Neoliberalism

Glen DaSilva

Directed Studies in Sociology - SOC-495-002 Section Instructor: Dr. Diamantino Machado DREXEL University December 12, 2008

Neoliberalism
Merriam-Webster’s defines Neoliberalism as:
n. 1. A political orientation originating in the 1960s, blending liberal political views with an emphasis on economic growth1
This sufficiently vague definition tells us something, but not nearly enough, about an ideology known as Neoliberalism. Neoliberalism is promoted as the mechanism for global trade and investment supposedly for all nations to prosper and develop fairly and equitably 2.

Present Day Context Written at dramatic time in American and indeed world history, this paper attempts to provide a highlevel view of neoliberalism. So far in the 11 months of 2008, we have seen oil prices and production rise and fall dramatically around the globe, squeezing consumers’ wallets and corporate balance sheets, while also spurring development of alternative energy sources. We watched American political theatre entertain the world with a race to the White House ending with the election of the first African American President who ran on ticket promising change and selling hope in dire times. Toxic financial assets caused an unprecedented global financial liquidity crunch that led the US Congress to pass legislation which opened the floodgates for a $700++ billion bailout of American banks, insurance companies and automakers (maybe); the ripple effect saw similar bailouts around the globe. More than half a million US jobs were lost in November 2008 and today we find ourselves braced for a global recession that’s expected to stretch through much of 2009. He we are, faced with the first full blown crisis of globalized capitalism. These are exciting times indeed.

But, what is neoliberalism, anyway? Broadly speaking, neoliberalism seeks to transfer control of the economy from state to the private sector. Neoliberalism, in theory, is essentially about making trade between nations easier. It is about freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to maximize profits and efficiency.3 Neoliberalism has also been used to refer to a political movement in which some members of the American left endorsed some free market positions, such as anti-unionism, free market economics, and welfare reform.4

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The main points of neoliberalism include:

The rule of the market — freedom for capital, goods and services, where the market is selfregulating allowing the “trickle down” notion of wealth distribution. It also includes the deunionizing of labor forces and removals of any impediments to capital mobility, such as regulations. The freedom is from the state, or government. Reducing public expenditure for social services, such as health and education, by the government Deregulation, to allow market forces to act as a self-regulating mechanism Privatization of public enterprise (things from water to even the internet) Changing perceptions of public and community good to individualism and individual responsibility.5

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The underlying assumption is that the free markets are a good thing. They may well be, but unfortunately, reality seems different from theory, as we are seeing in the world today. The goal is to be able to allow the free market to naturally balance itself via the pressures of market demands; a key to successful market-based economies.

Political vs. Economic Liberalism A distinction is made between political and economic liberalism. There is an important difference between liberal politics and liberal economics. As summarized here by Elizabeth Martinez and Arnoldo Garcia from Corporate Watch:

“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate “liberals” — meaning the political type — have no real problem with economic liberalism, including neoliberalism.5

Over the years, neoliberalism has increasingly become a threat to democracy at home and abroad. As one of the most powerful ideologies of the twenty-first century, neoliberalism has become a breeding ground for militarism, profiteering, profiling, and a new political and religious fundamentalism that undermines the assumption that democracy is about sharing power and resources. 7 Democratic process, civil liberties, and social interest all take a back seat to capitalism and deregulation

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The web site www.politicalcompass.org highlights positions of some well-known political figures in the world:

Friedmanism and the Links to the Current Crisis of Globalization Economist Milton Friedman is generally accepted as the godfather of deregulation. This ideology was the rationale for turning the financial sector into the casino that we see today. Milton Friedman was clear about this. He believed that “history took a wrong turn,” and that’s a quote; it’s a quote from a letter he wrote to Augusto Pinochet. He said, “History took a wrong turn in your country, as well as mine.” He was referring to the responses to the Great Depression. In Chile, it was the rise of import substitution and developmentalism. But in the United States, he was referring to the New Deal. 8 Deregulation and Friedmanism stand as a counterrevolution to the New Deal, against regulations like Glass-Steagall, that was put in place in 1934 after having seen people lose their life savings to the market crash; it was a firewall, a very simple, sensible law that said if you want to be an investment bank, if you want to gamble, gamble with your investors’ money, but the government isn’t going to help you because it’s your own risk. You can fail. And if you want to be a commercial bank, then we will help you.

