Neoliberalism 3: The Illusion.
Fooling the 99% all the time.
These posts explore the themes developed in my monograph, Narcisso-Fascism, which is itself a real-world test of the central concepts of the Biocognitive Model of Mind for psychiatry.
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The point of modern propaganda isn’t only to misinform or push an agenda. It is to exhaust your critical thinking, to annihilate truth. Gary Kasparov.
If they can get you asking the wrong questions, they don’t have to worry about answers. Thomas Pynchon.
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The core of neoliberal economics is small government, sound money and free markets. Small government is the opposite of the “nanny state”: it means low levels of regulation, the minimum services to keep the society going, low taxation and high levels of individual responsibility. Free markets means prices are set by the market, not by central planners, because the amount of information required to set prices for even everyday commodities is so great that no committee can deal with it. Responsibility for prices must be made by all the people with immediate interest, whether to sell or to buy, and this mechanism is both necessary and sufficient to constitute a free market. Necessary means nothing else, such as a command economy, can do it, and sufficient means nothing else is required, apart from the basic laws governing fraud and adulteration of goods. This is the “invisible hand” of the Scottish economist, Adam Smith (1723-1790) that moves the market toward stability. Anything else, such as government regulation, will interfere with the free market mechanism and produce price distortions, which send the wrong signals to buyers, sellers and investors. Market inefficiency is the central element in the intense hostility of the neoliberal movement for anything they consider “socialist.” Generally unspoken, however, there is also a strong element of “Don’t tell me what to do.”
The first markets were simply people bartering goods and services among themselves but local trade quickly developed. Archaeology shows that Aboriginal Australians traded goods over many hundreds of kilometres, especially from coastal regions to the central plains and back again, and this was common in many parts of the prehistoric world. However, barter trade is limited so the concept of money developed and is now central to our lives. It’s important to remember that money is not the economy: there were economies long before money was invented although money itself has a most interesting history.
First point: value is not money. Value is the relevance of something to your goal-directed action. It is therefore highly subjective as it depends on your goals, how you rate them and what you think you can achieve with your time and resources. Next, money is not wealth. Wealth is having the ability to satisfy your goals which may or may not have a value in money. Money itself is a means of coming to grips with value, of translating subjective value into some sort of objective standard. It has three roles: as a unit of accounting, as a medium of exchange, and as a store of value.
Currency is a standardised form of money circulating in a country as the medium of exchange. Modern currency has no fixed value but depends on all other currencies for a relative value, which is why it declines compared with, say, gold or land. As a result, the stuff in your pocket is properly called ‘cash,’ not money. We can use whatever we like as currency but the ideal material is durable, divisible, workable, fungible and, ideally, rare. You want your money to last, so you would not be happy to get coins made of ice as they can easily be duplicated and would soon melt. Fungible means only that we can swap a $20 note for any other $20, or for two $10 notes or even €18, and the value is retained. It has to be workable but not so easily that anybody could copy or counterfeit it. Australian banknotes are now made of plastic but are said to be impossible to counterfeit because of a range of clever tricks in producing them. Regardless of how pretty they are, what gives all banknotes their value is the unique number printed on one side; without that, they are just confetti. If the number is damaged and can’t be read, the note is worthless. This is important because cryptocurrencies consist of a unique number and nothing else.
Finally, currencies are rare because only the government can print them, but they always print too much, which is why currencies lose value with time. This points to another property of currencies: trust. If people don’t trust its value, if they don’t trust the number printed on it, then it’s worthless. Gold, of course, satisfies all these requirements, including trust. Nobody can manipulate it, which is why governments hate it. Cryptos also have all these properties plus the very real benefit that they cost nothing to store or move, and can be transferred around the world instantaneously. However, they depend on a functioning internet, so a nuclear war could wipe them out, although gold would still be around.
