resisting neo-liberalism: a bibliography of intellectual self-defence

The Australian Financial Review (Review Section), 21 July, 2000


If there is any substance to the term 'political correctness' it is the reference to a growing intolerance of differences of opinion on a variety of politically related subjects, though amongst conservatives the term is used to disparage the rights of women, homosexuals, indigenous peoples and those struggling to protect the environment from the ravages of industrialisation. However, the most striking example of a failure to tolerate alternative points of view in the public domain can be found in the area of economic policy where the term 'economic correctness' is an accurate description of the stranglehold which neo-liberalism and neo-classical economics exert on contemporary economic discussion and thought. The marketplace of economic ideas is anything but free.

The most serious consequences of 'economic correctness' in the West have been (a) the absence of a genuine debate in the media about economic policy; (b) a failure to submit neo-liberalism to critical evaluation; (c) the masking of neo-liberalism's ideological agenda; and (d) the 'apparent' lack of alternative economic approaches and policies. In the media, the universities and in government bureaucracies, rigid economic dogma has replaced honest argument and open debate: only one true economic faith is allowed and it is free-market capitalism.

How could this situation have arisen in free and open societies? Aren't state propaganda and indoctrination characteristics of totalitarian states? Perhaps surprisingly, George Orwell offered a preliminary explanation of how thought control also operated in democracies in his recently published introduction to Animal Farm . "The sinister fact about literary censorship in England" he wrote 50 years ago, "is that it is largely voluntary. Unpopular ideas can be silenced, and inconvenient facts kept dark, without any need for an official ban". For the elites in democratic societies, voluntary censorship is much more effective than the coercion practiced by totalitarian dictatorships, which only encourages resistance to authority and ruling ideas. In democratic societies, elites cannot control the population by violence and terror. They must therefore use more subtle and sophisticated mechanisms to maintain what Orwell called "smelly little orthodoxies". How, then, does voluntary censorship operate?

For elites the challenge is to combine effective indoctrination with the impression that society is really free and open. This can be done by setting the boundaries within which 'legitimate' ideas can be 'freely' expressed. According to Ed Herman and Noam Chomsky, these boundaries are most effective when they are implicit and presupposed, and rarely effective when they are openly dictated by the state. As Chomsky argues, "a principle familiar to propagandists is that the doctrine to be instilled in the target audience should not be articulated: that would only expose them to reflection, inquiry, and, very likely, ridicule. The proper procedure is to drill them home by constantly presupposing them, so that they become the very condition for discourse". The presuppositions then act as the framework for "thinkable thought" instead of being assumptions which deserve critical evaluation. The debates and dissent we privilege are therefore permitted and even encouraged, but within rigidly prescribed and largely invisible boundaries, leaving us with the satisfying impression that our societies are 'open' and 'free'. As Milan Rai argues, "we can no longer perceive the ideas that are shaping our thoughts, as the fish cannot perceive the sea".

Defining the spectrum of permitted expression is a highly effective form of ideological control. There are many contemporary illustrations, but one will suffice. It is presupposed, for example, that free market, or more accurately state capitalism, is the superior configuration of political economy. The collapse of centrally planned economies in Eastern Europe reinforces Francis Fukuyama's argument that liberal capitalism is the endpoint of humankind's ideological evolution: it has no rivals. What passes for economic debate and comment in the Western press, therefore, centres on the issue of optimal policy settings - which policies will produce economic 'success' defined in state capitalist terms - high growth, high profits, low inflation, free trade, internationally competitive business, etc, etc,? The debate over the 'correct' policy 'mix' is relatively free and open, but questioning the system of state capitalism itself is beyond the bounds of expressible dissent. Economic analysis is reduced to 'problem-solving', where the prevailing social and economic arrangements are assumed to be immutable, and the challenge is to make existing institutions and relationships work more smoothly and efficiently.  

Paradoxically, controlled dissidence, or what Chomsky calls "feigned dissent", which occurs within the parameters of 'legitimate thought', has the effect of reinforcing the existing economic system by appearing to oppose elite interests, while not actually challenging them. The claim that within free societies a great battle of ideas is taking place is in fact an illusion because views which are genuinely outside the elite consensus are voluntarily censored from the discussion over economic policy. 'Free trade' is an article of faith amongst Western policy makers. Stategic trade and industry policy, which has been crucial to the economic development of most East Asian societies, is demonised as 'protectionism' and 'picking winners' and is therefore rarely, if ever, permitted to enter serious 'public' discussion. Public debate - meaning elite discourse - centres on whether free trade should be pursued multilaterally or unilaterally.

