Neoliberalism 4: Decline and Fall

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.

The fundamental elements of a productive economy are land and other natural resources, labour and capital. The cardinal features of a neoliberal society are small government, sound money and free markets. Therefore, a neoliberal economy mandates free markets in land, labour and capital. Because humans are rational creatures looking to advance their interests, prices can be left to the self-adjusting market mechanism. Governments can regulate the conduct of markets but must not interfere in prices as determined by the free market. Neoliberalism embeds human society in the market rather than vice versa.

That’s the theory, although a quick look at the world today suggests the whole deal is breaking down. This would not have come as a surprise to two influential writers from the early part of last century. While they were writing a mere 30 years apart, they lived in dramatically different worlds. Unfortunately, while neoliberal policies have been pushed hard in many parts of the world, the authors’ warnings have been ignored by government, by business, and by academia. Now, as they predicted, the vultures are circling and we need to take their case very seriously.

In 1912, the Anglo-French poet, novelist, historian, politician and Catholic, Hilaire Belloc (1870-1953), published a small volume arguing that society was in danger of sliding into what he called The Servile State [1]. Belloc was a most interesting character, perhaps an English Jack London, and definitely larger than life but is now practically unknown apart from occasional references to his poem, Tarantella (one of my favourite poems at school). As a Liberal MP (one of the first Catholic MPs in the UK), and even before WWI and the 1917 Revolution, he worried about imperial wars and the growing threat of Marxism. He was very much a traditionalist and saw the Church’s social conservatism as a force for good, but perhaps because of his early life as an outsider, he was not a conservative. His concern was the terrible state of the working classes in the UK and the growing power of the plutocracy. Writing at what turned out to be the end of empire, he warned: “If we do not restore the Institution of Property we cannot escape restoring the Institution of Slavery; there is no third course.’’

After societies dispensed with the immoral institution of slavery, he argued, life in Britain was stable. Church, King and aristocracy had divided the land among themselves, and the yeoman farmers and townspeople had their duly allotted place. Apart from the plague and such like, nothing much changed from one century to the next and everyone was fairly happy with their lot. Then along came Henry VIII who wrecked it. By abolishing the monasteries and confiscating their land, he removed a major stabilising element; in handing the monastic properties to the landed aristocracy, he consolidated their power and made it all very much worse. Before long, the already fabulously wealthy landowners realised they could make more money by enclosing the traditional common lands, forcing the peasants off the land and into the towns. By 1712, when Newcomen invented his first steam engine, Britain was in the unique position of having an entrenched and very powerful hereditary elite sitting on vast piles of money, and cities with huge numbers of destitute people crammed into foul slums. That is, Britain had the essential elements of an industrial revolution – land, including coal, labour and capital, so that’s what happened.

However, as the 24yo Friedrich Engels (1820-1895) showed in 1844 [2], even though Britain was rapidly becoming the wealthiest country in the world, life for the masses got very, very much worse (see Note). Working class people and the great mass of unemployed were far worse off than yeoman farmers in the late feudal ages, worse off than peasants in practically every other country in the world. In particular in Britain, the established wealthy fought bitterly against the idea of the common herd being allowed to vote as this was seen as a direct and probably lethal threat to capital. By the late 19^th Century, where 5% of the population owned 95% of the property, Belloc saw that if society continued on its course, the poor would end up as slaves to capitalists – the servile state. When Socialists looked at capitalism’s inherent inequities, they decided private property was the problem, therefore abolish it and all will be well. However, Belloc understood that the accumulation of power is the natural state of humanity, and money is the usual vehicle. Five years before the Bolshevik Revolution, before any socialist state existed, he predicted that if socialists took over and enforced collectivism, workers would end up in an equally powerless position, as slaves to a bureaucratic state. That is, the natural outcome of both unbridled capitalism and of socialist collectivism is the Servile State, where a tiny minority of the population control the great majority, in every aspect of their lives, from cradle to grave.

