Sunday 10 February 2008

Defining Neoliberalism

Neoliberalism is the creed of 21st century capitalism. The capitalist ideologies that have come before it, be they fascist, conservative, liberal, or social democratic have worked to obscure the reality of class rule behind the state, the nation, democracy, and class collaboration. Neoliberalism does none of this. It is the most naked, most open expression of capital the world has ever seen. It speaks only to business elites and bourgeois politicians, and as such is enthusiastically embraced by them. It informs the ruling class on nearly every social policy question and frames their attitude toward the forces arrayed against them. Neoliberalism is the mindset of our rulers and for this reason it has to be examined and understood by everyone opposed to the vandalism it has unleashed upon our planet.

A very modest step in this direction was taken at a day school hosted by Keele last Thursday. We heard contributions on Thatcher's criminological legacy, managerial power, and workers' rights under New Labour. But the most important was the stunning opening by Phil Mirowski. His paper, 'What neoliberalism means today' presented a wide ranging genealogy of neoliberal thought and its proponents, beginning with Von Hayek's biblical screed, The Road to Serfdom, and ending with Wikipedia. He told a story of how the popularisation of the book enabled Von Hayek to found the Mont Pelerin Society and slowly build up an interlocking network of intellectual and activist/PR cadres distributed across think tanks, campuses, and voluntary organisations. And it was slow, Von Hayek and his acolytes played a long game and their patience paid off. When the post-war consensus hit the buffers in the 70s neoliberalism had accumulated the human capital and connections to step out of the seminar rooms and fancy restaurants and onto the stage of history.

So what is new about neoliberalism? Isn't it all about dusting off Adam Smith's 18th century thinking and using it as a guide for managing contemporary capitalism? For Smith and his disciples in the neo-classical school of economics, buying and selling is rooted in human nature. This is the foundation for the market: it arises from our essence and spontaneously organises production and the distribution of goods. The hidden hand of millions of simultaneous transactions regulates the whole social metabolism, leaving nothing for the state to do except guarantee property rights by upholding the law. The state is passive and reactive. Here lies the first break between Smith and neoliberalism. Neo-classicism met its Waterloo in the great depression. The crisis was triggered and then prolonged by the state's hands-off economic policy: the market would eventually reach a new equilibrium. For neoliberalism this is what the state shouldn't do. Not only should states intervene to make sure markets function correctly (tacitly acknowledging markets are social and not natural phenomena) but they need to create the conditions for new markets to emerge.

This leads to the second break. For the state to perform such a role it needs to tool up. The neoliberals' "small state" is a police and military apparatus armed to the teeth and prepared to spill blood to carry out the programme, a programme not confined to economics: it attacks and remoulds the social fabric, bending it to the needs of capital and the logic of the market.

Third, for Smith the market was only the means of allocating goods. For neoliberalism it is an information processor and "knows" more about the economy than anyone else. This is why they can be interventionist and anti-statist: the state can only secure present markets and create new ones. It cannot act as an actor with the economy itself because it can only be privy to a small fraction of the information that are transmitted through and acted upon in market relationships. Democracy therefore is always a danger as popular pressure can force states to blunder into markets for non-economic ends. And as for socialism, you might as well forget it. But corporations? No problem. They're disciplined by the market.

What about problems? Neoliberals in their more honest moments do not deny that they exist, but the solution to market malfunctions are more markets. For example, capitalism's threatening to burn the planet to a cinder? No problem, just set up a market for carbon trading permits.

We have been living with neoliberalism for 30 years in Britain. It has given us a society where manufacturing has been decimated and sub-contracted overseas. The state is trying to extricate itself from being the primary health, education, and welfare provider. Everywhere property rights have been entrenched and what remains of the commons - state property and the genes in our bodies are sold off and patented. In short, neoliberalism strengthens the power of the ruling class by making the rest of society more and more dependent on the market. Their project is a permanent and irreversible distribution of wealth and power to the capitalist class. But its nemesis, the labour movement, remains. And as long as it does neoliberalism can never fully succeed.


