Neoliberalism as Fascism’s Tool.

For some years, I have been putting off a project which, in resources and in time, I realise is completely beyond me: examining the phenomenon of neoliberalism from the biocognitive point of view. It means exploring the relationship between the economy we have built, and the human drive for dominance, especially as we see it in right wing extremism. The topic is enormous so what follows can only be the briefest of introductions.

What’s this thing called an economy, or economics as the study of economies? In an educational brochure, the Reserve Bank of Australia (RBA) defines an economy as “…the system for deciding how scarce resources are used so that goods and services can be produced and consumed.” A dictionary defines it as “…the process or system by which goods and services are produced, sold, and bought in a country or region,” which seems a bit broader and will do.

If we go back as little as 400 years, economies more or less the world over were much the same. Feudal/medieval societies were built around a rigid hierarchy centred on God and monarch. Power and authority flowed from the combination of nobility and priesthood and, apart from wars and rebellions, life didn’t change much from one century to the next. The monarchy existed by divine right and conferred or removed whatever rights and powers it liked on its subjects. A few great families dominated the social and economic scene, enjoying lives of unimaginable luxury, while ordinary people endured precarious lives of backbreaking labour with practically no rights and fewer means of redress. Corruption was endemic. Royal monopolies controlled the economy and could be granted or removed on a whim or a suitable bribe. Taxes were used as weapons to punish opponents or favour allies. Currency was based in precious metals with no reliable facilities for credit. Trade was largely local as imports were heavily taxed. The great majority of people were illiterate, with no educational or medical services. Wars, plagues and famines were omnipresent. Religion promised pie-in-the-sky for those who didn’t cause trouble while for those who did, the state provided free bonfires.

Starting in about 1680 and proceeding in fits and starts over some 120 years, an intellectual revolution took place, now known as the European Enlightenment. God and king were pushed aside as the individual was promoted to the centre of society. Social and political life was transformed by the idea that all humans, and not just the rich and powerful, have inalienable rights. Combining intellectual and political freedom with individual responsibility stimulated rapid social mobility. With the church in its place, science developed rapidly, licensing the educated class to abandon religion’s quaint views of the universe, and even leading some to the idea that education and religion were incompatible. Trade restrictions were removed so that a new class of wealthy commoners grew; and the idea of the rule of law applying equally to all citizens replaced royal and priestly prerogatives. By the end of the 18^th Century, such radical concepts as universal human rights; freedom of speech, movement, religion and assembly; universal suffrage; the sanctity of private property and private enterprise; free markets; codified criminal statutes; trial by jury, etc., all of which we now regard as essential, were widely understood if not always firmly in place.

Needless to say, these noble principles applied more to the wealthy than to the working classes but they were a start. Together, these principles formed the structure of the socio-political doctrine known as classic liberalism. Translated into the world of business and developed over the next 140 years, they gave the world classic liberal economics. Central to the entire project was the idea that the individual, supported by the rule of law, was supreme. Parliament made laws that applied to all and could not be overridden arbitrarily but, apart from that, had very little role to play in the economy. The ideal government was the smallest possible government, sufficient only to keep anarchy at bay. All individuals were therefore equal, and nothing could be done to favour one over the others, meaning freedom became the preeminent civil virtue. According to Scottish economist Adam Smith, the free market was self-correcting: if everybody acted in their rational self-interest and showed suitable flexibility, and with the government exerting only a distant, paternal interest in setting rules to facilitate finance and trade, the market would hum along to the benefit of all. As he saw it, altruism played no part in a market-based economy:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages (Smith, 1776, almost 250 years ago).

In due course, this allowed the development of systems of national and international credit which, with the suppression of piracy, encouraged international trade to expand massively. Of course, none of this took place smoothly, contradictions abounded. At every inch of the way, there was bitter opposition from the established elite who feared loss of wealth, status and authority, finally spilling over into violent revolution in, among others, the US, France and much later, Russia. On the home front, the rapidly growing national wealth showed no signs of “trickling down” to the armies of workers needed by the industrial revolution. They were essentially slaves to capital, except capitalists were not concerned whether they lived or died as there were plenty more where they came from. The horrors of urban proletarian life, exposed by the 24yo Friedrich Engels in 1845 [1], were a major factor in the development of Marx’s “scientific socialism,” aka communism, which quickly assumed satanic qualities in the minds of the wealthy (see the opening line of the Communist Manifesto, from 1848: “A spectre is haunting Europe—the spectre of communism”).

