Neoliberalism is corporatism and naked capitalism without welfare

Friedrich Hayek the father of Neoliberalism
Contributed by Joe Montero

Neoliberalism thought by many to be one of the great scourges of the modern era.It is often defined as governments cutting back expenditure and handing out to big business. This is true. But there is also more to it.

As a codified ideology, it can be traced back to the Austrian Economist Friedrich Hayek, who coined the term at a meeting in Paris in 1939 and then made more systemic in his 1944 book, The Road to Serfdom.  He saw the rise of the welfare state as a major threat to the capitalist order. The unfettered right to do business, was regarded as the definition of freedom. To Hayek, the welfare state is totalitarianism.

This outlook that became known as the Austrian school, is much less an economic doctrine than it is a political ideology.  However, it did not receive a great deal of attention during the post World War Two boom years.

It was the onset of economic problems that had become more pronounced by the 1970’s that put the Keynesian orthodoxy to rest and provided an opportunity for Hayek’s view to surface.

During a friendly visit to Chile’s dictator Pinochet, Hayek remarked that in terms of government, “my personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism”. Liberalism and not democracy is what freedom is about, because, according to Hayek, it provides freedom of choice. Of course, he did not mean freedom of choice for all citizens. Freedom of choice is reserved for the conducting of business.

The Keynesian period had come in because of the Great Depression and  was based on the view that restoration required government intervention. Keynes argued that a capitalist economy goes through boom-bust cycles, because during the upswing, demand grows faster than investment, leading over production and collapse. Only through government intervention, providing a welfare state to create more disposable income and as an investor and consumer in its own right, can even out the ups and downs.

Keynesianism produced the New Deal in the United States and the Marshal Plan to reconstruct war torn Europe. It worked and served as one of the pillars of the post war boom.  It didn’t last. The end of the boom and the onset of the longest period of decline in history, more gradual than on past occasions had set in.  Keynesianism was not working any more. One after the another, Western governments began to reject it. The tide began to flow towards neoliberalism.

A range of think tanks had come into existence, based on the Mont Pelerin Society that Hayek himself had founded. There were the American Enterprise Institutethe Heritage Foundationthe Cato Institutethe Institute of Economic Affairsthe Centre for Policy Studies and the Adam Smith Institute.

Their function was to present an answer to the economic and social challenges of the day. Their solution was taken up by Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States.

As an ideology and economic policy, neoliberalism brought into Australia by the Hawke/Keating Labor governments. This was the time when protection of Australian industries through tariffs and other means came in earnest. We were told to tighten the belt, as labour market reform became the centerpiece.

A major component of the introduction of neoliberalism into Australia were the Prices and Incomes Accords. Although the first draft had emerged from the unions, via a document called Reconstructing Australia, its heart and soul was labour market deregulation and for employers to have greater flexibility in setting wages and conditions of employment. This involved restricting the capacity of unions to push up wages and impose more costs on employers in general. Union leaderships were convinced to agree and a mechanism was put in place to police it. Those who rocked the boat, such as the Builders Labourers Federation and the Airline Pilots Unions, were punished.

The introduction of the Accords brought put in place the beginnings of a major shift towards corporatism, that is, a decisive rise in the merging of the private corporations and government. Hayek’s “liberal dictatorship” had began to take shape.

Subsequent Coalition governments oversaw the ratcheting up of neoliberalism to new levels.  A major consequence has been the rise in what is now being called corporate welfare. It stands at odds with a faith that preaches the supremacy of the market at all costs. Consistency demands that if it is true that government intervention takes away from the freedom to do business as one likes and misallocates resources, government handouts and other forms of assistance should be ruled out too.

The problem is that they cannot be ruled out, because in today’s world, business has become so monopolised, and the merger between government and the monopolies so advanced, that one cannot be separated from each other. Big business needs government support to survive. Helping to secure this position is that major political parties are dependent on funding from the same monopolies. Nothing symbolises this nexus between government and the corporations more than the indecent infatuation with the drive to privetise everything and create new opportunities for profit for one’s partners.

A glimpse of the extent of this newly emerging brave new world was provided last year by the Panama Papersshowing how big an industry tax evasion and other behind closed door activities have become. Governments in many countries have abetted this and till now have done nothing to reverse it.

Neoliberalism is not working. If it had, the existing economic problems would have been solved during the more than 30 years of its application. Instead of  a retreat, we face the shaping a new neoliberalism,  which rises to a new level on the same path. This brings two major threats. Stepped up neoliberalism will feed more serious economic damage. It will also lift corporatism to a new level and this will impinge on what we regard as  democratic rights.

Neoliberalism is sometimes seen as something new, it really isn’t. It is the triumph of naked capitalism without the welfare state. Before Keynes, this was politically referred to as the prerogative of the investor and employer, and in the world of economics, as neoclassical economic theory.

The difference is that today the process to monopoly has gone a long way and corporatism has been entrenched like never before. Governments are more obviously in the services of the biggest corporations. Corporate welfare has been set to become the biggest growth industry.

Another negative spinoff to consider was raised by Paul Verhaeghe, in his book, What About Me. He refers to growing epidemics of self-harm, eating disorders, depression, loneliness, performance anxiety and social phobia and connects this to the application of neoliberalism. This has to concern us all.








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