What is Neoliberalism?

This post provides a brief introduction to the current form of capitalism: neoliberalism. It includes sections on: neoliberal ideology; Governmentality – how neoliberalism governs, neoliberal government policies; how neoliberalism is a capitalist class project of domination; the history of neoliberalism in the twentieth century; and the three phase of neoliberalism in government since the 1980s.

Neoliberalism is a form of capitalism and liberalism. Neoliberalism is the most aggressive form of liberalism ever formulated. Liberals generally assume that being a “self-interested, competitive entrepreneur is the natural state for human beings, neoliberals know that it isn’t.” But the neoliberals still want people to behave that way. They achieve this by using the state and corporate power to make us act in that way, regardless of what most people want. [1]

 

Neoliberal ideology

Ideology can be defined as a set of assumptions about how society does and should work, it structures both what we think and how we act. Our world has competing truths, values, and theories, ideologies aim to favour some values over others and to legitimise certain theories or sets of meanings. Ideologies provide intellectual maps of the social world that establish relationships between individuals and groups versus the larger structure of power. They therefore play an essential role in maintaining the current power structure as fair and natural, or in challenging it by highlighting its injustices and pointing out the benefits of alternative power structures. [2] An ideology is most effectively when it denies its own existence and can pass itself off as the normal state of things or ‘common sense’ [3]

Jeremy Gilbert describes how it is difficult to differentiate between capitalism and neoliberalism:

“because neoliberalism is the most fanatically pro-capitalist ideology ever, and because it has become the default ideology of almost all actual capitalists, and certainly of almost all pro-capitalist political parties..it is important to differentiate between capitalism and neoliberalism because they are not the same thing – they are not the same KIND of thing. Capitalism is an economic practice. Neoliberalism is a philosophy about how societies in which that practice prevails should be managed, and a programme which is at least nominally informed that philosophy, or looks like it is.” [4]

Neoliberal ideology can be summarised as “a single global marketplace to the public, they portray globalizing markets in a positive light as an indispensable tool for the realization of a better world. Such market visions of globalization pervade public opinion and political choices in many parts of the world. Indeed, neoliberal decision-makers function as expert designers of an attractive ideological container for their market-friendly political agenda. Their ideological claims are laced with references to global economic interdependence rooted in the principles of free-market capitalism: global trade and financial markets, worldwide flows of goods, services, and labour, transnational corporations, offshore financial centres, and so on.” [5]

George Monbiot describes the ideology of neoliberalism as:

“Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning. Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve. We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.” [6]

Meritocracy is a key feature of neoliberal ideology. This promotes a “hierarchical and highly unequal set of social relations while claiming to offer individuals from all backgrounds an equal chance to compete for elite status.” [7] This is good propaganda for neoliberalism, but in fact social equality and social mobility have decreased since the 1970s. [8]

Mark Fisher describes the ‘capitalist realism’ of neoliberalism as: “that it is easier to imagine the end of the world than it is to imagine the end of capitalism…the widespread sense that not only is capitalism the only viable political and economic system, but also that it is now impossible even to imagine a coherent alternative to it.” [9]

 

Governmentality

A second dimension on neoliberalism is what the French philosopher Michel Foucault called ‘Governmentality’:

