Why does Neoliberalism Persist?

Written by Christos Mantoudis

Neoliberalism has undoubtedly become one of the most influential ideologies across the Globe over the last 40 years. This unique kind of capitalism has dominated the agenda of policy makers, business men and interest groups at national and transnational level. More importantly, neoliberalism has managed to effectively coexist with various political traditions and systems stressing from Chinese Confucianism, to European welfarism and East European Post-Communism.  One could argue that thanks to neoliberalism the global interconnected economy we witness nowadays would not have been possible. In countries such as the US, it’s popularity among policy makers has converged mainstream party discourses to an extent that a world beyond neoliberalism seems impossible to imagine. Despite the widespread acceptance by a large proportion of political parties, interest groups as well as intellectuals and supranational organizations, neoliberalism is being severely criticized particularly for causing increasing inequalities, precarious working conditions and diminishing living standards for the less privileged social strata. Nevertheless, neoliberal ideology still manages to be the dominant political paradigm across the developed world as it effectively marches triumphant out of crisis caused by its own internal inconsistencies, such as the 2008 Recession.

 This text will look deeper into the reasons that make neoliberalism so persistent in contemporary politics. Academics across different disciplines have long been approaching this question, effectively producing knowledge in both high qualities and quantities. It is not the ambition of this paper to go through all the reasons why neoliberalism persists, but rather emphasize its conflictual relationship with democracy and democratic politics. What is argued instead, is that through the ‘marketization’ of the political and private realm, neoliberalism manages to transform democracy in such a way that both institutions and the demos function to legitimize its doctrines. Hence, neoliberalism will not be seen purely as an economic doctrine, but as an ideology capable of forming habits, dispositions, and a particular way of thinking and acting (Fukuyama, 1997). The first part of this work looks into the marketization of the political, borrowing from the ideas of Crouch, who claims for a devaluation of democratic politics by corporate interest and power-hungry political elites. The second part will further look into the popular side of democracy and the way neoliberal ideology has transposed the political identity of the demos, drawing from the work of Wendy Brown.

What is Neoliberalism?

Inspired by Neo-classical economics, neoliberal ideology embarks from the objectives of consumer theory, welfare maximization, and profit intensification (Harvey, 2005). Leading theorists of the neoliberal ideology are Friedrich Hayek, Milton Friedman, Ludwig Von Misses. The market is the main vehicle for achieving these objectives as governments are considered inefficient in stimulating economic growth. Neoliberalism adopts fundamental elements of capitalism such as private property, market liberalization from state patronage and liberty of individuals to maximize their welfare uninterrupted by external forces. For neoliberals, market actors act rationally in pursuit of their individual interests. All exchanges are voluntary and negative externalities are unintended, therefore part of the market function. Nevertheless, one should not entirely equate neoliberalism with capitalism, as not all kinds of capitalism adhere to the totality of unregulated markets neoliberalism advocates for (Crouch, 2015). In its economic practice, neoliberal ideology supports labor market deregulation by promoting flexibility in working relations, financial market deregulation, privatization of state-owned enterprises, commodification of public goods and services, abolishment of price control on basic goods, and minimum public spending (Harvey, 2005).

Overall, in its economic aspects, it promotes total liberation of markets from any kind of political intervention, implying a dichotomy between politics and economics. As Anderson (2015) argues, in neoliberalism, the economic realm exists independently from the political and marks it as non-political. This assumption has multiple consequences for politics and more importantly for democratic politics because it incorporates the idea that politics leads to suboptimal outcomes when entering the free space of the market. Economic transactions are non-ideological, as they are driven purely by individual rationality and voluntary exchange. The term voluntary here is important when we contrast the capitalist mode of production with other forms of profit-making such as the feudalist order, where serfs and peasants were physically imposed by landlords to produce. In neoliberal capitalism, the absence of sheer force makes all ethical considerations irrelevant since actors engage in transactions with knowledge of the consequences. Therefore, the economic realm should not be politicized.

