Has neo-liberalism reached use-by date? Ayn Rand and the failure of philosophy

A good deal of what I’ve been seeing of late on social media – but also in mainstream journalism – revolves around the notion that the Covid-19 pandemic will be the trigger for a shift away from the neo-liberalism that has characterised leading western economic policies since the early 1980s.

That might be right. Back then this ideology was trumpeted as a ‘more sophisticated’ approach than the liberal democratic western policy mixes of the mid-twentieth century. When the eastern bloc fell over in the early 1990s its triumph seemed complete. History, Francis Fukuyama declared, had ended as a result. From then on, The Future would consist of a changeless neo-liberal nirvana.

Well, quite. It was an absurd statement, curiously built on the same faulty assumption that Karl Marx had applied to his thinking in the 1840s: that societies, by nature, move towards an ideal end-point – a meaning summed up by the term ‘progress’. But this was an intellectual illusion. Societies don’t ‘progress’ directionally; they simply change. Sometimes that is, indeed, for ‘the better’ (however that might be defined), but sometimes – equally – it isn’t.

Karl Marx, via Wikipedia.

What emerged in the 1990s, then, was a simplistic reversal of communist doctrine in which end-point nirvana became a capitalist triumph where the world prospered thanks to the one-percenters. This vision was, in short, a realisation of a Randian wet-dream; and to understand its place we have to remember that Alyssa Rosenbaum (Ayn Rand) was actually Russian, brought up in her formative years during the Russian revolution. Her exaltation of lassiez-faire capitalism and demonisation of governments was, in many respects, merely a disingenuous reversal of the statist totalitarianism she saw around her while growing up.

To cut a long story short (but I’ll expound on it ‘long’ if asked), what appeared to be ideological ‘opposites’, in short – totalitarian communism versus liberal capitalism – were both framed and defined by the broad ideological framework that had originated with the industrial revolution in the late eighteenth century, which historically remains one of the definitions of ‘modernism’. All that was happening was a succession of flip-flops from one ideological extreme to another within that broad picture.

The other problem with Fukuyama’s idea was that, as historians well know, any ‘permanent future’ usually disappears after a couple of generations, because society keeps changing organically and the ideals held by one generation won’t be held by their grandchildren. This doesn’t mean history moves in specific cycles. However, the pressures that lead to social change over time within a broader cultural framework do seem to be generational. There are, at times, discontinuities where governmental framework apparently ruptures; but those in turn still come down to contiguous life-ways held by those within the broader culture, with which government has become disconnected. (I’ll post later on mechanistic ‘historical cycles’, an idea as interesting as it is wrong; and yes, I once wrote a post-grad paper on Oswald Spengler).

The Market in panic, 1837.

Nonetheless, pop-social perspectives are often trapped by the recency effect – where whatever has just happened dominates. The early-1990s fantasy that neo-liberalism marked the end of ideological and economic change was typical of this fallacy. It was picked up by plenty of people whose ignorance of history and of human nature was as profound as their sense of entitlement. There would be no further change. The future was a permanent neo-liberal paradise in which governments were almost irrelevant, taxes low, and profits high: a global economic playing field where ever-larger corporates could compete to produce ever-larger profits for the benefit of stock-holders; and where the poor would reap any benefits that ‘trickled down’ on their heads from above. And, as the editors of Random House told Rand in 1957 when she offered them Atlas Shrugged, some 3,000 years of Judeo-Christian tradition would go out the window.

Why was all this welcomed from the 1980s? The ideological oppositions of the Cold War played a large part. Neo-liberalism was the diametric opposite of what its exponents imagined communism to be (this doesn’t validate what communism actually was, of course: that system was disastrous in its own way, economically, politically and socially).

To a large extent neo-liberalism was also appealing because the social-democratic mix of the mid-twentieth century, adopted in various ways from the 1930s and 1940s by many western governments, had itself reached use-by date in the 1970s. Two generations of these policies had led to an increasing raft of regulation-on-regulation, an increasing sense that the welfare ‘safety net’ was actually a lifestyle choice. And economic prosperity was faltering. Neo-liberalism, which removed what were then seen as stultifying regulations and offered prospects for creating wealth by new enterprise, seemed appealing. And at first it was. The older system had, indeed, reached an unworkable extreme; and the new generation did not identify with the structures it was built on.