“certain modes of governance based on particular premises, logics, and power relations. A neoliberal governmentality is rooted in entrepreneurial values such as competitiveness, self-interest, and decentralization. It celebrates individual empowerment and the devolution of central state power to smaller localized units. Such a neoliberal mode of governance adopts the self-regulating free market as the model for proper government. Rather than operating along more traditional lines of pursuing the public good (rather than profits) by enhancing civil society and social justice, neoliberals call for the employment of governmental technologies that are taken from the world of business and commerce: mandatory development of ‘strategic plans’ and ‘risk-management’ schemes oriented toward the creation of ‘surpluses’; cost–benefit analyses and other efficiency calculations; the shrinking of political governance (so-called ‘best-practice governance’); the setting of quantitative targets; the close monitoring of outcomes; the creation of highly individualized, performance-based work plans; and the introduction of ‘rational choice’ models that internalize and thus normalize market-oriented behaviour. Neoliberal modes of governance encourage the transformation of bureaucratic mentalities into entrepreneurial identities where government workers see themselves no longer as public servants and guardians of a qualitatively defined ‘public good’ but as self-interested actors responsible to the market and contributing to the monetary success of slimmed-down state ‘enterprises’. In the early 1980s, a novel model of public administration known as ‘new public management’ took the world’s state bureaucracies by storm. Operationalizing the neoliberal mode of governance for public servants, it redefined citizens as ‘customers’ or ‘clients’ and encouraged administrators to cultivate an ‘entrepreneurial spirit’. If private enterprises must nurture innovation and enhance productivity in order to survive in the competitive marketplace, why shouldn’t government workers embrace neoliberal ideals to improve the public sector?” [10]

Cultural theorist Mark Fisher describes the ‘bureaucratic managerialism’ of neoliberalism. Bureaucracy has been decentralised so that we actively produce it ourselves through “continuing professional development, performance reviews, log books, not to mention the whole machine of the Research Excellence Framework (REF).” Workers are encouraged to be highly self critical, but are assured that there will not be any consequences from this self criticism. The demonising nature of having to self criticise, that will then be ignored. Assessments at work have changed from periodic to continuous: “Our status is never fully ratified; it is always up for review.” [11]

 

A set of government policies

Jeremy Gilbert describes the main aim of neoliberal government programmes as being the promotion of the interests of finance capital and the processes of financialisation  above all other interests. [12] He lists neoliberalism’s policy agenda or ‘actually existing neoliberal’ as:

  • privatising public services
  • deregulating labour markets so workers have fewer rights and protections
  • attacking labour unions
  • cutting taxes on the rich
  • reducing public spending and welfare entitlements
  • forcing services in the public sector to behave, as much as possible, like competitive, profit-seeking business. [13]

 

Capitalist class project

Neoliberalism can be described as a project of the capitalist class to restore their own class power, , following their loss of power through the middle of the twentieth century, during the Keynesian period of high public spending and a strong welfare state. There has also been a recomposition of the capitalist class, with finance capital now dominating over all other sectors. [14]

Neoliberalism can also be seen as a reaction by capitalist elites to the increase in democratic demands in the 1960s. This was followed by a crisis in the 1970s between the capitalists and labour movement. The neoliberal response to was to offer increased private consumption and easily accessible credit, which “re-asserted the supremacy of finance capital over both industrial capital and the rest of the population for the first time since the great crash of 1929”. [15]

At this point of crisis in the 1970s, the neoliberals had two ‘revolutionary goals’. The first was to “re-organize capitalism on a universal, transnational scale and thus place global markets out of reach of the influence of national governments, making markets less subject to national-scale popular democratic demands and freeing corporations to exploit labor and the environment at will.” The second was to “apply global economics in a ‘race to the bottom’ competition between nations, creating ‘austerity societies’ of disempowered consumers at the expense of social groups and their ‘market-distorting’ demands. The formation of the World Trade Organization in 1995 capped-off this revolutionary process of transferring economic power from nations—which ostensibly could be controlled democratically—to the much-less accountable global level.” [16]

A key function of neoliberal ideology is to “secure consent and generate political inertia precisely by enabling the experience of precarity and individualised impotence to be experienced as normal and inevitable.” Only a small number of people support neoliberal policies, namely the core neoliberal elite. For everyone else, neoliberal ideology aims “to console us that the sense of insecurity, of perpetual competition and individual isolation produced by neoliberal government is natural, because ‘that’s what life is really like’.” [17] Most people do not support neoliberalism, but as long as there is no viable alternative that wins broad popular support, then this results in a general ‘disaffected consent’ with the current system. [18]

