Criticisms of neoliberalism are proliferating, not just within the political and academic left, but within mainstream public opinion as well. Everywhere, people are beginning to seriously doubt whether markets will be able to produce another extended period of sustained growth, or whether they will solve the world’s current problems or merely exacerbate them. Liberal economists are pointing to the increasing inequality caused by 30 years of neoliberalism in the west.
This analysis of rising inequality has been built upon by other critics of neoliberalism who examine the social effects of this inequality, beginning with Pickett and Wilkinson’s The Spirit Level: Why Equality is Better for Everyone, a path-breaking and hugely popular book that has led to more important work in this area, with research focusing in on inequality’s mental and even physical health effects.
Aside from inequality, other critics have focused on how neoliberalism is incapable of solving the problem of climate change. Naomi Klein has, for a long time, pointed to how climate change intensified with the deregulation of markets in the 1970s – for many people the beginning point of the rise of neoliberal hegemony in the west. Today there is an intensifying debate over the idea of ‘natural capital’, which some critics see as an absurd move by neoliberal policy makers to apply the logic of the market to a problem that has, as Klein argues, only made the problem worse in the first place.
In what George Monbiot has referred to as the “the pricing, valuation, monetisation, financialisation of nature in the name of saving it”, the natural ‘commons’ is turned into a potential new source of value which can be speculated on by investors. This form of speculation, of course, is what led to the 2008 financial crisis, with risk on sub-prime mortgages hedged into more and more complex ‘derivatives’, eventually bringing the whole intertwined financial world to its knees as the housing bubble burst.
As Monbiot and others have correctly pointed out, the move to financialise natural resources is not intended to save the world, but to create another source of capital accumulation and thus save an increasingly desperate capitalist system.
The problem is that, despite growing dissatisfaction and criticism of neoliberalism, we don’t seem to be able to shift this socio-economic structure in favour of a better one, or even just to a return to a more Keynesian inspired alternative. We seem to be stuck in what Mark Fisher has called a state of ‘capitalist realism’, somehow, despite our apparent knowledge, coming to accept in practice Margaret Thatcher’s insistence that ‘there is no alternative’, or Francis Fukuyama’s idea of capitalism as the ‘end of history’.
However, this inability to deal with contemporary neoliberalism in practice is not due to the victory of capitalism, but comes from an under-estimation of how far neoliberalism is a long-term, and very successful, political project with a coherent and shared ‘world-view’. This world-view has its origins in a crisis of liberalism in the 1930s, as it faced what it saw as the return of authoritarianism, or ‘arbitrary rule’.
Neoliberalism was an attempt by influential German economists, such as Ludwig von Mises and Friedrich Hayek, and social theorists, such as Max Weber and Walter Lippmann (in the US) to rescue and reformulate liberalism in theory, a theory that had itself originated historically (in the 17th and 18th centuries) as a critique of the arbitrary power of church and state. According to these theorists, liberalism had become incapable of dealing with what they saw as the contemporary manifestation of arbitrary rule in fascist Germany and Italy and communist Russia.
In an extraordinary book, The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective, Philip Mirowski and other scholars describe how early neoliberal theorists and sympathisers came together in 1947 to form an exclusive, secretive and powerful club called the Mont Pèlerin Society. This was the beginning of ‘a transnational movement’ which accepted right from the beginning that undermining what they saw as the evils of economic planning would take a long time, lots of effort and careful coordination. As Mirowski points out in his conclusion, neoliberalism was never a conspiracy, but rather an “intricately structured long-term philosophical and political project”.
Contrary to popular belief and some academic opinion, ‘neoliberalism’ is not just a dirty word invented by left-wingers resenting the ‘victory’ of capitalism in the western world, but a term self-consciously chosen by what Mirowski and others refer to as the international ‘thought collective’ arising out of the Mont Pèlerin Society. This neoliberal thought collective bade their time, connecting and combining “key spheres and institutions – academia, the media, politics and business”, creating a new knowledge apparatus for the dissemination of propaganda, the “neoliberal partisan think-tank”, and eventually finding power through the victories of the political right in the 1970s, Thatcher in Britain and Reagan in the US.
To understand the true origins of neoliberalism, and therefore be able to rescue a convincing alternative, however, we must return to the work of Walter Lippmann. Lippmann was very much influenced by the emerging critique of economic planning that was beginning to appear in the 1920s, especially in the work of Ludwig von Mises, Boris Brutskus and Friedrich Hayek, reaching its high-point just before the outbreak of World War II. But before engaging with this critique explicitly in The Good Society, Lippmann had been mounting a devastating attack on what he considered to be the naivety of liberal democracy in two major works, Public Opinion and The Phantom Public.
In these books, Lippmann argued that at the heart of liberal democratic theory lies a fiction, that of the “sovereign and omnicompetent citizen”, which in turn leads democrats to rely uncritically on a myth of an active and responsible public, which is supposed to guarantee freedom against arbitrary rule. This myth, however, allows agents with special interests, such as the media, controlled by advertising, and the government, controlled by individuals with a desire to maintain power, to pretend that they are acting in the so-called ‘public interest’. Realising, with Lippmann, that the public does not spring up ‘spontaneously’ with free speech, these agents create and manipulate public opinion in order to achieve their own ends.
In Public Opinion, Lippmann still held out hope for social science as a mediating “machinery of knowledge” to provide the truth to both decision makers and the public, a truth which the media is structurally just not able to provide (due to what might be called ‘market failure’, as people don’t want to pay for the apparatus necessary for truth, and the sociological constraints of having to report the news quickly and efficiently). But by the time he wrote The Phantom Public, Lippmann had given way to a full blown pessimism regarding the capabilities of average citizens.
