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Neoliberalism and ethics

Neoliberalism was thought of in Europe and USA long before its concretization in Chicago in the 1970s. The culmination of various currents of thought resulted in a particular economic vision, in the middle of the cold war, ie in a climate of growing fear of communism. One of the founding fathers, Milton Friedman, is said to have “demonstrated” the superiority of monetarist theories over the policies of J.-M. Keynes, who aimed at economic recovery through state intervention in the markets. To be fair, one should also mention Walter Lippmann and his book “The Good Society” published in 1937. His publication is no less than the theoretical matrix of the new liberalism. I would describe him as the “spiritual father” of this new movement.

Neoliberal theories have thus taken the opposite tack to Keynesianism by asserting loud and clear the primacy of the individual, his autonomy and his freedom to choose in a market free of any state intervention.

This economic model was first implanted in Chile in 1974 when General A. Pinochet invited young economists from the monetarist school of the University of Chicago to reform the Chilean economy. The missions of the so called “Chicago boys” was to revoke the communist-inspired choices of President Allende, who had nationalized the copper mines, and on the other hand to revive the Chilean economy, which had been strangled by an embargo. Thanks to the dictatorship, this model was imposed without any democratic control. Many other countries suffered a more or less similar fate: Argentina, Brazil etc.

The neoliberal economy is based on the simplistic belief that trade would bring progress if it was free from all barriers and if everyone had the freedom to undertake and trade. This supposed reducing the role of the public sector in favour of the private sector. This also implied removing borders and administrative barriers, ie deregulating and ignoring basic ethical rules.  

However, anyone active in the most diverse markets will observe that only fair, proportionate and responsible trade can bring progress. Neither freedom nor competition alone can deliver progress without strong normative and ethical rules.

A parallel can be drawn between neoliberalism and the scientific discoveries of the 20th century. The interactions of sub-atomic particles or that of cosmic objects depend only on fundamental forces. By analogy, it was believed that commercial and financial interactions could be treated as similar interactions, controlled by competition. The market, left to itself, without state intervention or moral constraints, would spontaneously generate growth whilst remaining balanced and stable.  

This theory has been verified many times at small local scales, but never at the large scales of globalization. When there is a local shortage of apples, prices rise and very quickly competitors fill the shelves. Because the local rules of competition are fair, the costs are similar, and the laws are the same for all players.

At large (world) scales however the markets are unable to rebalance themselves, because competition is often distorted by hidden state aid, manipulated exchange rates, not to mention environmental and ethical laxity.

We are all guinea pigs and witnesses to the imbalances and excesses of the neoliberal system. This unlimited freedom has unleashed an inordinate growth in world trade. With the injunction to “maximize profits”, the lure of gain has stifled all other considerations. A privileged few with powerful leverage have accumulated fortunes, while aggravating financial, trade, fiscal and environmental imbalances. Social inequalities and discrimination are also among the many side effects that have never been recorded on financial balance sheets.

This new freedom has obviously stimulated the creativity in science, finance, industry, commerce and the arts. The question however is: can this limitless growth be sustainable in a limited (finite) world? Or will this infernal quest achieve only one goal: self-destruction? 

By focusing on the tree (the individual), neoliberalism has lost sight of the forest (society, nature) and its ecosystems. It does not care about pollution, the plundering of natural resources, global warming. This focus on the individual is one of the causes of disturbances. Is it due to a cultural or religious heritage? is it a mere reaction to communism? or just selfishness and greed?

Neoliberalism considers ethics as an individual matter. If there are problems, there are political and judicial institutions to solve them, so the theoreticians believe. But in most cases these institutions are disarmed because national laws stop at borders while trade is globalized. (Irresponsibility of the system).

Around 1972, a group of intellectuals and practitioners of industry, commerce and finance, the “Club of Rome”, with an exhaustive analysis of the M.I.T., launched a paving stone in the pond by publishing the book: “The limits to Growth“. This book, which was a resounding success in bookstores, had practically no impact on neoliberal actors. It was already heralding the collapse of the world economy and our political systems by 2030, with warning signs as early as 2010.

The effervescence around the neoliberal project has spread to many universities around the world and the movement has accelerated with the growth of the economy. Numerous publications have given it a seemingly strong, but often biased, intellectual foundation. Many theories, disconnected from reality, could have been fatal to it because they were based on beliefs such as: “The supposedly perfect information of buyers and sellers“, “The efficiency of markets that rebalance themselves spontaneously” and the contemptuous “trickle down effect” : follow the rich, there will always be crumbs falling from their table! In spite of these “drifts” the neoliberal movement continued its progression, precisely because the world economy and the profits for its promoters were growing.

The World Trade Organization (WTO) is today unable to redirect the world trade towards the common good. It is the reign of the “every man for himself“. Moreover, the WTO still does not have an ethical charter and its secretariat is powerless: it has no right of legislative initiative. Only the member states have this right and most of them think only of their own interests.

Let’s try to go back to one of the other sources of the problems linked to neoliberalism: the notion of freedom. Its referential system considers freedom as a higher value. Indeed, it is an essential value: millions of people throughout history have sacrificed themselves in their struggles for freedom. However, the liberal doctrine of the 19th century had already established that in the name of freedom one could do good and/or evil! Therefore, freedom could not be an isolated value. 

For freedom to be at the service of the common good, a normative value had to be added to it, such as the responsibility to limit the natural exuberance of actors motivated by the lure of gain in the markets. The liberal credo of the 19th and early 20th centuries: “Freedom and responsibility” was affirmed for more than a century. Responsibility was a necessary condition for framing and limiting freedom, but it was not a sufficient condition.

Instead of abandoning ethical references, neoliberalism should have complemented them by adding the following normative values to freedom:

The principle of equality ie an equal right to be, to live, to flourish. Let’s say a level playing field. This principle is the foundation of equity, fairness, equilibrium, justice. I suppose that we are all aware of the current problems: growing social inequalities, trade and financial imbalances that generate trade wars and numerous forms of discrimination. When we break the principle of equality, we inevitably fall into discrimination.

Proportionality: this principle gives us a sense of proportion and moderation. One of the correlates of neoliberalism is its excessiveness: unlimited economic growth, excessive pollution that destroys ecosystems and biodiversity. The plundering of natural resources: fisheries, agriculture and mining. (over-fishing and over-consumption of meat, huge destruction of edible grains to produce ethanol, unlimited deforestation etc.)

Reciprocity in the good: this is what makes solidarity a strong and necessary value for the cohesion of societies. Reciprocity in the good is the underlying force in mutual insurances (health, unemployment insurances etc.). Neoliberalism supports charitable foundations, because charity is a private matter. It ignores solidarity, which creates a bond between individuals; henceforth it is not compatible with selfish neoliberal doctrine!

Responsibility: Accountability for one’s actions, words, and commitments over time is a sine qua non if we want a sustainable economy and a place where we can live peacefully.

Neoliberalism has followed a different path; instead of pursuing the common good, it has promoted personal good, i.e., every man for himself, by making individual freedom an overriding value, and has thus favored the pursuit of short-term profit. In the meantime, the hour of reckoning has come. The frame of reference has changed: threats of climatic and social disasters are knocking at our doors and leave us with little choice: the stock market or life?  The Greens have chosen life. International finance is following another, more conservative path: it has just invented a new word: “de-globalization”. This backtracking does not put ethics back on the horse, but it shows some more realism.

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