Is the World Throwing Off the Chains of Neoliberalism?

In these days of dark news from the rise of militarism to a new wave of Covid, there are green shoots: neoliberalism is finally being replaced by social democracy around the world & in America

Image by Schäferle from Pixabay

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Seventeen years before Reagan plunged America into the pains of our current 40-year-long experiment with neoliberalism, Henry Kissinger, the CIA and the University of Chicago’s Milton Friedman helped a murderous general, Augusto Pinochet, stage a military coup in Chile. Their goal was to “prove” Friedman’s bizarre new economic and political theory could one day save the world from both communism and fascism.

Not only did neoliberalism not save the world, it has (predictably) empowered authoritarians across the planet. Here in America, as the working-class “pie” has steadily shrunk while the top 1% looted our nation, neoliberalism pitted newly economically insecure people against each other, often with violence like we saw here on January 6th.

But now the world, like large parts of America, is waking up and throwing off the chains of neoliberalism.

This past weekend, Chile’s progressives and their new government declared: “[W]e have built the road to a new Chile, one that is more democratic, one with social rights and a new way of relating to the environment. … Together, we will bury neoliberalism and rebuild the world.”

When a small group of economists, several having fled the Nazis in Germany and Austria, met on Mount Pelerin in Switzerland in 1947, they wanted to create a system of governance that would protect governments from both Soviet-style communism and German-style fascism. 

Being economists, they concluded the answer was simple: just turn everything government normally does over to “the free market.” 

All this “democracy” stuff was inefficient, slow, and confusing: just cut through it all and turn the nation over to big corporations and the rich, who best knew how to make things work like a well-oiled machine.

Under neoliberalism, they promised:

• Governments would stop protecting their own nations’ economies but instead turn those over to “free trade” so employers could search the world for the cheapest labor

• The welfare of citizens would be taken care of by philanthropy via churches, wealthy individuals, and corporations

• Unions, which gave working people “inappropriate” power over the “market forces” only their employers should wield, would be neutered

• Taxes, which “punished the productive” would be cut to the point where morbidly rich billionaires would pay less than 3% in income taxes, while the working people who “use” most of the benefits of the nation’s infrastructure would carry the majority of the tax load

• Public benefits like primary and higher education, electric power, water, septic, railroads, airports, stadiums, and even highways would be sold off to the highest bidders and then operated purely along “market principles” using the magical “profit motive”

• Even the military and intelligence services would end up as much as 50% in private hands: the more privatization the better

Outside of the Bolshevik Revolution, no nation had ever tried such an audacious and revolutionary economic and political experiment.  

When Pinochet’s tanks rolled toward the presidential palace on 9/11/1973, President Salvador Allende, along with about 30 supporters, held the palace for a few hours, gave a national radio address, and then put a gun to his head and ended his presidency.

In the early 1970s, Chile was one of the most progressive countries in South America. The democratically elected socialist president, Salvador Allende, nationalized the nation’s #1 natural resource (copper), taking the mines away from American companies, and used the resulting revenue to give every Chilean access to free healthcare and higher education. GDP went up and income inequality went down.

But not everyone was happy with President Allende’s 1970s Chilean version of the New Deal. Behind his back, the Nixon administration and Chile’s corporate and military elite conspired with Chilean General Pinochet (whose senior officers were graduates of our notorious School of the Americas) to sabotage Allende’s reforms and seize control of that nation’s wealth.

Pinochet’s dictatorship, which lasted from 1973 to 1990, was one of the most vicious in modern Latin American history. He jailed, tortured, and executed dissidents with savage cruelty.

Some were thrown out of helicopters into the ocean. Others were taken by death squads into the national soccer stadium in Santiago where they were tortured in the lockers and private boxes and then executed by firing squads.

The memories of Pinochet’s regime are so raw that to this day many Chileans refuse to watch soccer matches at the national stadium because they don’t want to dishonor the general’s victims.

Inflation ballooned to 341 percent, GDP decreased by 15 percent and in the face of Friedman’s “free trade” policies Chile’s trade deficit exploded to a whopping $280 million. Unemployment jumped from 3 percent to 10 percent — and in some parts of the country climbed as high as 22 percent.

None of that deterred Friedman or his economist buddies in the Mont Pelerin Society, the group that invented the word “neoliberalism” in the 1940s and then undertook a successful crusade to bring it to the world. Instead of acknowledging their failures, they took their show on the road.

In Russia, Friedman’s “Chicago Boys” oversaw a neoliberal “shock therapy,” giving state-owned enterprises to oligarchs close to Yeltsin. The immediate result was massive poverty, unemployment, even severe malnutrition. I worked in Kaliningrad in 1991 with a German-based charity to revive “peasant farming” techniques to provide people with enough food when the massive collective farms were disbanded.

In Iraq, George W. Bush threw that country into chaos when, following neoliberal doctrine, he shut down nearly all the state-run enterprises and removed all trade barriers, throwing the nation open and inviting companies from around the world to set up shop and take as much as 100% of their profits out of the country tax-free.

Things moved more slowly here in the US.  It took Reagan and GHW Bush twelve years to destroy our union movement and strip America’s working people of pensions, bargaining rights, and the kind of good pay and benefits that had created the largest and wealthiest middle class in world history in just the four decades of FDR’s New Deal. 

Today’s good news is that Joe Biden is the first president since Lyndon Johnson to repudiate neoliberal policies (Trump gave ending “free trade” lip service, but his efforts were mostly performance art), although even Biden is (so far) unwilling to wipe out the student debt that running higher education by “market principles” in collaboration with banksters always brings.

In Latin America, Chile is leading the way with president-elect Gabriel Boric, an unabashed progressive who overwhelmingly won last week’s election.  Progressive movements are again awakening in the global south, just as they are here in the United States and across Europe.

A few weeks ago I wrote that, “Two forces in American politics are on a collision course today: neoliberalism and progressivism.”  

Joe Manchin and the entire Republican Party continuing to cling to neoliberal ideas, suggesting that child tax credit money will be used by parents to buy drugs and that working-class people, when given paid sick leave, will invariably abuse it to “go on hunting trips” at their employer’s expense.

Most Americans, however, are waking up to the damage Reagan’s 40-year-long experiment with Friedman’s neoliberalism has done to America.

In these days of dark news ranging from the rise of great power militarism to a crushing new wave of Covid, there are green shoots growing through the cracks: neoliberalism is finally being replaced by social democracy around the world and in many states in America.

“The cause of America is in a great measure the cause of all mankind,” Thomas Paine told us in 1776. “We have it in our power to begin the world over again.”

Our work has just begun.