Supposed to be Confused

“To allow the market mechanism to be sole director of the fate of human beings and their natural environment…would result in the demolition of society.”
Karl Polanyi

The enormous degree of confusion surrounding the term “neo-liberal” is due at least partially to the fact that accepted definitions have been abandoned, expanded and in some cases purposefully subverted making rational discourse an exercise in linguistic gymnastics. The best initial step is to distinguish between the philosophical meaning of liberalism as derived from the historical period known as the Enlightenment and the liberalism of economic theory, which share certain characteristics but certainly not all. It is then necessary to separate this classic definition of philosophical liberalism from its modern usage and then to differentiate classic economic liberalism from its bastard progeny, neo-liberalism.

Informed by such thinkers as Locke, Kant, and Jefferson as well as the slogans of the French Revolution, classic political and philosophical liberalism embraced the concepts of individual liberty (including freedom of speech, assembly, publication) and constitutional law based on the “natural rights of man.” In opposition to Monarchy and the divine right of Kings legitimized by the Church, liberalism advanced freely elected governments and representative assemblies, rule of law and a distrust of dictators or absolute rule. Liberals felt State and society should be informed by values of reason, public debate, education, science and the improvability of the human condition. Liberalism also contained the idea that democratic values had Universal Applicability.

Classical liberal economics then springs from the work primarily of Adam Smith who saw the mercantilist imperial structure of the Monarchy as enriching privileged elites and sought to impose equality through free markets and free trade deriving from these expanded freedoms of the new citizen in the new state. He and others advocated the abolition of government intervention in economic matters, claiming “the invisible hand” of the market, unfettered by restrictions, barriers or guidance would be the most efficient way to allocate resources and distribute goods and labor.

Neo-liberalism is a recent modern economic philosophy which retains the word free as used by the classic economic liberals and applies it disingenuously to a system controlled by powerful agents of global finance and production backed by powerful international development lending institutions and enforced by powerful state actors. The term “liberal” is simply a propagandistic tool to draw attention away from what in reality is a system lacking democratic processes or accountability. The theoretical underpinnings of this ploy are derived from the work of Fredrick von Hayeck and his disciple Milton Friedman and its profound effects have spread beyond the field of economics into politics and philosophy. Invigorated by a deep conservatism it rests on a platform of a Hobbesian view of nature, the War of All against All where individual agents are pitted against each other in a battle for survival. The modern form of neo-liberal economics is in fact a return to mercantilism serving international monopoly capitalism. It has cannibalized the structures established by the post World War II Bretton –Woods Agreements such as the International Monetary Fund and World Bank, which were ostensibly set up to stabilize the world economy, rationalize its currencies, work towards re-construction and development by opening markets, resources and labor to US capital. Expropriating the “freedom” rhetoric of classic economic liberalism (free-trade, free-markets etc), the neo-liberal in fact uses State power and these US controlled international financial institutions to forcibly pry open markets and facilitate capital penetration by demands on debtor nations (markets). These imposed “structural adjustments”, known commonly under the rubric of The Washington Consensus, include: production for export, removal of import controls, privatization of public services and energy resources, financial deregulation, and dismantling labor unions. They are opposed to state –led development policies of social democracies such as economic nationalism (other than US) import substituting industrialization (other thanUS), subsidies (other than US) tarrifs (other than US) and protection (other than US). The motto then is: Whats good for the goose is not necessarily good for the gander.

Contradictions abound. Social conservatives like Hayeck, Ronald Reagan and Margaret Thatcher considered themselves economic liberals. Franklin Roosevelt, adopting Keynesian welfare policies and state economic intervention called himself a liberal to avoid the label of socialist yet the socialist labor movement was dedicated to Enlightenment ideals. In the US, liberal economics is usually referred to as “economic conservatism” or “free trade ideology.” Mid twentieth century political liberalism began to define itself in opposition to totalitarianism while economic neo-liberals are seen as forcing a totalitarian acceptance of capitalism. The anti-democratic, corporatist dictator Augusto Pinochet was the poster boy for Chicago School neo-liberal economic development yet Chicago school theorists believed restricting economic freedom restricts civil and political freedoms. They never went to Chile I guess. They saw socialism, fascism, communism and Nazism as authoritarian, totalitarian equals.

Lurking underneath neo-liberal economic theory is a radical philosophical movement with a decidedly illiberal approach to social development but I will leave that for later.