Why You Live in the Embrace of an Evil Economic Theory — a Short History of Neoliberalism
By: Glen Hendrix
Tags: Economy, Politics, Equality, Society, History

The Negative Effects of Neoliberalism

Neoliberalism was responsible for the slack regulations that precipitated the 2008 financial crisis. It has kept wages stagnant for the last 40 years, decreased taxes on the wealthy from 92% to 37%, and raised marginal taxes on the poor from 0% in 1977 to oftentimes 100% or more today. It has purposely linked affordable health insurance to employment and reduced health care to a pay or die arrangement for many.

It has allowed the creation of hundreds of monopolies that strip Americans of their hard-earned money with legal price gouging. It has left unions a ghost of their former selves with only 13% participation rate in America. By comparison, Sweden has 70% participation. It is responsible for the unchecked onslaught of climate change and its hordes of deniers. It has allowed the upgrade of police departments to military style weapons systems funded by stealing from innocent citizens of the United States. It has provided the political environment that allows police departments to be infiltrated by white supremacists and incorporate systemic racism.

It has successfully posited the notion of wealth inequality as a means for the free market to punish slackers and reward its most efficient players and is therefore an acceptable, if not innocuous, byproduct of normal economic activity.

Lowering of taxes has created a lack of government funds that allows adherents of neoliberalism to decry current government responsibilities such as Social Security and Medicare by saying, “See! These things are just too expensive now. We have to cut back these programs. Infrastructure? Oh, we can’t possibly afford that now.”

More importantly, it has provided a background of propaganda that has left a large portion of the population thinking that the wealthy are better than them; and that they are somehow lacking because they are not filthy rich. It has created an inherent, unconsciously ubiquitous scale of worth based on money.

This same background propaganda is responsible for the exacerbation of racial tensions, making society more malleable for the wealthy to control and manipulate for their own purposes.

What Neoliberalism Wants You to Believe

Neoliberalism is an economic theory and philosophy that emphasizes competition among consumers who are free to make choices about buying and selling in a free market environment. How circumspect they are in making those choices determines everything in their lives — whether they are winners or losers.

A believer in neoliberalism sees this as the ultimate freedom, a consummate liberty in action. They consider any perturbations in this overall process such as unions, taxes, regulations, and public services as a form of cheating, a denial of the free market’s ability to winnow the wheat from the chaff in society. There is never a consideration for natural disasters like floods, hurricanes, or pandemics. There is never a consideration for generational poverty or obvious inequalities in education.

Neoliberalism puts all the blame of poverty on the poor and exalts the rich for their wealth creation. It is judgmental by default. Why else would the poor be in such a state if not for their poor choices? Why else would the wealthy be rich if not for their wise and excellent decisions? As you might expect, if this were a generally held wisdom it would soon become a tool of the wealthy for exploiting the poor to become even more wealthy. And that is exactly what has happened to American society and much of the world in the last half of the 20th century.

It is an economic philosophy that tends toward austerity, free trade, privatization, deregulation, globalization, and minimizing taxes and government spending. An advocate of neoliberalism believes increasing wages decrease jobs, government regulations reduce the efficiency of businesses, and raising taxes kills economic growth. In a twisted caveat, it sees monopolies as a reward to the most efficient of the free market’s participants. It is an advocate of continued and compound economic growth at all costs, a killer of planets.

Neoliberalism has gone beyond a philosophy or theory for much of the conservative right wing wealthy — it has become dogma. For the rest of us, it has been taught in colleges and inculcated to all levels of society for so long that we now live and breathe a dog eat dog competitive philosophy. We wear it like a cast iron business suit. It is stifling our humanity and drags us down physically, mentally, and socially.

Origins of Neoliberalism

Where did this theory come from, and how did it get injected into the American economic system during the 1970s and 1980s?

Friedrich von Hayek was born in Vienna in 1899, to August von Hayek and Felicitas Hayek. August was a medical doctor employed by the municipal ministry of health whose passion for botany led to part-time lecturing on the subject at the University of Vienna. Felicitas inherited a sizable sum of money from her conservative, wealthy parents.

Friedrich fought in WWI, mostly as a spotter in an airplane. He was decorated for bravery and survived the 1918 pandemic. After the war he studied economics at the University of Vienna, eventually obtaining doctorates in law and political science. He spent much of his academic career at the London School of Economics and was considered a leader of the Austrian School of Economics.