Journalists can unwittingly become the agents of propaganda in democratic societies because it is in their professional interests to voluntarily censor themselves "on the basis of an internalised sense of political correctness". The personal costs of dissidence, even in relatively free societies, can be high. Orwell noted that under voluntary censorship "anyone who challenges the prevailing orthodoxy finds himself silenced with surprising effectiveness". If the citizens of a country can internalise values which encourage them to comply with ruling ideologies, violence is not required to crush dissent. Ideally, they should also come to believe that what is actually a transitory state of affairs - a particular configuration of political economy - is in fact a permanent and natural condition of their lives. This induces apathy and a sense of hopelessness about the possibility of alternative economic pathways.

The dominance of neo-liberalism in contemporary economic debates stems from official claims that all alternative policies have been tried, have failed, and are therefore discredited. Only market-based solutions will work, it is said. With an increasingly concentrated commercial ownership of the press, and with newspaper editors who regard a variety of commentators with the same ideological point of view as constituting a diverse range of opinion, this is not a difficult message to sell. The voluntary censorship which Orwell wrote about is particularly evident in the absence of a serious debate in the national press about the social effects of neo-liberalism, in particular the silence surrounding the inequalities of wealth and income distribution produced by these policies. Instead, most discussion focuses on the speed with which such policies should be implemented. Free trade always produces losers - those cast into unemployment in industries rendered 'uncompetitive' by a withdrawal of government support - but they are rarely if ever compensated as even the most dogmatic free traders expect. This inconvenient fact is steadfastedly ignored by neo-liberals in the media and the academy.

In part, neo-liberalism reached its 'hegemonic' position by projecting itself as a 'science' with the same intellectual sophistication and rigour that we would expect from the natural or hard sciences: the behaviour of markets, for example, is frequently discussed by economists in the same reverential terms as Newton's laws of physics (for a discussion of this, see Brian Toohey's Tumbling Dice (William Heinemann, Port Melbourne 1994) and Paul Ormerod's The Death of Economics (Faber and Faber, London 1994)). By claiming the cachet of scientific scholarship, neo-liberalism is able to conceal its ideological basis and marginalise alternative economic approaches. In this task it has been remarkably successful in recent years, Keynesian economics being just the most obvious casualty of neo-liberalism's dominance of the economic agenda in most Western countries.

The resuscitation of neo-liberalism has also been dependent upon a culture of amnesia, otherwise it would have been almost impossible to have resurrected economic doctrines previously and justifiably condemned for their inhumanity. As Eric Hobsbawm notes in his recent history of the twentieth century (Eric Hobsbawm's Age of Extremes: The Short Twentieth Century 1914-1991 (Michael Joseph, London 1994)),

those of us who lived through the years of the Great Slump still find it impossible to understand how the orthodoxies of the pure free market, then so obviously discredited, once again came to preside over a global period of depression in the late 1980s and 1990s, which once again they were equally unable to understand or deal with. Still, this strange phenomena should remind us of the major characteristic of history which it exemplifies: the incredible shortness of memory of both the theorists and practitioners of economics. It also provides a vivid illustration of society's need for historians, who are the professional remembrancers of what their fellow-citizens wish to forget.

As Roger Waters claims in Amused To Death (Columbia Records, USA 1992), the message from the decision-making class is clear: "time is linear, memory's a stranger, history's for fools". The starting point of any critique of current economic orthodoxy is therefore an alternative reading list of articles and books which are rarely read and never cited by neo-classical economists, but which place their arguments and assertions within an historical context. In the words of Raymond Williams, these texts can be considered "resources of hope". Below is an introductory list which should be seen as merely the first stage in mounting an intellectual self-defence against the onslaught of neo-liberalism.

