Book Note: A Brief History of Neoliberalism by David Harvey

by Dan Miller.
A Brief History of Neoliberalism by David Harvey (Oxford University Press, 2005)

A Brief History of Neoliberalism by David Harvey (Oxford University Press, 2005)

The roots of the anti-establishment mood that was so visible this year in the US presidential primaries and the Brexit vote in the UK are no doubt many and complex. But a key element is surely the rise of a political economy that allows a tiny international elite to garner unimaginable wealth and wield inordinate political power while the middle and working classes of the developed nations stagnate economically and writhe in political impotence. David Harvey’s A Brief History of Neoliberalism, a slender but dense volume, provides an explanation for that situation. Harvey’s main point is that the current global dominance of neoliberalism—a set of policies that includes free trade, low taxes, lax business regulation, reduced government services, and hostility to labor unions—was not the inevitable result of economic logic but was instead the product of a deliberate campaign by wealthy and powerful individuals to secure their class interests.

The mix of policies that came to be known as neoliberalism were first implemented in the third world: by military diktat in Chile and by financial diktat in Mexico (and once again by military diktat in Iraq after the US invasion). Later they were introduced into the rich western democracies by popular politicians such as Ronald Reagan and Margaret Thatcher. Reagan and Thatcher persuaded millions of voters to embrace neoliberal policies that were contrary to their economist interests by identifying them with “freedom”: from excessive taxation, from interfering government bureaucrats, from greedy and corrupt labor unions, and from welfare programs that were turning people from free and self-sufficient citizens into indolent wards of the state. Even Communist China adopted aspects of neoliberalism, turning the entire country into a Dickensian workhouse for the benefit of the party elite which incongruously continued to mouth the egalitarian pieties of Mao while economic inequality soared. The end result is the global economic system we see around us which channels ever more of the world’s wealth into ever fewer hands and leaves most people feeling confused and powerless.

This book, which was published in 2005, sounds eerily prophetic. It notes that financial transactions which used to allocate capital to productive enterprises have increasingly become disconnected from the “real economy” or, more properly, financial speculation has become the real economy. Harvey’s narrative also explains why the bankers and financiers who created the recent global fiscal crisis were bailed out with no legal consequences (and big bonuses into the bargain!) while millions of ordinary people lost their jobs and their homes. The thoroughly debunked urban legend that the catastrophe was the fault of the US government forcing banks to offer mortgages to poor people also fits nicely into Harvey’s notion that the elites are masters of propaganda through their control of the media and well-funded “think tanks” that spew out neoliberal orthodoxy. The recent upsurge in anti-establishment populism in Europe and America suggests that the neoliberal narrative is wearing thin as it becomes increasingly hard to hide the fact that it is a huge con game, another development that Harvey’s book anticipated.

There is much food for thought but there are also some obvious weaknesses in the author’s argument. Two stand out. Harvey notes that the rise of neoliberalism began in the 1970s when the welfare state began to experience high inflation and high unemployment; however his discussion of what went wrong with the welfare state is theoretically vague and lacking in detail, especially in comparison to his incisive critique of neoliberalism. Without a proper explanation of the economic problems of the 1970s, it’s hard to know whether to agree with him when he claims that neoliberalism was the wrong solution to those problems. Even more importantly, Harvey’s narrative does not give sufficient weight to the benefits gained by billions of people in the third world who were lifted out of abject poverty by the neoliberal economic reforms he condemns. China’s embrace of aspects of neoliberalism in particular has made a huge material difference in the lives of many ordinary people, not just party elites. That does not mean that neoliberalism has not spawned huge problems there such as environmental degradation, crony capitalism, and a debt overhang that could yet bring the Chinese economy, and possibly the global economy, crashing down. Still, Harvey’s argument would carry more weight if he acknowledged the benefits as well as the limitations of neoliberalism.

Despite those weaknesses, this is a book worth reading and pondering. It calls for a new way of defining “freedom” and “rights” that does not privilege market relations or individual profits over the interests of the community. And it makes clear that, however misguided some of the proposals put forward by the current crop of populist leaders and movements may be, their complaints are very real.

 

Professor Daniel Miller has been a member of the Calvin History Department since 1983. He regularly teaches a survey of Latin American history and has taken students there on several January Interim trips. His research interests include the history of Protestantism in Latin America and U.S.-Mexican relations.

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