The neoliberal paradox

Sep 11 2024 · 12 min read

Social Responsibility · Ethical Governance · Public Governance · Human Rights

Neoliberalism, a political and economic ideology that emerged in the late 1930s, was born out of a concern among thinkers like Friedrich Hayek and Ludwig von Mises, who believed that democracy posed a fundamental threat to capitalism. These early neoliberal ideologues thought that democracy posed a threat to capitalism because it enabled the majority to vote for social protections and economic safety nets, which they viewed as detrimental to free-market capitalism. The central concern was that democracy allowed people to demand rights and benefits that could undermine the unfettered operation of markets. To safeguard the capitalist system from potential challenges of democratic rights and social mobilization, neoliberal thinkers developed strategies to construct and propagate narratives that would effectively suppress any movements or rebellions against capitalism. Their efforts were aimed at maintaining the dominance of the capitalist structure by preemptively neutralizing any forms of resistance or dissent.

This strategy is closely linked to the implementation of austerity policies and the dogma of perpetual economic growth, which, although seemingly contradictory, are deeply intertwined in neoliberal capitalism. Austerity, with its reductions in public spending, cuts to social services, and suppression of wages, creates conditions of economic insecurity and inequality. This insecurity, in turn, drives the relentless pursuit of growth, which is presented as the only pathway to prosperity. However, this growth predominantly benefits the elite, reinforcing the power structures that austerity seeks to protect. Together, these forces trap the working class in a cycle of precarity and dependency, ensuring that wealth continues to concentrate at the top while making it increasingly difficult for the many to challenge the entrenched status quo.

The austerity trap

Austerity, at its core, is a policy prescription that demands sacrifice from the many in the name of economic prudence. Governments, often under pressure from financial institutions and economic elites, implement austerity measures during economic downturns or debt crises. These measures typically involve reducing public spending, cutting social services, and suppressing wages - all under the guise of stabilizing the economy and reducing public debt.

However, austerity is not just a financial strategy; it is also a political tool used by neoliberalists that serves to discipline the working class. By cutting social safety nets and reducing the bargaining power of workers, austerity increases economic insecurity. This insecurity forces individuals to accept lower wages and poorer working conditions simply to survive, thereby weakening any potential for collective resistance. As Clara E. Mattei argues in The Capital Order, austerity policies are not merely about economic necessity but are fundamentally about maintaining the power and privilege of the elite. By keeping the working class economically vulnerable, austerity ensures that they remain too preoccupied with survival to effectively challenge the existing power structures.

"Austerity cloaks itself as fiscal necessity, but in truth, it is the calculated preservation of power, silencing the voice of the many to uphold the dominion of the few."

Neoliberalism further entrenches this power dynamic by using austerity measures to justify extreme inequality. The narrative underpinning neoliberalism is built on the premise that there is a natural hierarchy of worth among people. In this worldview, the wealthy are seen as inherently deserving of their riches because they are perceived as the most capable, while the poor are viewed as undeserving, lacking the necessary qualities to succeed. This ideology asserts that the rich are wealthy because they merit their wealth, and the poor remain in poverty due to their own shortcomings.

Yet, this notion is fraught with contradictions, particularly when juxtaposed with the idea that wealth will "trickle down" to benefit everyone. Neoliberalism promotes the belief that some people are naturally destined to be rich while others are destined to remain poor, while simultaneously arguing that the wealth of the rich will somehow uplift the poor. These contradictions are often glossed over by simplistic narratives that, despite their logical flaws, resonate with certain segments of society.

Despite these logical flays we repeatedly assured that trickle-down economics works, we just need to grow a bit more. Yet, after more than 40 years of adhering to this system, the stark reality is that just eight individuals now possess more wealth than half of the world’s population, who live on less than five dollars a day. Meanwhile, the number of people living in absolute poverty has reached unprecedented levels.

The myth of perpetual growth

Contradictorily, the same elites who impose austerity measures also champion the ideology of perpetual growth. Economic growth is often presented as the panacea for all social ills - a rising tide that lifts all boats. This narrative suggests that by increasing production, consumption, and GDP, societies can achieve prosperity and improve the standard of living for all. However, this growth is rarely distributed equitably. Instead, the profits from increased production tend to flow disproportionately to the top, exacerbating income inequality.

