We Have Never Been Neoliberal

A Manifesto for a Doomed Youth

John Hunt Publishing Ltd.

Contents

Neoliberalism in Retrospect

Introduction

Having outlined the aim and structure of this book in the introductory chapter, I'm going to start the substantive chapters by looking at neoliberalism in some depth, something which, strangely enough, is rarely done by critics, with several exceptions as will become clear below. Aside from the glaring title of the book, the previous chapter should have indicated that I'm taking a critical look at neoliberalism as a concept we use all-too-freely on the left to define and describe a range of things we don't like, whether it is philosophical worldviews, government policies or political-economic change.

In this chapter, then, I'm going to delve into the dingy darkness from which neoliberalism rose and has yet to go back to. As a result, I'm probably going to go into more depth than would be usual in this sort of book; the reason I'm doing this is because I think it's important to get a good grasp of what neoliberals think themselves, rather than rely on second-hand criticism. Through this examination of the intellectual histories of neoliberalism – or "neoliberalisms" – I hope to highlight some of the ambiguities and contradictions that exist when we talk about neoliberal-this or neoliberal-that. Thus my purpose is to problematize the very notion that we can even identify one thing as neoliberal or neoliberal-like from the morass.

After outlining one critical take of neoliberalism drawn from the work of Michel Foucault, I then consider neoliberalism as a contested rationality – I should really hold up my hands here and admit that I've probably played fast and loose with the term in my time. Here, though, I highlight the difference between critics of neoliberalism and the supposed neoliberals themselves. Why is there such a difference between the two? What implications does this have? My main point is that critics have allowed neoliberals to weasel out of admitting their culpability for the effects of neoliberalism because they can deny being neoliberal.

What is Neoliberalism I: Governmentality

It is probably good to start with one of the earliest writers about neoliberalism, Michel Foucault. He presented his ideas in a series of lectures at the College de France called "The Birth of Biopolitics" in 1979 – these lectures were not published in English until much later but have still proved to be highly influential. In them he 'excavates' the emergence of neoliberalism, although he does so in his contemporary political context (i.e. the 1970s). According to Thomas Lemke, who has written extensively about Foucault's concept of biopolitics, what Foucault was trying to do was link the "study of the technologies of power ... [with] an analysis of the political rationality underpinning them" (p.191).These two things constitute governmentality; the way that governments try to mould their citizens into 'productive members of society'. What this approach enables Foucault to do is explore the political rationalities behind the technologies of power that shape our behaviour and actions. What Foucault identifies is a difference between the ideas underpinning the German and the Chicago schools of neoliberalism and how these lead to different political technologies (e.g. laws, regulations, policies, etc.). For example, the former promotes state intervention to ensure market competition, while the latter promotes the downloading of state responsibilities onto individuals to force them to compete in (free) markets. Either way, what drives these changes is a rationality based on promoting market competition.

That last point is important to remember. According to Foucault, neoliberalism is characterized by a distinct attitude to monopoly; neoliberals view it as "an archaic phenomenon and a phenomenon of [state] intervention" (p.135). For neoliberals like Ludwig von Mises and Wilhelm Ropke, monopoly is particularly problematic because "it acts on prices, that is to say, on the regulatory mechanism of the economy" (p.136). What this legitimates is the introduction of "an institutional framework ... to prevent either individuals or public authorities intervening to create a monopoly" (p.137). While Foucault highlights this fear of monopoly in the Austrian and German schools of neoliberalism, he pays less attention to monopoly when it comes to what he calls American neoliberalism – basically, the 'second' Chicago school. I've outlined the differences between these various 'schools' of neoliberalism below. Why all this matters will become clearer, hopefully, when I discuss the changing attitude of neoliberals to corporate monopoly in the last third of the 20century (see also Chapter 3).

Returning to Foucault, he sees markets as technologies of power and neoliberalism as the rationality that underpins them. In both the German and Chicago schools there is an emphasis on promoting and strengthening competitive markets in order to stop totalitarianism (or whatever else they find reprehensible); where these schools differ is in how this goal is achieved and the ways to achieve it. Thus they share the same rationality but differ in terms of the technologies that underpin it. Perhaps the most significant difference is that the German school is built on the assumption that there is a difference between society and economy, while the Chicago school – at least in its later guise – is most definitely not. In fact, the second Chicago school (see Box 1.1 below) is based on a much starker and evangelical attempt to spread economic assumptions to new areas of substantive research (e.g. the law), other disciplines (e.g. sociology) and individual subjectivities (e.g. human capital theory). A recent article by Edward Nik-Khah and Robert van Horn makes this point much clearer through an historical analysis of the aims of key (second) Chicago school economists like Aaron Director and George Stigler.

