Neoliberalism Inequality and Authoritarianism

NEOLIBERALISM, INEQUALITY, AND AUTHORITARIANISM

Jon V. Kofas

Copyright # TXu 2-362-779

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NEOLIBERALISM

INEQUALITY

AND AUTHORITARIANISM

Jon V. Kofas

Table of Contents

Preface

Introduction: An Overview of Neoliberalism’s Historical Antecedents

CHAPTER I:

The Social Contract, Neoliberal Ideology and Development Model

Social Contract Theory

Neoliberal Ideology

From the Washington Consensus to China’s Belt and Road Initiative

Developmentalism in the Semi-periphery: Asian Tigers and BRICS

China’s Response to Neoliberal Crisis

CHAPTER II:

Neoliberalism’s Path to Illiberalism

Illiberal Democracy in Neoliberal Society

‘Third Wave Democracy’ or Illiberal Democracy?

Southern Europe and Third-Wave Democracy

The Arab Spring and Counter-Revolution

CHAPTER III:

Neoliberalism and Autocratization in the Global Metropolis

Financialization, Hedge Funds, and Neoliberalism

The Great Neoliberal Recession

Neoliberal ‘Solution’ to the Great Recession

Neoliberal Autocratization against the Open Society

CHAPTER IV:

Structural Exploitation under Neoliberalism

A Theoretical Introduction

Concentrated Capital and Vertical Growth

Endemic Neoliberal Corruption in the Former Soviet Bloc

Neoliberalism and Corruption in Iraq and Indonesia

Neoliberalism’s Subversion of the Liberal Social Order

Social Exclusion and Popular Resistance

Household Debt and Global Imbalances under Neoliberalism

CHAPTER V: ‘

De-democratization’ under Neoliberalism

A Theoretical Framework

Cold War, Class War, and De-democratization

The Popular Base of Authoritarianism

Downward Social Mobility and the Rise of Authoritarianism in the US

Grassroots Resistance to Neoliberalism

CHAPTER VI:

The Neoliberal Model of Education

Commodified Education

The Rising Cost of Higher Education

The Information Age, Bureaucratization, and Proletarianization of Higher Education

The Media and the Corporate Model of Education

CHAPTER VII:

Neoliberalism, Transhumanism, and Artificial Intelligence

AI Paradise or Digital Authoritarianism?

Social Consequences of AI under Neoliberalism

AI and the Job Market under Neoliberalism

Transhumanism and Neoliberal Identity

AI Alienation and Neoliberal Marginalization

CHAPTER VIII:

Neoliberal Indoctrination, the Media and Social-Media

A Historical Overview of Journalism

Neoliberal Media Ownership: The Myth of Free Market Democratization

Neoliberal Indoctrination, and the Illusion of Popular Consent

Media Credibility under the Neoliberal Model

Social Media, Neoliberalism, and Authoritarianism

Media-Defined Democracy and the Liberal-Rightwing Populist Antagonism

Conclusions

CHAPTER IX:

Neoliberal Transformation and Geopolitics

Neoliberal Foreign Economic Policy

US-led Sanctions and Currency Weaponization

BRICS Reaction to Western Neoliberal Geopolitics

US-China Competition and Global Consequences

Epilogue:

Neoliberal Twilight or the Waning of Liberal Democracy

Crisis of Neoliberal Transformation

Neoliberal Governance and Neo-enclosure under the Veil of          Environmentalism

Corporate Welfare and Neoliberal Response to the Pandemic

The Myth of Progressive Neoliberalism and Speculation about Neoliberalism’s Demise

Neoliberal Culture of Narcissism

Bibliography

PREFACE

Before the Great Recession of 2007-2008, neoliberalism was a term that academics, journalists, and analysts working for think tanks or international organizations used to articulate how the new phase of capitalism impacted society. Experiencing the transformation’s impact daily, the public accepted neoliberalism as the new norm. Unaware of the global transition from Keynesian social welfare to the neoliberal corporate welfare state, people fell into the mold of more rapid redistributive economics from the bottom up.