Interestingly, this dichotomy was institutionalized in the US by the ‘Washington Consensus’, a set of neoliberal policy guidelines that legitimately marked a ‘hands-off’ from the function of the market. However, one can easily wonder how can politics be excluded from a production mode and a system that is inherently unequal and produces hierarchical power relations. Anderson argues that it is not politics that is being excluded from the economic realm, (as neoliberal capitalism coexists with liberal democratic institutions), but rather democratic politics. For him, it is only through democracy that persons can individually or collectively raise claims to mitigate the negative externalities produced by the free market. And this is why neoliberalism is not equivalent to all forms of capitalism. Even though liberal economics and theorist realize that capitalism creates unequal wealth and power distribution, they recognize these problems as political and call for collective mitigation through politics. Therefore, neoliberalism is not inherently unpolitical but rather hostile to democratic politics since democratic contestation is precisely the mechanism of change that could intervene in the absolute liberty of the market. The following section will describe how neoliberal market governmentality has transformed liberal democracy to what theorists call post-democracy.

Post-Democracy

The chameleonic nature of neoliberal ideology allows for its application in various political traditions, as well as political systems from authoritarian (China, Singapore) to democratic (Europe, US). The coexistence of neoliberal capitalism with liberal democracy in the Western world has been marked by notable transformations of the latter, resulting in what political theorists and democratic intellectuals call post-democracy (Crouch, 2004). This term refers to the transfer of authority from democratic institutions and the people to the markets and organizations beyond the standard democratic machinery. As Wolfgang Streek (2012) famously put it “It is now quite clear that the democratic states of the capitalist world have not one sovereign, but two: their people, below, and the international markets’ above. In other words, post-democracy denotes a tendency, evident already from the early 1980s, which describes the decline of democratic political contestation and its replacement by the neoliberal unpolitical governmentality. Here, the basic premise is that the left/right divide is absent, ideologies are irrelevant in the era of globalized neoliberal capitalism and traditional democratic value such as confrontation, conflict, and contestation are obsolete if not harmful for democracy (Mouffe, 2005). Elections, in particular, are damaging to economic stability and growth. As Wolfgang Schauble cynically argued in the midst of the Greek crisis ‘Elections change nothing, there are rules’ (BBC, 2015). Instead, neoliberal governmentality requires wide consensus on key economic issues (especially on fiscal policy) under the instruction of expert, administrative, non-political institutions and the economy needs to be left to function uninterrupted from popular or political influence (Crouch, 2004).

The unpolitical (or undemocratic) component of neoliberalism is fully materialized in the post-democratic framework. Economy is a realm stripped of any constraining rules detached both by politicians and people. As Moufe (2005) puts it, post-democracy denotes the passage to post-adversarial politics where citizens are spectators rather than active political actors. The legitimizing symbol is no longer popular will expressed through elections and political representatives but economic growth objectives, credit rankings, managerialism and business interests. The neoliberal era is marked by the passage from the political to the post-political and from democracy to post-democracy (Mair, 2013). Neoliberalism successfully coexists with democratic institutions, which assume a reificatory role of outcomes determined beyond democratic control and public accountability. The next few paragraphs will further look into how the main actors of the neoliberal ideology, large corporations, interact with political actors and institutions within the post-democratic framework.

Corporatizing Democratic Politics

The neoliberal doctrine of minimum public spending and privatization of state-owned enterprises has made governments heavily rely on multinational corporations and financial institutions when it comes to economic growth. Private capital dominates not only the market economy realm but actively and invasively transcends the realm of politics. As Crouch (2011) argues, large corporations fall beyond the limits of the market because they have acquired a large share of multiple markets. More importantly, democracy is incapable of limiting its hegemonic role as its power supersedes the bounds of legal limitations and public institution checks and balances. In The Strange non-death of Neoliberalism (2011), Crouch describes this as a contest between networks of influence. The systematic erosion of public networks as means of political action has left the demos unable to confront with powerful economic actors. On the contrary, corporate networks steer markets and policymaking by threatening the government that they will take their businesses somewhere else if their demands are not met. Politics is not designed according to the interests of the demos, but primarily according to those of corporate actors precisely because public welfare is dependent upon the economic prosperity of corporations.