The pursuit of perpetual growth requires an ever-increasing exploitation of both labor and natural resources. Workers are pushed to produce more, often for stagnant or declining wages, while environmental degradation accelerates as industries expand to meet the demands of growth. Despite the rhetoric that growth benefits everyone, the reality is that the gains are captured primarily by a small elite,

Neoliberalism has turned millionaires into billionaires and turned the working class into the working poor

This pursuit of growth is deeply tied to the logic of capitalism, which demands constant expansion to sustain itself. Yet, this growth is not inherently tied to improving human welfare; rather, it is about increasing capital accumulation for those who already hold wealth. As profits soar across sectors - from tech to finance to manufacturing - more people find themselves struggling to survive, working 3-4 jobs just to stay alive. This paradox highlights the hollow nature of the growth narrative: while the economy expands, the benefits are hoarded by the few, leaving the many to grapple with worsening economic conditions.

Neoliberal policies exacerbate this situation by undermining the state's capacity to function effectively. Neoliberalism posits that the state's role should be minimized, particularly in providing social welfare and regulating the economy. Consequently, it fosters an environment in which the state is perceived as inherently ineffective, thus reinforcing the notion that market forces alone are capable of efficiently managing society. This dynamic creates a self-fulfilling prophecy: the state’s diminished ability to address social issues is then cited as evidence that state intervention is inherently problematic.

Moreover, the state is not so much eliminated as it is repurposed. Its primary function shifts towards enforcing compliance and quelling dissent, rather than safeguarding the public good. The state thus becomes a powerful enforcer of neoliberal capitalism’s rules, while simultaneously becoming impotent in protecting citizens from the market's excesses.

The vicious cycle of inequality

The combination of austerity and the relentless pursuit of growth creates a vicious cycle that perpetuates inequality. Austerity measures reduce the income and social security of the working class, making them more vulnerable to economic shocks. At the same time, the drive for growth demands that these same workers increase their productivity, often without a corresponding increase in wages or improvements in their quality of life.

It's like trying to dig yourself out of a hole. Every time you get close, someone piles more dirt on top, making it even harder to escape. All while they keep telling you that if you just work a bit harder, you'll get out - knowing full well that their survival depends on you never making it out. Because as Lisi Krall says

“Hierarchies' feedback on the natural system pushing it to further expand because Elites depend on the expansion of surplus for their survival as elites.”

As inequality grows, so does the power of the elite to shape economic policies in their favor. The wealthier they become, the more resources they have to influence government decisions, fund political campaigns, and shape public discourse. This concentration of power makes it increasingly difficult to enact policies that could challenge the status quo or redistribute wealth more equitably.

Moreover, rising inequality leads to decreased social mobility, trapping individuals in a cycle of poverty and precarity. The working poor are left with few opportunities to improve their circumstances, as access to education, healthcare, and stable employment becomes increasingly commodified and out of reach for many. This lack of mobility ensures that the existing class structure remains intact, with the wealthy maintaining their dominance over economic and political systems.

This cycle is deeply embedded in the neoliberal worldview, which assumes that human beings are inherently selfish and greedy. This belief justifies policies that prioritize individual wealth accumulation over collective well-being. However, scientific evidence from social psychology, neuroscience, and anthropology challenges this view of human nature. While humans do possess selfish impulses, our primary values often center on altruism, empathy, and community.

Neoliberalism systematically undermines these values by promoting a society governed by individuals who prioritize greed and self-interest. It fosters a culture of blame, where the poor are held responsible for their poverty, while broader systemic issues are ignored. This strategy serves to atomize society, making individuals feel isolated and solely responsible for their circumstances, rather than recognizing the powerful systemic forces at play. In doing so, it perpetuates the vicious cycle of inequality, ensuring that the wealthy remain at the top while the working class struggles to escape the ever-deepening hole.

The illusion of choice

One of the most insidious aspects of the neoliberal paradox is the illusion of choice it creates. Workers are told that if they work harder and produce more, they will eventually achieve prosperity. However, this promise is rarely fulfilled. Instead, the system is designed to keep them on a treadmill of constant labor with little to show for it. The relentless push for growth means that workers are always expected to do more, while austerity ensures that the rewards for their labor remain minimal.

