Designed by | Gooyaabi

How Neoliberals weaponise the concept of an ideal market

This new bookby Colin Crouch will perplex many on the left who simply believe neoliberalism has to be overthrown. Indeed the author starts his book by talking about the Grenfell Tower disaster, which he along with many others believe epitomises the failings of neoliberalism. Yet he writes that the book
“is not a contribution to the demonology of neoliberalism, but an attempt at a nuanced account. Only in that way can we assess its capacity for reform.”

Such an account can of course also be justified on the basis of intellectual curiosity, but in addition the author sees some positive aspects of the ideology: He summarises these as
“the discipline of price and calculation [recognising efficiency and opportunity cost}; helping us appreciate the limitations of democratic government; facilitating trade and reducing barriers to it; and facilitating links among people [reducing national divisions].”

So what exactly is neoliberalism? He defines it as
“a political strategy that seeks to make as much of our lives as possible conform to the economist’s ideal of a free market”

The problems and deficiencies of this strategy come when the conditions required for the free market to be ideal do not hold, and the author’s long discussion of these problems would be useful for any economics undergraduate.

One of these conditions for an ideal market is competition: a free market is an ideal from a social point of view if (alongside many other conditions) each good is produced by a very large number of producers. The author recognises, for obvious reasons, that most neoliberals (as opposed, perhaps, to ordoliberals) tend not to go around wanting to break up monopolies and reduce monopoly power. As a result, he distinguishes between market-neoliberals who might, and corporate-neoliberals who would not. He talks about past competition (that may have resulted in monopoly) and current competition. As Luigi Zingales describes it rather well here, business tends to be in favour of a competitive market before it enters it, but once it has a dominant position in that market it is happy to put up barriers to further competition.

The author goes on to discuss conflicts between corporate and market neoliberalism, and much else besides. I think it is a great book, free from unnecessary jargon that you often find elsewhere. It got me thinking about the concept of neoliberalism again as you can see below. Whether that is a good thing or not, I would encourage you to read the book. The author also of course discusses whether he thinks neoliberalism can save itself. For his answer to that question you will have to read the book.

Now, for what it is worth, are some of the thoughts the book inspired. They go back to the distinction between market-neoliberals and corporate-neoliberals. It seems a little odd to define an ideology as the evangelisation of the free market, and then go on to say most neoliberals happen to exclude a crucial component of that free market (competition) when it suits them. I am quite prepared to believe that some of the people who first wrote about neoliberalism many years ago (and perhaps one or two today) could be described as what the author calls market-neoliberals, but as I have suggested in the pastI think neoliberalism has evolved (or if you like been distorted) by ‘big money’ or capital to become a tool for self justification.

As a result, I would tend to suggest a slightly different definition that seems to work quite well today. The definition would be: 
neoliberalism is a political strategy promoting the interests of big money that utilises the economist’s ideal of a free market to promote and extend market activity and remove all ‘interference’ in the market that conflicts with these interests.

This replaces a definition based on following an idea (the author’s market neoliberalism), by one of interests promoting an idea so long as it suits those interests.

This alternative definition seems to fit two cases I have used in the pastto question more conventional ideas. Large banks benefit hugely from an implicit subsidy provided by the state (being bailed out when things go wrong), but neoliberals do not worry too much about this form of state interference in the market (whereas economists do). Regulations on the other hand they do complain about. It is a very selective focus on market interference.

The second is executive pay. This is always justified by neoliberals as being something determined by the free market, when obviously it is not. Yet if you pretend that there is a market in executives and salaries etc are set by that market and not the remuneration committees of firms, then you are being a good neoliberal by defending these salaries. This example is interesting because it involves defending one part of ‘big money’ (CEOs or some workers in finance) at the expense of another (shareholders). It is why I do not talk about the interests of capital in my definition. 

Is this alternative definition simply negating the power of ideas and going back to good old interests? Only in part. Interests utilise an idea because the idea is a powerful persuasive tool. There is an obvious lesson for the left here. Because neoliberals promote the concept of an ideal market only when it suits them, so opposing neoliberalism does not necessarily mean opposing the concept of an ideal market. The left should utiliise the same concept to oppose monopoly power, for example. The idea of a free market is too powerful an idea to cede to the other side. 


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