The question few asked was whether the answer to the problems of the 1970s was to simply reverse older assumptions, which is basically how neo-liberalism was applied in the United States, Britain and – curiously – New Zealand during the 1980s. In New Zealand, particularly, there was a sharp crusade to get rid of regulation and attack the welfare state – an explosion of polemic sold on the basis that to propose any path other than what was being imposed was to advocate the discredited old. This stifled debate. Again, for a while, the change was welcomed. But when the brief burst of saved money ran out and the stock market collapsed in the late 1980s, the down-side emerged. Rising unemployment, poverty and collapsing infrastructure became the norm in early 1990s New Zealand. Yet even when a Labour government was elected in 1999 and declared a failed socio-economic experiment ‘over’, the fundamental frameworks of policy didn’t change.

New Zealand was not the only country to undergo this transformation, although the Kiwi experience was one of the most extreme. Two generations on, and the costs of under-funding government services, particularly those relating to key infrastructure such as hospitals, has become evident worldwide as a result of the pandemic. Add to this the application to public services of business practises such as ‘just-in-time’ global delivery, creating dependency chains of both goods and cash-flow with no resilience, and the whole edifice begins to look fragile. There has also been the adjustment of capacity to suit only average normal demands.  In an emergency, or if supply chains are disrupted for any period, there’s nothing to stop the whole lot falling over.

But it’s worse than that. This same issue of paper-thin reserves and conceptual frameworks on which trade is based also affects the financial sector – something that remains very much a child of neo-liberalism. Much of the money being made in ‘the markets’ comes not from production, but from speculation on the imagined future value of that production – further abstracted through buying and selling stocks, shares and debt. When such products of humanity’s apparently unique ability to conceptualise the intangible are treated as ‘real’, and traded on that basis; or when the same thing is done in terms of buying and selling debts – which is what caused the General Financial Crisis, but which hasn’t stopped since – it’s clear that much of the ‘prosperity’ generated by neo-liberal deregulation is tangible for those who benefit from the cash-flows, but in any real economic sense no more than a house of cards.

I mean, what do you think something that is built not just on imagining what something invisible and untouchable is worth, but on competitively trading that assigned value? And then take the ‘products’ of that conceptual trade, and trade that? This is how the financial system actually operates. It has nothing behind it, although those involved profit in a real sense from the flows of money. Eventually, somebody sees a fleeting shadow that spooks them, everybody else follows, ‘confidence’ falls, and then real value and people are slammed. I am not kidding. Why do you think the GFC happened?

Yah. When the conceptual vision falters, the neo-liberal system of global financial markets, ‘futures trading’ and all the rest is fucked. There is no other word for it. And it doesn’t take much to do that. Just saying. It has little to do with what actually fuels the human effort – intellectual or otherwise – that supports complex societies, yet a few from those societies can always benefit from the practise before it bursts. The problem is that the ‘stimulus’ packages of 2008-10 kicked the can into the future but didn’t fix the cause. And today – well, this is that future.

A beautiful picture of Earth from 1.6 million km sunwards. NASA, public domain.

There is also evidence that ‘trickle down’ hasn’t worked. In a sense it did: the third industrial revolution combined with de-regulation and market freedoms to enable a wide distribution of cheap consumer goods that gave the illusion of wealth. The fact that many of these were of historically low quality, ultimately reflecting a devaluation of production input, did not reduce the impression that the wealthy corporates were, indeed, showering gold upon us all. But in fact, wealth continued to flow through these mechanisms from the poor to the rich – aided by tax structures flowing from the neo-liberal revolution – leading to the present situation where much of the world’s wealth is locked up by less than one percent of the population.

The more insidious problem has been the way the conceptual reduction of all interactions to monetary value, coupled with corporate-style cost-benefit analysis – has framed thinking. After two generations of it, everything, it seems, including intangible human values, can be ‘rationally priced’ in purely monetary terms. To me, this sits poorly with the reality of humanity as a primarily emotional species. But such assumption has become so embedded it has even found its way into governmental systems. The emotional value of gaining a new friend in New Zealand, in September 2019, has been priced by The Treasury at $616, since you ask – and yes, that is from their spreadsheet. I have friends who are economists there, who I know for a fact don’t think so cynically; but what I am critical of is the underlying bureaucratic driver for such calculations, which is shaped by the longer-term ideological outcome of neo-liberal frameworks on government systems.

