The National

June 6th, 2016

... and an academic weighs in on the topic

WRITING in Saturday’s National (Fry Will Contribute Common Sense and Clear Thinking), Jim Walker writes: “As an economist, I have no clue what a neoliberal is.” In Jim’s view we should therefore stop using the term, because “there is no such thing and you don’t have a clue how to define it.” Actually, there is and I can.

The term neoliberalism can be used in three ways. First, it is an ideology which emerged in Central Europe during the 1930s in opposition to what was mistakenly called “socialism” (ie state planning and ownership) and which later migrated to the economics department at the University of Chicago. The adherents of this conception of neoliberalism actually adopted the term as a self-description; indeed, Milton Friedman wrote a paper in 1951 called Neoliberalism and Its Prospects.

The difference between the neoliberals and more conventional supporters of neo-classical economics was that the former did not believe that the market order they desired was a spontaneous result of human activity, but one which would have to be brought into being by the state. The notion that neoliberalism is about markets as opposed to the state is simply a myth – it is rather about changing what the state does.

Second, neoliberalism is also the strategy adopted by the alliance of state managers, politicians and employers which began to emerge from the mid-to late-1970s, first in Chile, the UK and the USA. This responded to the return of economic crisis in 1973 by seeking to shift the balance of power in the workplace from labour to capital, in the first instance by weakening the trade unions through artificially raising unemployment levels, attacking key groups of workers (miners in the UK, air-traffic controllers in the US), and moving production to greenfield, non-union sites (the “M4 Corridor” in the UK, the “Sunbelt” in the US).

The strategy was not, however, the implementation of a master plan derived from neoliberal ideology: it was largely improvised. But once Keynesianism and other forms of state capitalism had proved themselves no longer able to raise or even maintain the rate of profit, ruling classes had a limited set of options. It is therefore unsurprising that most arrived at the same set of responses – privatisation, outsourcing, deregulation, unrestricted capital flows, indirect rather than direct taxation, and all the rest. The ideologists could claim this as their work, but, without successful resistance, it would almost certainly have happened even if Friedman and co had never written a word.

Finally, neoliberalism is the entire period in the history of capitalism since this strategy began to be applied in the 1970s. There have of course been variations in the regime: the “social” neoliberalism of Blair (or Sturgeon) is different in many ways from the “vanguard” neoliberalism of Thatcher and Reagan, not least in relation to identity politics, but the underlying economic doctrines have remained remarkably consistent.

The problem with Jim’s argument is that it assumes there are underlying economic “laws” which are eternally true for all of human history. On the contrary, every single statement he makes has to be prefaced by the words “under capitalism”. Ironically, Von Hayek, one of the forerunners of neoliberal ideology, knew better than this. He argued in several places that for most of human history we sought cooperation rather than competition – and that this attitude had to be stamped out of us if capitalism was ever to be truly secure. Neoliberalism is an attempt to create a world in which all human relationships are forced to conform to a model of economic competition; but what can be created can also be destroyed – and as far as neoliberalism is concerned, the sooner the better.

Neil Davidson, School of Social and Political Science

University of Glasgow