The Neoliberal Bogeyman

Neoliberalism is a word chucked about a fair bit these days. It is said to be the dominant ideology of our time, which is really weird, because almost nobody anywhere calls themselves a neoliberal. It has become a broad, catch-all term to refer to any period of administration characterized by economic deregulation or privatization, regardless of the end product or the reasons for those reforms. It is also used to describe, in a totalising and fractal fashion, every aspect of our society, in service of an anti-liberal critique. As such, it is an idea defined entirely by projection for partisan ends. To see this particular intellectual strategy in action, disseminated for a popular audience, look for example at the rather professionally polished videos produced by communist YouTubers Oliver Thorne and Tom Nicholas.

In short, it is a code-word for capitalism, used entirely pejoratively, in a game of word-substituted Marxism, as shown by this graph of its academic usage, where it appeared just in time to provide a subtle alternative to the easily recognisable language of the collapsing Marxist empire:


Who were the Real Neoliberals?

As a comprehensive review of the literature shows, Neoliberalism is almost never clearly defined, and often not defined at all, even by academic scholars employing it as the main dependent or independent variable in their analysis. It is almost universally used negatively or pejoratively. Almost nobody anywhere alive subscribes to it as a label. Yet according to the left-wing consensus, particularly amongst philosophers, not generally known for their economic literacy, it is said to be omnipresent, invisible, totally dominant in society, and extremely obvious once you look for it.

So, how did this confusion begin? Well, most of it has to do with the field of geography, the University of Chicago, and the country of Chile. The rest has to do with the collapse of the Soviet Union and the proliferation of the ideas of Michel Foucault. But the story begins, as many pivotal stories about the 20th century do, with interwar Germany. Here in Freiburg, a small collection of mostly German philosophers, economists and historians, meeting in the late 1930s. These men had a spectrum of ideas, but generally, they agreed that Bolshevism, National Socialism, German Democratic Socialism, and the pre-WWI market-fundamentalism were all fatally flawed, and led to an unacceptable destruction of human liberty and dignity, either because of their tyranny or because of their inherent instability. These men tried to navigate a “middle ground”; a path of moderation, grounded in liberal ethics.

They included Alexander Rustow, Ernst Böhm and Wilhelm Röpke, the German conservative pioneers of the West German post-war governing system known as Ordoliberalism, often called German neoliberalism. The government is intended to follow the market and intervene only to protect it from unfair practices, not define its trajectory or character. But this requires a state-managed form of market economy based on specialized institutional roles and determined interventions and stimuli, involving deploying antitrust regulation, and handing macro-economic policy over to employers and trade-unions, whose collaboration in the running of business is encouraged. It still defines the German model today.

In the social circle which surrounded this school of thought were Milton Friedman, Ludwig von Mises and Friedrich von Hayek, who trended back to an almost laissez-faire attitude. They spent their efforts defining a moral framework which prohibited as far as they thought reasonable the intervention of the state in private and economic affairs, as a protection against the ideas which led to the gulag and the gas chamber, years before they became bywords for the outcomes of those regimes. Others included George Stigler and Karl Popper, founding philosophers of George Soros’s Open Society Institute, which campaigns for several extremely trendy left-wing positions including public housing initiatives, legalisation of narcotics, amnesty for petty criminals and open borders. This is a very broad school, and many of these men are not thought of as neoliberals anymore, and most denied the label themselves, including Milton Friedman, the man often used to exemplify it.

This brings us little closer to defining neoliberalism. However, the identification of the key thinkers allows us to define a few common elements. First, they aimed to define the ethical limits to state power in the economic realm. Second, all these men were diffident to Keynesian economics. They saw it as unethical for the state to attempt to steer and control the economy through expenditure and make-work programs, preferring minimal intervention through monetary policy. They also believed in fair competition, allowing a sort of referee role for the state, against bad actors and monopolies in the private sector. The Keynesian system was a consensus of the Western economic system up until the 1980s, when the West started contracting money supply and relaxing credit regulation. Since these reforms challenged the Keynesian weakness for arbitrary government expenditure, it is this distinction which came to define the change.

So, what is it anyway?

If we are going to define neoliberalism, calling it a third way between Leninism and laissez-faire describes nearly every economic system in modern history. Even Laissez-faire wasn’t laissez-faire, with the British and Americans running several state-owned monopolies across their global spheres of influence, and utilizing metallic currency at a state-determined exchange, which is not a neutral position. It also doesn’t mean Ordoliberalism, because that is… Ordoliberalism. Nor does it mean Keynesianism, against which it was reacting. That rules out the criticisms of neoliberalism based on the economic bailouts after the 2007 Credit Crunch, which were driven by Keynesian-revival stimulus economics. Of course, that didn’t stop lefties from trying to pin the tail on the wrong donkey.