Such disconnect between intellectual constructs and the realities of human emotion, I suspect, has been why the social impact of neo-liberalism has taken the specific direction it has globally. The poor have been hurting, and in recent years the middle classes have run into trouble. In recent years terms such as ’employed poor’ – people who can’t make ends meet, despite every efficiency, and despite full-time salaries – have begun to circulate.

There is an end-game to this system. My home town of Napier, for instance, has areas whose people have become feral; suburbs where default behaviour is to be aggressive to strangers on sight – verbally and physically – and where vandalism, violence and theft are part of ordinary life. This city is not, of course, alone in such experience. Rand’s editorial critics in 1957 were, it seems, quite right. I suspect the cause is a shift of mind-set that leads the dispossessed to extend human values only to their immediate groups and to de-humanise all else, including government authority. It is difficult to see this as anything other than a return to the urban social problems of the early industrial period, caused by much the same forces. Back in the nineteenth century, it led to governments being knocked over by pitchfork-wielding workers. And it has re-emerged now only as the neo-liberal ‘reforms’ have entered their second generation – which, from a historical perspective, is pretty much standard when looking for social outcomes of major shifts.

So yes, it seems clear enough from these factors that neo-liberalism has reached its use-by date. And simply reversing its excesses won’t offer longer-term answers. What will work? I have some general ideas based on my own qualifications, publications, and experience in anthropology, history and philosophy: and otherwise in the experience I had of professionally communicating economics as a ‘day job’ over many years, all of which contribute to the discussion points I intend to outline in subsequent posts. But maybe the answer, in detail, can only be ‘nobody knows’. Which, of itself, is actually an answer in a philosophical sense. Just not the one anybody wants. We’ll see. Watch this space.

Either way, the apparent global social response to the current Covid-19 crisis suggests that there is a definite mood for a paradigm change in western socio-economic philosophy, and I hope that whatever happens will be done carefully, with consideration, and with a better understanding of human nature than accepting, as faith, simplistic Randian wish-gratification. Put another way, as the world plunges into an economic depression that will make the Great Depression of the 1930s look like a kiddie game – a depression that has been ripe and ready to happen for years, and isn’t fundamentally caused by anti-virus lock-downs – I hope understanding of human nature and society can flow from something more than the default intellectual frameworks of the immediate moment, and the polemic flowing from that perspective.

Meanwhile – any opinions?

Copyright © Matthew Wright 2020


19 thoughts on “Has neo-liberalism reached use-by date? Ayn Rand and the failure of philosophy

  1. Oh I loved this. Forgive the trip down memory lane, but Ayn Rand and Atlas Shrugged changed my life.

    Back in the early 70’s I was a well-brought up young ex-Catholic who saw the world in black and white, and capitalism was pretty much in the black box. Then a rather gorgeous young man insisted that I read Atlas Shrugged. I considered myself to be an ‘intellectual’, and he was very handsome so… -cough-

    Coming to terms with capitalism was almost as painful as the decision to become an atheist, and I’ve never been completely comfortable with it. But. In Hungary, I’d seen first hand how ugly human beings can be when they’re /forced/ to work for the ‘common good’. It was as if poverty brought out the worst elements of capitalism in them – i.e. greed, selfishness, dishonesty etc etc etc. So wanting ‘stuff’ was clearly a human trait. Atlas Shrugged persuaded me that being innovative and creating that ‘stuff’ was good.

    Even now, I see the freedom to create, on a small scale, as being intrinsically good for humans. It’s what all of us on this forum are doing, right this moment. But the neo liberal version of capitalism has gone way beyond creativity and ‘product’. It’s become something that’s almost feudal. Not in the forms, obviously, but in the distribution of power and wealth. And as you say, product is now almost incidental to the trading of concepts.

    It’s funny, as I read the section on trading, it suddenly hit me that the whole system is basically a ponzi scheme.

    I’ll be interested to read what ideas you have for the future. At the moment, part of me hopes it includes some pitch forks, with the tips blunted, of course.

