3.5.9.1 Neoliberalism

(This is a current page, from the Patterns of Power Edition 3 book contents.  An archived copy of this page is held at http://www.patternsofpower.org/edition03/3591.htm)

The term ‘neoliberalism’ has been overused, sometimes as a synonym for capitalism.  As Kean Birch wrote, “Neoliberalism means many things”, but he has usefully contextualised and defined it:

“neoliberalism is usually associated with a number of influential thinkers, politicians, and policymakers from the last century, including Friedrich Hayek, Milton Friedman, James Buchanan, Margaret Thatcher, Ronald Reagan, and Alan Greenspan.  These neoliberals claim that the market is the most efficient and moral institution for organizing human life, meaning that it should replace all other institutions (e.g.  family, state, community, and society) as the main mechanism for creating, promoting, and maintaining social order – in particular, it should replace socialism and collectivist planning”.[1]

This book uses the above definition.  There is also a body of literature on the subject, including a “handbook of neoliberalism”.  It is an individualist set of values, which assumes that freedom from institutional constraints will benefit everybody.

Neoliberalism asserts that economic growth is maximised by having free markets in goods and services (3.3.2), labour (3.3.3) and finance (3.3.4).  It advocates minimum regulation (3.3.1), and it supports globalisation (3.4.2) and free trade (3.5.4).  Michael Sandel described it as “market triumphalism” in his fourth 2009 Reith lecture A New Politics of the Common Good, because what is determined by market forces reigns supreme over any other consideration of what best serves the common good.

Neoliberalism gives individuals the freedom to make their own economic decisions, but this is of more benefit to corporations than to the population as a whole.  There is what George Monbiot called a “problem with freedom” if it means cutting regulations that safeguard people’s quality of life, to increase corporate profits at the expense of society.

Milton Friedman is credited with giving neoliberalism the traction that it has had since the 1980s, making it an accepted doctrine among many economists and politicians.  Its proponents write about “The Unacknowledged Success of Neoliberalism, but that perspective has been robustly challenged.  Martin Jacques, for example, argues that it has failed and writes of “The death of neoliberalism.  Its perceived failure has also led to calls for “Rethinking Capitalism”, [2] possibly requiring the active participation of the State in supporting innovation.

Globalisation has been beneficial in aggregate, increasing the number of jobs available in both rich and poor countries and enabling many people to be lifted out of poverty.  It doesn’t benefit everyone, though.  In rich countries, relatively highly-paid manufacturing jobs have been lost and have been replaced by less stable and lower-paid service jobs – and the new jobs are often in different locations (3.4.3.2).  This has led to considerable suffering in some areas and, as discussed later, it is essential to have a political response to such problems (6.7.8).

Another serious criticism of neoliberalism as an effective engine of growth is that it has delivered economic instability (3.5.5).  Unregulated financial markets led to the great recession in 2007/8, and some regulation is needed to correct that weakness.

As itemised below, many people feel that an economy also needs to be regulated to deliver economic fairness (3.5.9.2) and to protect other aspects of people’s lives (3.5.9.3).

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[1] Kean Birch’s article, Neoliberalism: The Whys and Wherefores … and Future Directions, was published in Sociology Compass 9/7 (2015): 571-584, 10.1111/soc4.12277.  It defines neoliberalism and gives a comprehensive reading list of relevant material; it was available in April 2018 at https://www.academia.edu/26024978/Neoliberalism_The_whys_and_wherefores_…_and_future_directions.

[2] Mariana Mazzucato has written a book, co-edited with Michael Jacobs, called Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth.  In it, she argues that the State has a role in fostering innovation – citing past examples in health, computing and communications.  She suggests that green energy is a prime candidate for active government participation.  She gave a brief summary of her position in an interview with Lynn Parramore, entitled The failures of capitalism have led to Brexit and a Donald Trump presidency; it was published on salon.com on 24 December 2016 and was available in April 2018 at http://www.salon.com/2016/12/24/the-failures-of-capitalism-have-lead-to-brexit-and-a-trump-presidency_partner/.