Since the era of Margaret Thatcher and Ronald Reagan Neoliberalism has been the dominant force in global politics. At its core, it was an ideological reaction by sections of elites, against the type of political economy that grew up in the aftermath of the 1929 Wall Street crash and World War II. The NHS the Welfare State, the New Deal and the Bretton Woods conference helped to reshape the British and US economies; Keynesian economics drove these ideas, and attempted to address the radical political sentiment and dystopian milieu that followed both cataclysms. At their core, they were collectivist ideas designed in the hopeful spirit of what seemed like a victorious West. Nevertheless, in the decades that followed, the neoliberal reaction simmered, until eventually in the late seventies, it elevated its transatlantic figureheads.
Over the past five decades though, neoliberal policies have wreaked havoc on communities and the environment alike. In recent years, we have seen noble attempts at resistance. The campaign of Syriza in Greece. The growth of the American left with the Sander’s campaign, AOC & Co. Corbynism in Britain, Podemos in Spain. All failed, and yet some may argue necessary, steps in arriving at a discussion that is omitted from the mainstream, a discussion that has been making an impression on progressive social media platforms of late (Double Down News, Novara Media, Let’s Talk It Over, DiEM25, The Owen Jones Show).
The discussion is about the breakdown in social democracy that has followed the 2008 financial crisis, referred to as ‘Our Generation’s 1929’. Many commentators have explored the links between the rise of fascism that followed the Great Depression, and the rise of right-wing populism that has swept the world since the recent crash, 12 years ago. The correlations are alarming, but not unique. Nonetheless, the self-critical thinker should admit that each of the serious progressive movements that attempted to resist European, Asian, and American neo fascism, were mainly defeated from within – owing much to the coordination of party stooges with very powerful elements within the Murdoch media and its associated political elites.
In each of these cases, what resulted was the effective opposition of all of the largest progressive socialist or left movements in the US, Europe, and elsewhere. The serious protest movements that found their voice in Corbynism, Podemos et al, were the legacy of austerity and all its horrors. In Greece, Syriza, led in negotiations by finance minister Yanis Varoufakis, resisted the dictates of the Troika, refusing to comply with their policy of socialism for the super rich coupled with harsh austerity for many. The campaign was fought skillfully and hard, but in July 2015, the leader of Syriza, Alexis Tsipras, betrayed the will of his party colleagues, and of the Greek people. He signed a last minute back room deal with the Europeans that guaranteed a harsher austerity policy in Greece than anywhere else in Europe. The price of democracy.
In Britain, a ruthless and effective smear campaign against Jeremy Corbyn illustrated perfectly the nature of the relationship between The Conservative Party and the aggressively right-wing British media. The way in which these forces unified in a coordinated daily assault, and successfully vilified one the most progressive anti-racist politicians in Europe, ought to disturb even the most moderate democrat. As in Greece, the result was that the radical centre gained control of the national agenda, this time under the reigns of Sir Keir Starmer, who gave the lefties the boot, and all is well in the establishment.
Yet, to understand how we got to this depressing point, we must step back and take account of history. Any worthwhile understanding of the political and economic context in which we find ourselves must question the economic and philosophic origin of this broken global financial system.
The following quote offers a description of capitalism. “It is not from the benevolence of the butcher, the brewer or the baker that we expect to eat our dinner, but from their regard to their own interest.” Adam Smith put this radical argument forth in 1776, in favour of capitalism, or ‘market societies’. His favour for competitive markets and for the associated self-interest of business owners, such as the butcher, baker, and brewer, was a central feature of the theory.
It goes something like this; producers operate in a marketplace where there is competition. Serving their self-interest, they aim to maximise profits. Theoretically, the competition between producers such as butchers facilitates lower prices that attract custom, improvements to the quality of product, and increased quantities of product to serve anticipated growing demand. These facilitations, Smith argues, lead to favourable circumstances for the consumer, because in this process, producers are incentivised to undercut one another, driving prices down, with the unintended consequence of serving the public interest. We gain the phrase the ‘invisible hand of free-market’ from this ‘free’ and apparently self-regulating form of enterprise.
Capitalism, therefore, according to Smith, is the perfect way of balancing selfishness with the public interest and liberty. Within the rules of the free-market, the producer, or capitalist, is free to do what each wants to do. These circumstances will bring about freedom and prosperity for all. Capitalism is good because capitalists are selfish. They serve the public interest precisely because they are not intending to. It is a powerful argument, whether or not it bears any truth. Though the fact is, it would not have survived in this form, as a favoured economic model, had market society not transcended the crucible.
The First industrial Revolution, during the era of Smith, opened the floodgates for rapid innovations in telecommunication, steel production, petroleum mining, and electricity, which led to the creation of cars, trains and airplanes. The transcendence occurred, in the form of the Second Industrial Revolution, which was a giant leap forward in technology and society. The age of the artisan workshop to that of the factory floor. The raw materials and labour power that would build the new world would be the sovereign property of the dispossessed nations of the world, the wretched of the earth, as described by Fanon. Colonialism, racism, and financialised capitalism, the three-headed dragon of the elite enlightened Europeans, and their bastard American offspring. This period of exploitation, war, and genocide, was one of huge growth for capitalist industry.
The newly discovered scientific applications of electromagnetism led to an ever-expanding industry culminating in mega-firm corporations. Industry was becoming monopolised, and the captains of industry replaced the competitive ideal of Smith’s marketplace with an oligopoly market served by a rapacious form of financialised capitalism. The demise of competitiveness at the expense of endless growth in the market, and endless profits for executives, led to a significant change in the way traditional markets operated.