This is a matter of defining liberalism itself to some extent. Liberalism is broadly speaking, a group of political norms which prioritise freedom above other political concerns. But since absolute freedom can mean a man alone in the desert, or a society’s descent into chaos, there are several intellectual tools which Liberal philosophers have used to frame the moral dilemma faced by those who attempt to maximise freedom without creating misery. JS Mill proposed that it was a balance between freedom and harm. Do what you like, say what you like, as long as you cause no harm. But as anyone paying attention to modern politics can see that this can be used as a lever to introduce illiberal ideas very easily, with hate speech being the big fulcrum.

Mill also believed in the right to life, so the state had a mandate to provide a safety net against penury and destitution. Many liberals see this mechanism as a slippery slope to welfare socialism, like in South Africa, where our welfare dependents outnumber our taxpayers almost 2-to-1. This resembles the liberalism of John Rawls, who advocated a system created to achieve equal outcomes for all, on the basis that inequality begets unequal freedoms; policy frameworks like South Africa’s tend to create extremely large dependent classes and suffocate free enterprise with endless corrupt, demographic-based gatekeeping and arbitrary redistributive policies.

So others, like John Gray, have used the distinction of positive and negative rights to frame matters. The state only guarantees negative rights, meaning rights not to be interfered with in certain ways, like freedom of speech, freedom of movement etc. But no positive rights, like a right to housing, jobs or healthcare, which would require socialist policies. In this picture, private property rights emerge as central. John Locke, one of the earliest men regarded as a Liberal, believed that property was absolutely necessary to liberty, and as a consequence, the right to property is often framed as the right not to have any of one’s property taken without one’s permission. This leads us to men like Robert Nozick, who see taxation as being more or less identical with theft or slavery, but since the state is necessary for national security, advocate what they call a “watchman state”; super minimal, only providing for the military and justice systems.

So where does Neo-Liberalism fit into all of this? Well, it’s more or less a fuzzy compromise. Much like Ordoliberalism, it is a via negativa, that is, it is defined more by what it is not, than what it positively is. It isn’t national socialism, it isn’t Keynesianism, it isn’t laissez-faire, it isn’t Marxism, and it isn’t anarcho-capitalism. Milton Friedman, who refused the label, has paradoxically been cast as its representative. His theories place limits on what the state has a right to do, based on similar parameters to Nozick, and insists on fiscal discipline and lean expenditure, but recognises the role of the state in guiding the financial aspects of the economy, preferring the use of monetary policy over the stimulus and public works programs favoured by Keynes.


The Chicago Connection

The popularity of a moral philosophy which introduced principled limits on the state’s authority to intervene in the economy became popular among certain South American political thinkers, and drew sharp criticism from Marxists. These think tanks and discussion groups among the professional classes drew on the earlier circles, names like Röpke and Rustow, envying the then-emerging West German economic miracle.

Some Chilean students of Milton Friedman’s at the University of Chicago, who belonged to this network, resurrected the term and used it to advocate for the dissolution of arbitrary appropriation and control which had become a marker of South American populism for more than a century. These self-proclaimed neoliberals became known as the Chicago boys, and were influential in the dictatorship of Augusto Pinochet. Under their advice, Pinochet set about unpicking the Marxist regime of Salvador Allende, deposed under a CIA-backed coup (for a rare, non-Marxist account of this period of history, I suggest Mark Falcoff).

Allende was the first ever democratically elected Marxist head of state, and as such, became the focus of global attention by a ravenous left-wing intellectual class which, like today, dominated the global intelligentsia. This was significant, because according to Marx, socialism could not be achieved under electoral democracy, and required the armed seizure of the state and the means of production. Allende promised a compromise between Christian values and Socialist institutions, between Western notions of civil rights, and cast-iron control of the economy. Chile was already regarded as an oasis of peace and civil liberty in the region, but was at once re-imagined, by international left-wing pilgrims who streamed into Santiago, as a hellish landscape of poverty, underdevelopment and inequality, desperately crying out for a socialist saviour, retelling the election as a retrospective historic inevitability.

The Christian Democrats had already gone a long way to build a national coalition based on a middle path between capitalism and communism, nationalising mines, fostering agricultural cooperatives, unionising workers, settling families on rural state-owned land, and introducing a higher minimum wage. This was limited by the rocketing inflation and increase in unemployment it created, but per capita income rose significantly, and inequality remained more or less the same, meaning everybody’s lives were on an upward trajectory. While Marxists theorise that communism will arise as a result of deteriorating social conditions, Marxist governments have never come to power under such conditions; Chile likewise. The Socialists offered more of the same, just as the Christian Democrat’s charismatic leader Eduardo Frei was reaching his term limits.

Due to a first-past-the-post electoral run-off, Allende’s Popular Unity government were elected in 1970 with just 36% of the national vote. Despite this narrow mandate, they set about nationalising all the major industries, from mining and agriculture to distribution and manufacturing, from banking to foreign trade, which caused debt and inflation to skyrocket. Coupled with a fall in the price of copper and a drastic hit to output efficiency, the legitimate economy fell through the floor, and the black market took over. Famously, they attempted to centrally govern the entire economy according to cybernetic management theories through the use of a massive mainframe computer intended to keep track of prices, though without the benefit of linear programming. The government turned the communication infrastructure over to bald-faced pro-government propaganda, engaged in massive cadre deployment to turn the country’s institutions over to socialism, and accepted massive economic tributes from the USSR, who began to direct arms shipments to the country.