Outside Western Europe and its North American extensions, the remarkable ideas behind the spread of the liberal bourgeoisie were counter-balanced by the most brutal expansion of imperialism in human history. While the middle classes in Europe were demanding their right to vote and sit in parliament, their armies overseas were spreading slavery, death and devastation wherever they went, as long as the dividends kept flowing. It is estimated that in less than 250 years, Britain extracted from its vast colonial empire in the Subcontinent (modern Pakistan, India, Bangladesh, Sri Lanka and Myanmar) wealth of the order of $45trillion (2018 $, with a T). Over that period, the average Indian slipped from being one of the wealthiest people in the world to equal poorest. For the European imperialists, freedom home meant that nobody noticed slavery overseas. And for all the high-sounding talk about human rights, rule of law, Judaeo-Christian morality and so on, this tumultuous period of human moral, intellectual and social change culminated in the bloodbaths of the Great War.

Following the war, and with the addition of ample consumer credit to buy houses, cars, etc., the major economies tried to resurrect the liberal system of small government that had failed so grievously to prevent war. The experiment lasted barely a decade before, slowly and then suddenly, the entire liberal economic system collapsed into the Great Depression. The way out of it, according to British economist JM Keynes, was to reverse course: to bring the government into the economy as an active, well-meaning player, the only one with the resources to spend its way out of the slump. Over the next 40 years, that’s what happened. The world changed to high levels of regulation and intervention, with governments spending freely to relieve the constipation of liberalism.

World War II was the exemplar: governments controlled everything, borrowing lavishly to pour money into their chosen projects (war and destruction), and economies responded brilliantly. Post-war, and pushed by the increasingly assertive US Government, national governments combined to build an elaborate structure intended to prevent further wars. The Bretton Woods agreement of 1944, which pegged the US dollar to gold and established it as the international reserve currency, was quickly followed by the World Bank and International Monetary Fund, the UN with its array of specialised agencies, and so on. This system of treaties and international bodies was soon dubbed the rules-based international order (RBIO). The intention was to replace the destructive free-for-all of liberal capitalism with a tightly-regulated form of international governance. However, no sooner were these systems in place than a major war broke out on the Korean peninsula, and there has not been a day of peace since. Moreover, as of this week, it seems the entire RBIO is teetering on the brink of destruction but we’ll come back to that.

On the national level, post-war governments instituted lavish social programs to prevent the unpleasant side effects of liberalism, including poverty and inequality, deprivation of basic rights and entitlements, etc. European countries in particular built cradle-to-grave welfare systems with extravagant benefit schemes while the US engaged in massive government spending programs that provided high levels of employment and good wages for skilled workers. Financial markets were heavily regulated, interest rates controlled, and governments built or nationalised entire industries or ran their own services in parallel.

The next 25 or so years were a golden age: ordinary workers in a full-time job could raise a family, buy a house and car and provide for their children’s education. In the US in the 1960s, the median pay of CEOs was about 18-20 times that of their median workers. But it didn’t last. In August 1971, under the twin pressures of trying to fight a major war and build a “Great Society” at home, the US was forced to impose wage and price freezes and let the dollar float, thus repudiating one of the central elements of the post-war era: a stable dollar as the world’s reserve currency. Keynesian economics became a dirty word as governments scrambled to reduce spending to avoid bankruptcy. The program they chose was a return to the principles of liberalism: small government combined with maximum freedom, meaning deregulation, privatisation, balanced budgets, and self-sufficiency. What central planning couldn’t achieve, a stable and prosperous economy, the free market could. This became known as neoliberalism, although most people who support these ideas don’t refer to themselves as neoliberals.

