An invitation to question the doctrine of neoliberalism
Rochester Business Journal by Abigail McHugh-Grifa
May 16, 2024
Although it has been the dominant economic paradigm in the United States throughout my entire life, I had never heard of neoliberalism until I was in my early 30s, and only within the past two years have I begun to really understand how it shapes our lives and livelihoods.
Neoliberalism seems to be one of those unquestioned and unquestionable pillars that underlie everything we do, but because it’s the status quo, we often fail to see the harm it causes and assume that it can’t be changed.
Though the term has been defined in different ways at different times, as I understand it, the concept emerged in the 1930s and 40s as a counterpoint to Roosevelt’s New Deal and the work of John Maynard Keynes, with the original intention of keeping governments in check to prevent tyranny through the freedom of markets. With World War II as the backdrop, this goal was understandable and was almost certainly well-intentioned.
Milton Friedman, Ludwig von Mises, Friedrich Hayek, and the other thought leaders who brought this idea to prominence believed that the government should never interfere in the economy and that individual freedom and prosperity could/should be achieved through the pursuit of selfish interests in an unfettered market. Those early proponents of neoliberalism went on to become central bankers, heads of state, advisors to world leaders, and professors at prominent business schools.
A few decades later in the 1980s, when Margaret Thatcher and Ronald Regan took office, neoliberalism came to fully dominate the political and economic discourse. It is now primarily associated with free markets and free trade, deregulation, globalization, austerity, limiting the power of government, and private property rights/private ownership of assets. In practice, this framework encourages businesses to prioritize and maximize their short-term profits, with little regard for anything else.
From my perspective as an environmentalist, neoliberalism has played out in some very problematic ways. Most obviously, I think it’s foolish to get rid of environmental regulations that prevent corporations and other entities from polluting the natural systems on which our lives depend. Not all regulations are bad. History has clearly demonstrated this, for example with the very effective Clean Air Act that has saved hundreds of thousands of lives, but which polluting industries have been relentlessly (and partially successfully) working to undermine.
In a completely unfettered market, there’s no mechanism for holding polluters accountable and protecting shared assets like air and water. For example, if there’s heavy rain that washes chemical fertilizers and pesticides from a factory farm into a lake that people use for drinking water and fishing, that’s just too bad. However, with some degree of government intervention, a fee could be placed on these “externalities,” to discourage the use of harmful chemicals, or if they’re really bad, they could just be banned. Yes, I think it’s perfectly reasonable to ban something that causes lots of harm.
In addition, I believe there are some natural resources and assets that just shouldn’t be privately owned. For example, it’s super alarming to see how water is being privatized in some places, often as a “solution” to municipal budget shortages. Food & Water Watch has identified a number of problems with this, but from an economic perspective I think it’s most important to note that “investor–owned utilities typically charge 59% more for water service than local government utilities” and “increase the cost of financing a water project by 50% to 150%,” while also leading to job loss and worse service.
Unlike diehard disciples of neoliberalism, I don’t believe that the answer to every question is always privatization and smaller government. That doesn’t mean that I want a big, bloated government either, but an effective, uncorrupt government that is truly working for the public good would sure be nice! To me, this would include ending government subsidies for fossil fuel companies and increasing government support for the deployment of clean energy, to intentionally shift the market toward energy sources that are better for people and the planet. I know I’m getting into dicey political territory here, but to my mind this really shouldn’t be a polarizing issue, since we all need clean air to breathe and fresh water to drink. Considering that the free market hasn’t done a great job of providing that over recent years, I believe the government can and should play a key role in getting us back on track.
On that note, it’s important to point out that recent efforts to undermine/dismantle our democracy in the United States are at least partially rooted in neoliberal ideology. The history of this is far too complicated to unpack here, but some major milestones include (1) the launch of the Tea Party movement in 2009, which brought a whole new level of dysfunction to Congress by putting anti-government advocates into positions of power, (2) the Supreme Court’s 2010 Citizens United decision, which gave corporations the ability to spend unlimited amounts of money to support or oppose political candidates as a form of “free speech,” and (3) all the many efforts to limit voting rights and block election reform bills that have happened ever since.
With its emphasis on freedom and individualism, neoliberalism is an appealing idea that aligns well with many Americans’ sense of self, so I can understand why it has maintained its dominance for so long, even though it hasn’t lived up to its promise. To be clear, I love freedom and individualism as much as anyone, but when markets are free to harm individuals and communities, and the freedom of markets is prioritized over the freedom, health, and safety of individuals, I think we’ve gone too far.
So what’s the path forward? Well as a first step, I think it’s important to speak up and push back on the idea that regulations are bad and governments shouldn’t interfere in the economy. It’s true that our government isn’t doing its job very well these days, but that’s largely because a small group of extremely wealthy and powerful people have invested heavily in screwing it up. So as a second step, I think we need to work together across political lines to reform our government and establish a true democracy that actually advances the priorities of the majority of its citizens.
This would require a lot of structural changes that many people have been pursuing for a long time, ideally including significant campaign finance reform. If you are interested in learning more about this, I’d highly recommend listening to season four of the Scene on Radio podcast, entitled “The Land that Never Has Been Yet,” or reading “Democracy Awakening” by Heather Cox Richardson, both of which provide an eye-opening account of how our government became so dysfunctional and how we might fix it.
Our current economic system is based on some very good ideas and some harmful, outdated ideas. Humans created this system and humans can change it, but to do this in a fair and equitable manner we need a system of governance that actually represents the will of the people. We also need to question our basic assumptions about how the economy should function, which for many of us probably means questioning the tenets of neoliberalism. If this is new territory for you, welcome to the journey!