This article was featured in the 2013 edition of Equilibrium, our annual print publication.
‘The salient failure of the current financial crisis is that it was not caused by some external shock … the crisis was generated by the system itself.’—George Soros
Over the past 30 years, the principles of neoliberalism have reigned supreme in the minds of western policy makers, making it the economic orthodoxy of our time. Neoliberalism represents a reinvigorated commitment to private property rights and the rights of free individuals to pursue their notion of a good life without interference from the state. In an economic sense, this is represented by free market fundamentalism. Neoliberals believe that amidst the flurry of unfettered market forces, the invisible hand will oversee all instances of market failure to restore equilibrium naturally, without the need for interference from the state. This reflects the autonomy and unequivocal freedom neoliberals so highly regard. This is the basis of the global regulatory framework, which has transfixed governments throughout the world. Recently, however, unchecked market forces have brought the West to its knees, bringing into question the legitimacy of neoliberal policies.
In the 1980s, Margaret Thatcher was forced to convince the people of Britain that there was ‘no alternative’ to neoliberalism. Today, students of economic and political theory unquestionably accept neoliberalism as the global hegemonic paradigm. It is all that some of us have ever known; yet how did it go from being a newfound concept to the norm in the eyes of right and left wing policymakers? Neoliberalism’s return to a classical focus, on the freedom of individual pursuits and the free market, has produced a contemporary theory that draws together economic and political traditions. Economic theory and political life are inextricably linked. Economic strength is the overriding and decisive basis for political power today. Neoliberal policies remain embedded in the psyche of policymakers, despite a multitude of modern failings. The adoption of neoliberal ideals has without doubt given rise to a surge in wealth creation but this, as we all know, has not come without consequence.
Neoliberalism has been described as ‘little more than personal greed dressed up as an economic philosophy’, with former Prime Minister Kevin Rudd believing it to be akin to an emperor with no clothes. Despite the emperor, or in this case the supporter of neoliberalism, realising that he is wrong, he refuses, in the words of Hans Christian Anderson, to ‘admit to his own stupidity and incompetence’. Neoliberalism exists in light of promise but fails to deliver, much like the emperor discovering that his clothes did not deliver what was promised. Despite alarm bells ringing in the past, the number of financial crises that occurred did nothing to deter supporters of neoliberalism. They remained absolutely committed, and notoriously reluctant, to identify and respond to instances of market failure. This total commitment to the deregulation of the market despite failure of the system is synonymous with the emperor’s reluctance to admit that he cannot see his clothes. The question is why the supporters of neoliberalism continued implementing such an economic framework if it clearly did not work. Neoliberals support only the mechanisms by which wealth is created—that is, ‘open competitive markets’ and limits to protectionism—inevitably leading to the manifestation of extreme personal greed. The propensity for Western governments to deviate toward neoliberal principles of economic management played a central role in building up to what is the biggest economic crisis in our hands.
In a world where wealth translates to power, the neoliberal policies that have made global monarchs so rich are the policies which have thrown away the ladder for those at the bottom. A world ruled by neoliberal politics is unnatural and inevitable. There is a possibility that amongst the sea of riches, the poor are able to empower themselves despite the fallacy of the global institutional framework that is neoliberalism. Popular resistance to neoliberalism has mounted since the financial crisis of 2008, exposing the flaws of deregulation. Staring objectively at the events of the US, Britain and Europe, it is not difficult to see that the entire structure of neoliberal thought is built upon the demands of the wealthy and powerful, all of which have been dressed up as sophisticated economic theory and applied without consideration of the outcome. The uncomfortable truth in the eyes of neoliberals is that one cannot restore faith and confidence in the market without help from the agency of the state. In the words of Joseph Stiglitz, the ‘invisible hand’ neoliberals are so fond of is invisible, simply because it does not exist.