Beating Blair and Clinton by 80 years, Belloc proposed a third path, the distributive state, in which each person would be guaranteed a small amount of property but nobody would be able to amass enough to take control. However, he was sufficiently realistic to realise that implementing such a system would be a massive effort as people brought up in a capitalist state, where a small group hold all the power and tell the rest of the people what to do, automatically think of socialism in the same terms. A manager in capitalism would expect to do the same job after the revolution, only his title would change. Even revolutionary workers would immediately think in the same rigid, hierarchical terms. Although Belloc didn’t state this clearly, he understood that the problem is not private property compared with public, but monopoly. There is monopoly private capitalism, which proceeds inevitably to total economic slavery, and there is monopoly state capitalism, which has the same outcome. Even before anybody had heard of Stalin, Belloc was sure that full-scale, enforced collectivist socialism must end in slavery, because humans love power. Without using the expression, he saw dominance hierarchies as the core problem in human affairs, driving us to self-destruction. Soon after he wrote this, the Great War erupted so nobody took any notice of Belloc and, for the next four decades, the world was engulfed in chaos.

Thirty years, two world wars and a depression later, Karl Polanyi (1886-1964), an émigré Hungarian economist and historian working in Vermont, published a long and detailed analysis of economies as services embedded in society and culture. This was a direct challenge to the developing Austrian school of economics which, at the time and despite Hayek’s Road to Serfdom (also 1944) [3], was struggling to gain credibility. Polanyi’s The Great Transformation [4] is far too detailed and extensive to be reduced to a few paragraphs. He opens his case with the idea that organising society around a self-regulating, self-correcting and impartial market is fallacious. Whereas markets in traditional societies served a purpose within the structure of the society, transforming the market to the level of raison d'être of society was self-defeating:

Our thesis is that the idea of a self-adjusting market implied a stark Utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness [4, p3].

Self-regulation implies that all production is for sale on the market and that all incomes derive from such sales. Accordingly there are markets for all elements of industry, not only for goods but also for labour, land, and money, their prices being called respectively commodity prices, wages, rent, and interest … (In the neoliberal economy, n)othing must be allowed to inhibit the formation of markets, nor must incomes be permitted to be formed otherwise than through sales ... no measure or policy must be countenanced that would influence the action of these markets. Neither price, nor supply, nor demand must be fixed or regulated; only such policies and measures are in order which help ensure the self regulation of the market by creating conditions which make the market the only organizing power in the economic sphere [4, p72]

Heavily influenced by positivism, neoliberalism says that everything must be given a price in order to be traded; that by the law of supply and demand, the free market will automatically set the correct price; nothing such as government regulations must be allowed to interfere with the mindless process of price setting; and that anything that cannot be given a price cannot be taken into account. Polanyi saw this as the first flaw at the core of the neoliberal ideal: human values cannot be used in the allocation of resources. Neoliberalism converts the essential inputs of any economy, land, labour and capital, into commodities, and puts a price on them, but dismisses everything else. This is where Thatcher got her notion of “There’s no such thing as society,” and thereafter used it to wreck British society.

This, Polanyi argued, is false: land, labour and capital are fictional commodities as they were never produced for sale. They have a value independent of anything a market may dictate but attempting to convert that value to cash subverts them. If the idea of “commoditisation” is applied to the fundamentals of society, it may seem effective at first but it will eventually destroy everything. Leading to the final collapse, the unregulated neoliberal economy will slowly extract wealth from the natural environment and from the larger society, and transfer it to the people who control the economy, namely the wealthy and the people they put in parliament. Like water flowing down a hill and not up, this is inevitable:

All types of societies are limited by economic factors. Nineteenth century civilization alone was economic in a different and distinctive sense, for it chose to base itself on a motive only rarely acknowledged as valid in the history of human societies, and certainly never before raised to the level of a justification of action and behaviour in everyday life, namely, gain. The self-regulating market system was uniquely derived from this principle … The outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only insofar as they serve this end [4, p30, p57, emphasis added].

Here, without actually mentioning it, he invokes the concept of the social dominance hierarchy as one of or even the most important organising principles in human affairs. As an anti-fascist, he saw this as dangerous and was aware of its outcome: “That competition must ultimately lead to monopoly was a truth well understood at the time” [4, p66]. This is important, as the neoliberal approach is firmly based in the idea that competition is natural, neutral, and both necessary and sufficient to deliver a stable, efficient market economy. Polanyi, on the other hand, sees unbridled competition as neither stable nor efficient, but inherently self-destructive (a collapsing economy is definitely not efficient). Humans are not, as neoliberalism supposes, rational little robots politely going about their daily work of matching buying and selling prices, but short-sighted and selfish, and easily aroused to a frenzy of competition that would result in the downfall of buyer and seller:

To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society … leaving the fate of society and people to the market would be tantamount to annihilating them [4, p73, 131] … there was no type of background – of religious, cultural, or national tradition – that made a country immune to fascism, once the conditions for its emergence were given [p238].

