Neoliberalism is Not the Free Market

Recently libertarians have been determined to conceive their opinions as comparable to modern neoliberalism. Within neoliberalism they see a generally free market system which is raising living standards in the developing world and progressing all of society forward. As Sam Bowman states in his article on neoliberalism, neoliberals believe in the power of markets to efficiently allocate resources, take a consequentialist view on the appropriateness and applicability of particular political systems and governance structures, and have a positive view of redistribution to correct any market misdistribution.

A system like this sounds excellent, so far as it is removed from political and ideological debates and instead situated within a more pluralistic conception of governance which maximises individual utility. And it relies on a disputed concept ill-defined by its originators, regularly being used as a term of abuse rather than a genuine ideological critique of capitalism and markets. Such a neoliberal manifesto would be very agreeable if it were actually a realistic assessment of the current structures of existing neoliberalism.

Neoliberalism as a concept is badly defined. When taken up by the likes of David Harvey and other classical Marxists it seems to simply denote a significant ideological disagreement with free markets in their conceptual totality. Rather than identifying a coherent, pluralistic ideological conception which actually exists in and around neoliberalism, its used as a tautology for modern capitalism and its supposed reliance on truly free markets. As much as it is a term of abuse, it is also a conceptual marker which denotes particular things rather a consistent definition within political economy. In this sense, I’d agree with Bowman.

However that does not mean that he is correct in identifying a non-ideological system that simply supports consequentialism and the free market. Rather, neoliberalism can be seen as a coherent ideological structure if we view it empirically, as a qualitative reality situated within existing socio-economic relations. In this sense neoliberalism does not equate to a free market, but is rather an ideological concept that supports managerialism, financialisation, state subsidy and the power of technocracy.

Within the realities of neoliberalism “the state must be an active force, and cannot simply rely on ‘market forces’” to function coherently. Rather by supporting bureaucratic technocracy and the wisdom and power of centrally-planned corporations, a quasi-market state hybrid is developed which requires subsidisation of distribution and output. The major ways of doing this are through either state regulation, which puts up entry barriers to other competitors and limits the competitive impetus of functioning free markets, or through the development of financialisation and rentierism which warp time preferences and allow for the soaking up of overproduction in an unfree economy. Entry barriers originating from the large state monopolies, such as intellectual property, the money monopoly and transport subsidies create large economies of scale while subsidising the diseconomies, meaning artificially high overhead and capital costs which limit the ability of potential entrepreneurs to compete and engage in market activity and price discovery.

On the other side, the use of financial markets to soak up excess capital goods leads toward a financialised economy where time preferences are made much shorter due to a desire for immediate profit, and where rentierism becomes the norm of wealth production. Established companies benefit through more access to debt and capital markets, and financiers can hedge bets on the performance of company debts and stocks. A Misesian concept of financial markets functioning to efficiently allocate capital to businesses and entrepreneurs is thrown out the window when land-value speculation, currency manipulation and the desire for short-term profit over long-term medium gains become the existing function of said markets. In effect what is seen is a privatisation of profits, and the socialisation of losses. To describe such a system as related to free market activity would be laughable if weren’t actually being done.

Going to the consequentialist argument, Bowman and the like would see the way in which neoliberalism has reduced poverty as a marker of its efficiency in maximising individual happiness. Unfortunately, such a view does not stand up to empirical observation. If we actually look at the realities of neoliberal development in the developing world, we see massive land expropriation by the state in line with agribusiness and corporate interests. By removing land rights to commonly-owned farmland and wood, urbanisation as a process is sped-up, quickly creating a cheap pool of poverty-laden wage labourers. Well it may have certainly decreased their poverty as measured by GDP, it does not stand up to the basic arguments of libertarian justice. If land is expropriable based on an erroneous reading of efficiency and allocation, then private property in any reading gets chucked out as well. As Carson brilliantly elucidates, neoliberalism “had its origins in massive robbery and enclosure of most of the earth’s land and mineral resources, and continues to get the overwhelming bulk of its profits from rents on state-enforced monopolies, entry barriers, enclosures and subsidies”.

In the end, by libertarians and classical liberals supporting modern neoliberalism, they are supporting a highly ideological conception of managerialism which defends the centralisation of economic power into monopoly outfits with financialised economies which inefficiently allocate capital away from the real economy. Capital becomes highly regulated and limited to networks of established power, and the entrepreneurial zeal of free markets is crushed under the weight corporate managerialism which supports tax subsidies, monopoly power and the socialisation of losses. A competition of monopolies under the guidance of the state structure, as Michel Aglietta would put it, becomes our existing reality.