In 1936, Hayek had a revelation in which free markets would become a sort of hive mind whereby knowledge of the relative scarcity of goods and services could be determined by the participants’ setting of prices through transactions. Every rational individual’s self-serving choices and purchases would, in the aggregate, automatically correct and control free markets.

This built on Adam Smith’s previous idea of the “invisible hand” in which he defined a market as a self-determining, self-correcting sphere of human activity. In no way did Adam Smith ever maintain the validity of this same economic mechanism encroaching beyond that market sphere into other aspects of the human social construct, intimating a moral repugnance at the suggestion. Friedrich Hayek had no qualms about it whatsoever.

Hayek was briefly considered a competitor of John Maynard Keynes at Cambridge, but Keyne’s General Theory of Employment, Interest and Money, published 1936, did away with that notion. The book was well received by scholars and the public, leaving Hayek in the shadows for a time.

Keynes disagreed with Adam Smith’s idea of a rapid-response, self-adjusting market that could heal its own problems. Keynes pointed out there was no mechanism that could break the cycle of an economic turn down causing a drop in demand, causing layoffs, causing further drops in demand, ad infinitum. Keynes maintained government had to intervene by directly hiring or causing to be hired more people, thus breaking the cycle. As an example of Keynesian economics in action, President Roosevelt’s New Deal certainly helped millions of Americans during the Great Depression. It never had time to prove it could fix the economy, however, before WWII made that a moot point, injecting new life into a sleeping American industrial behemoth.

In the meantime, Friedrich Hayek had written and published a book in 1944 called The Road to Serfdom in which he details his concern that government interference in economic matters can only lead to totalitarian control and the demise of individualism. It expounded on how, if the government were to do anything, it should intervene to assure markets were free to do whatever they needed to do. It called for much less regulation and taxation.

It was published in London by Routledge with limited distribution because of wartime paper shortages, but it was also published by the University of Chicago Press in the United States. It became very popular with an abridged version appearing in Reader’s Digest in 1946, exposing it to millions of readers.

In 1947, Hayek formed the Mont Pelerin Society (named for the Swiss resort its members convened at) to disseminate and promote the idea of less government intervention in free markets. He attracted the backing of wealthy capitalists looking for philosophical tools justifying free and unfettered markets. In 1950, he moved to a professorship at the University of Chicago, staying until 1962 when he moved to Germany where he was a professor at the University of Freiburg until his retirement in 1968.

The 1950s and 1960s were considered the Golden Age of Capitalism with Keynesian economics holding sway. But in the late 60s, the corporate capitalist class in the U.S. was feeling threatened politically as business took a backseat to healthcare reforms, the expansion of welfare, civil rights laws, and the Voting Rights Act. The 70s saw the introduction of the EPA, OSHA, and other regulatory agencies; and so they felt threatened economically as well. The 70s also brought an economic situation the Keynesian school of thought could not deal with — stagflation. Wages were stagnant while inflation ran rampant. Milton Friedman, one of Hayek’s neoliberal disciples at the University of Chicago was ready with a solution of deregulating the economy and allowing the free market to correct itself, which it did.



The event that may have tipped the ball back into the capitalists’ court while dealing a blow to Keynesian economics was a memo written by Lewis Franklin Powell in 1971, just before he was nominated to sit on the U.S. Supreme Court. This memo was directed to a friend of Powell’s at the U.S. Chamber of Commerce — Eugene Sydnor who chaired the education committee of the organization. In this memo, Powell suggested businesses begin using the courts as “social, economic and political” instruments to be more aggressive in molding politics and the law into a more business friendly environment. It spelled out specifics in how business should go on the offensive to combat the “radicals” in society — intellectuals, journalists, consumerists, “leftists”, and environmentalists. He suggested the establishment of think tanks, media platforms, lobbying, campaign financing, advertising, and stacking the deck with appointed judges in the court system. This memo was circulated to all the heads of major corporations.

Perhaps that memo caused several CEOs to harken back to Friedrich Hayek’s neoliberal notions, take advantage of Milton Friedman’s recent successes, and decide now was the time to take action. Whatever the reason, conservative think tanks began to sprout like mushrooms after rain. Funded by energy companies and the likes of the Koch brothers , they were meant to add an intellectual status to the pro-business propaganda they produced.