Karl Polanyi's The Great Transformation (Beacon Press, Boston 1957) remains the seminal antidote to market hagiography, and should be compulsory reading for anybody who wants to know what happens to a society when unfettered market forces are unleashed upon it. Because contemporary economics courses at most universities are often openly hostile to the study of economic history, few economists would know why laissez-faire capitalism was abandoned earlier this century. Polanyi's classic work reminds us of something the elites are either ignorant of or would prefer the rest of us didn't hear about: namely, the devastating social effects of unregulated markets. "To allow the market mechanism to be the sole director of the fate of human beings and their natural environment", he argued, "would result in the demolition of society". Polanyi claimed that without state intervention to safeguard the public from the odious conditions of modern industrial life, "society would be annihilated".

Economists have erected an entire academic discipline upon an explicit assumption about the human condition. Ever since the industrial revolution, when the study of the economic was artificially separated from the study of the social and the political, liberal economists have assumed that the pursuit of material self-gain is the natural condition of humankind. In the words of Adam Smith, they have presupposed that society is comprised of individuals with an innate propensity to "truck, barter and trade".

On the other hand, Polanyi argued that the pursuit of material self-gain was an institutionally enforced incentive specific to industrial society. "Only in the nineteenth-century self-regulating market did economic self-interest become the dominant principle of social life, and both liberalism and Marxism made the ahistorical error of assuming that what was dominant in that society had been dominant throughout human history". According to Polanyi, for capitalist economic system to function properly, everyone was required to make the competitive pursuit of their own interests - the accumulation of material wealth - the primary goal of their lives.

Despite being historically specific to the rise of industrial capitalism, Polanyi argued (in the 1940s) that "the pursuit of material gain compelled by laissez-faire market rules is still not seen as behaviour forced on people as the only way to earn a living in a market system, but as an expression of their inner being; individualism is regarded as the norm, and society remains invisible as a cluster of individual persons who happen to live together without responsibility for anyone other than kin". Instead of being seen as a behavioural response to specific economic conditions imposed upon them, the capacity of people to adapt to capitalism - their liking for competition, their preference for markets, their desire to accumulate wealth and maximize profits in all things - were mistakenly regarded as 'natural' expressions.

Neo-liberal economists are also generally opposed to the study of history because economic historians acknowledge that state 'intervention' is a crucial feature of economic development in virtually every successful industrial society. This truth strikes at the very heart of current economic orthodoxy which regards the market as 'normal' and the state's involvement in economic life as an external and artificial 'interference' with 'natural' market arrangements. This most enduring neo-liberal fallacy can be easily refuted by consulting Alexander Gerschenkron's Economic Backwardness in Historical Perspective (Harvard Uni Press, Harvard 1962), an account of the role of the state in 'delayed development' in continental Europe.

Since Gershenkron's pioneering research in the 1950s, a substantial body of literature has emerged arguing that a direct departure from neo-liberal market doctrines has been a pre-requisite for economic development this century. Most of the recent accounts have concentrated on East Asia, where so called 'economic miracles' turn out to be the result of strategic economic planning, and most specifically, state-co-ordinated industrial policies. On Japan see Chalmers Johnson's MITI and the Japanese Miracle (Stanford Uni Press, Stanford 1982), on Korea see Alice Amsden's Asia's Next Giant: South Korea and Late Industrialization (Oxford Uni Press, Oxford 1989), and on Singapore see Gary Rodan's The Political Economy of Singapore's Industrialization: National State and International Capital (Macmillan, London 1989). For a more general survey of the East Asian experience, see Robert Wade's Governing the Market: Economic Theory and the Role of Government in East Asian Industrialisation (Princeton Uni Press, Princeton 1990) and Stephen Haggard's Pathways from the Periphery: The Politics of Growth in Newly Industrialized Countries (Cornell Uni Press, Ithaca 1990).

Paul Bairoch's Economics and World History: Myths and Paradoxes (Harvester Wheatsheaf, Hemel Hempstead 1993) challenges one of neo-liberalism's core sacred faiths, namely the link between free trade and industrialisation. Bairoch argues that "it is difficult to find another case where the facts so contradict a dominant theory than the one concerning the negative impact of protectionism", with the United States, "the mother country and bastion of modern protectionism", a case study of what happens when free trade doctrines are explicitly violated. Bairoch's argument will come as no surprise to those familiar with Friedrich List's The National System of Political Economy, first published in 1841 and one of the first arguments in favour of limited, short-term protectionism. A more contemporary and idiosyncratic critique of neo-liberalism can be found in Frederic Clairmont's The Rise and Fall of Economic Liberalism (Southbound & Third World Network, Penang 1996), a forgotten classic first published in the 1960s but now reprinted with an updated introduction.

