How neoliberalism ate itself

The astonishing self-mutilation of the most powerful idea in the world has made space for a new philosophy of liberty

The Ouroboros monster — a serpent or dragon who eats its own tail in a closed circle — is the most intriguing universal symbol in world mythology. Imprints of the “tail devourer” feature on Neolithic Chinese jars, dating back to 4000BC. Motifs have been found in Ancient Egyptian remains, including the tomb of Egyptian Pharaoh Tutankhamen. The Greeks — who were heavily influenced by Egyptian spirituality — in turn incorporated the Ouroboros into the Western magical tradition. 

The Ouroboros symbolises eternal rebirth and the cyclical nature of time. But it also feeds into two pieces of universal ancient wisdom. Firstly, annihilation and creation are deeply integrated processes (an insight we are increasingly uncomfortable with in the modern West but nonetheless lives on in Schumpeter). Secondly, and more obscurely, ultimate power derives from the assimilation of one’s opposite.

As Carl Jung writes:

“The Ouroboros is a dramatic symbol for the integration and assimilation of the opposite, i.e. of the shadow. This 'feedback' process is at the same time a symbol of immortality since it is said of the Ouroboros that he slays himself and brings himself to life, fertilizes himself, and gives birth to himself. He symbolizes the One, who proceeds from the clash of opposites, and he, therefore, constitutes the secret of the prima materia.”

Part of the reason that the modern world is so baffling is that we have forgotten so much of the old wisdom, or it has become hollowed out into meaningless clichés. We say, for example, that history repeats itself or that it rhymes, but we lack a folk wisdom about the mechanism by which this happens — namely the ideas that drive history adapt to survive. This process often involves a given idea neutralising its competition by appropriating rival ideas that seem to contradict them. 

Take the communist ideology, which has endured by reinventing itself over time, to the point where it is barely recognisable: the original Marxism is a materialist, objectivist doctrine. It conceives history as a mechanistic process with economic realities driving social change. In contrast, the New Marxism rejects the very notion of objective truth. It perceives a world driven not by material forces but the subjective awakening (or awokening) of the individual.

In quite an astonishing way then, Marxism has been forced to swallow its Other, appropriating capitalism’s individualistic worldview. Whereas Karl Marx was preoccupied with impersonal external forces and the emancipation of the collective, the New Marxists — influenced by Freud’s concept of the ego and Sartre’s notion of the authentic Self — have put the false consciousness of the individual at the centre of Marxist thought.

Purist Marxists argue that this is a catastrophic corruption of the original creed. But in wake of soviet communism’s failures through the 20th century as well as the rise of individualism and post-modern doubt in the Sixties, Marxism had to adapt to remain relevant. Even more crucially, Marxism’s rebirth did not alter its DNA. It mutated in a way that preserves its core essence — that is as a reaction to capitalism. Marxism’s identity is, after all, completely wrapped up in its role as capitalism’s greatest ideological enemy. (It is the thorn in capitalism’s side, always ready to assail its depravities, and alienation of human spirit. Even in its New Marxist form, this combative spirit has been maintained.

The self-mutilation of neoliberalism

Marxism is not the only ideology that has been reborn by seemingly destroying itself. Such is also the case with the real focus of the blogpost, neoliberalism — that is, the free market individualist doctrine that hit the political mainstream in the 1980s with the rise of Margaret Thatcher and Ronald Reagan.

The Anglo-American Right is in turmoil because neoliberalism has ended up reconstituting itself into a movement that seems to betray its very foundations. Where it once championed limited government it now accepts an ever-expanding state. Where it once banged the drum for low taxes, free trade and the small-time entrepreneur it is stuck in a loop of high-tax austerity, big business protectionism and regulation creep. Instead of preaching self-reliance it now institutionally encourages welfare dependency.

Neoliberalism has also radically altered its basic view of human beings. While the original doctrine conceived human beings as rationally self-interested, a newer version treats them as cognitively flawed and thus in need of behavioural nudges

Quite understandably, the Right tends to regard the “technocratic orthodoxy” that has emerged over the last 30 years as a distinct, rival phenomenon that has nothing to do with Hayekian free market movement that emerged with the founding of the Mont Pelerin Society in 1947. In fact, what has occurred is far more troubling.

It is important to confront the fact that Thatcher, Blair and Rishi Sunak are of the same tradition. So are Reagan, Clinton and Biden. As the philosopher Laurence Paul Hemming has pointed out, “neoliberalism manifests itself not only as itself — as an attempt to bring an entire world under a certain kind of economic, rational, domination and control — but also the capacity to internalise and absorb its own oppositions and contradictions”. Or, to return to the Ouroboros metaphor, neoliberalism has swallowed its socialist opposite for the sake of its own survival.

