The wealth of more than 2,200 billionaires across the globe had increased by $900bn in 2018 – or $2.5bn a day. The 12% increase in the wealth of the very richest contrasted with a fall of 11% in the wealth of the poorest half of the world’s population… The World Inequality Report 2018 – co-authored by Piketty – showed that between 1980 and 2016 the poorest 50% of humanity only captured 12 cents in every dollar of global income growth. By contrast, the top 1% captured 27 cents of every dollar.

These obscene levels of inequality link clearly with the growing problem and crisis of legitimacy of neoliberalism, as I discussed in my article here.

But, aren’t we told there is no money left? That the free market and capitalism is the best way? That we can’t curtail the freedom of the market as otherwise we risk a brain drain, a race to the bottom, or a lack of entrepreneurial spirit?

Fredrick Hayek – a significant influence upon the rise of neoliberalism in the 1980s – was very critical of government interference in the market, arguing it was the manipulation of money by the government that created problems regarding malinvestment and savings linking to the Austrian theory of the business cycle. Criticised economically, it was politically that Hayek had his most significant impact, including influencing Margaret Thatcher, who as UK’s Prime Minister was central to the rise of the neoliberal project.

The other political economist that is often cited as having a central influence on Thatcher and neoliberalism is Milton Friedman. Friedman has talked about the influence Hayek had on him:

Milton Friedman emphasizes that he is “an enormous admirer of Hayek, but not for his economics. I think Prices and Production is a very flawed book. I think his capital theory book [The Pure Theory] is unreadable. On the other hand, The Road to Serfdom is one of the great books of our time.”

The Road to Serfdom was the first interaction Thatcher had with Hayek’s views, with the Margaret Thatcher Foundation arguing “in fact one can argue that few books influenced her more deeply at any point in her life”. The Foundation goes further when discussing the book’s influence on Thatcher:

She absorbed deeply Hayek’s idea that you cannot compromise with socialism, even in mild social democratic forms, because by degrees socialism tends always to totalitarian outcomes, regardless of the intentions, professed or real, of its proponents. And she saw that her own party had done just that, putting her deeply at odds with its collective leadership.

After the post-war consensus was smashed, the return of Hayek – marked by his Nobel Prize for economics in 1974 – was instrumental to Thatcher, with the Foundation stressing this was a political, not economic, influence:

While there is no reason to doubt Hayek’s emblematic significance to the Thatcherites in their search for new roots, it was as a political and economic philosopher that he mattered, not as an economist. And The Road to Serfdom counted for more than The Constitution of Liberty, the critique of socialism more than the vision of a pared-down liberal state.”

There has been an increasing interest in Hayek’s economic writings given the 2007-8 crisis, with people looking for alternative explanations to why the sub-prime mortgage crisis happened. Hayek historically is mostly forgotten in mainstream economic debates, with it often being summarised as ‘John Maynard Keynes vs. Milton Freidman’. Comparing and contrasting these three thinkers, Hayek and Friedman advocated for free markets with limited, to no (in the case of Hayek), government intervention whilst Keynes encouraged government intervention, yet Hayek and Friedman disagreed on monetary policy with the former believing it created boom and bust cycles (as discussed above) whereas the latter believing it helped navigate economic crises. Keynes’ focus on fiscal policy was something both Hayek and Friedman were against. Therefore, concluding:

If we look at interventions government has taken to help “stimulate” the economy, the actions are more akin to the economics of Keynes and Friedman, where Congress passes stimulus packages, and the Central Bank inflates the money supply. Mainstream economics is a hybrid of the Keynes and Friedman approach. However, from Hayek’s view, the actions of a “stimulus” and inflation sow the seeds to next bust. In one respect, Friedman is a “Keynesian”, but in another he is not. The free market usually gets associated with Friedman, but not all free market folks follow Friedman’s economics. Many free market economists follow Hayek’s vision of economics, Austrian Economics. Austrian Economics rarely uses any mathematics, but seeks to understand human action. It takes into account the human element of economics.

