‘Neoliberal capitalism’ has contributed to the rise of fascism, says Nobel laureate
How would you define the “good society”?
It’s a question Joseph Stiglitz, winner of the Nobel Memorial Prize in Economic Sciences, is asking everyone, in this fraught moment in history.
His new book, The Road to Freedom: Economics and the Good Society, takes a deep look at the question.
“My ultimate objective in this book is to understand what kind of an economic, political, and social system is most likely to enhance the freedoms of most citizens, including by appropriately drawing the right boundaries on freedoms, constructing the right rules and regulations, and making the right trade-offs,” he writes.
“The answer I provide runs counter to more than a century of writings by conservatives.
“It is not the minimalist state advocated by libertarians, or even the highly constricted state envisioned by neoliberalism.
“Rather, the answer is something along the lines of a rejuvenated European social democracy or a new American Progressive Capitalism, a twenty-first century version of social democracy or of the Scandinavian welfare state,” he writes.
If you haven’t heard of Professor Stiglitz, he’s credited with pioneering the concept of “the 1 per cent.”
That refers to the modern phenomenon of the top 1 per cent of Americans (or more precisely, the top one-tenth of 1 per cent) that have accrued so much wealth and power in recent decades that it’s imperilling the US political system.
In 2011, 13 years ago, he explained how the severe growth in wealth inequality, if left unchecked, would keep feeding on itself and drive further inequality and division in politics.
The next year, in 2012, he published The Price of Inequality: How Today’s Divided Society Endangers Our Future (which became a best-seller) to warn of what was coming.
“As our economic system is seen to fail for most citizens, and as our political system seems to be captured by moneyed interests, confidence in our democracy and in our market economy will erode along with our global influence,” he warned.
“As the reality sinks in that we are no longer a country of opportunity and that even our long-vaunted rule of law and system of justice have been compromised, even our sense of national identity may be put into jeopardy.”
Today, he has returned to that theme in his new book, but from a different angle.
He takes as his starting point the extreme social, political and environmental problems besieging some societies in this age of polycrisis, and wonders how Americans (and citizens of other countries) can reverse the destructive growth in wealth inequality and rebuild a better and healthier society in coming decades.
“The challenges to — and attacks on — democracy and freedom have never been greater in my lifetime,” he warns.
What does your ideal society look like?
We may not know it, but when we complain about a new policy, or tax settings, or housing, or our health and education systems, or the rate of population growth, we’re often engaging in political philosophy.
Why? Because if we’re arguing that some policy isn’t good, we must have an idea (whether conscious or unconscious) of what a better policy would be, and that means we’re comparing it to some ideal we have in mind.
For example, what’s your view on gun ownership?
Should Australians be allowed to have access to guns in the way people in the United States do?
Your answer to that question will say a lot about your conception of “the good society.”
Do you think Australians would be freer and happier if the countryside was awash with guns? Would our schools be safer? Would our politics improve?
That’s the type of exercise Professor Stiglitz engages with in this book.
He spends a lot of time talking about the economic freedoms that are required for the majority of people to flourish.
He talks about the importance of someone’s “opportunity set” — the set of options available to someone during their life, given the resources at their disposal — and how it determines their freedom to act, and what can be gained by good economic and social systems that provide someone with the freedom to live up to their potential.
“People who are barely surviving have extremely limited freedom,” he writes.
“All their time and energy go into earning enough money to pay for groceries, shelter, and transportation to jobs … a good society would do something about the deprivations, or reductions in freedom, for people with low incomes.
“It is not surprising that people who live in the poorest countries emphasise economic rights, the right to medical care, housing, education, and freedom from hunger.
“They are concerned about the loss of freedom not just from an oppressive government but also from economic, social, and political systems that have left large portions of the population destitute,” he writes.
He reminds us that economic rights and political rights are, ultimately, inseparable.
“When you understand economic freedom as freedom to act, it immediately reframes many of the central issues surrounding economic policy and freedom,” he says.
The lies we were told?
To that end, a big chunk of his book is dedicated to arguing why we’ve been fed a lie by “neo-liberalism.”
He says the neoliberal political project has made millions of people in the United States and elsewhere less free, as it’s destroyed the US middle class (and severely threatened it in other countries) while enriching the pockets of the ultra-wealthy and undermining democratic institutions.
“The system that evolved in the last quarter of the twentieth century on both sides of the Atlantic came to be called neoliberalism,” he writes.