After the Great Recession of 2008, the intensified crisis of the neoliberal political economy, and the rise of illiberal democracy (regime under an electoral system curtailing popular consent and civil liberties legislatively and through the courts) intensified. Given the rapid pace of social and political changes, academics, journalists, analysts, and businesspeople examined more closely the neoliberal model’s impact not just on the economy, but society as a whole.

In search of a link between the rise of authoritarianism and the institutionalization of neoliberalism, social scientists debated the inexorable relationship between the two. This was especially after Donald Trump’s presidential victory in 2016, emboldening a global wave of rightwing populism as a movement and regime, but also as it impacted the media which unapologetic advocated or stealthily promoted the GOP candidate. Rhetorically opposed globalization to consolidate the disgruntled popular base, Trump and other populist politicians in the US and around the world pursued privatization of public enterprises, tax cuts for the wealthiest, an accommodative monetary policy as another form of subsidy benefiting institutional borrowers, and business deregulation resulting in higher profits amid deteriorating labor and environmental conditions.

In the name of market efficiency and economic competition during China’s global economic ascendancy, policies associated with authoritarianism became mainstream within the G-7 and in developing nations. The origin of the slippery slope toward US authoritarianism took place during the early Cold War when Senator Joseph McCarthy in the early 1950s used Communism as the pretext to impose sociopolitical conformity at home and support covert operations and overt military intervention globally.

Under neoliberalism, and especially after the terrorist strikes in the US on 9/11/2001, the US-led global war on terrorism and military intervention in Iraq and Afghanistan distracted people from stagnant living standards and downward social mobility during a period of rapid and massive income transfer from the lower classes to the wealthiest. Regardless of empirical evidence compiled by international organizations, the media, political, business, and community leaders promoting neoliberal transformation insisted that the US was the world’s beacon of freedom and democracy.

Beyond the disconnect between the projected hollow image and verifiable evidence, there is the link between neoliberalism and autocratization, namely, the erosion of democratic institutions and policies within an electoral system on the path of authoritarianism owing to the neoliberal phase of capitalism responsible for the global trend of rapid capital concentration and rising inequality. The historical antecedents for the erosion of democratic institutions and renewed efforts toward monopoly capitalism after the twin shocks of the Great Depression and WWII culminated in the neoliberal experiment in Chile in the 1970s, and then in the UK toward the end of the decade and the US in the beginning of the 1980s.

The US emerged as the world’s most powerful economic power in the 1940s when Europe and Japan were at their nadir. Global transformation policy was the catalyst to cement Pax Americana’s preeminence during the East-West confrontation. Relying on the Bretton Woods System established in 1944 to manage the capitalist world economy under America’s aegis, all presidents from Truman to Biden used its unprecedented economic and military power to integrate as many countries as possible under its orbit of influence. The goal was also to prevent countries from allying with the USSR and/or China after Mao’s victory in the Civil War in 1949, and even non-aligned countries after the Bandung Conference in 1955.

The ideological justification for US global integration of the non-Communist world started at the end of WWII when Japan Europe, and their colonies in Asia and Africa had collapsed and needed reconstruction aid. Exploiting public fear of the emerging Communist bloc, especially after 1949 when Mao’s Red Army prevailed over Chiang Kai-shek’s nationalists, and the USSR successfully tested the atomic bomb, the US government and the entire establishment from Wall Street to mainstream media discouraged workers from supporting leftist organizations, trade unions, or political parties anywhere in the world. The class war that neoliberalism institutionalized had its origins in the early Cold War during the zenith of Pax Americana, inexorably linked to geopolitics from its origin.

Combined with a wave of decolonization in Asia and Africa, the world order remained in a bipolar superpower division from the Truman-Stalin era until the collapse of the Soviet bloc in 1991 amid the ascendancy of global neoliberal transformation. Undercutting the convergence of liberalism and democracy that the New Deal forged in the 1930s, neoliberalism became institutionalized after the capitalist class and mainstream political parties used the pretext of the crises of capital accumulation in the 1970s, amid the concurrent energy crisis and stagflation to launch a class war and dismantle the Keynesian state.