As with Marxism, neoliberalism survives on stronger than ever despite this self-mutilation because it has preserved its core essence — that is, its dedication, not to freedom per se, but to order.

Swallowing the socialist other

Before we get into the controversial business of neoliberalism’s dedication to order over liberty, and why that has created so many problems, let us briefly lay out how neoliberalism came to appropriate rival socialist ideas. This is a process that has been ongoing in the UK since the Tory Party’s efforts under John Major to craft a new kind of “Thatcherism with a human face”. In the end, it was the centre-Left, not the Major government, that pulled this off with New Labour and the rise of political Blairism.

The victory was a neoliberal one, however: Blairism was Thatcherism with socialist characteristics, rather than socialism with Thatcherite characteristics. That is to say, Blairism fully accepted the neoliberal economic order based on free market capitalism, including light regulation for the financial markets.

Still, amid stubbornly high youth unemployment and heightened anxiety that post-industrial ‘ghost towns’ were being left behind, Nineties neoliberalism sought to appease popular fears that the sharp-elbowed markets had left too many behind. Thus the political view evolved that, rather than rolling back the state, governments could use tax coffers and cheap money generated by the free market to bankroll an ever-larger welfare state.  

Over time, neoliberalism has been forced to appropriate other socialist views in order to retain the ‘centre ground’. One is that inequality is innately immoral. The original neoliberalism, as articulated by Hayek, viewed inequality as fundamental to society’s progress, asserting there are no superior alternatives to the market-based distribution of income. This view was emphatically endorsed by New Labour, embodied by Peter Mandelson’s notorious quip that "we are intensely relaxed about people getting filthy rich".

However, with technological change, globalisation and declining union power, inequality has increased — a trend further aggravated by state policies like austerity and quantitative easing. And as popular anxieties over this have intensified, neoliberalism has once again been compelled to neutralise its critics by appropriating their views.

This has proved a double triumph for neoliberalism; it is increasingly able to present itself as the solution to the very problems that it helps create. Thus we see how the IMF — one of the principle global missionaries for neoliberal economic policies, not least austerity — is now erecting whole departments to produce analysis of inequality trends and offer policy advice to countries where inequality has become “macro-critical”.

It is intriguing to also note how the neoliberal system has appropriated New Marxist views about diversity. Clunky discourses about structural racism have been melded into corporate HR legalese. Movements that were originally intended to highlight the intersections between racial struggles and the exploitations of the working-class have been refashioned into a means for middle-class minority professionals to advance their careers. 

Neoliberalism’s devotion to order (not freedom)

But let’s not to make the mistake of therefore concluding that the new neoliberalism is just some elusive, shadow-swallowing phenomenon, endlessly reinventing itself. Like the communist ouroboros, neoliberalism has devoured itself in a way that preserves its core essence. As I have already mentioned this core essence is neoliberalism’s dedication not to liberty per se but to protecting the civilisational order. This cannot be stressed enough: everything leads back to this single point. It explains why neoliberalism, despite the best efforts of the likes of Thatcher and Reagan, has resulted in an ever-expanding state, anemic technocratic centrism, growing liberal antipathy to democracy and doom-loop austerity economics.  

This may seem like a perplexing argument. After all, there is no doubt that the intellectual titans behind neoliberalism, not least Milton Friedman and Friedrich Hayek were vehemently dedicated to freedom. The foremost political pinups of neoliberalism, Thatcher and Reagan, were evangelically individualistic, disruptive populists, and viscerally dedicated to liberty.

Yet a closer investigation into the academic works and discussions of neoliberal thinkers reveals an ultimate preoccupation not with freedom, but with the protection of order. Friedrich Hayek wrote The Road To Serfdom out of a sense that things were “progressively moving away from the basic ideas on which civilisation had been built”. The Mont Pelerin Society was above all concerned with the safeguarding of Western progressive tradition amid the dramatic political and economic upheavals of the first half of the 20th century. It was this sentiment — not the notion that human freedom should be an end in itself — that motivated the neoliberals into action.

It is also important to understand that the Mont Pelerin Society was overtly critical of classical liberalism’s spiritual reverence of freedom. The classical view of liberty as an end in itself — epitomised by the natural rights tradition that conceived of certain basic human liberties as sacred and inviolable gifts from God —  was rejected.

The neoliberals, in contrast, argued that natural rights were merely a product of capitalism; a concept humanity had invented so that markets could smoothly function. Hayek was frank in his admission that there was nothing about his conception of liberty that treated it as an “indisputable ethical presupposition”. He argued that “the ideas of 1789 — liberty, equality, fraternity — are characteristically commercial ideals which have no other purpose but to secure certain advantages to individuals”.