Despite its repeated failures, neoliberalism continues to dominate global economic policies. The financial crisis of 2008 and more recent political failures, such as those seen under leaders like Liz Truss, are examples of neoliberal policies leading to disaster. Yet, neoliberalism persists, often described as a “zombie doctrine” that continues to influence policy even after its failures have been exposed.

The reason for this persistence lies in the power of the narrative that neoliberalism has crafted. Neoliberalism has mastered the art of the “restoration story,” a narrative where the entrepreneur is the hero fighting against the villainous state to restore freedom and prosperity. This narrative is deeply appealing and overrides rational critiques of neoliberalism’s failures. The story that neoliberalism tells is simple, compelling, and resonates with many people, allowing the ideology to maintain its grip on global politics.

This restoration story perpetuates the illusion of choice that placates the working class, making them believe that their circumstances are a result of personal failure rather than systemic inequality. It diverts attention away from the structural factors that keep them impoverished and directs it toward individual shortcomings, maintaining the false hope of a way out. This narrative not only perpetuates the status quo but also fosters a culture of blame and division among the working class, weakening their ability to organize and demand change.

The rise of protest candidates in America and the global surge of right-wing authoritarian movements, such as those led by Trump, Bolsonaro, and Modi, can be directly linked to the failures of neoliberalism. Research from Harvard and Boston University shows that neoliberal policies, such as austerity measures and perpetual growth ideology, which prioritize market control over state intervention, have led to the privatization of essential services, increased job insecurity, and exacerbated inequality. This has fueled polarization by creating social divisions and eroding solidarity. The resulting economic insecurity and social unrest create a vacuum that authoritarian leaders exploit, presenting themselves as outsiders who will restore order and address the problems caused by neoliberalism. However, once in power, these leaders often deepen the very crises they were elected to solve, further intensifying inequality, corruption, and perpetuating the illusion of choice.

Breaking the cycle

Despite the profound challenges posed by neoliberalism and the rise of authoritarianism, there remains hope for meaningful change. Societal transformation, while often appearing unattainable, can swiftly become inevitable when the right conditions are met. This is evident from past social movements, such as those advocating for marriage equality and civil rights, which have demonstrated that change is possible when driven by a compelling narrative that resonates with the values and aspirations of a broad base of society.

The path forward lies in constructing and amplifying a new narrative - a compelling “restoration story” that can inspire and mobilize people towards a more equitable and sustainable future. The paradox of austerity and perpetual growth, which underpins the contradictions of modern capitalism, must be confronted with an alternative vision that prioritizes human well-being over profits. While austerity and growth are often portrayed as necessary for economic stability, they primarily serve to entrench the power of the elite at the expense of the many, perpetuating inequality and making it increasingly difficult for those at the bottom to challenge the system.

To break this cycle, it is essential to challenge these neoliberal narratives and build collective power among the working class. This involves supporting labor unions, advocating for living wages, and pushing for policies that redistribute wealth and power more equitably. By telling a compelling, coherent story that resonates with people’s values, it’s possible to catalyze the kind of societal shifts needed to overcome the challenges posed by neoliberalism and authoritarianism.

In this system, industries place profit above all else: a food industry where feeding people is secondary to maximizing revenue, a pharmaceutical industry that values profit margins over human health, a media landscape that distorts truth to serve corporate agendas, and a fossil fuel industry propped up by subsidies to perpetuate environmental destruction. These outcomes are the inevitable products of a capitalist system where austerity and unchecked growth serve as twin pillars of control, keeping the working class subjugated while the elite tighten their grip on wealth and power.

However, by understanding the dynamics of complex systems and the power of narratives, it is possible to create the conditions for significant social and political change. The strategy for those seeking change should be to focus on building and expanding support until a tipping point is reached. At this tipping point, transformation can occur rapidly, challenging the concentration of wealth and power at the top and dismantling the systems that perpetuate inequality.

To create a more equitable society, it is imperative to reject the neoliberal narratives that have long dominated and work towards an economic model that prioritizes the well-being of all members of society. The challenge is immense, but by advocating for systemic change and telling a powerful, alternative story, we can build a future that serves the many, not just the few. This approach provides a pathway to overcoming the challenges of the current era and moving towards a more just and equitable society, where human well-being is at the forefront of our collective goals.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.