The US retreat from Vietnam, the oil embargo of 1973, the Iranian and Nicaraguan revolutions, and USSR troops in Afghanistan, all in 1979, exacerbated capitalism’s systemic contradictions in the US-Western European core, thereby setting the stage for neoliberalism first in the UK under Prime Minister Margaret Thatcher and then in the US under President Ronald Reagan. Partly because China shifted economic development strategies after the Mao-Nixon visit of 1972, but also because northwest Europe and Japan had become much stronger relative to the US in the 1950s, the East-West Cold War world order was already multipolar at the economic level by the 1970s.

As evidenced not only by northwest Europe and Japan’s economic ascendancy, but also OPEC’s global leverage, and the non-aligned bloc’s South-South cooperation intended to modify the historical dependency relationships with the former colonial powers, the world capitalist system’s multipolar nature weakened the US economically despite its continued military preeminence. Along with northwest Europe, the US chronic balance of payments deficits and defense spending from the beginning of the Korean War to the end of the Vietnam War, combined with the nuclear arms race contributed to lower capital returns as Europe and Japan were increasing global market share. Despite an average of 3.7% GDP growth from 1950 to 1973 in the US, the period from 1973 to 1992 witnessed a 2.2% GDP growth rate and 0.9% business productivity.¹

The US-based multi-dimensional crisis had a global impact. The combination of the Bretton Woods System and military Keynesianism (diverting the surplus from social welfare to raise defense spending amid the nuclear arms race) hastened capitalism’s contradictions and slowed civilian economic growth amid chronic rising balance of payments deficits and weakened the dollar as the world’s preeminent reserve currency.

Refusing to further devalue its currency, in May 1971, Germany left the Bretton Woods System. In August 1971, President Richard Nixon delinked the dollar as a reserve currency from the gold standard. To control inflation, Nixon ordered three-month wage-price controls, while imposing a 10% import surcharge as insurance not to disadvantage US-made products amid the fluctuating exchange rates. Replacing the fixed exchange rate system with a floating responsible for sinking the greenback by one-third in the 1970s was part of the pretext to abandon Keynesianism.²

With the relative decline of US global economic power amid the Vietnam War in the 1970s, there was a grassroots movement for popular sovereignty in the Southern Hemisphere, especially in South Africa where apartheid was another tool of race-based working-class exploitation. South African apartheid had some similarities with the US. Other parts of Muslim northern Africa and sub-Saharan Africa were inspired by Gamal Abdel Nasser, Indonesia’s Sukarno, India’s Nehru, and other non-aligned leaders defying the bipolar Cold War world order that the US and USSR were using to manage the world balance of power.

Popular sovereignty and social inclusion, democracy with all its limitations during the Cold War, and classical liberalism placing all emphasis on the individual above social class, never existed except at the theoretical level. Even in the Scandinavian countries, which consistently rank among the most committed to democracy, the hierarchical social structure reflects the essence of the political economy that neoliberalism inherited from the Bretton Woods System. The Bretton Woods conference (July 1944), which created the International Monetary Fund (IMF) and the World Bank, established the antecedents for neoliberalism by scaling back on Keynesian policies of social welfare, accelerated privatization of public entities, and government bolstering businesses by sub-contracting and outsourcing services otherwise carried out in the public sector. Through monetary stabilization and development loans, the multilateral financial institutions’ role was paramount in influencing the fiscal, trade, investment, and labor policy of its member countries, especially of the Global South. Indirectly coordinating and managing the world economy with the full support of private financial markets, the US government and its junior partners dominated the IMF and World Bank both instrumental in transformation policy.

Essential elements in IMF-World Bank loan conditionality included decentralization of state power and minimal business regulation. Antecedents to neoliberalism included the free flow of goods and capital between national borders with minimal tariff barriers and a reduction in business taxes with a simultaneous rise in consumption taxes. Impacting the Keynesian welfare state, the twin international financial institutions promoted reducing the labor force in public agencies, opposed policies favoring trade unions and safeguards for both workers and the environment, and advocated a skeletal social safety net including social security, education, and health care. Permitting the market to determine services otherwise included in a social welfare state, especially health care, was the epitome of market hegemony over the state.³

Diluting Keynesian social welfare policies was a gradual process after the US-based Bretton Woods System established the institutional mechanisms to manage international monetary stability and economic development on behalf of the private sector which benefited from such policies intended to redistribute income from labor to capital and from the Global South periphery to the core countries. IMF and World Bank policies of the first three postwar decades helped pave the way for neoliberal transformation. The financial institutions applied policies selectively in developing nations, but not in the advanced capitalist countries, and not in those countries which the US deemed of geopolitical significance.