It should not have been a surprise then that so many economic libertarians fully supported Covid lockdowns in contrast with many of their peers on the Right, citing John Stuart Mill’s harm principle to justify their position. Neoliberalism has always argued for freedom in purely utilitarian terms. It has never conceived freedom as an end, but rather a tool.

The neoliberal school’s devotion to the free markets came with equally big caveats. In fact, Hayek framed the Mont Pelerin School’s mission as  “overcom[ing] the failures of laissez faire.” He supported market intervention when necessary, for example with anti-trust laws, public utilities and a universal income. Moreover, in a pre-shadowing of Blairism, fellow Mont Pelerin member Wilhelm Röpke aimed at a “third way” that evaded the extremes of both laissez-faire capitalism and  socialism, combining economic freedom with humane factors reflective of  the “nature of man”.

It is also worth highlighting neoliberalism’s innate suspicion of democracy. The Chicago School’s James Knight suggested that government must be willing to put strict restrictions on the issues that should be subject to popular vote, a sentiment his peer James Buchanan concurred on. Hayek meanwhile called the notion of popular sovereignty a “nonsense notion”. One is left wondering whether what the Mont Pelerin economists idolised by the British Eurosceptic Right would have really made of the Brexit referendum. 

Foucault’s strange love affair with neoliberalism

Overlooking these tensions at neoliberalism’s heart, Right-wing politicians energetically seized on their ideas, slashing taxes and rolling back the state.

(That said, there remained powerful metaphysical tensions between small-c political Thatcherism, steeped in her father’s Wesleyan Methodism, and the economic libertarianism of the Mont Pelerin set, which the PM endorsed with equal measure. I will soon write a blogpost on this and why the Tories will have to grapple properly with Thatcher’s contradictions if they are to have any hope of recovering politically, and indeed moving beyond her.)

In any case, only the most astute philosophers at the time immediately grasped the deep irony at the new liberalism’s core. The late conservative philosopher Michael Oakeshott warned about Hayek’s The Road to Serfdom that “A plan to resist all planning may be better than its opposite, but it belongs to the same style of politics.”

It is also a little known irony that the Right’s intellectual nemesis, Michel Foucault, became an unlikely champion of neoliberalism, to the bafflement of his Left-wing devotees. As the historian Michael Behrent has written, Neoliberalism seemed to address his fears about the modern disciplinarian state’s tendency to interfering moralism. He was particularly attracted by the fact that the Chicago School was concerned not with individual behaviour but “general states of regularity [and of] equilibrium” in the population. He was intrigued by Milton Friedman’s proposals for a Universal Basic Income because it broke the links between state payouts and individual behaviour.

Foucault also marvelled at the criminal’s “anthropological erasure” in neoliberal discourses on crime — take for example Chicago School economist George Becker’s assertion that there is no need to define criminality as anything more than an individual action that risks punishment. More than anything though he was captivated by neoliberalism’s argument that power should limit power for the sake of power (based on the insight that laissez faire was the most efficient approach to government) This was not only fully consistent with his central philosophical perspective that everything is reducible to power relations, but seemed to offer a solution to the problem of how to limit power in a world in which power is everything. 

Neoliberalism’s fatal flaw

What Foucault — and indeed the neoliberals themselves — didn’t fully foresee was the capacity for neoliberalism to justify an infinitely expansive, interventionist state on the same utilitarian basis that it justifies a strictly limited government. This is where Foucault’s radical liberalism and neoliberalism alike potentially fall down in my view. The refusal to articulate an Enlightenment-based notion of a human essence, or make a natural rights case for human freedom as an end in itself, leaves the state room to bludgeon human dignity and freedom in the name of order and market stability.

Which is exactly what has happened. The legacy of the last 40 years is not a leaner state or lower taxes. It is an ever-expanding state that paradoxically adds new levels of bureaucracy and surveillance with every efficiency target, corrective reform, and emergency intervention (not least lockdowns). It is also an elite ambivalence towards the messiness of trade offs and the democratic process.

But perhaps the strangest legacy, however, is neoliberalism’s strange renunciation of the free market. As the corporations it has empowered have become averse to competition, and those in the financial sector in particular, have become too big to fail, the ruling class has been compelled to choose between devotion to free market dynamism and protecting the status quo order —  and it has predictably chosen order. 

This was of course powerfully demonstrated with the bailouts of the banks after the financial crash. But we have seen further evidence of this phenomenon in Britain of late, with the markets’ swift annihilation of the Reaganite Liz Truss government. One might argue that Truss’s plan to grow the UK economy out of recession with tax cuts funded through open-ended borrowing was flawed and foolish. Perhaps it might have been more plausible if the Government had a workable plan for supply-side reforms.

And yet a question remains: has the UK economy been rendered so fragile through the financial markets’ reckless dabbling in toxic derivatives products, that it is now impossible for the UK to shake itself out of the doom-loop economics of ever increasing taxes and stagnant growth? As the free market becomes a threat to market order, so must the free market be annihilated, it seems. Such is the circularity of the ouroboros monster.