Inherent in his work is the case that in its early phases, the neoliberal economy seems to work very well for the people who are implementing it. That makes sense: if, from the beginning, it transferred wealth from the rich to the poor, it would never get a look in. However, once the process of transforming traditional societies with their local markets to vast, interlocked, finance-based international markets gets started, it takes over. Deregulation of financial markets is transformed from a convenient policy to the level of a moral injunction. Anything that could possibly obstruct the accumulation of wealth has to be discovered and excised from the body politic, as we see in the US at present. In the neoliberal dogma, not doing so is more than just a matter of rationality, it is a matter of morality because the freedom to make money is the ultimate virtue. Anything or anybody that prevents people from exercising their natural right to extract and accumulate wealth from their surroundings in whatever form is morally abhorrent and must be opposed by all possible force.

While the whole point of the neoliberal experiment was to remove all traces of values and emotions from human economic interactions, leaving conduct of the market to blind forces, we see that, stripped of its jargon, it’s just another moral system which people can take or leave as they wish. Whatever else, it isn’t science. However, from the point of view of those implementing it, neoliberalism is an astounding success. For example, in real terms in the US, the median worker’s wage has risen 15% since 1978. In the same time, the median CEO’s take has risen 4,000%. This reinforces their belief that this is the right and proper economic doctrine for the entire world. Needless to say, they use this pile of pelf to buy influence in Congress to ensure that the legislature continues to work to their advantage. While this manifestly disadvantages the overwhelming bulk of the population, neoliberalism gets enough votes from the dispossessed to keep itself in power, partly by a constant stream of propaganda about Islamic terrorists, immigrants stealing dogs and jobs, and socialism as Stalinism, and partly by its regular demonstrations of blood-curdling violence delivered on the heads of anybody who tries to oppose it.

Neoliberalism has failed, although it’s probably more accurate to say it’s in the process of failing. There are still deposits of fossil fuels to be dug up and burned, still a few whales hiding from the hunters among the ice floes, possibly a river to divert, so we haven’t seen the end of it. By the time it has overtly failed, it will be too late. Its supporters will not accept that it has failed until there is nothing left to dig up and nobody left to buy it, and probably not even then: they’ll blame the communists and jihadists and everybody but themselves.

The central defect of the neoliberal ideology is that it does not take human psychology into account. The people who devised it, von Mises, Hayek, Friedman and so many others, had seen human folly at first hand, in wars and in the rise of fascism and Stalinism. They were not naïve as to the inherent brutality of Homo sapiens so why did they write a plan for society that gave free rein to humanity’s worst instincts, the drive to compete and win by any means? They knew their Lord Acton:

Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or certainty of corruption by full authority. There is no worse heresy than the fact that the office sanctifies the holder of it.... And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control (1887).

Gangsters. Yes, Donald? While they knew that power attracts the corruptible, I doubt that the first neoliberals sat down and asked each other: “Right, let’s devise a scheme that sucks all the wealth out of the bottom 95-98% of the population and funnels it to the rich.” That seems very unlikely. More likely, they wanted a stable system that would putter along, taking inputs and churning out finished products that would satisfy everybody, and they decided the self-regulating market would do it. With a breathtaking naivete, they assumed everybody would calmly and quietly go about their business, playing it straight and doing the right thing. Even after he had visited Chile following the murderous Pinochet coup, Milton Friedman was still convinced he was right. Speaking to a Chilean interviewer, he said: “My personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism." In a letter to the London Times he defended the junta on the grounds that he had "not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende." There is no evidence that he spoke to any of the thousands of people executed or their relatives, or to the tens of thousands who were tortured by Pinochet's military and secret police.

However, the moment financiers and industrialists and confidence men saw the early neoliberal plans, they realised what it was: a heaven-sent opportunity to suck all the wealth out of the bottom 95-98% of the population and funnel it to themselves. But, you say, they were already rich, why would they want more? And that, dear reader, is the essence of the concept of Narcisso-Fascism: humans always want more. It is written in our DNA that more feels better. We have a mechanism that rewards fighting to get to the top, but nothing to switch it off. Being on top feels fantastic whereas being at the bottom of the pile is crappy. And if we don’t bring this drive under control very soon, it’s going to destroy the planet as Justice Louis Brandeis observed: “America has a choice. We can have democracy in this country or we can have great wealth concentrated in the hands of the few, but we cannot have both.”