The market and capital interests have not been left to be ‘free’ and fail. If we are to follow a Hayek approach to the markets, the banks and financial actors central to creating the sub-prime mortgage crisis, they should have been left to fail. However, Cédric Durand in his book, Fictitious Capital: How Finance is Appropriating Our Future (2017), shows that:

Between autumn 2008 and the beginning of 2009, the total amount that states and central banks in the advanced countries committed to supporting the financial sector (through recapitalisation, nationalisation, repurchasing assets, loans, guarantees, injections of liquidity) has been evaluated at some 50.4 per cent of world GDP! (page 39)

You only have to look at how much state money has been thrown at Amazon in the US as they searched for their second headquarters to see how important the state has been for supporting capital, financial interests and the market. Richard Wolff discusses this in detail, referring to how Amazon invited all US States to bid and ‘compete’ to be the location. Key to Amazon splitting its second headquarters was the overwhelming response and attractive bids from the States, with Amazon deciding to have their headquarters in New York City, New York and Crystal City, Virginia with the total estimated cost for the headquarters standing at $10.5 billion and crucially subsidies given by the two states and cities amounting to an estimated $5.5 billion.

Let’s remember, the owner of Amazon, Jeff Bezos, is the richest man in the world, and the Oxfam report shows how he “saw his fortune increase to $112bn. Just 1% of his fortune is equivalent to the whole health budget for Ethiopia, a country of 105 million people.”

The state supports the corporate and capital interests whilst politically we argue about the virtue of the free market. This goes alongside the Oxfam report criticising governments around the world for not investing in public services, meaning inequality is getting worse.

The concept of the individual over the collective, the critique of socialism and the advocacy for the free market are all related to support for the capitalist system. Whilst Hayek’s economic opinions might be becoming more popular for some, it must be remembered that this is a political decision. In search for creating an alternative argument – one that takes attention from the inherent contradictions and flaws of the capitalist neoliberal system – Hayek’s theory can quite easily be utilised to take attention away from the financial actors that have constructed financial instruments such as collateralized debt obligation with limited regulation, think tanks (such as the Mont Pelerin Society, which Hayek and Friedman, amongst others, founded) and spent lots of money to ‘buy’ politicians and political parties to create a political class project where a very few people own the majority of the world’s wealth.

For instance, Oxfam’s report found since the financial crisis, “the number of billionaires has nearly doubled…between 2017 and 2018 a new billionaire was created every two days” and to top this off, “the poorest 10% of Britons are paying a higher effective tax rate than the richest 10% (49% compared with 34%) once taxes on consumption such as VAT are taken into account.” This links into the problem regarding the concept of value, price and the market, something I discussed with Jay Baker in a recent vlog of ours as part of Jay & Jane.

The Oxfam report calls for a wealth tax to address the global wealth inequalities:

It said the widening gap was hindering the fight against poverty, adding that a wealth tax on the 1% would raise an estimated $418bn (£325bn) a year – enough to educate every child not in school and provide healthcare that would prevent 3 million deaths.

This relates to the problems of an unspoken acceptance of the ‘right’ of capital mobility, and how important capital controls are to bring in – alongside taxes such as a wealth tax – to address the global economic imbalances. This is something Grace Blakeley discussed in great detail when referring to the 70% marginal tax rate that Alexandria Ocasio-Cortez has proposed:

The golden age of capitalism took place under the Bretton Woods system of exchange rate pegging, which permitted the use of capital controls (limits on the amount of money that can be brought into or out of a country). These controls were anathema to the global elite, which sought the right to move their money to wherever the most profitable investment opportunities – and lowest tax rates – could be found. Friedrich Hayek – the intellectual godfather of neoliberalism – called capital controls “the decisive advance on the path to totalitarianism and the suppression of individual liberty…Raising top marginal tax rates is the best moral and economic course of action for the UK, but any socialist government that attempted to do so would be punished severely by “the markets”. Without constraints on capital mobility, investors will continue to exercise a veto power over domestic states’ fiscal policy, and tax competition will only get worse.

We therefore need to be aware of the ideological and political theories and arguments that have underpinned the dominant economic arguments tied with Western governments and global institutions such as the International Monetary Fund, and crucially central to the neoliberal project, if we are to tackle these global wealth inequalities. The market has been supported for years by the state, with governments only willing to bail out corporate and capital interests and then politically blame everyone else in the hopes of divide and rule. This has worked. But it is also facing a huge legitimacy crisis after the 2007 crash. It is about seizing control of this narrative, as key political actors across the world are, and arguing that democracy needs to be at the heart of the economy as well as in our political system and that capitalism is antithetical to this.

Jane Watkinson (she/her) is an anti-capitalist, intersectional feminist and vegan interested in Marxism, social ecology, sociology, revolutionary humanism, and studying radical social, economic, and political theory and how this can be applied in practice. She is a freelance researcher working in the community sector. Her LinkTree is here.