Obviously what I've written here is bound to have done a major disservice to the intricacies of Foucault's thought, but since many people have written whole books about it I don't feel the need, nor do I have the expertise, to do much more than sketch some interesting aspects of his analysis. I would recommend the work of Thomas Lemke, Nikolas Rose and Mitchell Dean for further reading. What I want to stress here, and you'll understand why this is important as you keep reading, is that Foucault had a rather static view of neoliberalism – he distinguished between German and American versions but didn't go into their intellectual evolution. Thinking about how neoliberal ideas (and therefore rationalities) have changed is important because we have to understand how and why attitudes to things like corporate monopoly changed over time, which can lead to contradictory positions between early and later neoliberal thinkers.

Neoliberalism as Contested Rationality

I've been writing about "neoliberalism" for several years now – again, apologies for the scare quotes but as you read it will become evident why I have put them there. Because of this, it's not easy for me to break down the concept of neoliberalism into constituent parts that are clear and unambiguous. It's difficult to recall when I first heard the term, but it was probably when I was at university in the late 1990s. It was not the most popular term at that time, for sure; others like globalization were much more in vogue, especially in the social sciences. So it wasn't until the early-2000s that I really began to engage systematically with neoliberalism as a concept beyond a mere signifier of everything bad with the world. Since then I've used the term quite frequently when writing about specific policies, processes and perspectives that have dominated our political economies since the late 1970s.

As I've mentioned already, the more I've written about neoliberalism the less sure I've become about what it actually is or means. I increasingly worry that it has become a rather fuzzy and amorphous term that can be applied to anything I look at, if only I massage the theory enough or squeeze the round peg of reality through the square hole of the analytical concept. Clearly others reject the term outright as too ideological – a term used by the left to bash anything they don't like – as well as analytically useless – see, for example, Clive Barnett's critical arguments about how neoliberalism is used. In popular debates, moreover, it has become hopelessly entangled with other terms like conservative, neoconservative, libertarian, New Right, free marketer, Thatcherite, Reaganite, Washington Consensus, etc., to the extent that it is sometimes hard to tell what people are talking or writing about when they refer to 'neoliberal' or 'neoliberalism'.

One example of this entanglement is Naomi Klein's 2007 The Shock Doctrine. Early on in the book she claims that these different perspectives (e.g. neoliberalism, conservatism, etc.) are equivalent because they "share a commitment to the policy trinity – the elimination of the public sphere, total liberation of corporations and skeletal social spending" (p.17). Although she specifically does not call this neoliberalism, preferring the term Chicago School (itself a problematic shorthand for neoliberalism), she does conflate a range of different political, theoretical and ethical perspectives and arguments. This is not to say that Klein doesn't provide some important insights in Shock Doctrine, far from it. She highlights the fact that while free markets are pushed as the solution to all social ills, what we tend to end up with is "the rise of corporatism" (p.18) – that is, corporate power, but unlike other forms of corporatism it's delivered on the back of violence, terror and misery (i.e. shock). I will come back to some of these issues in Chapter 2 when I talk about the rise and dominance of corporations and how this contradicts many (early) neoliberal tenets. For now, though, it is enough to highlight the frequent conflation of concepts in popular debates.

Whether or not neoliberalism is an adequate term or concept might simply be beside the point. What we are trying to define needs a term we can use to describe it, so why not use neoliberal? Funnily enough, supposed neoliberals (e.g. Milton Friedman, Alan Greenspan, etc.) don't describe themselves using these terms – in recent memory at least. For example, even though Milton Friedman wrote an essay in 1951 called "Neoliberalism and its prospects", according to Daniel Stedman Jones at least he then rarely referred to the term afterwards. More importantly perhaps, Friedman changed his views considerably from those in that essay during the following decade. Moreover, in his recent book The Great Persuasion, Angus Burgin (pp.72-3) claims that there was significant debate about what 'neoliberals' wanted to call themselves and their program at the Colloque Walter Lippmannin 1938 – the founding event of neoliberalism which I discuss below – and "neo-liberal" was suggested but largely rejected by the participants. It is interesting to note this discrepancy between self-and external identifications of neoliberals because it raises the question of whether neoliberals recognize themselves as such in the characterizations made of them by others, especially critics from the left, and whether these critical characterizations have changed so much over time that they have mutated beyond recognition and, hence, usefulness.

