What is neoliberalism, and how is it linked to inequalities?

Dock No. 9 (top left) of the Salford Docks, Salford, Greater Manchester, England in the early twentieth century. Dock No. 8 is in the centre and the Ship Canal in the foreground (Wikimedia, public domain)
Salford Quays 2019, with Dock 9 on the right, looking towards the Ship Canal
Copyright Philip Thomas, 2019

These images indicate how the world has changed over the last fifty years. The first is of the Salford (Manchester) Docks in the early years of the twentieth century. The Ship Canal (in the foreground) enabled cotton, grain, coal and timber to enter the country. Dock 9 on the left is packed with ocean-going vessels. The second image is of Dock 9 a hundred years later, looking towards the canal. Ships, railways, cranes, wharves and warehouses are replaced by the neon lights of Media City, with theatres, concert hall, wine bars, restaurants, cinemas, fitness centres, and companies specialising in information technology, finance, insurance, marketing and advertising. A single word accounts for the change – neoliberalism. 

As a result of neoliberal economic policies British heavy engineering and manufacturing industries withered and vanished. These policies included the deregulation of the financial industry and stock market, making it possible to shift heavy manufacturing industry and the capital necessary to sustain this to parts of the word where labour was cheaper and union-free. The new information technology served the market’s need for the near instantaneous transmission of financial information, necessary for its efficient functioning. As heavy industry shrank in the UK, union membership declined, weakening the solidarity of working men and women. Changes in employment law increased the numbers of people self-employed working in a precarious and unstable job market, on zero-hours contracts, without sick pay, and few rights. 

We may prefer not to recognise it, but these changes have implications for our work as psychiatrists, psychologists and therapist. They also extend into the most intimate and personal aspects of our lives to the extent that it is no longer possible or desirable to maintain that political life is something that must be kept apart from our work and our personal lives. So, what exactly is neoliberalism?

Although some deny its existence (for example Talbot, 2016) neoliberalism is a set of inter-related philosophical, economic, and political ideas and practices that have become enormously influential over the last fifty years. Here I will attempt to define neoliberalism and examine its origins and values. This will help us to understand how the ideology has disadvantaged women, members of racialised communities and disabled people. This will become important in subsequent blogs when we consider the consequences of austerity.

 

The origins of neoliberalism

Friedrich von Hayek
(https://creativecommons.org/licenses/by-sa/3.0/deed.en)

One way of understanding the origins of neoliberalism is to see it as a response to the rise of tyranny and totalitarianism in the first of half of the twentieth century. That, at any rate, is how the philosopher whose ideas are at the heart of contemporary neoliberalism, Friedrich Hayek, understood it. Hayek was an Austrian economist and philosopher who shared the 1974 Nobel Prize in Economic Science for his work on the theory of money and economic fluctuations. In his best-known work, The Road to Serfdom (Hayek, 1944), he describes the rise of Nazism and Stalinism in Europe in the first half of the twentieth century. This was antithetical to Western liberalism in the tradition of De Tocqueville, Hume, Lock and Smith. Hayek argued that socialism and state planning led ultimately to the threat of totalitarianism:

We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past. Although we have been warned by some of the greatest political thinkers of the nineteenth century, by De Tocqueville and Lord Acton, that socialism means slavery, we have steadily moved in the direction of socialism.

(Hayek,1944: 67)

Yakov Guminer’s 1931 poster reading “The arithmetic of an industrial-financial counter-plan: 2 + 2 plus the enthusiasm of the workers = 5”
(Wikimedia, public domain)

The central principle of liberalism is that of individual freedom, which, when allied to capitalism, allows individuals the freedom to generate wealth through the operation of free markets. Hayek and his followers (like Milton Friedman economic adviser to Ronald Reagan and Margaret Thatcher) saw state intervention and planning as a major barrier to the operation of the free market. Reducing the size, authority and scope of the state became (and remains) one of the most important objectives of neoliberalism.

Harvey (2005) describes how this is achieved. Privatisation of public utilities and services serves the dual purpose of opening up new markets for competition by the private sector, whilst at the same time reducing public spending. The state also withdraws from welfare and social provision. Banks and financial markets are deregulated to facilitate competition. As an ideology, neoliberalism has become so pervasive and taken for granted that it is extremely difficult to question it. To do so is to risk ridicule and marginalisation. 