    Liked by 4 people

    1. The problem I have with Rand is that her version of capitalism is an extreme one: reducible, essentially, to ‘government bad/corporates good’, where the assumption is that one has merely to allow individuals to flourish, and all will be well. Actually, not all humans are innovators. That said, individual enterprise is clearly a part of the human condition and needs to be nurtured – the issue has been finding a system that does so without destabilising society. Communism got it precisely backwards and failed as an economic system (as Barbara Tuchman once remarked, Marx was perhaps the butt of history’s greatest joke). However, the various flavours of ‘capitalism’ haven’t been so good at working, either, because of this lurching from one extreme to another.

      I am kind of hoping that the world can avoid the problem of the peasants-with-pitchforks. It’s where societies end up after pushing their work-force too hard – witness Europe in the mid-nineteenth century (1848 especially). In essence, the systems then developed and brought to fruition via the social changes and lens of the two World Wars in the twentieth century were an effort to avoid that problem. Have we learned since? I’d hope so.

      Liked by 2 people

      1. You’re absolutely right about Rand. She smooshed the concept of jesus together with The Hero to create a character that we simply had to relate to. With a main character that persuasive, it’s hard not to see value in the ‘message’. And yes, not everyone can be an innovator.

        As for those pitchforks…I guess I’m like the White Russians, I want change but only to a point. Unfortunately, once people get angry it’s hard to limit that anger. Could it happen in the Western world? I guess it depends upon how much we can claw back from the 1%. Noblesse Oblige perhaps?

        Liked by 1 person

        1. I keep thinking of the French Revolution – once people went over the edge, it never stopped. After a while the revolutionaries were, themselves, overthrown by the next wave, and so it went on. Ouch. Trotsky thought the same likely to happen in the early Soviet Union.

          On that note of the French Revolution, incidentally, have you seen Sophia Coppola’s movie on Marie Antoinette? Marvellous film & for me the best part was the deliberately anachronistic use of New Wave-Gothic as soundtrack for the sequences involving the royal family – underscoring, metaphorically, their utter disconnect from the people.

          Liked by 1 person

          1. Yes, it turns into an orgy of bloodletting, that’s why I insist on blunted pitchforks. 🙂
            No, I very rarely go out to the movies, but it sounds rather good, although I did have to look up New Wave-Gothic! lol

            Liked by 1 person

  2. There’s a dynamic to these words that is almost symphonic, brilliant! I think there is a key to everything in the idea of value. If you are going to price everything in money, you need to make a very careful job of it, economics would then actually be a science. Perhaps there may emerge a neo-neo-liberalism, where we say yes, value everything in money but do it properly. A barrel of oil priced to reflect the damage to the atmosphere may be $10,000, where today’s speculative market makes it $20 – the cheapest option includes destroying the planet. Climate change or social unrest – or Covid 19 – was never costed as a liability. Everywhere you look during the Covid crisis you can see the words ‘free market failure’ – from PPE supplies to preparedness for global pandemics in general, and interestingly, the UK – with it’s glorified City of London – is looking like the sickest patient in Europe right now, despite being – 1, the world’s sixth largest economy, and 2, an island. Which vindicates the critics of neo-liberalsim entirely – you can’t have a ‘just in time’ vaccine and there is no market for one when you don’t have a pandemic. Pitch-forks, usefully, will allow two metre social distancing.

    Liked by 3 people

    1. I worry about those pitchforks. I quite like modern society in many ways and would be sorry to see it disappear under a pile of pitchfork-wielding, torch-waving protestors. What worries me is that when people such as you or I can see what might well be coming (perhaps) and comment about it, the underlying social currents driving that are probably already too well-developed to be stopped easily. To me the Covid-19 issue is a trigger, not a cause – including of the economic crash that will certainly occur in a few months (every projection I’ve now seen, from professional economists – including former colleagues who I trust and respect – points to a calamity).

      The issue of reducing the economy to numbers is an interesting one. Years ago I co-authored a peer-reviewed article on one of the world’s first economic analytical machines, a water-driven computer invented by Bill Phillips. I had lengthy discussions with my co-author – a brilliant economist, all-round good guy, and now one of the deputy secretaries of the New Zealand Treasury – about the underlying philosophy of economics. In particular we discussed the effort to ‘harden’ it into a ‘science’ by mixing numbers into the equation (as it were). To a significant extent those are offset by the understanding among economists that it is also a social science – this has become more of a feature recently than (say) 30 years ago.