In neoliberalism, capitalists have worked out the sweet spot to stop any serious challenge to their dominance: “as long as feeding one’s children (still the principal preoccupation of most adult humans, as it has been throughout history and before) remains an achievable but difficult task, then energies are likely to be devoted to the accomplishment of that goal: energies which cannot then be channelled into political activity of any kind. Where this objective becomes unachievable, populations are likely to resort to desperate, perhaps revolutionary, measures. Where it becomes too easily realised – as it did for the generation which came to maturity in the post-war years of social-democratic ascendancy – then capitalism is also likely to find itself subject to challenge by constituencies no longer intimidated by the immediate threat of destitution. Much of the neoliberal programme can be understood in terms of the efficacy and precision with which it engineers precisely the outcome of an economy and a society within which feeding their children and keeping them out of relative poverty remains an achievable but highly demanding task for most actors: actively producing insecurity and ‘precarity’ across the working population, without allowing the level of widespread desperation to pass critical thresholds. [19]

 

The making of neoliberalism

George Monbiot provides a good summary of the history of neoliberalism:

“The term neoliberalism was coined at a meeting in Paris in 1938. Ludwig von Mises and Friedrich Hayek saw social democracy, exemplified by Franklin Roosevelt’s New Deal and the gradual development of Britain’s welfare state, as manifestations of a collectivism that occupied the same spectrum as nazism and communism. In 1944 Hayek argued that government planning, by crushing individualism, would lead inexorably to totalitarian control. It came to the attention of some very wealthy people, who saw in the philosophy an opportunity to free themselves from regulation and tax. When, in 1947, Hayek founded the first organisation that would spread the doctrine of neoliberalism – the Mont Pelerin Society – it was supported financially by millionaires and their foundations. They created a transatlantic network of academics, businessmen, journalists and activists. The movement’s rich backers funded a series of thinktanks which would refine and promote the ideology. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.

As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from forming gave way – among American apostles such as Milton Friedman – to the belief that monopoly power could be seen as a reward for efficiency. The neolibers stopped using the name for their ideology ‘neoliberalism’ in the 1950s.

In the post war period neoliberalism remained at the margins, despite its lavish funding. The postwar consensus was almost universal: John Maynard Keynes’s economic prescriptions were widely applied, full employment and the relief of poverty were common goals in the US and much of western Europe, top rates of tax were high, and governments sought social outcomes without embarrassment, developing new public services and safety nets. But in the 1970s, when Keynesian policies began to fall apart and economic crises struck on both sides of the Atlantic, neoliberal ideas began to enter the mainstream. As Friedman remarked, “when the time came that you had to change … there was an alternative ready there to be picked up”. With the help of sympathetic journalists and political advisers, elements of neoliberalism, especially its prescriptions for monetary policy, were adopted by Jimmy Carter’s administration in the US and Jim Callaghan’s government in Britain. After Margaret Thatcher and Ronald Reagan took power, the rest of the package soon followed: massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services. Through the IMF, the World Bank, the Maastricht treaty and the World Trade Organisation, neoliberal policies were imposed – often without democratic consent – on much of the world.” [20]

 

Phases of neoliberalism

There are a number of different perspectives on the phases of neoliberalism. [21] I believe there have been three phases of neoliberalism in government:

  1. First-wave neoliberalism in the 1980s: Reaganomics and Thatcherism

The ‘New Right’ of Thatcher and Reagan in the US and UK implemented a basic neoliberal economic programme with a range of conservative social policies such as restoring traditional family values, increased military spending, a tough law and order agenda, and limiting multiculturalism. [22]

  1. Second-wave neoliberalism in the 1990s: Clinton’s and Blair’s Third Way

The Blair and Clinton governments in the 1990s took a more centrist approach, that included the majority of neoliberalism combined with socially progressive policies. The governments supported private-sector-led economic growth, combined with the government providing a consistent level of social services to citizens. They also promoted equality for gay people and supported women in the labour market. [22]

  1. The third phase of neoliberalism began with bailing out the banks following the 2008 financial crisis. This was followed by austerity – massive cuts to public services. Inequality has increased, life expectancy has declined or stagnated, living standards have dropped. All this has polarised politics with the election of authoritarian, right-wing, isolationist politicians.