Western Europe, Japan, South Korea, and Taiwan, all countries that the US chose to reconstruct and reindustrialize for geopolitical and trade considerations, were not subject to IMF-World Bank monetarism-free trade policies. Allowing developmentalism based on import-substituting industrialization, Washington injected capital into these nations instead of de-capitalizing which would have forced them into chronic balance of payments deficits and external financial dependency conditions, as was the case with Latin America and Africa. Furthermore, IMF-World Bank conditionality never interfered with parasitic military Keynesian policies in any country undergoing austerity.

Although the IMF and World Bank linked market-based policies to stabilization and development loans, the institutionalization of full-fledged global neoliberal transformation started with UK Prime Minister Margaret Thatcher in 1979, and US President Ronald Reagan in 1981. This was after a neoliberal experiment in Chile in the second half of the 1970s. By the late 1980s when the Soviet bloc collapsed, neoliberals celebrated the triumph of capitalism and seized the opportunity to integrate the former Communist countries under neoliberal transformation’s global reach. Against the background of the new doctrine of deregulation and privatization, governments around the world shifted resources from social welfare to corporate subsidies under a state conducting fiscal and monetary policy to accommodate market hegemony over mainstream institutions.⁴

After UK and US conservative governments institutionalized neoliberalism in the 1980s, liberal and center-left political parties globally pursued transformation in the 1990s amid the euphoria of the Communist bloc’s collapse. Following Reagan’s lead, neoliberal governments promised trickle-down economic prosperity, a theory prompting John Kenneth Galbraith to observe that: if one feeds the horse enough oats, some will pass through to the road for the sparrows.⁵ History proved that neoliberals delivered a chronic rise in inequality under the existing stratified social structure and uneven development in the world economy. Promises of protecting the environment, democracy, and human rights were as hollow as trickle-down economics which was originally part of Will Rogers's satire about capitalism during the Great Depression.⁶

As much in the US and UK, as in Brazil, India, Hungary, Turkey, Russia, former Soviet republics, and indeed most countries in the world, aspects of authoritarianism behind the thin veil of representative democracy are rooted in structural dynamics of the neo-classical political economy’s contradictions and empirical conditions in deteriorating social relations. Other than historical antecedents of the global rightwing populist tide in core countries, neoliberalism has had an impact on all aspects of society. From social structure to popular culture, commodifying one’s identity as a consumer-citizen seeking fulfillment in narcissistic and increasingly virtual reality endeavors, neoliberalism’s global reach has had a far-reaching impact even in traditional societies.

Contrary to liberal and center-left claims that progressive neoliberalism is the antidote to rightwing populism, the dynamics of the neoliberal political economy transcend conservative, centrist, or center-left politics, all of which operate under the larger umbrella of the same social contract. All mainstream political parties have been responsible collectively for the consolidation of the model whose tentacles reach every aspect of society.

Regardless of political obfuscation by liberals blaming conservatives and vice versa, the systemic cause of the rise in inequality and authoritarianism is intertwined with policies of capital concentration and reliance on aspects of governance designed to serve the political economy amid class war intended to transfer income from the lower classes to the wealthy. The amazing aspect is that a segment of the lower classes supported such policies, aspiring to join the wealthy. Giuseppe Ricotta calls it punitive populism, part of neoliberal control strategies both in rhetoric and practice at all levels of government.⁷

One could dismiss such control strategies as symptomatic of high tech’s application to the state’s bureaucratic mechanisms. However, at the core rests an ideology molding society to have it serve the political economy benefiting the world’s richest 1% who own half of the wealth on the planet.⁸ In Neoliberalism – the ideology at the root of all our problems, George Monbiot correctly points out that neoliberalism’s pervasiveness as an ideology arose as a conscious attempt to reshape human life and shift the locus of power.⁹

No matter what criteria one considers, for the working class and a segment of the middle class, life in the UK has changed for the worse after Thatcher’s term in office. Apologists present the ideology as neutral and natural, reflecting human nature, as though Heaven dropped the neoliberal social contract to Earth for humanity’s salvation. Promising a hierarchical society in which competitive capabilities determine the individual’s socioeconomic status, the neoliberal utopia is riddled with contradictions, including the promise of freedom and prosperity vs. the reality of the degree of freedom and prosperity that socioeconomic status determines, as was the case before neoliberalism.