In response, the CIA began asserting pressure on key military figures. After the election, they supplied small-arms to a far right group who bungled a kidnapping of the regime-friendly military command, which resulted in the death of General Schneider, the supreme commander. As the regime wore on, the courts and the legislative branches complained of widespread corruption and disappearance of the rule of law. Accusing the minority government of subverting the constitution, the Chamber of Deputies resolved to have the military seize power from the Marxists. The airforce bombed the presidential palace, and the military seized power, writing a new constitution, and set about crushing the Marxist opposition with brutal efficiency and occasionally extreme cruelty. While the CIA were not directly responsible for the coup, they had advertised their political support for it through private channels. Pinochet’s regime, which saw just under 3 000 political enemies killed extrajudicially, and extensive cronyism, overshadowed any reforms he might have instituted.


Guilt by Affiliation

By employing the Chicago boys to undo Allende’s socialism, Pinochet inadvertently poisoned the well of economic liberalism with the external trappings of quasi-fascist militarism. The global left wing came together in unison on a single interpretation. Neoliberalism did it. The fact that the neoliberalismo of Latin American circles drew inspiration from West Germany’s economic miracle, driven by a moderate economic project was deliberately ignored, in favour of the argument that they were market fundamentalists suffering from a fetish for the liberation of capital. But the liberal intellectual circles were eventually overshadowed by the radicals who clustered under Pinochet, and all nuance was forgotten.

The main reason for the proliferation of this concept in the English speaking public in recent years, is down to two public intellectuals, the orthodox Marxist geographer David Harvey, and the new-left Chomskyite Naomi Klein. The latter took after the former, who gained his use of the term from the Latin American Marxists who spun their criticism of Pinochet into the conflation of fascism and capitalism that is de rigueur today, though nowadays it is spiced with a fair amount of Foucaultian biopolitics.

To understand the Marxist three-card monty, you need to understand a bit of the theory. Marxists believe that culture and ideas are determined by the economic base which sustains it. Under “capitalism”, the state exists as the servant of the real ruling class, defined by the owners of the means of production. The dominant ideology, according to Marx, is Liberalism, facilitating the free exploitation and accumulation of wealth by the bloodsucking elites. It doesn’t describe reality exactly, but it does resonate with common resentment and feigns intellectual maturity through the use of black cynicism. Neoliberalism has since lost the meaning its proponents held, and taken on the function of an epithet for capital-friendly policymaking which binds it to a Marxist analysis of class domination.

Foucault’s part in the matter was that, through factual fabrication and unfounded generalisations, he cast liberalism in general, and neoliberalism in particular, as being defined by the very opposite of its actual nature. He described it as being defined by “securitisation” (code for authoritarianism) and “governmentality” (code for bureaucracy), that is to say, micromanagement of the lives of the subjects of the state. Of course, this was not remotely true, especially contrasted with the Soviet Union and China, whom Foucault saw no reason to criticise. But he was following the Marxist critique, that liberalism was the superstructure ideology of capitalism, the ultimate tyranny. Foucault muddied the water by arguing that the West and the Soviet Union were functionally identical, and that any difference of opinion on the matter was nothing more than participation in the politicisation of knowledge. His writings can largely be dismissed, since he is easily the second-most intellectually dishonest man ever to achieve a tenured post in Western academic history.

By describing everything that isn’t the total domination of economic life by either the state or some democratic cooperative as “neoliberalism”, and then construing that concept as being in essence a system of domination and exploitation and the fetishization of greed, the late-20th century Marxists created a means of doing what they have always been rather good at – arguing for socialism without arguing for socialism. No matter the situation, less regulation and less state ownership are capitalist “neoliberal”, and thereby part of an unconscious system of discipline and domination, which not only serves capital dominant power structures, but is also adjacent to fascism by way of the Pinochet connection. Thus, the neo-Marxist critique characterises every move to resist the Leninisation of society as a move motivated by corruption, hatred of the poor, and capitulation to capitalist overlords. They don’t then have to advocate for a solution, since they have defined all alternatives out of existence.

Most people opposed to “neoliberalism”, resemble each other in that they take very similar lines, even if they don’t see themselves as Marxists. Many don’t even think of themselves primarily as Marxist, but because almost all of the literature they read at university is from a first- or second-hand Marxist perspective, their understanding is based in the norms and beliefs of Marxists. This is not a matter of mere instrumental categorisation either. In the next article, I outline the moral schema that constitutes Marxist metaethics, and elucidate the extremely simple and easily distinguishable characteristics that separate a culturally Marxist thinker from any other.


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