Neoliberalism and How We Got Here

Neoliberalism and How We Got Here

Mark Dieffenbacher

“The neoliberalism package is specifically designed to undercut democracy” (Noam Chomsky, 2014)

    Neoliberalism is an economic geopolitical philosophy that emphasizes privatization, deregulation in the interest of corporations, and deep cuts to social spending.   It a system that has a “by the market and for the market” approach.    Proponents preach of the wonderful, fair, and just powers of the free market.

    The neoliberal approach was formulated  at the University of Chicago by economist and professor Milton Friedman in the early part of the last half of the 20th century.  Friedman was adamantly opposed to the New Deal policies of Franklin Delano Roosevelt, which were an extension of the doctrines of economist John Maynard Keynes.  Keynes had advocated, conversely to Friedman, for strong government intervention and corporate regulation to temper the rampant inequality and cyclical recessions that unfettered capitalism produces.  He advocated for programs that leveled the economic inequality and cyclical instability inherent in a capitalist system.   These policies, implemented in response to the Great Depression, produced a uniquely vibrant middle class in the US.

Income Inequality Trends Europe Versus US 1900-2010

This graph is taken from Capital In The 21st Century by Thomas Piketty

Relative Industry Shares of corporate profits in US Economy. 1950 -2001.   This chart illustrates the steep decline of manufacturing in the designated period and the sharp rise of the FIRE (Finance, Insurance, Real Estate) sector, also indicated in the following chart.

   Friedman’s policies were readily welcomed by corporations and Republican politicians and bureaucrats in the early 1970’s, most notably Henry Kissinger, then Secretary of State. It was impossible to set these policies into practice as the Democratic party still held dear the policies and institutions originated by FDR, including the Social Security system and welfare.  Over the past 45 years, the US government has been able to gradually cut these programs by using globalization, forcing millions of American workers in the field of manufacturing to compete with workers from countries that pay much, much lower wages.  The weakening of campaign finance laws over time also allowed corporate money and lobbying to overwhelm the US political system, making US politicians mere courtiers to corporate interests.  The Democratic party became subservient to corporate money and loosened its adherence to FDR-style public policies.  The membership of unions was devastated.  Holding the upper hand, the corporations, in collusion with the US government, drove down pay and benefits.  Workers in the US saw manufacturing jobs leave the country by the millions.  Social programs have been severely reduced and privatized.  Austerity, or cutting government spending for the working class, is the rule. The wealthy, on the other hand, enjoy lavish perks from the government, including, quite dangerously, exorbitant military spending.   

    Neoliberalism is not just the norm in the US, but also throughout most of the western world.  Bureaucratic institutions such as the European Union and International Monetary Fund, which have little association with the working classes, impose austerity behind closed doors.  A myriad of elite international institutions stretching from the ivy league universities to the International Monetary Fund collude to create a worldwide ruling class.  The economy has become financialized, with the Finance, Insurance, and Real Estate (FIRE) sector assuming dominance in the economy and deeply exacerbating inequality by creating wild wealth on one end and a vast debtor class on the other.  

    Of course, the general public becomes enraged with its ever-declining living standards.  The age-old ploy of using scapegoats, such as immigrants, minorities and even the government itself, is utilized to divide the populace.  Politicians, doing the bidding of their corporate masters, egg on this sentiment in order to deflect public ire from the true corporate culprits.  The western world, riddled with austerity and the results of unending wars and the present danger of climate change for which it is largely responsible, is in deep crisis.  Donald Trump played on the angst of the US public, using a combination of scapegoating, white nationalism, and narrow but accurate economic critiques of the system to successfully claim the US presidency.   Interestingly, with the election of Trump as US President and the subsequent cabinet appointments of corporate CEO’s and board members such as Rex Tillerson (Exxon), Betsy DeVos (Amway), and Ben Carson (Costco) to name but a few, the courtier class has now been supplanted at the top of the executive branch by the corporate masters themselves. Indeed, the middleman has been eliminated.   

Paul Street, “They Rule:  The 1% v. Democracy”

Dr. Gus Bagakis, “Seeing Through the System: The Invisible Class Struggle in America”

Greta R. Krippner, “The Financialization of the American Economy”