How Did We Get Into This Mess?

George Monbiot (photo: James Duncan Davidson, cc licence)

Post 4 in a series on the 2016 Hay Festival

“How many of you know what neoliberalism is?”

George Monbiot began his address to an audience of perhaps 1000 people at Hay Festival with this question. I began raising my hand but, unable to see any other hands raised, I hesitated half-way up.

“Two and a half,” said Monbiot. “The anonymity of neoliberalism is its power.”

Neoliberalism  is the free-market and small government ideology, also known as economic rationalism, Thatcherism or Reaganism, that advocates:

• Privatisation: anything the government does can be done better by private firms
• Austerity: the best response to a crisis is for the government to balance its budget
• Trickle-down economics: policies that benefit the rich will help the poor
• All regulations that interfere with the freedom of the market should be removed

At Hay, Monbiot traced the history of Neoliberalism. Initially it could not gain a foothold because of the post-war success of Keynesianism, which advocates a mixed economy with a major role for government in managing business cycles. But Keynesianism ran into trouble in the mid-seventies, resulting in financial crises, and neoliberalism became the new model, implemented by Thatcher and Reagan and expanded under Clinton and Blair.

George Monbiot’s latest book

Finance markets were given their head through deregulation, public services were privatised, and the rich were given massive tax cuts. In economic terms neoliberalism is a failure – growth has been lower than during the Keynesian period, and it led to the Global Financial Crisis. But for the rich, it has been a glorious success. Putting a toll booth in front of public services enabled them to extract wealth from health and education and then pay little tax on their gains.

And so the invisible hand has invisible backers. The promotion of neoliberal ideas have been massively funded by billionaires, mainly through think tanks. The ultra-wealthy Koch brothers fund Americans for Prosperity, which set up the Tea Party.

Neoliberalism benefits big business and harms both small business and workers, yet has captured both sides of politics. Thus there is little chance of changing outcomes through voting.

Monbiot sees the vacuum on the Left as just as responsible as the neoliberal promoters for this “mess”. The Global Financial Crisis signalled the complete collapse of neoliberalism, and the Left responds with nothing except, maybe, “Let’s go back to Keynesianism.”

Richard Murphy, a prominent economist who also spoke at Hay and whose ideas were taken up by Labour Leader Jeremy Corbyn, does want to go back to a type of Keynesianism. I will cover Murphy’s ideas in a later post, but for Monbiot, the problems of the mid-seventies are still there, “and you can’t inspire people with old ideas.” His only hope is that a new political philosophy will arise, one that will, like Keynesianism and neoliberalism in the past, change the world.

What we need, he says, is an economics Apollo program.