Welcome back to Connected & Disaffected’s first ever lecture series: The Millennial Guide to Neoliberalism, Part 2.

Neoliberalism is one of those words that gets thrown around a lot in contemporary political discussions. It is reviled and revered in more or less equal measure but, a lot of the time, the people who so passionately attack/defend it would struggle to explain it to a newcomer.

We too were guilty of this. So Warren took it upon himself to look at the past, present and future of Neoliberalism. This week’s installment takes us right up to Reagan and Thatcher.

Part 1 of the Millennial Guide to Neoliberalism was all about what it actually is, conceptually, and what gave rise to it. You can check it out here.

Part 3 brings us into the 1980s and Neoliberal leaders like Thatcher and Reagan. Get that here.

Part 4 takes us into the 90s and the rise of the Third Way. Listen to that here .

. Part 5 brings us right up to the financial crisis — the end of the End of History. Listen now.

As ever, I am on hand to ask all the questions you might be embarrassed to ask. Raj also chimed in with some choice takes. Listen to the episode to hear the full breakdown but, just in case you need to win an argument on the internet today, here is a cheat sheet on the birth of Neoliberalism that you can copy-paste from.

Who came up with Neoliberalism?

The ur-neoliberal was Friedrich Hayek.

Hayek was an Austrian economist and is the so-called Grandfather of Neoliberalism. Hayek’s idea wasn’t another statistical model tinkering at the edges of economics. His was an all-encompassing worldview of how society should and should not be organised.

Hayek’s most influential work was called ‘The Road to Serfdom’, published at the tail-end of WWII. Hayek wanted to figure out how to halt the seemingly endless cycle of tyrannical governments rising to power, which was a fixture of human history and only seemed to be getting worse. His basic argument was that when government intervenes in the economy to achieve some idea of ‘the common good’, it was actually just pushing the minority in power’s very narrow idea of ‘the common good’. Over time this inevitably pissed off more people than it pleased, so governments had to become increasingly oppressive to maintain order. His solution was to minimize government’s powers as much as possible.

Hayek’s ideas were very unpopular until they got taken up by a different economist in the 1960s.

Milton Friedman, probably one of the two most influential economists of the 20th century. (The other was Maynard Keynes — the guy who Friedman spent most of his life attacking).

Unlike Hayek, Friedman was a technically good economist who contributed helpful models and theories to the field. The problem was he then used this platform to promote a very unhelpful philosophy built on Hayek’s radical vision.

What ideas did Friedman bring to the table?

The first is his concept of economics as an ‘objective science’.

He broke with two centuries of precedent and argued that economics should, and could, be bereft of any bias or value-judgements. To achieve this, economic modelling should aim to be as simple and focussed as possible. It would then produce cold, hard, undeniable evidence for policymakers. This idea of economics as an objective science dominates public perception of it.

It is also deeply, deeply questionable. Boiling down all human behaviour to ‘rational actors always seeking to maximize profit’ is quite obviously a mad idea, but it underpins virtually all economic theory of the 20th century. Many of the recent Nobel Prize winners in Economics have been awarded to economists who dispute this point of view (for instance: Richard Thaler, Daniel Kahneman and Elinor Ostrum).

Friedman’s second dangerous idea is something very familiar if you watch the Republican party in America.

Friedman was deeply anti-government in the neoliberal sense, which means he wasn’t quite an anarchist, but thought the state should be stripped back to just supporting free markets and maintaining law & order. If you read his work or watch his lectures, he uses clever, simple framing devices to really sell neoliberalism to the wider public. Taxation is a kind of ‘theft’. The public sector was always ‘wasteful’. Deregulation was a kind of ‘freedom’.

How did this go mainstream?

In 1962, Friedman wrote a book called Capitalism and Freedom. It went whatever the Boomer equivalent of viral is.

The book built on Hayek’s belief that free markets underpin political freedom. Challenging the era of big-state economic intervention, Friedman argued that there can never be real political dissent or exchange of ideas while key industries were owned or led by government. He also claimed that economic freedom was the best way to eradicate discrimination – where policy is shaped by biases and prejudices, the market is apathetic to people’s views or races.

This idea took the world by storm, offering a beautifully simple route to emancipating everybody. You liberalise the economy, and voila – all other forms of freedom inevitably follow. This is perhaps the most pernicious idea, because it makes Neoliberals feel really good about themselves. They’re not pushing Neoliberal policies because of a dogmatic ideology, or to please their corporate funders, or to make a killing on their own shares in business. They’re doing it because they are noble crusaders seeking to liberate all societies.

And this is all worked out great, right?

Uh huh. Just ask Michael Hobbes. Inequality has been on the rise ever since these ideas became mainstream, which has really hit Millennials hard.

There are three big flaws to his arguments:

1. Friedman focuses exclusively on government as a coercive actor, but completely ignores how the corporations and oligopolies that often emerge from free markets can be pretty coercive and dangerous themselves.

2. He also conceives of liberty only in the ‘negative’ sense, where freedom is simply the absence of coercion and barriers. He doesn’t consider ‘positive liberty’ — the ability to experience freedom. You can have a society without government interference, but if people don’t have information and capabilities and resources and opportunities, they are excluded. Is that being ‘free’?

3. And finally he also fails to recognize that free markets ultimately reflect the power structures of the society they emerge from. We as employers and consumers are plagued by misinformation, irrational decisions and discrimination. Markets don’t eradicate that, they actually reflect it and in the worst cases reinforce it.

In short, markets aren’t a deus ex machina. Nothing is. And just as pure-state socialism has well-documented failings, so does Neoliberalism.

A good rule of thumb for assessing a social and economic theory is: if it purports to solve every problem available with one simple solution, it isn’t worth the paper it’s printed on. It’s the theory equivalent of those adverts that tell you “how to lose weight with ONE SIMPLE TRICK”.

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Part 3 will be all about focusing the discussion on the politicians who implemented these big ideas. We’re going to discuss how Margaret Thatcher, Ronald Reagan and others took advantage of the 1970s economic crisis to sell Neoliberalism to rich countries. They were so successful that the ideology has captured mainstream politics on both the right and left for the last forty years.

But, as we’ve discussed many times, it looks like that is coming to an end. So what might be next?

You know the drill:

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