      There’s one other point about the article: all the economic modelling done today is digital. The machine I wrote about, by contrast, was wholly analog – which made it different (tests we did showed that it was pretty close though). Here’s a link to the article: https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2007/2007dec70-4ngwright.pdf

      Liked by 2 people

  3. This is a fascinating post, Matthew.

    I smiled at your mention of Rand. As an Objectivist, her ideas go well beyond those advocated by other thinkers who could be labelled as, broadly speaking “neo-liberal”. Unlike Rand, most neo-liberals do accept some degree of government intervention in the economy. Likewise (again, unlike Rand), many neo-liberals do accept the need for social welfare, although not to the same extent as “socialists” do.

    There are, also neo-liberals who are practicing Christians, Jews etc, so their philosophical outlook is influenced by moral and/or religious conceptions, not merely by dry economics. In short not all so-called “neo-liberals” should be lumped together.

    I would call myself a one-nation Conservative, rather than a neo-liberal as there is, obviously such a thing as society. Friendship, community etc help to sustain the social fabric, but free market economics (tempered by welfare provision and charitable activities for those who have fallen on hard times or are, temporarily unable to help themselves), is part of a civilised society (and a vital component to boot).

    Also neo-liberals (well some of them at least), make the mistake of speaking as though traditions do not shape individuals and communities. They, quite obviously do and a sense of rootedness helps to give meaning to human existence.

    Best, Kevin

    Liked by 1 person

  4. Thanks for helping me understand how we got here, Matthew. I look forward to the next instalment!
    Will retweet if I can. The more people understand the Randian mess we’re in the better!

    Liked by 3 people

  5. Reblogged this on I can't believe it! and commented:
    It has long been evident that the extreme neo-liberalism that followed Ayn Rand’s views has had a malign influence on the world economy leading to massive inequality. And the system is now like an unstable house of cards. Matthew Wright explains in this super post.

    Liked by 2 people

    1. Thanks for the shout-out! I quite like the phrase ‘malign influence’ relative to Rand. The worst of that is that she and others of similar ilk believed they were doing the world a favour and had no concept of the Pandora’s Box they were actually opening. Even if they had, I suspect, they might have done it anyway.


  6. Excellent and thought-provoking post. I hope I will give the time to read over this more than once (an act which reading on a screen has tended to stop me doing), but for now I have just one depressing thought on this.

    I think it’s optimistic to think that there is a change in people’s ideas towards neoliberalism being driven particularly strongly with what is going on now. These opinions are being voiced only in the same quarters as have always been analytical and critical of it. So left-leaning media will have opinion pieces about it, other intellectual, free-thinking political science sorts will vocalise or write about it, but there is no grand change in public consciousness.

    As thoughtful critics, as I believe all of us who read your articles probably are, or at least like to think we are, we are drawn to seeking out sociological, political, economic, philosophical ideas. We look for knowledge and spend a great deal more of our time seeking out intelligent discussion and ideas than the average person, and we are a minority – quite a severe minority (as can be simply verified by comparing reading figures of our favourite information outlets compared to any mainstream populist mouthpiece). If there are any of us lucky enough to have found ourselves within a group of like-minded individuals then unfortunately that can skew our perceptions of ‘popular thought’ and the makeup of our demographic within it, a concept familiar enough to have given rise to the ‘echo chamber’ metaphor entering the common lexicon.

    A more depressing and realistic view of popular opinion can be found in media that we would normally shun: the right-wing tabloids and populist mainstream media; twitter feeds or reddit posts from people ideologically opposed to us or who simply aren’t seeking knowledge and view themselves as typical people. The typical person doesn’t look behind the headlines, doesn’t verify sources. A typical person is happy to immerse themselves in their own echo chamber of populist, simplified problems and solutions and is distrustful of other opinions, again particularly in times of crisis (eg. views towards pacifists during both world wars). They have no cry for changing the horrendous injustices that have been done to them through an economic system that many do not even have a concept of existing.

