The term ‘neoliberalism’ refers to an economic program of deregulation, privatization, trade liberalization, corporatization and small government – a project to subject more and more economic activity to the whims of “the market”. At its core, neoliberalism is an attempt to make profitability the governing principle in all economic calculation. For this neoliberal aspiration to be approximated in reality, government must behave as if it is just another market participant. It must pretend to be subject to the same financial constraints as private corporations and to share their need for revenue. It requires maintaining the pretense that government has no capacity to act independently of markets; that there is no capacity for autonomous social action independent of markets; in fact, that there is no such thing as society. In short, obey the market, because there is no alternative. We are powerless to stand in its way. Or so the superstition goes.
There are Orwellian aspects to the language of neoliberalism. “Deregulation” is really code for what is often heavy-handed and class-interested regulation designed to serve the interests of capitalists over workers. “Trade liberalization” means constraining national economic policies that might otherwise encroach on multinational corporate interests. “The market” is spoken of as if it is a phenomenon of nature rather than a set of social institutions and social relations structured and shaped by government policy.
To be convinced of the farfetched notion that there is no alternative, it is necessary above all to believe that government must depend upon private markets for its finance. For governments that create their own currency, this is untrue. A currency-issuing government is not subject to the same financial constraints as a household or private corporation. Nor is it subject to the profit imperative. In particular, private market participants have no say in the rate of interest that government pays on its “borrowings”. Instead, the government gets to choose what it will pay – indeed, if it will pay anything (it can set an interest rate of zero if it wishes) – and private market participants can like it or lump it. To believe that there is no alternative is to be blind to the fiscal capacity of currency sovereigns.
This consideration is largely what appears to have motivated the imposition of the draconian European common currency arrangement. The purpose of the euro is to subject national governments to the demands of the market. If a government in deficit attempts to pursue any policy at odds with corporate interests, market participants can demand a higher rate of interest on its debt. To the extent the decision to shackle European populations to the euro was not made out of blind stupidity, it was an attempt to reduce governments to the status of all other market participants. It means that if the market disapproves of worker-friendly policies, welfare-state measures or much needed expansionary fiscal policy, the government can, by design, cry poor.
For member nations of the Eurozone, there is no sustainable way forward until either they free themselves of the euro or, which seems unlikely, they erect a democratically accountable fiscal authority at the head of the Eurozone, forming in the process something akin to a United States of Europe. For those of us in the rest of the world, however, any sense of powerlessness that we project to the level of society as a whole is largely due to a misconception. We have fallen for the lie that our governments are revenue constrained even though they have, for now at least, retained their currency sovereignty. Neoliberal politicians tell this lie either out of ignorance or because they want to deceive us into believing that responsible and equitable economic policymaking is “unaffordable”. But the lie is just that: a lie.
Once the fiscal capacity of a currency-issuing government is recognized, the feasibility of not-for-profit activity becomes clear. It becomes equally clear that government can implement appropriate regulation of for-profit activity, to the extent we want such activity to occur, irrespective of how such regulation might be perceived in the corporate sector. And it becomes obvious that unemployment is a government policy choice; one that is costly in terms of forgone output and, more importantly, unjust.
Needless to say, the neoliberal position is that government involvement in the economy of this kind is undesirable. The whole rationale for pretending that governments are financially constrained like households and firms – or, in the case of the Eurozone, actually making it so – is because neoliberals believe the government should be so constrained. Well, there is by now a clear accumulation of evidence, if it was ever needed, of the absurdity of this proposition. It is the truly appalling economic performance of the Eurozone, where some countries still have 25 percent unemployment and 50 percent youth unemployment nearly a decade after the outbreak of the global financial crisis.
So much for the wisdom of having government behave like a household.