From the neoliberal point of view, sound money means responsible spending, equitable taxation and low levels of debt such that trust is retained. Trust is the sine qua non of currency, as British economist John Maynard Keynes (1883-1946) warned:
By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some ... Those to whom the system brings windfalls ... become "profiteers" who are the object of the hatred ... The process of wealth-getting degenerates into a gamble and a lottery ... Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
Inflation is the enemy of a stable economy but governments are addicted to it as it allows them to hide their inefficiencies. More dangerous, however, is corruption, which brings us to neoliberal theory, a large part of which was penned by Ludwig von Mises most prominent student, the Viennese-born Friedrich Hayek (1899-1992). Hayek was born into a wealthy, upper-middle class family with strong academic and intellectual ties and traditions. Because of his age, he served in the military in the latter parts of the Great War, then returned to civilian life to study at the University of Vienna, where he had close contact with von Mises and many other renowned figures in a variety of disciplines. He quickly established a reputation for his work and moved to the UK in 1931 where he and his family became British citizens.
Post-World War II, he moved to Chicago University where he was influential in establishing its distinctive, Chicago School of economics. In about 1962, he went back to Germany where he remained for the rest of his life. In 1974, he was jointly awarded the Nobel Memorial prize in economics (not one of the original five prizes). Throughout his life, he published extensively and his collected works amount to some 18 volumes. He was closely associated with the new economy imposed in Chile after the Pinochet coup in 1973, defending the far-right government as “authoritarian but not totalitarian.” In a letter to the London Times, he said he had not been able to find a single person in Chile “… who did not agree that personal freedom was much greater under Pinochet than it had been under (deposed and murdered president) Allende." In fact, under Pinochet, tens of thousands of people were arrested and tortured, while at least 3,200 were murdered.
Hayek’s most widely-read and influential work is The Road to Serfdom, [1] published in 1944. Despite the war, it sold reasonably well but was then picked up by an American publisher and took off. It was also published by Reader’s Digest condensed books, which exposed it to an audience of millions. The central theme is that any form of socialism, and he swept with a very wide broom, must lead to distortions of the market and thence to further restrictions and ultimately to totalitarianism. Fascism had to be resisted as it led to socialism, or maybe it just was socialist (as in NSDAP, the official name of the Nazi party) and socialism is slavery. Government has to be kept to the minimum, although he admitted that criminal codes were necessary, as well as some form of welfare for the elderly and disabled, except families should look after their own. All this meant some form of taxation, which would also pay for the military, and for the elected government, and the necessary bureaucrats to keep the market orderly and ticking over. All right-thinking people should strenuously oppose socialism as free market capitalism has led to every improvement in human affairs. Anything that interferes with the free market therefore opposes civilisation and should be resisted by all good men (there were no women in his world):
It was men's submission to the impersonal forces of the market that in the past has made possible the growth of a civilisation which without this could not have developed; it is by thus submitting that we are every day helping to build something that is greater than anyone of us can fully comprehend… … the only alternative to submission to the impersonal and seemingly irrational forces of the market is submission to an equally uncontrollable and therefore arbitrary power of other men [1,p210].
The Reader’s Digest condensed version of Serfdom was very influential, allowing Hayek entry to the highest levels of business, academia and government in the latter part of his life. However, the whole of this work is opinion masquerading as authority, i.e. propaganda, meaning the condensed book was thus distilled propaganda. For example, Chap. 15, Prospects of an International Order, set out his views on the need to reduce the status of national governments and hand authority to a form of international governance. The chapter runs from pp225-254, at about 350 words per page but Reader’s Digest reduced it from some 10,000 words to just 159, with no mention of a supranational world federation or authority. Of course it did: Americans are totally neuralgic on the topic of giving foreigners authority over their affairs. They believe they should be dominant but nobody else is allowed to have any influence over them. Essentially, Hayek and his editors were feeding their readers what they wanted to hear.