They had names like Heritage Foundation, State Policy Network, Heartland Institute, Manhattan Institute for Policy Research, Texas Public Policy Foundation, Pacific Research Institute, Independent Women’s Forum, Fraser Institute, George C. Marshall Institute, Capital Research Center, Cato Institute, Federalist Society, Mercatus Center, Institute for Humane Studies, Institute for Justice, Institute for Energy Research, American Enterprise Institute, Foundation for Accountability and Civic Trust, Aspen Institute, Ohline Foundation, FreedomWorks, Americans for Prosperity, and Citizens for the Environment. To name a few.

Professorships were funded by business to teach the principles of neoliberalism at colleges.

Just like Powell suggested, media platforms were created to distribute the products of these think tanks; and talk radio began to come into the limelight. Lobbying campaigns were created to sway politicians and advertising campaigns created to “educate” the public.

One of the products of the think tank Heritage Foundation was the Mandate for Leadership, a 20 volume, 3,000 page tome published in 1981, containing thousands of individual suggestions for taking the federal government down a more conservative path — a basic script of neoliberalism in practice. It suggested halting affirmative action policies, raising the military budget $35 billion dollars a year for the next five years, cutting taxes across the board by 10%, developing a new strategic bomber, and introducing a line-item veto power for the President.

Ronald Reagan was aware of the Heritage Foundation project and had given his tacit approval before being elected. At his first cabinet meeting copies of Mandate were distributed to all attendees. The authors of Mandate for Leadership claimed 60% of its 2000 proposals had been implemented by the end of Reagan’s first year in office.

Margaret Thatcher had been elected Prime Minister in 1979. She still had her copy of Road to Serfdom by Friedrich Hayek, and he was her favorite economist. So began the reign of neoliberalism in our world: quashing of trade unions, tax cuts for the rich, privatization of public services, and deregulation. All Keynesians were thrown out of the International Monetary Fund, the World Bank, and the World Trade Organization; and these organizations were then used to impose neoliberal policies on the rest of the world.

The icing on the cake was the 2010 Supreme Court “Citizens United” decision that gave corporations (and unions) the right to spend unlimited amounts of money for the election of a political candidate. This was a very neoliberal decision. It allowed the Koch brothers and their associates to ramp up their campaigns to control the government. They funded the Tea Party. They were instrumental in totally eliminating moderate Republicans from Congress. They were able to kill a carbon control measure in the Senate after it was passed by Congress.

The Republican controlled Senate is still directing Trump to appoint judges as fast as possible just as Lewis Franklin Powell said to do in his memo of 1971. Though flawed and not the Koch family’s choice of candidate, Trump is still a tool of a very neoliberal influenced Republican Party. I should point out that much of the Democratic Party has drunk the Kool Aid on neoliberalism as well, but not all democratic members of Congress are on board.

The COVID-19 pandemic has exposed the problem of neglecting safety nets and basic human rights to medical care to be able to afford tax cuts for the rich. As of September 12, 2020, thirty million people are out of work and running out of unemployment. Nearly 200,000 people are dead. While much of it is the fault of the current administration, because of entrenched neoliberal policies there is no suitable social mechanism to correct or alleviate these problems. Then there is the stagnation of wages, the systemic racism, the wealth inequality, the crumbling of infrastructure, and the unchecked business monopolies tearing apart the fabric of existence for 90% of Americans. When will we say “enough is enough?”

In Conclusion

How do we wind up this discussion of neoliberalism? Let us perform a thought exercise. Let’s substitute ‘genetics’ for ‘wealth’ in neoliberalism’s implied equation for determining whether a person is superior or inferior. Now it becomes obvious that you have a tool for implementing fascism. Nazism, in fact. Let me be clear about this. If you substitute any human characteristic or attribute or external value into a generalized and commonly used judgmental equation involving people you greatly increase the risk for fascism. It should simply not be done.

We, as individual human beings, have an intrinsic value beyond any spreadsheet or calculus of worldly assets. We should be revered for our simple existence rather than how much money we have, or the color of our skin, or our religion, or our physical or mental condition.

Our government has a duty to protect all of us based on our humanity, not our checkbook or race or origin. It has failed abysmally. Neoliberals in government and industry are making a mockery of democracy and capitalism and America in their idolatrous worship of wealth and power in the name of free market enterprise. We must expose this blasphemy for what it is, an affront to all things good about humanity, and a tool for the wealthy to stigmatize and exploit the rest of us.