“‘Liberal’ refers to being ‘free’, in this context, free of government intervention including regulations. The ‘neo’ meant to suggest that there was something new in it.
“What really was new was the trick of claiming neoliberalism stripped away rules when much of what it was doing was imposing new rules that favoured banks and the wealthy.
“For instance, the so-called deregulation of the banks got government temporarily out of the way, which allowed bankers to reap rewards for themselves. But then, with the 2008 financial crisis, government took centre stage as it funded the largest bailout in history, courtesy of taxpayers. Bankers profited at the expense of the rest of the society. In dollar terms, the cost to the rest of us exceeded the banks’ gains.
“Neoliberalism in practice was what can be described as ‘ersatz capitalism’, in which losses are socialised and gains privatised,” he says [his italics].
The title of his book is an explicit reference to The Road to Serfdom, which was published by the famous Austrian economist Friedrich Hayek in 1944.
Professor Hayek was one of the leading figures of the post-war neoliberal political movement.
He wrote the Road to Serfdom to warn people of the threat posed to freedom, as he saw it, by governments in the 1930s and 1940s that were increasingly willing to intervene in the market system to plan, or direct, some economic activity for the masses.
He spent much of his life trying to rid the world of the influence of the British economist John Maynard Keynes, whose policy prescriptions inspired governments in countries such as Australia and the UK to pursue “full employment” policies after the war (policies which, coincidentally, supported the so-called Golden Age of Capitalism from 1945 to the early 1970s).
Professor Stiglitz argues that the conception of “freedom” pushed by Professor Hayek and other neoliberals, including Milton Friedman, led us down another wrong path.
“They talked of ‘free markets’, as if imposing rules and regulations results in ‘unfree markets’,” he writes.
“They relabeled private enterprises — companies owned by private individuals — as ‘free enterprises’, as if giving them that appellation would bestow a reverence and suggest that they should not be touched and their freedom should not be curtailed even if they exploit people and the planet.
“[And] the Right claims that governments have unnecessarily restricted freedom through taxation, which constrains the budgets of the rich and thereby … reduces their freedom to act.
“Even in this they are only partially correct because the societal benefits of the expenditures financed by these taxes, the investments in infrastructure and technology, for instance, may expand their opportunity sets (their freedom) in more meaningful ways,” he writes.
We’re in a war to ‘protect and preserve freedom’
Professor Stiglitz was born in 1943. He’s 81 years old.
He knew some of the people he writes about in the book and had a ringside seat to the “market turn” that occurred in the 1970s.
He’s seen the impact that that market-turn had on the US middle class during the past 40 years.
One can easily imagine that the supporters of the vision of “freedom” that’s been promulgated by neoliberalism will find plenty of problems with his book, in both its historical analysis and its policy prescriptions.
But Professor Stiglitz takes no backward step.
“Unfettered, neoliberal capitalism is antithetical to sustainable democracy,” he concludes.
“Hayek’s famous book The Road to Serfdom claimed that a too-big state was paving the way to our loss of freedom.
“It is evident today that free and unfettered markets advocated by Hayek and Friedman and so many on the Right have set us on the road to fascism, to a twenty-first-century version of authoritarianism made all the worse by advances in science and technology, an Orwellian authoritarianism where surveillance is the order of the day and truth has been sacrificed to power.”
Ultimately, he says we must start using the economic system to provide millions more people with meaningful freedom, and that means harnessing the power of government to make it easier for people to access the resources that will enlarge peoples’ “opportunity set” and improve their economic and political freedoms.
“We are in a global, intellectual, and political war to protect and preserve freedom,” Professor Stiglitz warns.
“Do democracies and free societies deliver what citizens want and care about and can they do it better than authoritarian regimes?
“This battle for hearts and minds is everywhere. I firmly believe that democracies and free societies can provide for their citizens far more effectively than authoritarian systems. However, in several key areas, most notably in economics, our free societies are failing.
“But — and this is important — these failures are not inevitable and are partially because the Right’s incorrect conception of freedom led us down the wrong path.
“There are other paths that deliver more of the goods and services they want, with more of the security that they want, but that also provide more freedom for more people.”
Professor Stiglitz has come to Australia to promote his new book. His trip is sponsored by The Australia Institute think-tank. He will appear on the ABC’s Q+A on Monday night, which will stream live from the Queanbeyan Performing Arts Centre.