For mega-firms such as the Ford Motor Company (or Apple and Amazon) to operate successfully, huge quantities of money were required. The private banks at the time were too small, and therefore incapable of satisfying mega-firm investment requirements. This necessitated the creation of the mega bank, or central bank – created and managed wholly by the state. Unlike previous smaller lenders, the US Federal Reserve System, established in 1913, had the capacity to create money out of thin air and lend it to the mega firms as credit. As a result, during the first two decades of the twentieth century (as in the 1980s/90s), the vast majority of the money in circulation was fictitious. The Federal Reserve created huge and highly volatile economic growth, leading to the roaring twenties, and the infamous resulting crash of ‘29. The elite bankers, political leaders, and industrial magnates, as in 2008, benefitted collectively from their ability to print mountains of money out of thin air; inevitably, there was no stopping them.
Yet, rather than leading to a collectivist response such as that of the Spirit of 45’, the 2008 crash, has instead, led to deflationary forces such as austerity, and public sector cuts. As demonstrated by the Welfarism of the post WW2 world, Austerity in the 2010s was political choice, not a necessity. The wage stagnation and lay-offs that have accompanied austerity, have paralysed the labour market for the last 12 years. The Coronavirus pandemic has exploded the paradigm, increasing suffering, inequalities and tensions, but likewise, it has presented progressives and socialists with a unique opportunity to reimagine the world. One way to begin to address the situation therefore, is to discuss alternatives to the systemic problems that exist.
According to Yanis Varoufakis, there are two markets within neoliberal capitalism that are the source of poverty, inequality, financial crisis, and the inevitable social and political tensions that accompany these great problems. The first is the share market (stock exchange); the second is the labour market. Varoufakis, after resigning from Syriza in July 2015, set up his own political party (DiEM25), and was successfully re-elected to the Greek Parliament in 2019. He believes that we should get rid of the stock market, and radically redefine the principles and practices of the labour market. The way in which these markets currently operate, he argues, is driven by a collective irrationality that underpins the global financial system.
A situation has consequently emerged wherein the type of free market originally envisaged by Adam Smith in the baker, the butcher, and the brewer, is no longer capable of functioning freely or fairly in a market society driven by and wholly reliant on a stock market model. This broken system has simultaneously demonstrated its inability to meet the needs of societies in a sustainable way, and its ability to create unparalleled wealth, that ends up concentrated in the hands of an increasingly extreme minority. This is illustrated clearly in the fact that global wealth is the highest it has ever been in the history of humanity, while public investment is at a record low, relatively speaking.
Furthermore, every time it crashes, the mega banks re-float the system by providing financial welfare in the form of bailouts, paid for in the end by you and me. Yet, when applications for financial investment to support communities and the public sector, make their way via the democratic process to our politicians, suddenly, the magic money tree vanishes. Strange, that.
For confirmation of the tree’s existence, we need look no further than the recent Coronavirus contracts scandal. Tens of billions of pounds squandered by the Tories, when prior to the pandemic, this type of economic support and investment would have saved entire sectors from the criminal levels of neglect and dysfunction they have otherwise suffered. It is quite clear that the economic and political systems that created these conditions need radically re-imagined.
Varoufakis argues the following. In our democracies, it would be absurd to create the conditions in elections where citizens would be allowed to sell their votes. Yet, under our current economic system, this is natural. The super-rich, and other capitalists, are able to purchase shares in companies; the more shares you buy, the more votes and power you have. An inevitable antagonism emerges between the underpaid many who do most of the work and do not own the company, and the overpaid few who own the company and do the least amount of work (or no work at all beyond buying shares and extracting wealth). You could say that democracy ends at the company door. Why not then, extend the principle of democracy to the economy?
We could amend corporate law, to mirror our democracies, one person, one share, one vote. Imagine if the principle that applies to democracy applied to corporations; you cannot buy and sell your vote, you cannot rent them. With neoliberal decision-making, you can do just that. You buy votes by buying shares, and you can rent them by shorting them. If economics was democratised, we could still have markets, with shares – but redistributed equally among employees. A cooperative business model. Varoufakis offers the analogy of library cards. Like library membership, you cannot sell or rent your card; when you join a company, you get a card, a share, and a vote, and when you leave, you return your card and take your accumulated savings with you.
With this co-op based democratised economic framework, you essentially have markets, and you have freedom. You can leave a company after time, taking accumulated savings, earned in wages and bonuses, with you. If you wanted you could move onto another employer or start a new business with friends, each person having one share, one vote; an equal share in the wealth of the enterprise. In any company you are part of, you will be an equal shareholder with all co-workers, and will have a democratic voice in the operation of the business, through regular voting. No longer will the economies of the world be subject to the obscene inequality, stagnation, and plummeting social conditions that have emerged under neoliberalism – (or those which are emerging under the techno-feudalism of the soon-to-be trillionaire Bezos, Zuckerberg, and Gates et al.)
The political experiences of the post-recession resistance movements point to a serious flaw in the strategy. These movements, in the main, have been national strategies. Yet, from Wall Street to Frankfurt, it is clear that neoliberalism is a highly organised and effective international movement. Nevertheless, the irrationality of the system is characterised by the fact that the US Federal Reserve bank, is not a bank at all, it is a Welfare State for global elites. It literally creates money out of nothing, lends it to associates in governments and distributes it to CEOs, who spend it on wall street, raising their share prices and subsequent bonuses, and the whole cycle repeats again. However, once shares can no longer be bought, sold, or shorted, Wall Street becomes irrelevant, and the entire system collapses.