It's important to clarify the difference between neoliberalism, conservatism and libertarianism but first, we need to be aware of such terms as leftist, rightist, progressive and conservative. One of the most common terms in politics is the division between ‘left’ and ‘right.’ This came from the first parliaments of the French Revolution; the supporters of the Ancien Régime, the church, the aristocracy and the wealthy land owners, sat on the right of the president while their revolutionary opponents sat on the left. Today, leftist politics tend to be inclusive/collectivist, egalitarian, progressive and internationalist, while the right wing reflects exclusive/individualist, hierarchical, conservative/traditional and nationalist or even tribal thinking. As caricatures, the left wing is tender-hearted and believes in the common good, compared with the hard-headed right wing that scorns help.

Progressives are not happy with the status quo and believe that change will lead to improvement whereas conservatives say: “Life is comfortable so don’t change anything as it could easily get worse.” Progressive policies are favoured by the unfavoured, those who, as Marx said, have little to lose but their chains; conservatives feel they have a lot to lose. They are strongly inclined to stick to what and who they know and to be suspicious of change. English political theorist Michael Oakeshott (1901-1990) summarised conservatism in a famous essay:

To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the near to the distant, the sufficient to the superabundant, the convenient to the perfect, present laughter to utopian bliss. Familiar relationships and loyalties will be preferred to the allure of more profitable attachments; to acquire and to enlarge will be less important than to keep, to cultivate and to enjoy … [2].

In a nutshell, neoliberalism is an economic doctrine with political overtones, conservatism a set of social attitudes which affect economics, while libertarianism is a political doctrine with economic overtones, and thus not entirely a comfortable fit with neoliberalism. While neoliberals see the free market as the organising principle at the centre of human interactions, libertarianism sees freedom from restraint or restriction as the primary virtue (sic). It is thus wholly a moral stance based on what they believe ought to be the case. For libertarians, everything else flows from that position. Neoliberals, for example, are not ideologically opposed to mass vaccination, company laws or taxation to support the police and military whereas libertarians oppose them on doctrinal grounds. Hard-core libertarianism is simply not compatible with modern western life so any city dweller who claims to hold these views is making constant compromises (most don’t: if anybody steals their trolley, the first people they rush to are the hated police).

The central ideas behind neoliberalism developed in a small group of economists in Vienna after World War I, generally known as the Austrian School. Their version in the US, centred at the University of Chicago, is known as the Chicago School. As a doctrine, neoliberalism has had so many impacts in the modern world that it is difficult to know where to start but deregulation and privatisation are central to the program. Deregulation takes the form of shrinkage of government with transfer of responsibility for services to the private sector, leading to the internationalisation of finance and globalisation of industry. Immediately there arose vast offshore money markets entwined with a huge tax avoidance industry; massive deindustrialisation of western economies in tandem with the rise of the East as the world’s industrial base; impoverishment of workers going hand-in-hand with incalculable enrichment of the elite; loading students with crippling debts; loss of public services, on and on. However, for a doctrine that is so pervasive, so hugely influential and, on the face of it, so destructive, one that touches the lives of practically all humans, there is surprisingly little discussion of how it came to be and its significance. In these essays, I want to point to a hidden purpose, an unspoken agenda behind the whole neoliberal project and the reason for it. Because of the size of the project, I can only hint at what I see going on; with luck, this may start a process of enquiry as I feel the right questions are not being asked. It would also seem that this is not an accident.

Oddly enough, a considerable part of the intellectual foundations of neoliberalism were written during World War II, liberal capitalism’s “cure” for the Great Depression which it had precipitated. The prime mover was an Austrian economist and social philosopher, Ludwig von Mises (1881-1973), who reached the US just before the fall of France in 1940. With two of his students, the Viennese Friedrich Hayek (1899-1992), who worked in Britain, the US and Germany, and Milton Friedman (1912-2006) in Chicago, von Mises was at the core of what is now known as the Austrian school of economics and its offshoot, the Chicago school. Despite publishing some of their most influential works in 1944, by the end of the War, they felt marginalised and ignored. Today, their ideas regarding political and economic philosophy directly or indirectly dominate most of the world’s economies.