“In the area of poverty-related policy, the evidence points to the conclusion that the driving force has not been economic but rather a commitment to achieving radical social re-engineering…Universal Credit and the other far-reaching changes to the role of government in supporting people in distress are almost always ‘sold’ as being part of an unavoidable program of fiscal ‘austerity’, needed to save the country from bankruptcy. In fact, however, the reforms have almost certainly cost the country far more than their proponents will admit.”

In this article, I will however argue that this is also economically driven and part of a class political project: neoliberalism. You only have to look at the fact that “eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity” to see how economic and political power, relating to class, interrelate. Also, consider “Britain’s billionaires have seen their net worth more than double since the recession, with the richest 1,000 families now controlling a total of £547bn” as another example of the continued expansion of the super rich.

David Harvey, Distinguished Professor of Anthropology & Geography at The Graduate Center, CUNY, has written a lot on neoliberalism, which he defines as the following:

“I’ve always treated neoliberalism as a political project carried out by the corporate capitalist class as they felt intensely threatened both politically and economically towards the end of the 1960s into the 1970s. They desperately wanted to launch a political project that would curb the power of labour.”

Harvey talks about how Reagan and Thatcher were crucial to the transition towards this new system, leading a class assault to further their own interests with institutions and think tanks set up and funded to help promote this project. This related to the reduced role of the state providing public services, the emphasis on the freedom of the market alongside a rise in privatisation – especially of public services – and also the emphasis upon personal responsibility and individual liberty and expression (over genuine social justice organisation) while the state provides subsidies and assistance to capital and corporations. This has led to extreme levels of debt, especially personal, relating to contradictions in capitalism as people borrow to be able to deal with a crisis of living standards and stagnating wages and benefits, and reduction in important social programmes. Harvey refers to how capital doesn’t get blamed, it is protected. This happened so obviously in the 2007/2008 financial crisis, with banks bailed out and the rest of us taking the hit.

Importantly, Harvey argues that neoliberalism heavily relies upon legitimacy for it to continue to be a successful class project:

“The big problem for the neoliberal project is getting popular legitimacy. When it started out there was a lot of popular legitimacy. By the time you get to the 1990s and you are into the Clinton years of neoliberalism people start to realise…they are being had. So they went into alliance with the neoconservatives and so you get the neoconservatives and the neoliberals in alliance. Now you are beginning to see the movement towards neoliberalism and the connection to the neofascists/neo right wing, alternative right wing. So this is something that is really, really bothersome.”

In another article, Harvey explains the same problem:

“The neoliberal argument had a lot of legitimacy in the 1980s and 1990s as being liberatory in some way. But nobody believes that any more. Everybody realises it’s a con job in which the rich get richer and the poor get poorer. But we’re beginning to see the possible emergence of an ethno-nationalist protectionism-autarky, which is a different model. That doesn’t sit very well with neoliberal ideals. We could be headed into something which is much less pleasant than neoliberalism, the division of the world into warring and protectionist factions who are fighting each other over trade and everything else.”

Harvey, talking at the relaunch of Tribune event at The World Transformed, refers to the power of the Koch brothers and how important they are for helping create this new version of legitimacy, after they funded the Tea Party to “create chaos in Washington” helping further apathy towards politics and establishment politicians, relating to the election of Donald Trump as President who has “done everything that is in the neoliberal playbook”. Harvey explains that the Koch brothers disagree with Trump on free trade and on immigration, but Trump has been key to further neoliberalism as a political project.

A similar thing can be said of the UK, with the rise of the far right – linking in with Brexit arguments of our little island succeeding on its own like the good old days of the Empire. With this, things such as immigration are blamed for the problems caused by capital and the increasing expansion of speculative finance and related crisis and inequality.

Alston’s report draws clear connections between Brexit and the implications this will have on people in poverty and inequality:

“In my meetings with the government, it was clear to me that the impact of Brexit on people in poverty is an afterthought, to be dealt with through manipulations of fiscal policy after the event, if at all. But Brexit will have serious consequences in this domain and the challenges need to be dealt with head on. A lack of clarity is preventing families at risk of poverty from planning for its impact. People feel their homes, jobs, and communities are at risk. Ironically, it was these very fears and insecurity that contributed significantly to the Brexit vote…The UK stands to lose billions of pounds in EU funds that will disproportionately affect the poorer areas that have most benefited from them, including almost £9 billion in poverty reduction funding between 2014 and 2020. Although the government has announced a “shared prosperity fund” to replace this funding, local and devolved governments told me they had no information about the fund or how it would operate—just five months before Brexit. Time is running out.”