Rob said...
This comment has been removed by the author.
Rob said...

One interesting thing about Smith is the way that - to some degree - he has been quite miscontrued by his later followers. Personally, I find Hayek to be pretty interesting, particulary in his later stuff (when he engages in a lot of legal philosophy.

Charlie Marks said...

Smith was something of a welfarist, though he supported the enclosure of the commons he was honest enough to admit the class nature of the state...

As for Hayek, his criticisms of socialism's supposed economic calculation problem were beneficial in a strange way - encouraging Marxists to stress that mass participation in planning is essential for the functioning of a socialist economy.

And truly, the labour movement is all that stands in the way of neoliberalism - and thus the enmity towards corporatist approaches and the tendency to prevent unionisation and bust it if it exists...

Korakious said...

The quasi comical thing is that the greater the influence of the neoliberals and the smaller the state they demand, the bigger it actually gets. The reason is that the social chaos ensuing from market anarchy cannot really be reconciled with a smoothly functioning society unless it becomes subject to a powerful repressive apparatus. This does not just mean the powerful military/police that is necessary to keep the people's movement down; what we see is also a proliferation of financial etc institutions that mediate disputes between "market forces" so to speak. I think the case of Russia is particularly interesting in this respect, as what we have there is a huge state integrated to and towering over an essentially gangster economy. Every now and then, it will give this or that section of capital a good slapping around in order to keep it in line with the general interests of the class, see *the liquidation of oligarchs as a class*

Anonymous said...

Very interesting this, I often use neo-liberalism and capitalism as interchangable terms, I guess as I'm 30 this is probably right as it has been the dominant capitalist theory for my entire life. As it has been pointed out the Labour movement is the only force that stands in the way of neo-liberalism, but as we are in a capitalist system Labour is an integral part of the system that cannot be done away with. In the past 30 years our leaders have sought to nullify the revolutionary tendancies and solidarity of the working class with the myth of the selfish individual, or maybe more precisely the myth of the selfish consumer. However I think there is a intangible feeling in the UK that there must be more to life than this and people are looking for new ideolgies (new to them), and more and more people are coming to socialist conclusions. As the gap between rich and poor widens more people will come to these conclusions, this can be seen most clearly in Latin America where the Chicago school first tested the warp therories of neo liberalism and where these ideas were pushed farthest.

What the neo-liberals don't realise that they cannot eliminate Labour and the tensions between classes can only be resolved permenantly by revolution, the idea that we could reach the "end of history" before these tensions were resolved is a measure of their stupidity.

Phil said...

One thing I forgot to mention about Mirowski's paper was how neoliberalism, when it is a failure, is nonetheless billed as a success. By any measure the experiments mentioned by Neil in Latin America, and Chile particularly under Pinochet, failed to deliver better services or boost the accumulation of capital. But what it did was increase the wealth and power of the rich. This pattern has been repeated time and time again.

Anonymous said...

You misrepresent Smith by implying he believed all free market outcomes to be ‘good’. In fact he takes no view because like Marx (who was happy to incorporate elements of Smith’s work into his own), he aspired to a science of economics. For Smith, the market is no more than an efficient means for the distribution of resources. He doesn’t claim that it is fair; nor does he claim that it is unfair.

This is a common error made by those on left (who consequently blind themselves to Smith’s insights) and those on the right (who falsely claim he proves inequality to be inevitable).

But he doesn’t say social outcomes are unimportant and is highly critical of monopoly, which he argued always leads to negligence and corruption. Taking the East India Company as his example, he argued for restricting corporate power and breaking up capital.

Conclusions the Neoliberals like to forget, that often surprise those on the left which is rather sad.

Phil said...

Stephen, I don't think I've implied that at all. As far as I know my Smith the market is a means of allocation, nothing more. On the contrary it is the *neo-liberals*, not Smith, who believe markets are fundamentally good. This is why I took the time to show how neoliberal thought *breaks* with Smith and his epigoni in the neo-classical school of economics.

