inflation to put the theories of Friedman and Hayek into power in the USA, the UK, and with the help of the International Monetary Fund, eventually, almost everywhere.
What followed was thirty years of neoliberal ‘projects’ globally which would unseat Presidents and Prime Ministers, lead many more to the gallows or the firing squad and compromise millions of innocent bystanders simply trying to earn a crust.
Channelling billions of dollars to universities, think tanks, media organisations and governments, the Mont Pelerin Society helped fund bloody political and financial coups and assassinations in Chile, Brazil, Afghanistan, Portugal, Iraq, the former Soviet Union, Bulgaria and Uruguay. The neoliberal supporters were laughing all the way to the bank.
In countries where leaders needn’t be overthrown, Mont Pelerin Society members, affiliates and sympathisers have intellectually captured and taken over whole governments, from the US Republican & Democratic Parties, to Australia’s Liberal National Government, and the British Labour party who are the opposition, to Britain’s neoliberal Tories.
How Did We Get Here?
The wealth created between the early 1940s and 1970s was the direct result of the Bretton Woods agreement and the Marshall Plan which sought to pull the developed world out of poverty through regulated capitalism and a strong welfare state.
But by the late 1960s, capital movements began to undermine these agreements.
On the 15th of August 1971, President Nixon inadvertently killed the Bretton Woods system and by extension the Marshall Plan by replacing the gold standard (where the US redeemed dollars from foreign government and central banks for gold) with fiat (unbacked) currencies in most high income nations.
The driving force was the removal of controls on the movement of money from country to country. For example, the Single European Act of 1986 led to the removal of foreign exchange controls between EU countries. It is this which helped cause the exchange rate mechanism crisis of 1992/3, which not only affected the UK, but also Spain, Portugal, Italy and even France. It helped push the EU towards the Euro, because with the free movement of funds, a fixed exchange rate system for Europe no longer seemed defensible.
Neoliberalism’s big opportunity came with the stagflation brought on by the OPEC crisis of 1973. The Arab-Israeli war had caused a massive and unexpected increase in the price of oil. Though it was a supply-side problem caused by a cartel of oil producers, it was convenient for supporters of neoliberalism to deliberately mischaracterise the problem and blame big government as the cause of the crisis.
A series of global financial crises followed, beginning with the 1987 stock market crash, the UK sterling crisis of 1992 (which was due to a fixed exchange rate system breaking down), turbulent bond-markets in 1994. The Asian Crisis of 1997 essentially had the same cause, fixed exchange rates and IMF requests to open up foreign capital, causing a temporary spike in capital flows into the country, leaving behind a major financial crisis when it inevitably flowed out again. The same thing led to the crisis in Mexico between 1989 and 1994, (the result of a typical Minsky Moment in Mexico, along with the fixed exchange rate breaking down), Brazil and Russia in 1998 and Argentina in 2001.
These economic shocks are directly linked to the political and often bloody instability that has gripped countries all over the world, encouraged and perpetuated by the US, Europe the IMF and other organisations that have been influenced by the Mont Pelerin Society. The world has now pretty much adjusted to living from one crisis to another but the source is becoming increasingly clear.
The world has now pretty much adjusted to living from one crisis to another but the source is becoming increasingly clear.
Culminating in the global financial crisis of 2008, one might argue that neoliberalism is a failed doctrine. To the contrary, it has almost attained exactly what it set out to achieve: a system with no obligation to true economic recovery, that supports only profits and the corporations which generate them. We are in the midst of an existential neoliberal hell which if it didn’t need our continued consent to exist, would otherwise explicitly state that we are on our own.
Thatcher famously quoted that “economics are the method; the object is to change the heart and soul.” Neoliberalism has succeeded in doing just that:
The devastation these crises led to, aided in the creation of an economic caste system which rationalises and justifies poverty, inequality, starvation, disease, brutality, crime and corruption as the natural consequence of profit, and creates a precedent encouraging inaction to redress these very real and very human problems.
The global financial crisis of 2008 and the bailouts that followed was a nail in the coffin of democracy. It signalled to the world that government exists only to support the private sector, triggering a wave of disillusionment which allowed neoliberalism to complete its task: the complete and utter destruction of democracy, replacing it with a market society in which economics permeates every facet of modern life, from education to healthcare to law and order.
Today even the military operates as a for-profit model, conveniently privatising any activity that sits outside the criminal justice system.
Quoting Philip Mirowski:“While think tanks busy themselves riling up the zeitgeist with debt clocks and bogeyman statistics, neoliberal politicians work to massively increase the incarceration and policing of those deemed unfit for the marketplace, expanding state power to surveil and manipulate subject populations while dismantling judicial recourse, introducing intellectual property laws and expanding private property rights to cement into place their extension of market value to situations where they are absent, strengthening global sanctions such as the Trans Pacific Partnership agreement to circumvent and neutralise legislation they don’t like, bail out and subsidise private banks at the cost of many multiples of existing national income, defining corporations as legal persons to buy elections.”
If you think this is all in the past, a framework of a bygone era, think again. In between these brutal, bloody coups, the tenets of free-market capitalism has wrapped its tentacles around ordinary ‘democratic’ countries the world over.
The Trump administration has already set about attempting to further deregulate markets, wage an all out war on radical Islamic terror, trash climate science and resuscitate the fossil fuel industry. Trump can be trusted to create the very crisis neoliberalism needs to survive. In England Theresa May is threatening the wholesale privatisation of the NHS and what’s left of state-owned public railways. Of course, the country’s withdrawal from the EU signals at least some signs that the UK population is mad as hell and not going to take it anymore; exasperation and exhaustion which Labour under Jeremy Corbyn has had some success in seizing upon to revitalise a disillusioned public. With the election just days away the future of Britain, and of Europe, hangs in the balance.
And with terror attacks occurring at an alarming rate across the US and UK, the conditions are ripe for many more opportunities to destroy hope and replace it with the very system that led us to this moment in history in the first place.
To paraphrase Naomi Klein, the level of terror is always proportional to what is at stake.
But just because there is not yet blood in the streets of your backyard doesn’t mean that the pavement will remain unsullied.
If history has taught us anything, it is that democracy and progress do not happen in a straight line. This is why it’s essential that we must not be maddened into apathy, nor accept the conditions of the status quo as something that is natural, organic and to be expected. None of this neoliberal thinking is natural — it’s all anti-human and it has to go. It never used to be this way. The only thing standing between public squalor and private wealth is the will of the people. Thankfully the people are not stupid — they get it. They know that today they have to work harder and harder just to standstill. They know that the powers that be are incompetent. They understand that democracy has been hijacked. But there is one thing that collectively we should not do and that is fall into the trap of blaming ourselves for a system that is designed to deliver to just one set of interests.
Democracy and progress do not happen in a straight line.
It is not your supposed shortcoming that has not delivered, even though that is what the neoliberal supporters want you to believe. The problem lies squarely with the otherworldly inept economic thinking that began in a hotel in Switzerland in 1947. This is why financial crises recur with Swiss timing and it is why most sensible people think that most — if not all — mainstream economists are absolutely cuckoo.
Read more at renegadeinc.com