Politicians traditionally invoke the 'national interest' whenever they are preparing to administer harsh economic policies, usually upon the most vulnerable and disadvantaged in the community. But the idea of common economic interests in a class divided society is a difficult argument to sustain, particularly with disparities of wealth and income reaching unprecedented levels in so many Western countries. The idea that there can ever be a 'harmony of interests' in capitalist societies was, of course, first challenged by Marx, however the way in which the elites couch their particular economic interests in national or 'common' terms is explored in E.H. Carr's The Twenty Years Crisis 1919-1939 (Macmillan, 1939, 1946, republished London 1995). Though primarily a critique of liberal-utopianism in the inter-war period, Carr's book also exposes the tendency of elites to identify their own interests with those of the wider community so that any attack on the interests of the privileged class is interpreted as an attack on the whole community. According to Carr, "the doctrine of the harmony of interests thus serves as an ingenious moral device privileged groups in order to justify and maintain their dominant position".

In the study of 'political science' it is frequently argued that private business is just one amongst a number of pressure groups seeking to influence government; this approach to political culture is often given the grandiose title of 'pluralist theory'. The implication in this approach is that business is just one lobby group amongst equals, including organised labour, with no particular structural power. Robert Brady's Business as a System of Power (Columbia Uni Press, New York 1943) is an important counter to claims that in capitalist societies private business is not a privileged group.

For the corporate elites to maintain their positions of privilege and advantage it is necessary for the rest of us to absorb and adopt their value systems. This is the objective of corporate propaganda. There have been very few worthwhile studies of corporate propaganda in the West because thought control was said to be something only practiced in communist societies and authoritarian dictatorships. Alex Carey's Taking the Risk Out of Democracy: Propaganda in the US and Australia (UNSW Press, Sydney 1995) is therefore an invaluable addition to a sparse literature. It should be read in conjunction with Peter Singer's How are we to live? Ethics in an Age of Self-Interest (Text, Melbourne 1993) which, like Polanyi's work, also challenges the suggestion that self-interest, competition and greed have any biological basis.

A number of neo-liberal myths are exploded in Noam Chomsky's Year 501 (South End Press, Boston 1994), a book which also graphically highlights the gap between free market dogma and practice in advanced industrial societies such as the United States: 'free trade' is revealed as non-reciprical, honoured more in the breach than the observance, but a weapon to be used against the Third World. Chomsky also examines the effects of neo-liberal 'shock therapies' in Eastern Europe, Latin America and the Caribbean. The political effects of neo-liberal economics have now been substantially documented in most countries which have been subjected to them. In the UK, Will Hutton's The State We're In (Vintage, rev. ed. London 1995) is a significant repudiation of Thatcherism and New Right politics from a Keynesian perspective. Despite many attacks from the British Establishment, Hutton's book has become a best seller. In Australia, James Walter's Tunnel Vision: The failure of political imagination (Allen & Unwin, St Leonards 1996) examines the extent to which discredited economic theories, and policies which have demonstrably failed by any criteria, have captured the political agenda under the Hawke, Keating and Howard Governments by denying the existence of alternative approaches.

For an account of the influence of neo-liberalism in the Australian federal bureaucracy, see Michael Pusey's Economic Rationalism in Canberra: A nation-building state changes its mind (Cambridge Uni Press, Cambridge 1991), and for a discussion of its influence on federal politics see Hugh Emy's Remaking Australia: The state, the market and Australia's future (Allen & Unwin, Sydney 1993). Herman Daly and John Cobb JR's For the Common Good (Beacon Press, rev. ed. Boston 1994) highlights not only the limits of conventional economic orthodoxy, but also the impact of these policies upon the environment. This is a monumental study which should be required reading for policy makers everywhere. As should William Greider's One World, Ready or Not: The Manic Logic of Global Capitalism (Simon & Schuster, New York 1997).