Anonymous said...

Have I got this right?
Thanks to neo-liberalism workers overseas have got manufacturing jobs they didn't have before, and we now have less dangerous and higher-paid service sector jobs.
Excellent news.

Anonymous said...

"For neoliberalism [the market] is an information processor and "knows" more about the economy than anyone else."

I see. So, for example, Chris Dillow, is a neoliberal is he? Jesus wept.

Andreas Paterson said...

cjcjc, it went like this..

A small elite moved jobs from the developed world to the developing world. The people of the developing world got slightly better jobs but still far less well paid the people of the developed world were largely shown the door.

The younger generation in the developing world combined with a lucky few of the older sacked generation got service sector jobs some of which were well paid, a good deal more were poorly paid and all were ultimately sustained by an ever expanding debt bubble.

The small elite, grew fat on the exploitation of everyone else, was not held accountable and lived happily ever after.


Neoliberalism is not a precisely defined term, I would agree that the market pricing signals do act as transmitters of complex information and I'm a socialist. What I consider to be the problem with neoliberalism is the belief that we should simply follow these signals. I don't think we should simply follow the market.

Anonymous said...

The neoliberals' "small state" is a police and military apparatus armed to the teeth and prepared to spill blood to carry out the programme, a programme not confined to economics: it attacks and remoulds the social fabric, bending it to the needs of capital and the logic of the market.

In what way have our "police and military apparatus" done this since 1979? What leads you to think that they have done this more than in the 19th century heyday of classical liberalism?

Leftwing Criminologist said...

"In what way have our "police and military apparatus" done this since 1979?"

One example of this was the rapid tooling up of Britains police prior to the 1984-5 miners strike which they were used extesnively to break

Anonymous said...

Phil BC - Free markets in Chile seem to have given it a great advantage over the other countries of Latin America in several measures.

Anonymous said...

Leftwing, the police merely made it harder for the strikers to blockade other peoples workplaces, and attempted to protect those miners who did want to work. You are not a victim of oppression just because you are prevented from forcing someone else to obey you, however convinced you are of the virtue of your cause.

Even if this were not true, the police performed exactly the same function in 19th century strikes.

So, as I asked: “What leads you to think that they have done this more than in the 19th century heyday of classical liberalism?”

Charlie Marks said...


Were those miners legally permitted to picket but prevented from doing so by the police going to "forc[e] someone else to obey" them?

So, we've established that was not true - and yes, the police performed the same function in the 19th century. The difference being that there was not at that time a national political police force - MI5.

Phil said...

Anonymous - interesting list you have there. Seems to me Chile ranks very well on measurements indicating the social penetration of neoliberalism, but not so hot on other measures - even compared with other Latin American countries. For example the International Living 2007 Quality of Life Index (measuring material wellbeing, gender equality, health, political stability, job security, community and family life) has Chile 9th among Latin American nations. The Environmental Sustainability Index also places it 9th, 16th on the WEF's Global Gender Gap. Chile seems like a great place to be if you're wealthy. Not so hot if you're working class. (Also bear in mind Latin America as a whole is a continent that has been ravaged by neoliberalism for even longer than the West - these wikipedia comparisons are between nations where the free market has and continues to (except in a couple of cases) wreak havoc).

Ad, you must have been living in a cave. While the British state has been building up the police this last 30 years it's been attacking social spending, privatising and subcontracting public services, introducing wasteful and needless markets in education and health, and last but not least the con of PFI and PPP schemes. The violence of the state encompasses more than a copper's cosh

Anonymous said...

Just a thank you for making the distinction between Adams (neo-classical) and neoliberal capitalism. I'm constantly arguing with my econ majors who think that their version of "free market" fundamentalism is not what Adams described in Wealth of Nations. In fact, Adams even had a list of social goods that should not be left up to market forces.