Slaying the monster

And yet I can’t help but feel that the question is not how to slay the ouroboros, but whether we ought to slay it all. From a philosophical perspective, if one accepts the premise that protecting civilisational order is paramount, then there may be no getting beyond neoliberalism. Nobody has been able to build to craft a philosophy that prioritises human freedom is the ultimate end, without collapsing into anarchism or forcing people to be free, in the absolutist tradition of Rousseau.

Moreover, we see in the modern world how endeavors to fix the disorder created by neoliberal bureaucracy almost always leads merely to further layers of bureaucracy. As Laurence Paul Hemming has put it, “For as long as the only solution to managerialism is an intensification of everything managerial, there can be no resolution to the question before us.”

If the Left’s only answer to the current managerial capitalist order is more central planning, then the Right equally struggles to escape from offering order as the solution to order. It is intriguing indeed that Jordan Peterson — self-help guru of all those young men who feel betrayed and alienated by the atomistic, hyper-competitive status quo — frames his 12 Rules For Life as an “antidote to chaos” and draws so much inspiration from Nietzsche’s Will To Power (by definition, a constant willing forward to higher levels of power’s orderings).

It is even more interesting that Peterson has expanded his attention to the pre-Socratic philosopher Heraclitus and his theories about the existence of a mysterious ordering principle of the world amid all of life’s seeming disorder, known as the logos. (Peterson gave a lecture in Heraclitus’ birthplace Ephesus last summer, I wrote about it for the Telegraph here).

TINA - There is no alternative

And yet, to echo the Thatcherite slogan, there may be no other way. Russia’s search for an alternative to the liberal order by overcoming the “logocentric” and “turn[ing] to Chaos” and a philosophy of “another beginning”  (in the words of ‘Putin’s brain’ Alexander Dugin) is leading them into dark places. Post-modernist rejections of objective truth and liberal Left’s jettisoning of civilisation as an imperialistic, climate-ravaging project are almost as troubling — and potentially threaten the very fabric of Western civilisation. 

And yet, even if there is no escaping neoliberalism for those of us who believe in human progress and civilisational order, perhaps we can still hope to alter it into something more tolerable, and more effective in serving progressive aims. That means forcing the ouroboros to swallow a subversive new idea.

A new conception of freedom?

I will write another blogpost soon expanding on this but just maybe there is a case to be made that neoliberals like Ludwig von Mises were wrong in their assertion that economic freedom is the foundational liberty from which all other liberties spring. Such a conception of freedom has clearly collapsed under its own contradictions. The reading of history upon which it is based is spurious. China has also disproved the theory that economic freedom should lead to political freedom.

Perhaps it is possible to make a new case for liberty from the debris. Namely that freedom of thought, rather than economic freedom, is the foundational liberty that has largely driven civilisation. The great capitalist advancements of the 19th century could only take place after the Enlightenment had brought about a revolutionary shift: namely, a total reimagining of the relationship between man and nature, and the emergence of the radical new view that human circumstances could be continuously improved through an increasing understanding of natural phenomena, and an application of these insights to production.

Such a shift in views was in turn made possible by a seismic intellectual awakening in the early modern period — a steady but powerful loosening in religious and cultural attitudes  which are entangled in, but crucially cannot be reducible to, economic trends such as trade.

In other words, contrary to the neoliberal view of history, the egg may have come before the chicken. Modern civilisation — like all civilisations — was driven ultimately by a will to create. Such will could only have flourished in a world that permitted a certain level of intellectual freedom.

If this is true then we may have reached a perilous moment in civilisational progress. Freedom of thought is under threat from forces on the both Left and Right. This is partly because we are drifting away from that Enlightenment commitment to judging ideas by their correspondence to reality. Instead, we creeping back towards the clerical tradition of accepting or condemning them based on moral codes (and also tribal affiliations in wake of the culture wars). Right now we have no coherent way of combating this. This is not least because we have constructed a system that is much more effective at, say, facilitating consumer choice, than protecting freedom of thought.

A way out of the maze?

And, just maybe, if we are able to establish intellectual freedom rather than economic freedom as the foundational freedom then that offers a better defence against neoliberalism’s tendency to sacrifice liberty on the altar of order. After all, if we were all in agreement that freedom of thought and speech are the lifeblood of progress then at least that would encourage more open debates about the best course of action — with all the benefits and costs — when our civilisation is faced with an emergency like a pandemic.

If in contrast our civilisation merely boils down to economic freedom then, as long as Amazon can keep delivering next-day packages as professionals work from home, we can kid ourselves that all is well as the government finds new ways to restrict and intervenes in our lives. That I think is the great challenge of our generation.