Harvey highlights three key features of neoliberalism: the importance it attaches to individualism over collective responsibility, its implications for social justice and democracy, and the importance it attaches to technology and expertise. I’ll deal with these features in detail in subsequent blogs. The notion of individual freedom and liberty lies at the heart of neoliberalism (hence ‘liberal’), and the policies pursued by Ronald Reagan and Margaret Thatcher in the 1980s exemplify the neoliberal commitment to individual freedom over collective responsibility (the idea that through society and the state we have a moral obligation towards other members of society, especially the weak and powerless, that transcends our interests as individuals). In order to confront the economic problems of the 1960s and 70s (so-called ‘stagflation’), Thatcher slashed welfare provision and privatised public utilities and social housing. 

Miners’ Strike Rally in London in 1984 
(Nick from Bristol, UK [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)])

She confronted union power through the Miners’ Strike[1], and considerably weakened the power of organised labour in the process. She also cut back the power of local government and powerful professional groups. At the same time, she deregulated the banks and financial markets, resulting in the ‘Big Bang’ of October 1986 that opened up London’s financial market to large foreign banks and traders. 

The values of neoliberalism

It should be clear by now that a central value of neoliberalism is the adamant rejection of socialism and collectivism. Individual freedom of choice is valued above all else, especially as far as the competition of individuals in free markets is concerned. The resultant creation of wealth is another key value. The competition necessary to achieve this is seen as a universal social good. Braedly and Luxton (2014) write:

The centrality of competition, as a neoliberal value necessary to the pursuit of freedom, is difficult to overstate. Competition under a capitalist system is seen to be the least restrictive way of distributing inequality, which is perceived as inevitable.

Braedly and Luxton (2014) page 8

This is important. Neoliberal economic policies accept that inequality, like high unemployment, is an inevitable consequence of free market capitalism as the following passage from The Road to Serfdom indicates:

There will always exist inequalities which will appear unjust to those who suffer them, disappointments which will appear unmerited, and strokes of misfortune which those hit have not deserved … Inequality is undoubtedly more easily borne, and affects the dignity of the person much less, if it is determined by impersonal forces than when it is due to design.

[Hayek, 1944: 106, emphasis added]

 This last sentence could only have been written by someone born to wealth and privilege, and who had never experienced poverty and hardship [2]. Under neoliberalism everyone has the right to compete in the market, but not the right to start from a level playing field and with the same level of equipment. 

Neoliberalism and inequality

We can now consider the relationship between neoliberal economic policies and inequalities in income and health. I want to consider how specific aspects of neoliberalism have laid the foundations for the disproportionate increases in inequality affecting women, members of racialised groups, and disabled people. 

Gender and neoliberalism

According to Breadly and Luxton (2014) three aspects of neoliberalism have had particularly negative consequences for women. First, women’s work is so poorly remunerated that they are grossly over-represented amongst the poorest people in the world. Second, women are responsible for most of the unpaid work (so-called domestic duties, what Marx called social reproduction, care of sick and disabled family members) in private households. According to the National System of Accounts (part of the UN’s Department of Economic and Social Affairs) responsible for collating global economic data, domestic duties have no economic value because they do not create wealth. Finally, the principal operators and beneficiaries of neoliberal policies are men. They are over-represented at the highest levels in large corporations and the financial industry [3], so they can maintain the gender divisions in pay and benefits that result in them amassing more wealth. 

Neoliberalism and racialised groups 

Broadly similar factors operate for members of racialised groups. Connell (2014) points out that neoliberalism originated as a cultural product of the former colonial and imperial European powers that dominated most of the world’s population from the late sixteenth century on. Although writing about psychiatry and psychology, Suman Fernando’s (2017) account of the long-term impact of this history of colonialism is equally true for Western economic and political thought. The most egregious form of free trade was of course the trade in African slaves through which some British families acquired vast wealth. 

Slavery and the colonisation of non-Europeans was justified through belief in the superiority of European culture. Europeans were inherently superior to non-Europeans and it was argued that colonialism and slavery were in the best interests of non-European people, because they would benefit from the ‘civilising’ influence of contact with Europeans. The consequences of this linger on today in the form of institutional and other forms of racism.