 

Endnotes

  1. Twenty-First Century Socialism, Jeremy Gilbert, 2020, page 27-8
  2. https://buildingarevolutionarymovement.org/2019/02/25/political-ideology-part-1/
  3. What Kind of Thing is ‘Neoliberalism’? in New Formations, Jeremy Gilbert, 2013, page 12, https://www.lwbooks.co.uk/new-formations/80-81/what-kind-thing-neoliberalism
  4. https://jeremygilbertwriting.wordpress.com/2015/07/14/neoliberalism-and-capitalism-whats-the-difference/
  5. Neoliberalism: A Very Short Introduction, Manfred B. Steger, 2010, page 11-12
  6. https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot
  7. What Kind of Thing is ‘Neoliberalism’? Page 15. Also see Meritocracy as Plutocracy: the Marketising of Equality under Neoliberalism, Jo Littler, 2013 https://www.lwbooks.co.uk/new-formations/80-81/meritocracy-plutocracy-marketising-equality-under-neoliberalism. And Against Meritocracy, Jo Littler, 2017
  8. What Kind of Thing is ‘Neoliberalism’? Page 22
  9. Capitalist Realism: Is There No Alternative Mark Fisher, 2009, page 2 and a summary https://videomole.tv/events/mark-fisher-capitalist-realism-part-2/. Also see Capitalist Realism, Neoliberal Hegemony: A Dialogue, in New Formations, Mark Fisher and Jeremy Gilbert, 2013, https://www.lwbooks.co.uk/new-formations/80-81/capitalist-realism-neoliberal-hegemony-dialogue
  10. Neoliberalism: A Very Short Introduction, page 12-14
  11. Capitalist Realism, Neoliberal Hegemony: A Dialogue, in New Formations page 91
  12. What Kind of Thing is ‘Neoliberalism’? Page 17
  13. Twenty-First Century Socialism page 28-9. Also see A Brief History of Neoliberalism, David Harvey, 2007
  14. What Kind of Thing is ‘Neoliberalism’? Page 16. Also see A Brief History of Neoliberalism
  15. Neoliberal Europe section of http://nearfuturesonline.org/corbynism-and-its-futures/#en-70-10
  16. https://www.opendemocracy.net/en/transformation/revolution-that-will-not-die/
  17. What Kind of Thing is ‘Neoliberalism’? Page 15
  18. What Kind of Thing is ‘Neoliberalism’? Page 18-19
  19. What Kind of Thing is ‘Neoliberalism’? Page 14. Also 28 minutes into https://culturepowerpolitics.org/2016/06/08/how-did-we-get-here-radical-histories-of-the-uk-1974-88/
  20. https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot
  21. https://culturepowerpolitics.org/2015/05/20/session-one-neoliberal-common-sense/; https://medium.com/@efblake/the-corporatocracy-and-three-waves-of-neo-liberalism-e0eb2f5afc6b; A Brief History of Neoliberalism, Neoliberalism; A Very Short Introduction chapters 2 and 3; The Handbook of Neoliberalism, Simon Springer , Kean Birch , et al., 2016; https://newleftreview.org/issues/II101/articles/william-davies-the-new-neoliberalism; Neoliberalism in Context: Governance, Subjectivity and Knowledge, Simon Dawes (Editor), Marc Lenormand (Editor), 2020; Third-Wave Neoliberalism in Theory and Practice: A Case Study of the Halifax Centre Plan, Sandy Mackay, 2016, http://theoryandpractice.planning.dal.ca/_pdf/multiple_plans/smackay_2016.pdf
  22. https://culturepowerpolitics.org/2015/05/20/session-one-neoliberal-common-sense/