Neoliberalism, the left’s boogeyman.
In a new and what could only be described as frustrating article published by the Guardian, George Monibot claims that the political philosophy of liberal economists Friedrich Hayek and Milton Friedman (i.e., what he pejoratively calls ‘neoliberalism’) is “at the root of all our problems.” In the article, Mr. Monibot notes correctly that liberal economists generally are in favor of free markets and minimal government intervention in the economy.
However, he also makes some rather odd claims which makes one wonder if he has actually read the work of the economists whose ideas he is criticizing. For example, he claims that ‘neoliberals’ believe that, “inequality is… virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive.”
This is misleading. In his famous work, Capitalism and Freedom (1962), Milton Friedman wrote that, “special monopoly privileges granted by government, tariffs, and other legal enactments benefiting particular groups, are a source of inequality. The removal of these, the liberal will welcome.” He also wrote that, “the extension and widening of educational opportunities has been a major factor tending to reduce inequalities. Measures such as these have the operational virtue that they strike at the sources of inequality rather than simply alleviating the symptoms.” (Friedman 145)
F.A Hayek similarly wrote in his magnum opus, the Road to Serfdom (1944), that there is a, “strong case for reducing inequality of opportunity as far as congenital differences permit and as it is possible to do so without destroying the impersonal character of the process by which everybody has to take his chance and no person’s view about what is right and desirable overrules that of others.” (Hayek 106)
‘Neoliberals’ did not celebrate inequality and did prefer a more equal society, but their way of achieving greater equality would be by removing government imposed privileges and monopolies which benefitted the few at the expense of the many and by expanding economic opportunity.
On the other hand, the principle means by which those on the left wish to reduce inequality is through progressive taxation and wealth redistribution, which so-called ‘neoliberals’ generally are opposed to on the grounds that, “using coercion to take from some in order to give to others…conflicts head-on with individual freedom.” (Friedman 143)
Perhaps Mr. Monibot has mistaken ‘neoliberal’ hesitation to support involuntary wealth redistribution with opposition to an equal society entirely. Mr. Monibot continues, saying that ‘neoliberals’ believe that, “the market ensures that everyone gets what they deserve,” and that, “if you don’t have a job it’s because you are unenterprising…if your credit card is maxed out, you’re feckless and improvident …if your children no longer have a school playing field: if they get fat, it’s your fault.”
One has to wonder where exactly he got this impression, as it is the precisely the opposite of what supposed ‘neoliberals’ actually believe. In the Road to Serfdom, for example, Hayek wrote, that a man’s success in the market economy, “depends at least partly on the ability and enterprise of the people concerned and partly on unforeseeable circumstances” and also that, “in a competitive society it is no slight to a person, no offence to his dignity, to be told by any particular firm that it has no need for his services, or that it cannot offer him a better job.” (Hayek 110)
If Friedman and Hayek believed that the market always ensured that people got what they deserved, why did they support measures “supplementary to the market system,” as Hayek put it, in order to provide universal guarantees of economic security? In the Road to Serfdom, Hayek bluntly stated,
“There is no reason why in a society that has reached the general level of wealth which ours has attained…there can be no doubt that some minimum of food, shelter and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody.
“Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision.” (Hayek 124)
Similarly, in 1951, Milton Friedman wrote that, “Our humanitarian sentiments demand that some provision should be made for those who draw blanks in the lottery of life,” and that, “there is justification in trying to achieve a minimum income for all.” In Capitalism and Freedom he proposed a negative income tax as a means to achieve that goal. Mr. Monibot should have known about this, as he links to Friedman’s 1951 article in his own.
Nonetheless, Mr. Monibot next proclaims that, “As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from forming gave way – among American apostles such as Milton Friedman– to the belief that monopoly power could be seen as a reward for efficiency.”
And yet, in 1951 article just spoken of, and cited by Mr. Monibot, Friedman wrote that advocates of laissez-faire had, “underestimated the danger that private individuals could, through agreement and combination, usurp power and effectively limit the freedom of other individuals,” and that he personally believed that it was the state’s role to, “establish conditions favorable to competition and prevent monopoly.”
He also wrote that, “there can be little doubt that the Sherman anti-trust laws, despite the lack of vigorous enforcement during most of their existence, are one of the major reasons for the far higher degree of competition in the United States than in Europe.” A position he later reiterated in Capitalism and Freedom. (Friedman 164)
In another apparent misunderstanding, Mr. Monibot portrays privatization of public goods as something ‘neoliberals’ blindly support. But in Capitalism and Freedom, Friedman noted that, choosing between private and public provision of naturally monopolized services (like water provision), could not be made, “independently of the factual circumstances,” and that, “even the short run effects of private unregulated monopoly may not be tolerable, and either public regulation or ownership may be a lesser evil.” (Friedman 32)
Mr. Monibot understands ‘neoliberalism’ as highly doctrinaire in nature, when in fact the economic philosophy proposed by the likes of Hayek and Friedman was actually quite nuanced. After misrepresenting, presumably unintentionally, the philosophy of Hayek and Friedman, he attempts to tie it to facism, totalitarianism, and political violence.
He cites Naomi Klein’s debunked assertions that free market reforms (liberalization) are so unpopular they have to be forced upon people by violent dictators, apparently unaware of research published in the American Economics Journal, which finds that democracies are much more likely to undergo economic liberalization than non-democracies.
Or research by economists Indra de Soysa and Krishna Chaitanya Vadlammanati, who conclude that, “using the best available data and empirical methods, we find positive effects of market-economic policy reforms on government respect for human rights” and that their results, “vindicate those who find positive effects of free markets on economic development and other measures of social welfare.”
Klein and Monibot are also unlikely to know, or perhaps admit, that the supposedly ‘democratic socialist’ Scandinavian countries they likely fancy are actually “among the frontrunners in liberalization,” at least according to actual economists from Scandinavia. Sweden, for example, adopted a successful universal school choice system in the 1990s that is nearly identical to the system proposed by Milton Friedman his classic 1955 essay, “The Role of Government in Education.”
Mr. Monibot further attempts to link ‘neoliberalism’ to facism by blaming it for the rise of Donald Trump, because supposedly those in the political establishment are all ‘neoliberals’ whose beliefs have alienated their voters and turned them to leaders like Trump, who will push the political system towards facism.
But he doesn’t mention that the populist backlash against the establishment has also fueled the rise of Bernie Sanders, of whom Mr. Monibot is presumably a supporter. He doesn’t recognize that the rise of Trump has been predominantly fueled by opposition to establishment immigration policies, which, by Trump supporters, are seen as excessively pro-illegal immigrant and pro-refugee, which begs the question:
Does Mr. Monibot also believe that, since they have fueled a populist backlash, progressive principles which assert that the US should welcome immigrants and refugees and grant undocumented citizens amnesty (or a path to citizenship) inherently toxic as well?
Nonetheless, in the 1940’s, Hayek noted that, “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rough rules of thumb, above all the principle of laissez-faire.” (Hayek 18) Today, it is arguably the case that nothing has done so much harm to the liberal cause as those who misunderstand it, in the most unflattering way possible, and spread their confusion to others.
Hayek, Friedrich A. Von. The Road to Serfdom. Chicago, IL: U of Chicago, 1944. Print.
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
Dedicated to promoting personal and economic freedom.