“The two necessary words to describe the dominant economic “regime” of the past 35 years” – William R. Neil
It’s hard not to notice, during the American Presidential election drama, that despite all the debates and speeches, and multiple candidates, the terms “Neoliberalism” and “austerity” have yet to be employed, much less explained, these being the two necessary words to describe the dominant economic “regime” of the past 35 years. And this despite the fact that most observers recognize that a “populist revolt” driven by economic unhappiness is underway via the campaigns of Donald Trump and Bernie Sanders. With Trump, of course, we are getting much more, the uglier side of American populism: racism, xenophobia and misogyny, at least; the culture wars at a higher pitch.
Yet when Trump commented on the violence which canceled his Chicago rally on the evening of March 11th, he stated that the underlying driver of his supporters’ anger is economic distress, not the ugly cultural prejudices. The diagnoses for the root cause of this anger thus lie at the heart of the proposed solutions. For students of the Great Depression, this will sound very familiar. That is because, despite many diversions and sub-currents, we are really arguing about a renewed New Deal versus an ever more purified laissez-faire, the nineteenth century term for keeping government out of markets – once those markets had been constructed. “Interventions”, however, as we will see, are still required, because no one, left or right, can live with the brutalities of the workings of “free markets” except as they exist in the fantasyland of the American Right.
Americans have never been known to be systematic thinkers about policy matters, least of all in an election year, but still, it is a remarkable thing not to be able to name in public forums the ideas which have ruled the economics profession for decades now, and therefore the policy options of elected officials who turn to economists for guidance. Barry Goldwater, renowned, if not done in, for his candor, had no difficulty naming the system he opposed in his acceptance speech in San Francisco, 1964, or in his ghostwritten book, the Conscience of a Conservative: it was liberalism in all its forms, but especially its interventions into private markets – Keynesianism. For Goldwater, that included federal Civil Rights legislation and even Society Security.
Therefore, some clarification is called for when deploying these two terms, or the Market Fundamentalism/Market Utopianism others have chosen, myself included, to more polemically describe the dominant economic orthodoxy of our time.
By Neoliberalism it is meant the revival of “classical economics” which first arose in the late 18th and early 19th centuries in England, with the founders’ famous names living on into our own time: Smith, Ricardo, Townsend, Malthus, Mill and Bentham and a few others. Early economic writers tended to reach into the world of biology, of Nature, for their metaphors and analogies, and these excursions had two main tendencies: to cite nature’s cooperative features, or alternatively, its tooth and claw brutalities, which was Malthus’ grim legacy, one which we have not fully shaken to this day. Continuing this tradition, classical economics later flirted seriously with Social Darwinism (see the influence of William Graham Sumner in the U.S. and Herbert Spencer in England), almost becoming engaged to it, and then underwent the “micro” revolution of marginal costs in the late 19th century as the profession strained for its “scientific” laurels.
David Harvey, the prolific, polymath Marxist writer, links the term Neoliberal to the later Victorian economists – Alfred Marshall, William Jevons and Leon Walras – who succeeded their earlier classical colleagues from the first decades of the 19th century. But the realities of the past 30 years in America leads one back to the primal cruelties described by Karl Polanyi in those early industrial days, in his masterpiece The Great Transformation, and the religious intensity of the first classicals, not the later Victorian ones, those who worked in an era when life for workers was supposed to have gotten much better, although the London of those better days still horrified savvy American observers like Jane Addams of the Settlement House movement.
Neoliberalism was later greatly influenced by the conservative work – the defense of markets against governmental interventions – of Friedrich von Hayek and Ludwig von Mises (The preference here is to keep the “von” in the names: it makes them sound more sinister…) in the 1920’s and 1930’s, and Milton Friedman in the 1970’s, thinking which eventually eclipsed the Keynesian “revolution” of the 1930’s, and its demand-labor focused “macro” policies and accompanying federal fiscal interventions. Friedman’s great debates with John Kenneth Galbraith in the 1970’s usefully date the decline of Keynesianism for the general public, and the rise of “supply-side” economics: keeping entrepreneurs happy (and hopefully, inventive) through tax breaks without end. Many of us recall the linking of justice in-the-law with justice in-the- economy, courtesy of the old Smith Barney television advertisements from the 1980’s, starring John Houseman from the movie The Paper Chase: these noble stock brokers “make money the old fashioned way, they earn it.” Decided British accent too, he had.
The “liberalism” part of Neoliberalism is confusing to the average citizen thinking about the modern political spectrum, since Neoliberalism is most certainly a conservative doctrine aimed at undermining every intellectual pillar of Keynesian true “liberals,” Social Democrats, and Socialists of all stripes. In its formative years of 1790-1840, liberalism and its liberal economists were hell-bent on overturning the last vestiges of late feudalism, then mercantilism, which guided the treatment of the agricultural workforce in rural England. That workforce was about to be “conscripted”, under threat of starvation, as labor in the new industrial mills of the English Midlands, the infamous “Satanic Mills”. In this sense these economists were “liberal” reformers, urging dramatic individualism and heroic entrepreneurship upon society, to free economic activity from the last ethical restraints which Judeo-Christian morality had insisted upon. Ironically for the secular left of the 21st century, those biblical strictures, against usury, for example, are looking better and better as credit card interest rates soar between 18-25%, the rates being even higher for the notorious “pay day loans,” the last borrowing resort for the poorest in the workforce. However, the words “freedom” and economic “liberty” do not explain much in the “abstract”: historical eras and context text tell us much more about what they meant, the impacts for different parts of society.
And this is where the term “Market Fundamentalism” or Market Utopianism comes in. Karl Polanyi (1886-1964), in his magisterial work from 1944, The Great Transformation, explains that the English economy of those years, 1790-1840, was the landscape for the first great attempt in human history to consciously construct all-embracing markets for land, labor and money, to turn these many-faceted features of traditional human economic life into pure commodities, thus yanking them from their more organic historical connections to other, older governing values in traditional societies.