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We will offer insurance to make sure that those savings are safe, but you have to restrict the risks that you take. You cannot gamble. You cannot be an investment bank. Today we look at the way in which this crisis is supposedly being solved, and what we see, actually, is that a very few banks will have an implicate guarantee that they have become too large to fail. 9 The “economic downturn” (aka global recession) that has come to a boil here in late 2008, and the bailout of the financial and auto industries to mitigate it, argues a different way of seeing neoliberalism and its fundamental value. Some have called it Socialism.

Main Street vs. Wall Street Today, the anger in America is palpable. The anger at Wall Street has shown a vindictive quality to much of what the Congress-people heard from their constituents: “Why should we bail them out? Look at what they’ve done to us.” This is a failure of Friedmanism, because the idea of the ownership society was that class-consciousness was supposed to disappear. Because union members were not going to think of themselves as workers, because everybody owned a piece of the stock market, and everybody was going to have a mortgage, so they would think like owners, they would think like bosses, they would think like landlords, not like tenants, not like workers. Class is suddenly back in America, with a vengeance. Barack Obama responded to the market crisis by turning his campaign into a referendum of sorts; though he wouldn’t call it a referendum on Friedmanism, he turned it into a referendum on Friedmanism. He said that essentially what we’re seeing on Wall Street is the culmination of an ideology of deregulation and trickle-down economics—give a lot at the top and wait for it to trickle down to the people at the bottom—and that is precisely what has failed.10 We live in a time when the blending of private interests, empire building, and evangelical fundamentalism puts into question the very nature, if not the existence, of the democratic process. Under the reign of neoliberalism, less-than-responsible private entities, no longer facing any form of regulation and acting only in their own self-interest, have made properly addressing and executing tasks in the public interest (i.e. education, public infrastructure, etc.), which they would be responsible for, next to impossible. Free trade, globalism and maximizing profit are the goals of neoliberalism, leaving common citizens, third world economies, state governments, and small businesses to wilt and die in its wake. Neoliberalism is taught to the masses against a backdrop of fear and insecurity, making the desire for free thought, and/or opposition to it, terribly difficult. Corporations and government use terror attacks, war, and economic crises to shock the public into offering little resistance to new laws and policies that infringe on privacy. 11

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Media, directed by its neoliberal owners and contributors, cement these teachings. “Moral” social issues such as gay marriage and abortion earn more airtime than economic issues. Superficial celebrity gossip takes precedence over objective war coverage. While the aforementioned “issues” may seem important to the average viewer, the repeated injustices of neoliberalism and identification of its perpetrators seem to slip through the cracks at an alarming and increasing rate.

Historical Context Perhaps the most notable historic instance of an over-accumulation crisis is the Wall Street Crash of 1929 that led to more than a decade of widespread international job loss and economic hardship. Of course, capitalism, for all of its defects, has demonstrated a remarkable resilience to survive these downturns. Neoliberalism has become dominant in both thought and practice throughout much of the world since 1970 or so. The 1970s ushered in a dramatically shifting political and economic paradigm to virtually all Western industrialized countries. These nations, including the US, Canada, Great Britain and other countries of the then G7, were about to suffer a series of crippling recessions that continued throughout the decade. The series of devastating economic downturns confronted by all G7 countries were primarily caused by a period of rising wages combined with a falling consumer demand for available goods and services.12 For all intents and purposes, it was a classic over-accumulation crisis following from the inherent cyclical limitations and practical shortcomings of capitalist economies. 13 There’s something else at play in the kind of politicians that are attracted to this particular ideology. Ronald Reagan was the first really to embrace it, and Richard Nixon was the great disappointment to Friedman. He writes in his memoir that when Nixon was elected, he was euphoric. He couldn’t imagine an American president more closely aligned ideologically than Richard Nixon. 14 But Richard Nixon insisted on governing, and he wanted to win elections, and he imposed wage and price controls. Milton Friedman sort of had a bit of a temper tantrum and declared him the most socialist president in modern American history. It was Reagan who took a copy of Milton’s Capitalism and Freedom on the campaign trail; he was the first person to really put Friedmanism into practice. In 1979 Margaret Thatcher came to power and undertook the neoliberal revolution in Britain. She was well known for justifying her program with the single word TINA, short for There Is No Alternative. The central value of Thatcher’s doctrine and of neoliberalism itself is the notion of competition — competition between nations, regions, firms and of course between individuals.15 Competition is central because it separates the sheep from the goats, the men from the boys, the fit from the unfit. It is supposed to allocate all resources, whether physical, natural, human or financial with the greatest possible efficiency.