For this project, I selected a few of the most influential works of each author. It would take half a lifetime for one person to study the entire output of just these three authors without starting on the secondary literature. With this very limited resource, we will try to see why this has happened but first, a number of warnings:

1. The first point is that they were all singularly prolific authors. Hayek’s collected works run to no less than eighteen volumes while Friedman’s efforts get an entry of their own in Wikipedia.

2. Next, and very important, is that they are dreadful writers: turgid, over-inclusive and seriously unfocussed. The prose is often so mangled that barely a page goes by but the diligent reader has to go back over a paragraph, or even just one of their bizarrely long sentences, to try to work out what they are saying. Frequently, due to the structural ambiguity, it isn’t possible to be sure. Reading them becomes painful and the reader is often reduced to skimming through the pages, seeing the same trite facts or opinions said in a dozen different ways. As science or philosophy, this is unacceptable but it becomes very important when considering their public impact.

3. While they constantly claim to be writing scientific material, their popular works are polemical and laden with personal values. For example, at p22 of his major work from 1922, Socialism: an economic and sociological analysis [3], von Mises says: “My book is a scientific inquiry, not a political polemic.” Just two pages later, greatly alarmed, he trumpets: “We stand on the brink of a precipice which threatens to engulf our civilization” [he meant socialism but the only proof he offered was Stalinism].

4. The primary personal value, the sine qua non and total justification of their approach, is that freedom is the supreme and universal good. Beside the untrammelled right to do as one wishes, all other rights, values, morals and so on fade into insignificance. A citizen is free to starve to death in the street if he chooses but as long as council workers don’t try to move the dying man along, all is well in their world.

5. Flowing from that, their poisonous hatred of anything and everything that could possibly be labelled “socialist” leaps out of every page. To them, socialism is violently repressive, atheistic, Stalinist collectivism, while any “socialist” or even “welfare” program is a first and inevitably fatal step on the slippery chute that leads straight to the gulag. Theirs is an all-or-nothing world of freedom or total slavery, allowing no possible compromise with the godless socialist hordes lusting to destroy us.

6. Finally, in their world, there are two classes of citizens: constructive, virtuous builders who create wealth and spread it around, and lazy, immoral parasites who consume but do not contribute. Again, this is wholly a value judgement.

Their work starts with value judgements, not with empirical facts and not with first principles. Therefore, and despite everything they say, from beginning to end it is neither science nor philosophy but is pure ideology. This raises the question: Who reads these books? The short answer would have to be: only the devout. Readers who aren’t convinced beforehand will quickly give up, deterred by the awful prose and the barrage of rank opinions, while those who want to believe, such as Margaret Thatcher, will devour them, underlining all the bits that reinforce their prejudices. The nett effect of their prolixity, their waffling ambiguity and sweeping prejudices is that an uncritical reader, meaning anybody who can make it to chapter two without biting their knuckles, can zip through their works, picking out the supportive bits and overlooking the rest: “Oh yes, I agree with that and what’s this? Oh definitely, no doubt about it, and again here, yes, he’s certainly nailed it in this chapter.” In brief, it’s possible to find in their vast output material supportive of almost every conceivable centre-right to ultra-right wing position but precious little self-critical analysis. JM Keynes called Hayek’s book Prices and Production (1931) “… one of the most frightful muddles I have ever read… It is an extraordinary example of how, starting with a mistake, a remorseless logician can end in Bedlam.” Forewarned, I did not put that on my list.

In an article for students, author Liz Manning commented: “There are many criticisms of neoliberalism, including its potential danger to democracy, harm it causes to workers' rights, and that it structures society and the economy around markets that are far less rational than assumed.” That assumption is critical to their position. We will look at it more closely next week.

References:

1. Engels F (1845). The Condition of the Working Class in England. Various editions: available at Marxists Internet Archive:

https://www.marxists.org/

2. Oakeshott M (1956). On Being Conservative. Available at: http://www.geocities.com/Heartland/4887/conservative.html

3. von Mises L (1922/1951). Socialism: an economic and sociological analysis. New Haven: Yale University Press.