We need the grace to accept things that can’t be changed, the courage to change the things that can and the wisdom to know the difference – Reinhold Niebuhr
Nowhere is trust more important than in politics and the public sphere. It comes from shared values, of wanting to act together and form goals to be held in common. But trust is fragile and can be fractured. If the belief takes hold that political and economic systems are stacked against them, individuals will exit from civic obligations.
The rise of neoliberalism over the last 3 decades has led to this breakdown in trust. It’s arisen from the way business is conducted and the deleterious effect this has had on government and society.
When business is done right, it creates employment, reduces poverty, leads to meaningful lives and satisfies community need. But business is not being done right and only the big corporates and a few citizens are reaping the benefit. 62 individuals have a combined wealth equal to that of the bottom 50% (3.5 billion) of the global population.
It started in the economic downturn in the early 1970s, as social democracy was challenged by free-market philosophies. Neoliberalism became a vogue that took on a life of its own. A decade later, Thatcher and Reagan took power, and the rest of the package followed: massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services.
The new zeitgeist was summed up in Reagan’s 1981 inaugural address: ‘Government is not the solution to our problem. Government is the problem.’
‘There is no such thing as society” said Thatcher. There were no more citizens either, just customers in a consumer market, workers in a labour market, and investors in a financial market. This new ideology asserts that these markets magically deliver benefits that could never be achieved by planning.
Nothing was sacred. Energy, water, trains, health, education, roads and universities – even prisons have been privatized. Rent is then charged by these new monopolies which flows to dividends.
Neoliberalism is about freedom: freedom to take what you want, from who you want, when you want it.
The only thing that became united under this mindset was business and political interests: championing a politics that is entirely subservient to economic imperatives defined in terms of markets. And we’re left wondering how many extreme weather and coral bleaching events does it take to change a neo-lib’s mindset.
Neoliberal policies are everywhere beset by market failures. Banks are too big to fail and bankers too big to jail. Yet essential services can’t be allowed to collapse, so business takes the profits, the state keeps the risk. Heads – business wins, tails – we all lose.
Through the IMF, the World Bank and the World Trade Organisation, neoliberal policies were imposed on the developing countries. The rest of the free world meanwhile, found it hard to resist this new religion of the English speaking countries. After all it’s hard to run onto the pitch playing soccer when everybody else has decided to play hockey.
In Russia and India, oligarchs acquired state assets through fire-sales. In Mexico, Carlos Slim was granted control of all phone services, which led him to becoming the world’s richest man.
It was taken to extreme in English speaking countries who now have the biggest margins between the public and private spheres. In education, Australia has the biggest gap between its best and worst schools in the OECD. Also we have the highest domestic electricity and gas of anywhere in the world. While our banks rake in more pre-tax profit, per capita, than any in the OECD.
A study found privatized electric companies in 34 OECD countries charge over 23% more than public ones. Cuba’s public health system outperforms the largely private one in the US on every measure at far less cost. While in the UK, government support for British Rail increased after privatization in 1996.
But don’t worry, it’s all done to make markets more competitive and dynamic.
The Howard government liquidated over $100bn worth of public assets. This leaves the public purse – health, education and other public services – starved of funds, and climate change mitigation unaddressed.
The attraction of selling the family silver has been irresistible to governments of all persuasions. It frees them from the burden of managing public services properly and provides funds to fix holes in budgets and buy more votes with tax-cuts.
Any ensuing crisis is not corrected but used as another opportunity to cut taxes, privatize any remaining public services, deregulate corporations and re-regulate citizens.
When this neoliberal runaway train hit the buffers in the 2008 GFC, it wrecked an almost unbroken 200-year pattern of industrial capitalism, where new forms of technological innovation and automation provided higher wages and higher-value consumption. The travelling companion throughout had been government sponsored health, education and welfare.
Moreover, in every decade since World War 2, incomes at the bottom had grown faster than the incomes of those at the top. It had been inclusive growth.
Neo-liberalism was a con. But such myths rely more on faith than fact. Global economic growth has been markedly slower in the neoliberal era than it was in the preceding decades. It was over 4% in the 50s and 60s. After the neo-libs took a chokehold in the 80s and 90s, it became less than half that. In the new millennium it’s hovered around 1.2%.
Inequitable growth, according to Nobel Prize winning economist, Joseph Steiglitz, can’t foster new investment. That’s because “Inequality weakens aggregate demand and the economy.” Inequality moves money from the bottom of the pyramid to the top, and since those at the top spend less than those at the bottom, overall demand is weakened.
As the ballot box was replaced by the cash register, the state domain went walkabout and taken political engagement and trust along with it.
Markets lead to market power, which leads in turn to a concentration of political power. So an even more dangerous impact of neoliberalism than the economic crises, is the political crisis: we’ve lost the means to put it right.
When the social contract is revoked, when trust between a government and its citizens fail, disengagement, or worse – alienation – is sure to follow. This is serious. ISIS recruitment relies on alienation in society and those that carry out massacres – like Martin Bryant at Port Arthur – are usually alienated individuals. In many democracies around the world, mistrust is on the rise, particularly among younger generations.
To restore trust we have to stop thinking of government only in terms of what it takes away or interferes with, but what it can provide and initiate. It’s important to determinine what social and economic parts of society should be tackled by government and which ones can be safely left to the market.
Only then will we get a government that promptly makes and implements decisions that serve the common good. Only then will we begin to address our challenges and build the kind of society we want.