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The Reagan and Thatcher era in particular saw neoliberalism pushed to most parts of the globe, almost demonizing anything that was public, and encouraging the privatization of anything that was owned by the public, using military interventions if needed. 16

In Summary The crash on Wall Street, I believe, should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism: an indictment of ideology. It cannot simply be written off as corruption or greed, because what we have been living, since Reagan, is a policy of liberating the forces of greed to discard the idea of the government as regulator. Since the 1990's activists use the word 'neoliberalism' for global market-liberalism ('capitalism') and for free-trade policies. ‘Neoliberalism’ is often and should be used interchangeably with 'globalization'. Neoliberalism is not just economics: it is a social and moral philosophy.

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References and Notes
1. 2. 3. 4. 5. 6. 7. Merriam-Webster Online Dictionary. 2008. http://www.merriam-webster.com/dictionary/neoliberal (8 May 2008). Gouthro P. A., (2006), “Neo-Liberalism, Globalization and Human Capital Learning Reclaiming Education for Democratic Citizenship” pages 1-12 Giroux, Henry A., (2007), “Against the Terror of Neoliberalism, Politics Beyond the Age of Greed”, pages 1-4 Martinez, Elizabeth and Garcia, Arnoldo, (1997), “Profit Over People: Neoliberalism and Global Order”. Seven Stories Press. pages 32-40 Cohen, Joseph Nathan and Centeno, Miguel, (2006), "Neoliberalism and Patterns of Economic Performance" Annals of the American Academy of Political and Social Science. pages 52-67 Martinez, Elizabeth and Garcia, Arnoldo, (2008),“What is “Neo-Liberalism?, National Network for Immigrant and Refugee Rights”, posted at CorpWatch.org http://www.corpwatch.org/article.php?id=376 Cohen, Joseph Nathan, (2007), "The Impact of Neoliberalism, Political Institutions and Financial Autonomy on Economic Development, 1980–2003" Dissertation, Department of Sociology, Princeton University. Defended June 2007 Chase, Jacquelyn, (1998), “The Spaces of Neoliberalism: Land, Place and Family in Latin America” pages 134178 Giroux, Henry A., (2007), “Against the Terror of Neoliberalism, Politics Beyond the Age of Greed”, page 96-134 Nagourney, Adam, (2008, November 4). The Campaign ’08: A Sea Change for Politics as We Know It. The New York Times, page 1. Klein, Naomi, (2007), “The Shock Doctrine: The Rise of Disaster Capitalism.” Pages 1-672 Gwynne, R. N., and Kay C, (1999), "Latin America transformed: changing paradigms, debates and alternatives”", in Latin America Transformed: Globalization and Modernity Eds RN Gwynne, C Kay (Arnold, London) pp 2 – 30 Huber E, and Solt F, (2004), "Successes and failures of neoliberalism”" Latin American Research Review. pages 150 – 164 McCarthy J, and Prudham S, (2004), "Neoliberal nature and the nature of neoliberalism” pages 275 – 283 "Margaret Thatcher". MSN Encarta. Retrieved on 12-11-2008. Baker, Dean (2006), "Increasing Inequality in the United States." Post-autistic Economics Review 40.

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13. 14. 15. 16.

Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist and public intellectual, and a recipient of Nobel Prize in Economics. He is best known among scholars for his theoretical and empirical research, especially consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy. A global public followed his restatement of a political philosophy that insisted on minimizing the role of government in favor of the private sector (WIKIPEDIA http://en.wikipedia.org/wiki/Milton_Friedman)

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