A Brief History of Neoliberalism by David Harvey

My rating: 4 of 5 stars

It is one thing to maintain, for example, that my health-care status is my personal choice and responsibility, but quite another when the only way I can satisfy my needs in the market is through paying exorbitant premiums to inefficient, gargantuan, highly bureaucratized but also highly profitable insurance companies.

Neoliberalism is a term that is often thrown about; and yet, like socialism and capitalism, I often feel that I do not quite know what it means. Its common definition—the preference for free trade and free markets—did not seem to distinguish it from capitalism itself, as I understood the term, which made me wonder why neoliberalism was so controversial and hated.

Harvey’s book goes a long way in answering this question. The best way to understand neoliberalism may be historical. After the end of the Second World War, governments were dominated by Keynesian policies—that is, the use of taxation and spending (if necessary, deficit-spending) to control boom and bust cycles. But in the 1970s the Keynesian consensus broke down as a result of stagflation: low growth combined with high inflation. The failure of Keynesian policies to get the economy out of its rut led, eventually, to the embrace of quite a different governing philosophy: neoliberalism.

This has many intellectual components. Neoliberals are—at least in theory—opposed to fiscal policies as a way of fighting economic ups and downs. (In practice, this means that governments must adopt austerity measures in order to keep their budgets balanced in an economic downturn.) In fact, neoliberals are quite generally anti-government, at least in their rhetoric. They favor privatization, deregulation, low taxes, and low tariffs. The central idea is simple and, on its face, compelling. Prices communicate market information far better than a government can manage; individuals understand their own needs better than the government; and the profit motive is the great driver of general prosperity.

Yet what (ostensibly) began as a great liberation of sovereign individuals and all of their creative genius became, instead, an economic transfer from the poor to the rich. The evidence, by now, is clear that neoliberalization did not jump-start the economy. Growth has never recovered its pre-1970s levels; and economists now admit that they simply do not know how to make an economy grow. But as growth slowed, and wages stagnated for most mere mortals, the rich, richer, and richest made off with ever-increasing slices of the economic pie. Inequality reached such stark levels not seen since the 1920s. Harvey contends that this was not a mere byproduct of the economic philosophy, but one of its primary goals.

If the rhetoric of neoliberalism were, indeed, true—if the government was merely “getting out of the way,” and letting the market do its magic—then claims of nefarious intent would perhaps be unfounded. But as Harvey points out, the neoliberal state is no mere bystander. On the contrary, state power is quite necessary to the operation of neoliberal policies.

Most obviously, if property rights and contracts are sacrosanct, then there must be enforcement—violent if necessary—of those rights. In practice, this also means that there is a double standard between debtors and lenders. In a neoliberal state, the debtor has all the responsibility not to take out a loan that they cannot pay back; and there is very little protection if they do take such a loan. Meanwhile, there is no similar responsibility on behalf of the lender not to lend irresponsibly (as the 2008 financial crash proved); and if the lender does so, the state sanctions any draconian measures necessary to extract repayment.

The state also actively subsidizes the wealthy, both directly and indirectly. It directly subsidizes companies through (among other things) bailouts. The mortgage tax deduction is essentially a handout to the rich—as well as a spur to high-end housing construction. It puts up legal impediments to labor organizations and strikes.

And the indirect subsidies are many. If a community is devasted by a free trade deal, the state deals with the social fallout (often through mass incarceration, in the US). If the housing market leaves many homeless, then the state steps in to enforce eviction notices and provide homeless shelters. If medical insurance is out of reach to many, then the state provides public healthcare and emergency rooms. And this is only to speak domestically. Harvey documents many cases when the IMF and World Bank pressured developing countries to adopt neoliberal policies, and then demanded repayment of loans even if it meant impoverishing their populations.

In sum, the neoliberal state is not a mere onlooker, enforcing class-neutral rights and ensuring a fair game is played without cheating. On the contrary, the neoliberal state serves to provide welfare to the rich while enforcing brutal ‘capitalism’ on the poor.

Yet Harvey is not only valuable in his catalogue of neoliberal hypocrisies. Many of the most interesting parts of this book, I found, were Harvey’s reflections on how neoliberalism has transformed the culture. His contention is that the 1960s era emphasis on personal liberty has led to a kind of atomization of society. As more and more people are convinced that the government is evil or at least useless, people seek different forms of community. This can take many forms: religiousness, political populism (which Harvey predicts), or, for the progressively minded, NGOs. Indeed, one can see the rise in NGO activity as a kind of tacit defeat by the left, as they have yielded the possibility of democratic, governmental action, and instead turned to privately owned organizations run by elites.

More broadly, the embrace of a radically individualist philosophy makes political organization difficult. How can you politically unite people behind the idea that the government is the problem? Few forces have been able to transcend this limitation, most notably nationalism—giving birth to neoliberalism’s ugly cousin, neoconservatism. Other collective bonds—such as race, gender, or sexuality—do not have the widespread pull of nationalism, which Harvey believes gives the left a chronic disadvantage.

Harvey’s solution to this (unsurprisingly, given that he is a Marxist) is to make class, once again, a basis of political mobilization. It is only when workers collectively reform the society that the rich can be defeated. Unfortunately, the two economic crises that have transpired since this book was published have yet to make that happen. Nevertheless, I think this is a valuable and incisive book about one of our era’s most distinctive features.

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