Neoliberalism imagines the role of corporations as a form of governance, able to transcend the economy and assume political competencies, in what theorists call the marketization of politics. It was Peter Mair (2013) who also argued that people and politicians are becoming more and more indifferent, criticizing neoliberalism for depoliticizing the political realm. Mair noticed a phenomenon of twin disengagement, describing the decreasing interest of people on politics and the growing dependence of political elites on corporate interests. Both Crouch and Mair were referring to a situation where politicians are treated and act as market actors. In order for neoliberalism to function in Western Democracies, it needs to be democratically legitimized, consequently, politicians are treated as market players. Those who offer to satisfy corporate interests are rewarded by valuable support, enough to sustain them in institutional power positions. Furthermore, the opportunity cost of politicians to adhere to popular demands and risk a conflict with the strongest market players is much bigger.

By captivating political institutions, neoliberalism manages to survive economic crises. The European Recession is an exemplary case, where neoliberalism was strengthened by a crisis caused by its own internal weaknesses. If one were to look at the EU economic structure before and after the crisis, she/he would identify a significant increase of neoliberal economic policies with the fiscal compact being the most profound evidence (Puehringer, 2013). Signed in 2013 in the midst of an unprecedented emergency politics atmosphere, the fiscal compact imposes strict conditionality on the amounts of public spending to the EU member states, supervision of state budget as well as sanctions when public debts exceed the tight limits set by the Union. When member states fail to comply, they have to seek assistance from institutions such as the IMF, the ECB, and the European Commission, in order to apply a neoliberal-oriented rescue recipe of privatizations, loosening of working relations, wage reduction, and public spending cuts. Therefore, when at a state of emergency every kind of opposition to EU policies against indebted member states was criticized by mainstream party discourse as populist and wholeheartedly annulled regardless of argument validity, finance and corporate sector networks proved stronger and saw the crisis as an opportunity to consolidate their position in the political and economic sphere. As Carl Schmitt claims (1985), at a time of crisis the true stakeholder stands outside [steht außerhalb] and at the same time belongs to the legal order [gehört]. The next section will elaborate on the way neoliberal ideology reconfigures the primary democratic subject, the citizen, and its consequences on the demos drawing from the work of Wendy Brown.

The Neoliberal Demos

So far, the paper has emphasized the ways neoliberalism and corporate economic interests transform democratic institutions and politics in a way to serves the needs of the market. In order to fully grasp neoliberalism as an ideology, it is equally important to closely look into the way to (re)shape individuals and societies, in what Foucault calls ‘regulation of the society by the market’ (Brown, 2015). When it comes to the private realm, neoliberalism promotes individual self-actualization, one must make the most out of his/her potential, time, and resources. In other words, the neo-liberal subject seeks self-emancipation and self-liberation. Even if those values sound truly noble and promising, they become problematic when the objective of one’s full potential is to fit the needs of the labor market. Therefore, except for designing the state in the form of a firm, neoliberalism constructs an individual according to values of self-investment, (human) capital maximization, revaluation, and competitiveness. The goal of the individual is to become as competitive as possible in the job market in order to live a more luxurious life, work hard now in order to work less later, get a promotion, and more importantly, consume as much as possible. Brown argues that this king of self-development does not, in the end, belong to the individual but also to the employer as well as the state. Citizens need to transform into entrepreneurs who should alone create their own success story.

Neoliberalism effectively transforms the classical liberal homo oeconomicus, a subject which despite is individualistic self-interest seeking features was still a political subject. Liberal values such as autonomy, liberty, and equality could only be attained collectively. Thus, classical liberal economists could not even imagine separating the private from the public realm in such a pervasive way (Crouch, 2017). Neoliberalism leaves little if at all space for collective identities and democratic collective action and citizenship. As Mair (2013) notes, citizens should not expect solutions from politics nor be the protagonists of collective changes rather receive assistance in finding their own solutions. With the declining significance of collective identities, the political realm consists of individuals with competitive sentiments, seeking to ensure a better position in the job market. Naturally, public life thins in size and relevance, making the actualization of collective visions through democratic politics impossible (Brown, 2015). The shrinking of public life translates also in physical forms. The aggressive privatization of public space for the sake of economic development rapidly transforms parks into malls and city centers into touristic attractions. Places of significance where people used to meet, intersect and contest about public issues are now empty of meaningful spaces, non-places of consumerism and profit-making (Auge, 2008). Neoliberalism strips democracy of its popular component not only by putting barriers between citizens and their representatives but also by stripping the demos from its political identity through a value system reconfiguration oriented to serve the free market.