To summarise, neoliberalism shifts the economy to centre-stage in human affairs, making it the pivot around which society revolves, thereby devaluing all other aspects of society. It bases the entire economic system on the single moral value that freedom is the highest virtue and must not be restricted in any way. This can be done because, due to the law of supply and demand, buyers and sellers in a minimally-regulated market will act rationally to find their own prices without external pressure. The self-regulating market will be both stable and efficient as it, and only it, can properly allocate resources for investment and distribution. Ideally, it aims for small government, including deregulation and privatisation, sound money and free markets in all commodities.

Since it is not based in empirical findings, neoliberalism isn’t science. As it is not argued from first principles, it isn’t philosophy. It is an ideology of economics whose central point, freedom to do as one pleases, is a moral choice, not a fact. As a matter of applied psychology, neoliberalism fails due to its inability to see that humans are greedy and power-hungry, and will manipulate any system to their personal advantage when they can. In practice, the low levels of regulation and supervision of the minimally-regulated market are a cover for amoral people to gain power to enrich themselves at the expense of the rest of the community and of the natural environment. The inevitable outcome is the impoverishment of the social environment and the steady destruction of the natural environment. As Kenneth Boulding said, “Anybody who believes that exponential growth can go on forever in a finite world is either a madman or an economist.”

*****

An economy based on Belloc’s idea of a distributive state, where there are limits on the accumulation of wealth, is now technically feasible. In the past, it would probably have ground to a halt due to the physical impossibility of keeping up with all the transactions and changes in values but with blockchain technology, that is well within reach. However, the biggest problem would be convincing the 1% that they would have to hand a large part of their loot to a sovereign trust fund where they would retain ownership but lose all the benefits, such as interest, dividends, etc. They would scream the place down that they have an inviolable moral right to be as wealthy as they like so no communists or foreigners are going to take it from them blah blah. This, of course, is crap, as all they’re doing is dressing in moral clothes their primal urge to get to the top and crush the competition. Neoliberalism is the economic blueprint for a fascist takeover.

With the twin imperatives of unbridled buccaneer capitalism producing global warming, and the growing threat of nuclear war, it has to be understood that we cannot go on as we are. It all goes back to the drive to dominate, to be in control, to force other people to bow down, as Trump said: “There are 75 countries all wanting to kiss my arse.” That is exactly what he meant. His “tariffs” are simply economic warfare designed to make sure the US remains top dog. Why? None of them can answer that, they have no insight as to what drives them to try to subjugate their neighbours. They may think they’re being rational but, at base, it’s all hormonal, just the same as with dogs in the street. This leads to the paradox of domination, in that the drive to dominate comes twinned with a drive to avoid being dominated. But there can’t be a dominator without a dominated, but the victims must eventually tire of the servile state and rise up.

*****

Note: Engels was still a young man when he amassed the evidence he needed to write The Condition of the Working Class in England, but he had been beaten to the press by one Robert Blincoe. In 1832, Blincoe published his memoir covering his life from when he was taken from an orphanage at age seven and forced to work as an “apprentice” in a cotton mill until 21, when he gained his freedom. This book was apparently the source material for Dickens’ Oliver Twist, published in 1837-38. While it was graphic, the author barely mentioned two elements, the unbearable stink of poverty, and the inevitable sexual abuse of children and women in a completely lawless society. While powerful, it therefore has a slightly detached quality. Engels, however, described the filth and foul smells in many ways and, although he couldn’t directly mention sexual abuse of children, rape, etc, he made it quite clear that it was so widespread as to be normal. It was also clear that he saw the poverty, squalor and brutal deprivation of the poor as the inevitable result of laissez-faire capitalism, not due to the moral failings of the poor.

References:

1. Belloc H (1912). The Servile State. London: TN Foulis.

2. 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

3. Hayek FA von (1944). The Road to Serfdom. London: Routledge.

4. Polanyi K (1944). The Great Transformation: The political and economic origins of our time. Boston: Beacon Press.

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