I could go on about this book and his other popular works but it wouldn’t change anything: for all his influence over so many years, at so many levels of government and business in so many countries, Hayek’s output is pure propaganda. The only reason it has any currency is as the blueprint for an economic system favouring the wealthy. That’s it. If his “neoliberal” economics took money from the rich and handed it to the poor, nobody in a position of power would give it a second glance. How much does it favour the rich? That depends on how greedy the rich are, and how easily governments are influenced by the rich. This point lead us to the glaring and, I believe, fatal flaw in the entire neoliberal enterprise, their view of humans as rational creatures. Their doctrine is built on the concept of humans being perfectly sensible little calculators who walk around inspecting the goods for sale and prices and making sensible decisions that will yield a benefit to buyer and seller alike. That is, without articulating it, they depend entirely on an impoverished model of human psychology which, for want of a better term, is completely cuckoo. If it can be shown that humans aren’t sufficiently rational to build a sustainable global economy to benefit all with no hidden pressures leading to breakdown, then the neoliberal project collapses in a heap. I believe that is the case.
Because it relies on a mechanised concept of psychology, neoliberalism is unable to give account of the insatiable human urge to get to the top and stay there, so it ignores it. By this means, by refusing to acknowledge this fiendishly destructive and egregiously irrational element in our psychology, it leaves the back door wide open to people who don’t want to be regulated to take control of the economy and thereby dominate the population. That is, the attraction of neoliberal policies is the idea behind Narcisso-Fascism, the urge to dominate. As an economic doctrine, neoliberalism creates a garotte, a ratchet that tightens around the throats of the poor and middle classes, stripping them of their wealth and transferring it to the rich. While the noose can be released or even reversed, it never is as the people in control are never satisfied, they always want more. Right wing journalist and author, Charlie Sykes saw this tendency:
While the rhetoric of conservatives was often libertarian, their agenda often focused on the use of government power to satisfy the needs of the donor and lobbyist class. In recent years, nearly every major spending bill has been a master class in the art of crony capitalism [2].
It is, of course, but a small step between crony capitalism and gangster capitalism, or the mafia state. Von Mises and Hayek didn’t take this into account. They thought people can be trusted to do the right thing, that standing over them can only lead to inefficiency and thence to failure so, they argued, don’t stand over them. Every buyer and every seller knows better than Gosplan could ever know so they should be given the maximum responsibility to self-supervise and allowed to get on with the job. All the busybodies and interfering bureaucrats can then be released from their boring and unproductive jobs, and set free to make honest livings in ways that satisfy them, not a distant government. The breathtaking naivete of this position is stated repeatedly throughout the literature. In a chapter titled Monopoly and the Social Responsibility of Business and Labor, another of von Mises’ students, Milton Friedman (also Nobel Memorial prize) put it clearly:
There is no personal rivalry in the competitive market place. There is no personal higgling (sic)…. The essence of a competitive market is its impersonal character… no individual can by himself have more than a negligible influence on price … [3,p102].
It sounds wonderful. In fact, it’s probably about 90% correct as that’s the proportion of the community who can be trusted to do their jobs honestly and fairly without supervision, but we don’t have to worry about them. It’s the corrupt 10% who make the interfering, supervisory nanny state necessary. Lord Acton said “Power corrupts,” but the real point is that power attracts the corruptible. And, surprise surprise, the neoliberal doctrine gives them the means to indulge both drives, to cheat in order to show how clever they are by getting rich without dirtying their hands, and thence to dominate. Hayek doesn’t talk about corruption. In The Constitution of Liberty, from 1960, he mentions it once, on p386, but only in connection with trade unions. While Hayek said he was opposed to totalitarianism, once implemented, his system has only three possible outcomes:
The wealthy power-holders can either set up a repressive corporate state that keeps them in power permanently (the Reagan-Thatcher-Clinton-Bush-Blair model); or …
A mafia state whose faux democratic trappings provide cover for the elite as they loot the national treasure and squabble among themselves over the proceeds (Russia today [4], and as we see happening in the US at present): or …
The repressed lower classes can exert their authority and take over government by peaceful revolutions, as in Eastern Europe from 1989 on, Chile in 1990, etc, or violent as in Russia 1917, China 1948, Algeria 1962 and, of course, the thirteen colonies in 1776.