A History of Neoliberal Rationality

A number of scholars, who I'll come back to later in the book, have argued that there are phases or periods of neoliberalism; this raises the important point that neoliberalism has evolved over time and, consequently, it is unlikely to be the same now as it was when it first emerged. Its origins are commonly traced back to the Colloque Walter Lippmann held in Paris in 1938. It was at this event that the term "neo-liberalism" was supposedly coined; it was meant to refer to a rejuvenated liberalism or laissez-faire. There are several accounts of this meeting, including pretty detailed ones by the likes of Francois Denord, Jamie Peck and Angus Burgin, so I'm not going to repeat any of it here.

What I do want to point out, however, is that there are antecedents to this Paris meeting which are interesting in themselves. In an unpublished and undated paper, Dag Einar Thorsen and Amund Lie point out that "neo-liberalism" was a term used much earlier than the 1930s. In fact what Thorsen and Lie highlight is that the Italian economist Charles Gide used the term in an 1898 article in The Economic Journal to refer to the work of Italian economist Maffeo Pantaleoni. Here I'm going to quote a rather long passage from this article in which Gide refers to Pantaleoni and the "neo-liberal school" as promoting:

"This hedonistic world is that in which free competition will reign absolutely; where all monopoly by right or of fact will be abolished; where every individual will be conversant with his true interests, and as well equipped as any one else to fight for them; where everything will be carried on by genuinely free contract, in which each contracting party will weigh in a subjective balance, infallibly exact, the final utility of the object to be disposed of and of the object to be acquired,-a bargaining where neither violence, nor fraud, nor lies, nor ignorance, nor dependence on others, nor any foreign disturbing element whatever-for instance the miserable preoccupation as to whether there's anything-for supper-will come in to upset so delicate an operation: a world where the law of supply and demand will bring about the maximum of utility for both individual and society, and will always send back the barometric needle, at once and without friction, to "set fair" – I mean to the fair price" (p.494-5).

Pantaleoni was an Italian economists and a strong proponent of neoclassical economics; he was also a supporter of early Italian fascism, as were other Italian economists like Luigi Einaudi who founded the Bocconi School of economics – forerunner of public choice theories – and who became governor of the Bank of Italy and then Italian president after World War 2 (WW2).Both Pantaleoni and Einaudi supported the early economic policies of Benito Mussolini, who started out by promoting the return of laissez-faire through privatization as well as tax and spending cuts – later, Einaudi criticized the fascist government after it turned towards corporatism in the mid-1920s. This early Italian school of neoliberal thought is important because it influenced the later work of James Buchanan from the Virginia School of neoliberalism, especially the work on public choice theory (see Figure 1.1). Unfortunately there is little information about people like Pantaleoni in English so I can only develop this discussion so far. One source I did find was Peter Groenewegen in the book Italian Economists of the Twentieth Century edited by Ferdinando Meacci. The picture painted of Pantaleoni by Groenewegen is very much as a supporter of free markets – and early fascism – building on utilitarian foundations (hence "hedonistic world" comment by Gide) as well as mentor and teacher of important Italian economists like Vilfred Pareto. What is interesting to note is that Pantaleoni's support for early fascism shows how fascism and free markets are very much compatible; one particular example is the privatization of state-owned enterprises in Italy.

At the same time as it might be possible to identify an early Italian School of neoliberal thought, it is much easier to identify the Austrian, British, German and American schools as outlines in Figure 1.1. All these schools, in some way or another, arose out of the marginalist revolution in economics in the late nineteenth century. For example, the Austrian school descended directly from the work of Carl Menger, while the more amorphous British school can also be traced to Menger and William Stanley Jevons through people like Lionel Robbins, as well as to the British liberal perspective through people like Edward Cannan.

These intellectual roots share a common break with classical political economy and especially the identification of objective value premised by the labour theory of value which stretched back through thinkers like Karl Marx, David Ricardo and Adam Smith. According to Alexander Shand and George Shackle, for example, subjectivists like Menger and his adherents "argued that value is not a property inherent in goods but constitutes a relationship between appraising minds and object appraised". This explains why they (and later neoliberal thinkers who they influenced) placed such an emphasis on markets; from this marginalist perspective, markets provide the only mechanism to determine and coordinate all the subjective value judgements humans make.