    Already the governments who have embraced this ideology which you so succinctly outlined in your post, whose health systems are performing the worst during this pandemic (as to be expected for the reasons you’ve outlined) have a rallying of support. Their approval ratings are being reported as going up and up, as historically is always the case in any crisis (eg. war). Scapegoats are already being tested (eg. WHO and China) and unfortunately the masses who crave populist, simplistic answers (I suppose through no fault of their own) appear to be lapping this up.

    A view of the total lack of change can be seen in China where residents are already cheerleading, led at least partly by media propaganda no less sharp than our own, how great their government has been in handling the situation – a complete about-turn from the sympathy shown in the early stages to those suffering huge injustices there.

    Those in power, with the goal of maintaining the status quo, were caught unawares. They are now fully at work controlling popular perceptions of what is happening and who is to blame, comfortable in the knowledge that they have time-tested apparatus at their disposal to control popular perception and that our minority dreams of a better future coming about through a peaceful change of consciousness are unfortunately just dreams.

    If anyone has actually read to here, I apologise for feeding your undoubtedly crippling sense of nihilism 🙂

    Liked by 1 person

    1. I read to the end! I wouldn’t say nihilism so much as a healthy cynicism about human nature and the way it operates en masse, as opposed to specific individuals… Oh wait, that’s what drove the nihilists in the first place… 🙂 Joking aside, thanks for your thoughts. One of the issues the world needs to tackle is, indeed, the fact that the ‘current order’ will naturally want to find ways of preserving itself against the storm-surges currently rising around it from a number of directions. Whether this makes things worse – or whether it fixes things – will depend, I suspect, on the extent to which those doing it have empathy for those whose fortunes they dominate.

      Liked by 1 person

      1. I wonder if you’ve read or listened to Chris Hedges views on how the current order appear to be already well under way finding and implementing ways of preserving themselves. His views sadly point to empathy being either completely unknown to them, or to give them the benefit of the doubt, that they have a world-view or ideology that enables them to justify their means in pursuit of that ideal, similar in a way to Churchill making his decision about Coventry during WWII.

        Your post in fact has started me thinking, thanks to your insight about Ayn Rand and her background in the post above, that this current form of capitalism is just a mirror image of the awful Communist regime she witnessed and is perhaps just as stiflingly ideologically led – and as we can plainly see from the horrors of 20th century ideologies (fascism, communism), huge swathes of deaths are a necessary sacrifice for an ideology.

        Under those regimes it was obvious and brutal, under this regime it’s more insidious and less direct (economic and emotional pressures, disenfranchisement, and whatever word would describe the concept of a fatal hopelessness that descends upon a person or group of people when it becomes obvious that their views and needs have zero influence – like a neglected child that stops crying simply because it’s learnt no-one answers. With your knowledge of obscure words I’m hoping you might know of one which encapsulates this 🙂 ).

        And in those ideologies, people who rose to positions of influence or power were either ideologues to the regime or callous, selfish, apathetic, fearful or otherwise ‘inert’ enough to pose no threat to it.

        As can be witnessed by the terrible things that have happened and continue to happen to various “whistleblowers” over the past decade or so, I’m feeling that perhaps this is where we are now – under the rule of a pan-global ideological regime with the same powers at it’s disposal as those old states.

        *Sigh* I can still fondly remember the days when thinking along these lines could be comfortingly labelled paranoia. Sadly revelations about or by Snowden, Assange, Jamal Khashoggi, et al have removed that little security blanket for me.

        Well, it’s 10am. Nothing like a nice dose of pessimism to start the day 🙂

        Really enjoying your blog by the way. A nice mixture of light and heavy thoughts and, as I’ve implied, your insight into Rand’s driving forces has really opened up some interesting avenues of thought for me.

        Liked by 1 person

  7. Interesting article! I have seen a lot of speculation tight now too. And I’ve also seen both sides of the aisle thinking we’re heading for their version of utopia at time- but I think you summed it up: societies don’t progress towards an end goal, they simply change. I can only hope we’re not heading towards something a lot worse though.

    Liked by 1 person

    1. So do I. I think it’ll take a while for a practical way forwards to emerge from the likely chaos into which the world is being plunged – the Covid-19 crisis is merely a trigger that has highlighted much longer-standing issues. Doubtless it’ll resolve in a historically short time, but I expect that will still translate to something significant in terms of human lifetime.

      Liked by 1 person

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