My life was saved last year by the Churchill Hospital in Oxford, through a skilful procedure to remove a cancer from my body. Now I will need another operation, to remove my jaw from the floor. I’ve just learned what was happening at the hospital while I was being treated. On the surface, it ran smoothly. Underneath, unknown to me, was fury and tumult. Many of the staff had objected to a decision by the National Health Service to privatise the hospital’s cancer scanning. They complained that the scanners the private company was offering were less sensitive than the hospital’s own machines. Privatisation, they said, would put patients at risk. In response, as the Guardian revealed last week, NHS England threatened to sue the hospital for libel if its staff continued to criticise the decision.

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The dominant system of political thought in this country, which produced both the creeping privatisation of public health services and this astonishing attempt to stifle free speech, promised to save us from dehumanising bureaucracy. By rolling back the state, neoliberalism was supposed to have allowed autonomy and creativity to flourish. Instead, it has delivered a semi-privatised authoritarianism more oppressive than the system it replaced.

Workers find themselves enmeshed in a Kafkaesque bureaucracy, centrally controlled and micromanaged. Organisations that depend on a cooperative ethic – such as schools and hospitals – are stripped down, hectored and forced to conform to suffocating diktats. The introduction of private capital into public services – that would herald a glorious new age of choice and openness – is brutally enforced. The doctrine promises diversity and freedom but demands conformity and silence.

Much of the theory behind these transformations arises from the work of Ludwig von Mises. In his book Bureaucracy, published in 1944, he argued that there could be no accommodation between capitalism and socialism. The creation of the National Health Service in the UK, the New Deal in the US and other experiments in social democracy would lead inexorably to the bureaucratic totalitarianism of the Soviet Union and Nazi Germany.

He recognised that some state bureaucracy was inevitable; there were certain functions that could not be discharged without it. But unless the role of the state is minimised – confined to defence, security, taxation, customs and not much else – workers would be reduced to cogs “in a vast bureaucratic machine”, deprived of initiative and free will. By contrast, those who labour within an “unhampered capitalist system” are “free men”, whose liberty is guaranteed by “an economic democracy in which every penny gives a right to vote”. He forgot to add that some people, in his capitalist utopia, have more votes than others. And those votes become a source of power.

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His ideas, alongside the writings of Friedrich Hayek, Milton Friedman and other neoliberal thinkers, have been applied in this country by Margaret Thatcher, David Cameron, Theresa May and, to an alarming extent, Tony Blair. All of those have attempted to privatise or marketise public services in the name of freedom and efficiency, but they keep hitting the same snag: democracy. People want essential services to remain public, and they are right to do so.

If you hand public services to private companies, either you create a private monopoly, which can use its dominance to extract wealth and shape the system to serve its own needs – or you introduce competition, creating an incoherent, fragmented service characterised by the institutional failure you can see every day on our railways. We’re not idiots, even if we are treated as such. We know what the profit motive does to public services.

Facebook Twitter Pinterest The Amazon warehouse in Swansea – the company has patented a wristband that can track workers’ movements. Photograph: Matt Cardy/Getty Images

So successive governments decided that if they could not privatise our core services outright, they would subject them to “market discipline”. Von Mises repeatedly warned against this approach. “No reform could transform a public office into a sort of private enterprise,” he cautioned. The value of public administration “cannot be expressed in terms of money”. “Government efficiency and industrial efficiency are entirely different things.” “Intellectual work cannot be measured and valued by mechanical devices.” “You cannot ‘measure’ a doctor according to the time he employs in examining one case.” They ignored his warnings.

Their problem is that neoliberal theology, as well as seeking to roll back the state, insists that collective bargaining and other forms of worker power be eliminated (in the name of freedom, of course). So the marketisation and semi-privatisation of public services became not so much a means of pursuing efficiency as an instrument of control. Public-service workers are now subjected to a panoptical regime of monitoring and assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd. The bureaucratic quantification of public administration goes far beyond an attempt at discerning efficacy. It has become an end in itself.

Its perversities afflict all public services. Schools teach to the test, depriving children of a rounded and useful education. Hospitals manipulate waiting times, shuffling patients from one list to another. Police forces ignore some crimes, reclassify others, and persuade suspects to admit to extra offences to improve their statistics. Universities urge their researchers to write quick and superficial papers, instead of deep monographs, to maximise their scores under the research excellence framework.

As a result, public services become highly inefficient for an obvious reason: the destruction of staff morale. Skilled people, including surgeons whose training costs hundreds of thousands of pounds, resign or retire early because of the stress and misery the system causes. The leakage of talent is a far greater waste than any inefficiencies this quantomania claims to address.

New extremes in the surveillance and control of workers are not, of course, confined to the public sector. Amazon has patented a wristband that can track workers’ movements and detect the slightest deviation from protocol. Technologies are used to monitor peoples’ keystrokes, language, moods and tone of voice. Some companies have begun to experiment with the micro-chipping of their staff. As the philosopher Byung-Chul Han points out, neoliberal work practices, epitomised by the gig economy, that reclassifies workers as independent contractors, internalise exploitation. “Everyone is a self-exploiting worker in their own enterprise.”

The freedom we were promised turns out to be freedom for capital, gained at the expense of human liberty. The system neoliberalism has created is a bureaucracy that tends towards absolutism, produced in the public services by managers mimicking corporate executives, imposing inappropriate and self-defeating efficiency measures, and in the private sector by subjection to faceless technologies that can brook no argument or complaint.

Attempts to resist are met by ever more extreme methods, such as the threatened lawsuit at the Churchill Hospital. Such instruments of control crush autonomy and creativity. It is true that the Soviet bureaucracy von Mises rightly denounced reduced its workers to subjugated drones. But the system his disciples have created is heading the same way.

• George Monbiot is a Guardian columnist