Concluding Remarks

Why does neoliberalism persist after all? This text has argued that neoliberalism’s inherent incompatibility with democracy transforms democratic institutions and subject to an extent that their sole purpose of existence is to meet the needs of the market economy. But beyond these notable achievements of neoliberalism throughout the last decades, perhaps another reason why it is so resilient to change is because it has managed to hegemonize over public discourse by making a large share of people truly believe that no other world is possible. Maybe this is where the power of an ideology lies. By capturing democratic institutions and legitimizing its pervasive economic policies through democratic procedures, neoliberalism has normalized phenomena such as poverty, inequality and social hierarchy, along with values of individualism, competitiveness and consumerism. The absence of alternative collective utopias in the political realm allows neoliberalism to determine individual and collective visions and dictate what should we be, how should we be whether we like it or not.

Could perhaps neoliberalism mark the new end of ideology? Fukuyama’s end of history thesis becomes more relevant than ever in the neoliberal era, as liberal democracy has been surpassed by a new ideology. It would be naïve of us to think that Fukuyama literally meant that liberal democracy marks the end of ideology. Especially from the point that he simultaneously critically refers to the consumer society, the decline of intellectualism and in general the decreasing relevance of meaning and status for values and activities that lack commercial value. A way to interpret his thesis, one that fits the main claim of this paper, is that when an ideology captures both political and public discourse it is hard for alternative collective visions and ideas to be materialized, at least in a non-violent way.  The current pandemic for instance has exposed multiple weaknesses of neoliberalism. First of all, the lack of adequate public healthcare facilities to deal with such a large-scale crisis makes us reconsider basic neoliberal ideological premises. Furthermore, the inability of governments to intervene in the economic sphere and take the necessary measures for the safety of their population marks the total dependence of governments from the economic sector. The closing or opening of schools, universities, super markets, public gatherings, even the amount of time one could freely walk outside was decided according to what ‘the market’ could or could not endure. Yet, the world has not seen any significant political changes in response to the dominant pandemic resolution tactics. The only voices against the market oriented governmental responses are to be found in social movements, which are in most cases brutally oppressed. This should make us both sad and happy. One the one hand it becomes clear that we do not live in the end of ideology era, as alternative collective visions do exist, on the other hand the traditional way of doing politics through the liberal democratic channels will keep failing absorbing popular claims so long as they design politics according to the neoliberal market driven recipe.

References

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Augé, M. (2008). Non-places: Introduction to an anthropology of supermodernity. London: Verso.

BBC (2015), Greece the Dangerous game, Retrieved from:

https://www.bbc.com/news/world-europe-31082656

Brown, W. (2015). Undoing the Demos: Neoliberalism’s Stealth Revolution. Cambridge, Massachusetts; London.

Crouch, C. (2004.) Post-Democracy. Cambridge: Polity Press

Crouch, C. (2011). The Strange Non-Death of Neo-Liberalism, Cambridge.

Crouch, C (2017). Can Neoliberalism Be Saved from Itself, Social Europe Edition.

Foucault, M (2008). The Birth of Biopolitics: Lectures at the Collège de France 1978–1979, ed. Sennelart, M, trans. Burchell, G. Basingstoke: Palgrave.

Harvey, D. 2005. A Brief History of Neoliberalism. Oxford: Oxford University Press.

https://www.bbc.com/news/world-europe-31082656

Mair, P. 2013. Ruling the Void: “The Hollowing of Western Democracy. Verso: London.

Mouffe, C. 2005. On the Political. London: Routledge.

Puehringer, S. 2013. “The implementation of the European Fiscal Compact in Austria as a post-democratic phenomenon,” ICAE Working Papers 15, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.

Schmitt, C. (1985). Political theology: Four chapters on the concept of sovereignty. Cambridge, Mass: MIT Press.

Streeck, W. 2012. Markets and Peoples: Democratic Capitalism and European Integration. New Left Review, 73: 63–71.

February 24, 2021

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