Garments Factory in Bangladesh
(By Fahad Faisal – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=20246988)

That said, neoliberal systems of government are keen to encourage non-Europeans to engage fully in the market, and outside Europe, in India, China and other parts of South East Asia, governments have enthusiastically espoused neoliberal economic policies. Despite this, the long-standing legacy of systemic inequalities experienced by members of racialised groups have been made much worse under neoliberalism. Connell identifies three reasons for this. The higher standards of living enjoyed by those living in the Global North is achieved by the exploitation of racialised workers in the Global South. Second, global labour markets push racialised people into work that is less secure, less well-paid, and potentially more dangerous. Finally, the deregulation of financial markets has made it much easier for capital to flow out of countries where labour is expensive to those where it is cheap. 

Neoliberalism and disabled people

Neoliberal economic policies have had particularly baleful consequences for the disabled and elderly. The UK government’s austerity policies cut benefits and reduced the number of people claiming benefits. This has widened the chasm between rich and poor. The most vulnerable in society, disabled people and those with mental health problems, are paying a high price for the political ideology of neoliberalism, some with their lives. Suicides and deaths are the tip of an iceberg of misery experienced by those who are physically or mentally unfit for work, as the government exercises an increasingly punitive and authoritarian regime against benefit claimants. Vulnerable people are left destitute by sanctions that suspend or end their benefits if they fail to comply with orders to attend ‘assessments’, ‘training courses’, or submit the required number of job applications each week. 

It’s worth noting here that those who enthusiastically endorse neoliberal economic policies see people who are unable to work because of physical disabilities or because they have poor mental health, as a drain on the state. This is because they claim benefits and being unemployed, they don’t contribute to state revenues through taxation.  

Conclusions

In this blog I have tried to set out a brief overview of the origins, history, values and consequences of neoliberalism. I fully accept that it is a bit thin on evidence, but the details will be filled in in subsequent blogs, so please –watch this space! Thanks for reading.

References

Braedly, S, & Luxton, M. (2014) Competing Philosophies: Neoliberalism and Challenges of Everyday Life. Chapter 1 in Neoliberalism and Everyday Life(Ed Susan Braedley & Meg Luxton) Montreal, McGill-Queens University Press pp 4 – 21

Connell, R. (2014) Understanding Neoliberalism. Chapter 2 in Braedley, S., & Luxton, M. (Eds.). (2014). Neoliberalism and everyday life. (Ed Susan Braedley & Meg Luxton) Montreal, McGill-Queens University Press pp 22-36

Fernando, S. (2017) Institutional Racism in Psychiatry and Clinical Psychology: Race Matters in Mental Health. Palgrave Macmillan (see particularly Chapter 3, 39-380

Harvey, D (2005) A Brief History ofNeoliberalism. Oxford, Oxford University Press

Hayek, F. (1944) Hayek, F. (1944) The Road to Serfdom: Text and Documents(ed. B. Caldwell) Chicago, University of Chicago Press.

Talbot, C. (2016) The Myth of Neoliberalism Accessed at on 22 Jan 2018 at https://colinrtalbot.wordpress.com/2016/08/31/the-myth-of-neoliberalism/


[1]In the USA Reagan’s confrontation with the Air Traffic Controllers in the strike of 1981 served a similar purpose. In August of that year he fired all 11,000 ATC staff after they refused to return to work.

[2]  Hayek’s father was a medical doctor who became an academic. His mother came from a wealthy and conservative land-owning family. Some years before her son’s birth, she inherited much of her family’s fortune see https://en.wikipedia.org/wiki/Friedrich_Hayek  

[3]The writer and diversity advocate Marilyn Loden coined the term “glass ceiling” to describe the invisible barrier that prevent women accessing the highest echelons of commerce and business back in 1978. In the UK, the latest gender pay gap figures indicate that almost 80% of companies pay male employees more than female employees, and about a quarter of companies have a pay gap greater than 20% in favour of men (https://www.theguardian.com/world/2019/apr/04/gender-pay-gap-figures-show-eight-in-10-uk-firms-pay-men-more-than-women

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