How neoliberals stitched up wealth of nations

George Monbiot
29 August

A cabal of intellectuals and elitists hijacked the economic debate, and now we are dealing with the catastrophic effects.

For the first time the United Kingdom’s consumer debt exceeds the total of its gross national product: a new report shows that Britons owe £1.35 trillion. Inspectors in the United States have discovered that 77,000 road bridges are in the same perilous state as the one that collapsed into the Mississippi. Two years after Hurricane Katrina struck, 120,000 people from New Orleans are still living in trailer homes and temporary lodgings. As runaway climate change a pproaches, governments refuse to take the necessary action. Booming inequality threatens to create the most divided societies the world has seen since before the First World War. Now a financial crisis caused by unregulated lending could turf hundreds of thousands out of their homes and trigger a cascade of economic troubles.

These problems appear unrelated, but they all have something in common. They arise in large part from a meeting that took place 60 years ago in a Swiss spa resort. It laid the foundations for a philosophy of government that is responsible for many, perhaps most, of our contemporary crises.

Powerful backers

When the Mont Pelerin Society first met, in 1947, its political project did not have a name. But it knew where it was going. The society’s founder, Friedrich von Hayek, remarked that the battle for ideas would take at least a generation to win, but he knew that his intellectual army would attract powerful backers. Its philosophy, which later came to be known as neoliberalism, accorded with the interests of the ultra-rich, so the ultra-rich would pay for it.

Neoliberalism claims that we are best served by maximum market freedom and minimum intervention by the state. The role of government should be confined to creating and defending markets, protecting private property and defending the realm. All other functions are better discharged by private enterprise, which will be prompted by the profit motive to supply essential services. By this means, enterprise is liberated, rational decisions are made, and citizens are freed from the dehumanising hand of the state.

This, at any rate, is the theory. But as David Harvey proposes in his book A Brief History of Neoliberalism, wherever the neoliberal programme has been implemented, it has caused a massive shift of wealth not just to the top 1 per c ent, but to the top tenth of the top 1 per cent. The conditions that neoliberalism demands in order to free human beings from the slavery of the state — minimal taxes, the dismantling of public services and social security, deregulation, the breaking of the unions — just happen to be the conditions required to make the elite even richer, while leaving everyone else to sink or swim. In practice, the philosophy developed at Mont Pelerin is little but an elaborate disguise for a wealth grab.

So the question is this: given that the crises I have listed are predictable effects of the dismantling of public services and the deregulation of business and financial markets, given that it damages the interests of nearly everyone, how has neoliberalism come to dominate public life?

Richard Nixon was once forced to concede that “we are all Keynesians now.” Even the Republicans supported the interventionist doctrines of John Maynard Keynes. But we are all neoliberals now. Margaret Thatcher kept telling us that “there is no alternative,” and by implementing her programmes Bill Clinton, Tony Blair, Gordon Brown, and the other leaders of what were once progressive parties appear to prove her right.

The first great advantage the neoliberals possessed was an unceasing flow of money. American oligarchs and their foundations — Coors, Olin, Scaife, Pew, and others — have poured hundreds of millions into setting up thinktanks, founding business schools and transforming university economics departments into bastions of almost totalitarian neoliberal thinking. Their purpose was to develop the ideas and the language which would mask the real intent of the programme — the restoration of the power of the elite — and package it as a proposal for the betterment of humankind.

Their project was assisted by ideas which arose in a very different quarter. The revolutionary movements of 1968 also sought greater individual liberties, and many of the soixante-huitards saw the state as their oppressor. As Mr. Harvey shows, the neoliberals coopted their language and ideas. Some of the anarchists I know still voice notions almost identical to those of the neoliberals: the intent is different, but the consequences very similar.

Friedrich von Hayek’s disciples were also able to make use of economic crises. An early experiment took place in New York City, which was hit by budgetary disaster in 1975. Its bankers demanded that the city follow their prescriptions — huge cuts in public services, smashing of the unions, public subsidies for business.

In the U.K., stagflation, strikes, and budgetary breakdown allowed Margaret Thatcher, whose ideas were framed by her neoliberal adviser Keith Joseph, to come to the rescue. Her programme worked, but created a new set of crises.

© Guardian Newspapers Limited, 2007