Built into the development model which has contributed to an increasingly politically polarized and socioeconomically unequal society, liberal democracy’s erosion has been the inevitable consequence of the political economy’s contradictions manifesting themselves in the promise of prosperity vs. the reality of class war and inequality. Contrary to the nebulous rhetoric of the ‘free market’ doing its magic, neoliberalism relies heavily on the state to mold social relations. In every endeavor, from fiscal to monetary policy and from education to religious policy, the goal has been to maintain capital concentration, minimize popular opposition to rising inequality, and foster institutional conformity.

In reaction to the liberal pluralistic-diversity political camp operating within the neoliberal political economy, the evolving social contract has normalized rising inequality on a world scale, social marginalization, and class war in the name of market efficiency. Representing big capital, the media and establishment analysts incessantly debate whether the pluralist-diversity model best serves society amid a shrinking social welfare safety net, or a rightwing populist regime promising salvation. Each political camp reinforces the other and both serve the same social contract.

Socioeconomic polarization precedes political polarization. This was evident in President Donald Trump’s America, Prime Minister Narendra Modi’s India, and Jair Bolsonaro’s Brazil, among other authoritarian governments from Hungary to Turkey and from Kazakhstan to Myanmar where Western neoliberal transformation led to a military coup in February 2021.¹⁰ Espousing a pluralist–diversity-pro-environment model, while aiming at the same neoliberal socioeconomic goals as rightwing populists, French President Emmanuel Macron’s La République En Marche and Canada’s Justin Trudeau’s Liberal Party, as two examples in the same political camp, serve the same neoliberal goals as their rightwing counterparts around the world.

Whether under the pluralist or the authoritarian model, neoliberalism represents what Barrington Moore described during the Vietnam War era as a capitalist reactionary route in response to the struggle for capital appropriation and accumulation. To protect the capitalist class after the market crash of 1929, several countries fell under totalitarianism or a variety of authoritarian regimes. Fearing that the Bolshevik Revolution had inspired a global social revolution, the capitalist class, bourgeois politicians, the church, and many mainstream institutions supported totalitarianism promising salvation from trade unions and socialism. National and international conditions are not identical in the early 21st century as in the interwar, but there are some similar macroeconomic and sociopolitical trends.¹¹

Barrington Moore’s observation that capitalism’s reactionary route is singularly focused on appropriation and accumulation entails that the political economy’s goal transcends any concern to preserve liberal democracy as much in the interwar totalitarian era as under neoliberal transformation. Integrated geographically and demographically more thoroughly than at any time in its 500-year history, the capitalist world economy under the neoliberal phase has led society toward authoritarianism under the thin veil of liberal democracy.

Contrary to liberal analysis that the bourgeois democracy crisis stems from a combination of fringe groups and voter apathy, the problem extends into the socioeconomic elites' interference and manipulation of elections, as well as institutional forms of subtly coerced social conformity. Combined with marginalized extreme groups propagating against democracy and demanding authoritarianism, neoliberalism has manifested clear signs that it is incongruent with democracy and compatible with authoritarianism which it breeds. Although it has existed under the liberal-pluralist state, while doing so neoliberalism’s contradictions generate the antecedents to authoritarianism.

Liberal democratic society’s multi-dimensional crisis goes to the heart of neoliberalism’s myriad of contradictions hastening geographic and social polarization. This has led to the rebellion of many in the capitalist class against the liberal bourgeois institutional order intertwined with Keynesian policies. An inevitable development, authoritarianism as a vehicle to carry out class war means expanding the unfettered markets against the reality of downward social mobility and chronic erosion of the social safety net.