In their preoccupation with the inherent fairness and generosity of spirit of Homo sapiens, and their fascination with the idea that max freedom = max economic benefit, the neoliberal theorists missed a crucial point, that it is not the economic system itself that produces brutal repression. Instead, repression comes from a small group having a monopoly on power. The failure and brutality of the Soviet- and Maoist-style command economies was not due to socialism itself but to the massive concentration of power in a few hands and the associated disempowerment of the vast bulk of the population. The same is true of laissez-faire capitalism, such as Friedrich Engels described in 1845 [5]. In his era, the wealthy lived in palaces, ate roasts of meat from silver plate and slept alone under soft blankets, while the poor were crammed in damp and mouldering hovels, wore and slept in their clothes until they fell off, ate putrid food from wooden platters, and threw their waste into the streets where it rotted and bred rats. Anyone who ever wondered why the communist movement became so powerful, or anybody with an interest in social affairs, has to read that. But by 1937, after another hundred years of the wonders of capitalism, Orwell found that nothing much had changed [6 7].
In both monopoly private capitalism and monopoly state capitalism, aka Marxist/Stalinist/Maoist collectivism, the problem is not capitalism vs socialism, the problem is monopolies on power vs distributed and individualised power. However, because neoliberals were obsessed with socialism as Bolshevism, they missed the point that, as an economic system (not a political doctrine), capitalism fits comfortably with a range of forms of government. There is good capitalism and bad capitalism. It doesn’t have to be children working in factories (and historical photos here) or sorting rubbish from rich countries, capitalism is perfectly consistent with the democratic welfare state, as in Scandinavia, Germany and Japan, and with autocracy, as in modern China. The rules of capitalism are a subset of the rules of governance, not vice versa. Where power is allowed to accumulate to a few well-placed people, then the majority will suffer just because humans are not inherently nice critters. If we were, there would be no Sermon on the Mount to tell us not to be arseholes to each other. “There is no personal rivalry in the competitive market place.” Really? Friedman got a Nobel Prize for that?
The issue is this: You cannot build a general theory of society on a faulty model of human psychology. Instead of seeing the economy as a community service, like roads and sewage systems, they tried to promote it to the central role, as the conductor of the orchestra instead of being the percussion section. They had to see humans as rational because, influenced by early positivism, they were trying to write all emotions out of human affairs. They couldn’t allow such fanciful matters as art, envy, patriotism, religion or, above all, human rage and violence, to have any role in their model. So they wrote a doctrine based in a sterile, mechanistic model of the human mind that left their system wide open to corruption by the very emotions they pretended didn’t exist. As wannabe-Kaiser Drumpf has said, “I’ve got 75 countries waiting to kiss my ass” (he meant his arse, not his donkey). That’s what it's all about. Power. “Power is the greatest aphrodisiac,” as Kissinger said, and as Henry VIII could have said, along with most of the Medieval popes.
The problem for us today is that a group of psychologically-ignorant people wrote a doctrine of human behaviour which fosters the accumulation of power without any guardrails or limits, just because their impoverished conception of humans, essentially little shopping robots, didn’t need guardrails, they did as they were programmed to do. Unsurprisingly, power-hunger people have grabbed their scribblings with glee and are reshaping the world to satisfy their ambitions. Those ambitions have brought us to the brink of nuclear annihilation and are fuelling global warming. Unless the world sees neoliberalism for what it is, a system designed to convert the social welfare state into a mafia state run by and for a purblind oligarchy, sees its reality and takes back power, then we are in serious trouble.
References:
1. Hayek FA (1944). The Road to Serfdom. London: Routledge.
2. Sykes C (2017). How the right lost its mind. New York: St Martin’s Press.
3. Friedman M (1962). Capitalism and Freedom. University of Chicago Press (2nd Edn. 1982).
4. Belton C (2020). Putin’s People: How the KGB took back Russia and then took on the West. London: Harper Collins.
5. Engels F (1845/2010). The Condition of the Working Class in England. Marxists Internet Archive, at marxists.org: https://www.marxists.org/archive/marx/works/download/pdf/condition-working-class-england.pdf
6. Orwell G (1933/1940). Down and Out in Paris and London. London: Secker & Warburg.
7. Orwell G (1937). The Road to Wigan Pier. London: Victor Gollancz.