This relates to concerns from Labour leader Jeremy Corbyn, who has written to Theresa May to ask her and the government to not ignore Alston’s report, that Tory Brexit will result in a “bargain basement Brexit” ushering in lower taxes for corporations whilst attacking labour power alongside human rights.

Alston’s report also focuses heavily on Universal Credit, providing a damning assessment of the hardship and pain this is causing to so many people:

“The Universal Credit system is designed with a five week delay between when people successfully file a claim and when they receive benefits. Research suggests that this “waiting period,” which actually often takes up to 12 weeks, pushes many who may already be in crisis into debt, rent arrears, and serious hardship, requiring them to sacrifice food or heat…One of the key features of Universal Credit involves the imposition of draconian sanctions, even for infringements that seem minor. Endless anecdotal evidence was presented to the Special Rapporteur to illustrate the harsh and arbitrary nature of some of the sanctions, as well as the devastating effects that resulted from being completely shut out of the benefits system for weeks or months at a time. As the system grows older, some penalties will soon be measured in years.”

Central to David Harvey’s work is analysing Marx’s theory of commodities and how key they are to capitalism. As part of neoliberalism, we have seen the commodification of essential public services that should not be commodities, including healthcare, housing, transport and education. This could be argued about the internet too, which Harvey uses as an example for how fast moving capital is and how efficient it is at co-opting things:

“we have the internet, which everyone thought of initially as a great liberatory technology that would allow for a great deal of human freedom. But now look what’s happened to it. It’s dominated by a few monopolies that collect our data and give it to all kinds of seedy characters who use it for political purposes.”

Rather than seeing access to the internet as a human right, something the creator of the internet argues it is, access and usage to and of the internet has become again part of the neoliberal project where lots of people don’t have the resources or skills to do so. However, as part of the government’s 2017 Government Transformation Strategy, Alston refers to the ambition for “government services [to] become ‘digital by default’” and “the inner workings of government itself will be transformed in a push for automation aided by data science and artificial intelligence.” Alston links this into the discussion around Universal Credit, which is “the first major government service that is ‘digital by default.’” As Alston states, “One wonders why some of the most vulnerable and those with poor digital literacy had to go first in what amounts to a nationwide digital experiment.”

Alston refers to several other political programmes and policies that this government and the Coalition government before have brought in, which disproportionately punish poorer people, including the benefit cap and reductions, cuts to legal aid, local authority cuts significantly impacting upon the community, public and statutory services and importantly argues that “poverty is a political choice”.

Despite all this evidence of growing inequality, poverty and hardship, the argument that the neoliberal free market is the best way to operate is one that our current Prime Minster and the Bank of England are readily willing to accept and promote, with Theresa May arguing in a Bank of England speech in September 2017:

“A free market economy, operating under the right rules and regulations, is the greatest agent of collective human progress ever created… [it is] unquestionably the best, and indeed the only sustainable, means of increasing the living standards of everyone in a country.”

As Harvey argues, “Value is fixed by whatever price is realised in the market”, which puts the blame on the individual for not making it and training themselves to succeed in the current system rather than questioning what this value and price really means and the social impact this actually creates. On benefits? Your fault. Lost your home? Your fault. Can’t find a job? Your fault. The system is protected.

The response to Alston’s report from Amber Rudd, the new Secretary of State for Work and Pensions? To attack it as “extraordinarily political” whilst denying the real stories and lives affected by this government’s cruel policies. But neoliberalism isn’t about about moralism, it’s about furthering the corporate, capital and financial interests of a few over the rest. And here again we can see what Harvey is talking about when discussing the increasing crisis of legitimately of neoliberalsm. However, the rise of ethno-nationalist protectionism, found in the arguments supporting Brexit for instance, show how this class project can adapt. These policies are forms of social control, repression, creating division and alienation whilst the media and political discourse help whip up the fear of the ‘other’ whether that be migrants or benefit claimants (as shown with Universal Credit) etc. But as Trump shows in the U.S, and Bolsonaro in Brazil with his inner circle stuffed of Chicago school economic thinkers, there are cracks and contradictions in neoliberalism, and people are mobilising against this political project.

Jane Watkinson (she/her) is an anti-capitalist, intersectional feminist and vegan interested in Marxism, social ecology, sociology, revolutionary humanism, and studying radical social, economic, and political theory and how this can be applied in practice. She is a freelance researcher working in the community sector. Her LinkTree is here.