Launching a counterrevolution against the institutional order, a segment of the capitalist class has become what Dutch cultural theorist Johan Huizinga (Homo Ludens: A Study of the Play-Element of Culture (2016) described during the Great Depression as the sadistic elite striving to preserve its privileges by lashing out at the working class, especially trade unionists. Beyond the manifestation of narcissistic and psychopathic traits that the model foments not just among the capitalist class but across all of society finding expression in social relations, neoliberalism reinforces sociopathic behavior. Several psychologists and social scientists have concluded that in the predatory market value system, neoliberalism finds expression across all institutions impacting the individual’s psyche.¹²

Molding the mass consciousness that the root cause of systemic calamities befalling society rests with migrants, racial, ethnic, and religious minorities, women, and recalcitrant trade unionists, the neoliberal counterrevolution from above is multidimensional considering liberals and even progressive neoliberals have been a part of it. Because of identity politics in both the liberal-pluralist and rightwing populist camps, and because policies of both camps are designed to undermine working-class solidarity, the hegemonic social class, the political class, the media, and mainstream national and international organizations working toward the same goal of appropriation and accumulation are the reasons that the neoliberal order remains in force globally.

America’s gradual retreat from the core of the capitalist world system amid China’s rapid economic ascendancy also hastened authoritarian neoliberalism and its embrace of ultra-nationalist tendencies. As will be seen in the next chapters, China experienced phenomenal economic growth, upward social mobility, and elimination of extreme poverty from Jiang Zemin (1993-2003) to Xi Jinping (2013-present). China’s rapid economic ascendancy posed a challenge not only to US hegemony but its junior partners scrambling to keep their companies competitive by seeking greater market share. Rooted in global integration for the sake of national economic development, China’s long-term development has not entailed shared sacrifice amid industrialization’s benefits that the state celebrates as a collective achievement.

As much as they demand that China must adopt the neo-classical transformation model, liberal and progressive Western elements support the pluralist neoliberal political parties which promise to deliver the same goals under a policy mix that includes Keynesianism. Except for a few countries, especially Scandinavian, the goal has been to maintain a skeletal social safety net and inclusive social structure to mitigate class conflict and market disequilibrium.

Further confusing those concerned about whether neoliberalism falls in the domain of a progressive, liberal, or authoritarian political umbrella, culture wars have been intertwined with identity politics and green economy issues that neoliberal governments and international organizations, including the World Bank, have co-opted. Added to mixed reactions about the US-led campaign to slow China’s ascendancy, major corporate leaders like Morris Chang, Taiwan Semiconductor founder, argued in 2023 that de-globalization is a reality under a post-neoliberal fragmented world economy.¹³

These debates invariably shift the focus from neoliberal policies responsible for chronic downward social mobility to the slowing of capital appropriation and accumulation on a world scale. They further contribute to the debate of the lesser evil choice between liberal and rightwing populist regimes, although both aim at the same socioeconomic goals. Rejecting elitist culture and embracing popular culture often finding expression in identity politics, Friedrich Hayek, the most important apostle of neoliberal ideology, did not reject cultural pluralism as part of the political economy in the same manner that he rejected the Enlightenment’s rationalism and liberal democracy. On the contrary, he viewed culture as a useful tool for popular mobilization behind the neoliberal model.

It is common to find capitalists and corporations readily accepting Hayek’s popular culture theory based on evolutionist assumptions. Just as readily, they embrace the neoliberal order beneath the multilayered cloak of a trendy culture - clothing, music, lifestyle choices, etc. – intertwined with identity politics, camouflaging the political economy’s ultimate goal of market hegemony, class war, and rising inequality. While Hayek dismissed the constructivist theory (cultural context determines empirical reality/knowledge) of culture in favor of the Darwinian evolutionist theory, the capitalist system in its neoliberal phase is the quintessence of constructivism.¹⁴

Along with socioeconomic fiscal conservatives, nationalists, militarists, and technocrats, cultural conservatives also reject democracy’s collectivist assumptions. Historically, they have identified more with libertarian James M. Buchanan promoting authoritarian neoliberalism than with Walter Lippmann who brought the first group of neoliberal thinkers together in Paris in 1938. Although there are libertarian neoliberals who do not identify with Buchanan advocating supremacy of property over people, the libertarian policy does aim at cultural discrimination against workers and minorities.