In a tirade of insults that runs through the book, the average member of the public is conceived “in the lowest terms”. According to Lippmann they “will not be well informed, continuously interested, non-partisan, creative or executive”, and must be assumed as “inexpert”, “intermittent”, “slow to be aroused”, “quickly diverted” and “interested only when events have been melodramatised as a conflict”. Gone is the faith in science and expertise, with Lippmann’s universal scepticism forcing him to “throw the baby out with the bath water”. He writes: “Modern society is not visible to anybody, nor intelligible continuously and as a whole”.
Mirowski and others have shown that Lippmann had a huge influence on the early foundations of neoliberalism. Upon reading The Good Society, enthusiastic future neoliberals organised a conference in Paris in 1938, called the Colloque Walter Lippmann, which served as a precursor and inspiration for the Mont Pèlerin Society. The Good Society anticipated many of the key ideas of the emerging neoliberal world-view: the need to reinvent liberalism, to somehow create the conditions for the market to flourish and to prevent arbitrary rule and authoritarianism, and most importantly, to restrict democratic involvement in decision making and to replace the expectation of positive freedom with a completely negative ideal of the individual as an emancipated entrepreneur and/or consumer.
But what linked the attack in The Good Society on economic planning to Lippmann’s earlier work on democracy, and also to the work of key neoliberal Friedrich Hayek, was the epistemological rationalisation of both the market as answer to everything and of the restriction of democracy. Both Lippmann and Hayek worked with the assumption that no individual could know society as a whole, and therefore no individual, or even a group of individuals, can have access to the information required to make economic planning work, or to rule society in the name of the ‘collective will’. The only rational way to run society, therefore, was through the ‘natural logic’ of the market.
However, the whole epistemological critique of planning and the public in Lippmann and Hayek rested on the assumption that knowledge is asocial. For ‘democratic realists’ and neoliberals alike, reality is something that the individual achieves by accurately representing, or forming a true picture in the mind of the outside world. In this case, of course, the individual has limited access to knowledge, no matter how well educated or intelligent we are. But Lippmann’s earlier work, and his public debate with John Dewey throughout the 1920s and 30s, point to an alternative view, submerged in the subsequent war between capitalism and communism.
In Public Opinion, Lippmann argued that we see and understand the world primarily through ‘stereotypes’, the habits and customs of thought that guide our actions without realising, which he used to discredit ‘public opinion’. Dewey agreed with Lippmann that an individual’s capacity for knowledge was limited, and that many actions are guided by habit. But Dewey also believed that these habits could be made intelligent through reflection upon the consequences of our actions, and through this process we could develop ‘foresight’ which would in turn further develop the intelligence of our intuition.
Dewey drew a far more positive conclusion than Lippmann: habits can be an incredible source of power and knowledge if we are only willing to work on ourselves.
These stereotypes and habits also give us access to social knowledge, as subconsciously we must have a deep understanding of how society works in order to act. We human beings are so much more intelligent than neoliberals give us credit for; the brain processes huge amounts of information every second, most of which we are not aware of. According to Dewey, we have access to this submerged substratum of information, or ‘qualitative’ thought, through reflection; if we look deeply into our experience, we can make the connections which turn bare facts into truth, or for Dewey, into wisdom.
All our knowledge is social, everything we know is in some way derived from the shared understandings, customs and collective experience which we have come to refer to as ‘culture’. This means that everything around us is a source of exploration and knowledge. Life itself is a learning process and the world is a classroom. This is what Dewey meant when he talked about ‘democracy as a way of life’.
As Josiah Ober has observed, looking at the success of ancient Athens, democracy is a powerful way of harnessing “dispersed knowledge through the free choice of many people”. What Lippmann and Hayek fail to see, due to their attachment to extreme individualism, is that by tapping into the social nature of knowledge through collaborative reflection, the limitations imposed on us by our individual perspectives can be overcome. And democracy, in the positive Deweyan sense, is the most effective way of putting these perspectives to work.
Ironically, neoliberalism points to the way forward. The history of neoliberalism has taught us two things: firstly that no matter how unpopular an idea is at the time (and to say that neoliberalism was ‘leaning against the wind’ during the Great Depression of the 1930s is, to use Mirowski et al’s words, an understatement), with enough hard work, determination and above all, organisation, today’s outlier can become tomorrow’s hegemonic world-view. Secondly, the public, like the perfect market, does not just spontaneously appear with negative freedom. We can try to engage people in collaborative social inquiry, try to develop their awareness of the conditions that limit participation, to deepen our collective understanding of social and political processes and therefore increase the public’s potential for self-rule.
However, without creating the material and social conditions for participation, these efforts at condescension will be rightly met with scorn. Sociologists and social scientists need to be a part of an active process of giving back social inquiry to the public, emancipating this deeply human and social activity first and foremost from the elitism, specialisation and instrumentalism of academia. We may need to reduce the working week even further to enable people to have time for community activities and public research. We certainly need to prevent education from being turned towards a class-based, narrowly vocational process of training people to be profit-making machines.
We haven’t got all the answers yet. But if we have an idea whose time has come, as the neoliberal ‘thought-collective’ have shown, we can perhaps win the battle in the end, and work it out as we go along.
David Ridley is a Doctoral Researcher in the Department of Political Science and International Studies at the University of Birmingham.
This article was originally published on Open Democracy on 8th January 2016.