Because of the populist rhetorical rejection of globalization and diversity-based cultural identity, many confuse libertarianism with radicalism. Some of the confusion in the progressive camp has aspects of the counterculture of the 1960s; a thin coating over what the reactionary core beneath. The pluralist political and business neoliberal elite has been as effective in carrying out politically and socioeconomically polarizing policies as authoritarian neoliberals who use culture wars as a catalyst to mobilize the popular base.¹⁵

Liberal pluralists and rightwing populists have deliberately used culture wars to undercut class solidarity and mobilize support for the pro-market model molding the entire institutional structure. In the US, the political and business class has historically used politics of race, nationalism, ethnicity, and religion, especially Evangelicals as catalysts to mobilize the right made up mostly of whites. In India, Hindu vs. Muslim, especially as expressed in Hindutva has been the catalyst for rightwing populism under Prime Minister Narendra Modi’s regime. In mobilizing the masses behind authoritarian neoliberalism, religion, and culture have played a catalytic role. Effectively subordinating class consciousness to culture wars and using it as a mechanism of class war, conservative and liberal political parties alike have delivered a mass popular base behind the neoliberal social contract.

Without the mass media and social media’s role in mass indoctrination, education, and religious institutions, political distraction and indoctrination would be very difficult. Redefining citizenship based on market-based criteria, neoliberalism has reduced all human endeavors, including social relations and individuals, healthy and gravely ill, into cash-value commodities. Recognizing society only in its monolithic market dimension, neoliberalism accepts Max Weber’s disdain for bureaucracy, although serving the corporate welfare state bureaucracy is important in neoliberal transformation.¹⁶

By subordinating, if not obviating, community rights, human rights, and civil rights to the marketplace, neoliberalism has de-politicized and alienated the automaton-like citizens at the bottom of the socioeconomic ladder who recognize that the social contract excludes them from the privileged mainstream; a class war objective at the core of neoliberalism. The irony of undermining human rights and community rights is that the movements defending dissidents and community rights took off concurrently with the neoliberal transformation. This was only a trojan horse concealing the transition from the Keynesian state to the neoliberal corporate welfare state.

Another social conformity mechanism has been integrating neoliberal doctrines into constitutions by invoking constitutional originalism as a means of weakening the central government and Keynesian remnants while decentralizing state power. Especially in the US where social relations under states’ rights with layers of racist undertones, the concept has a divisive past. It is infused with neoliberal doctrines, constitutional originalism reinforced and legitimized the populist right culminating in Trump’s election and the Republican Party embracing aspects of authoritarianism, including regimenting press and academic freedom, voter suppression targeting minorities, election interference, high concentration of power in the executive, and manipulation of the judicial branch and entire criminal justice system.¹⁷

The success of neoliberalism has been that its apologists in all venues from media to education have convinced a large segment of the masses to accept its definition of self and a mythology analogous to Calvinist salvation for the market-oriented predestined souls. At the same time, neoliberal advocates have effectively neutralized both Keynesians and progressives advocating some form of social safety net. This is in part because the fall of the Soviet bloc coincided with the rise of neoliberalism under the US-centered world order emerging during the presidency of George H. W. Bush. At the same time, China’s ascendancy as the main driver of capitalist development, seemingly validated the Western neoliberal argument about accepting social contract as the norm globally, despite Beijing’s political economy resting on a hybrid model.¹⁸

With a special focus on the US, this study offers an overview of some aspects of neoliberal transformation’s global reach from the 1980s to the early 2020s. Contrary to apologists’ claims about neoliberalism as the panacea, the Great Recession of 2008 and its lingering aftermath, the COVID-19 pandemic which required a collective response with the state assuming a central role to save capitalism from self-destruction, and the Western sanctions against Russia after the latter invaded Ukraine provides ample proof of the myths and glaring contradictions that have been detrimental to society’s welfare throughout the world.

Refusing to reevaluate the neoliberal model in the face of such global tragedies, the state, international financial institutions, including the IMF, World Bank, and World Trade Organization (WTO), and stock markets, especially Wall Street, preach profit against addressing rising inequality and authoritarianism. The widespread misery of the majority living in fear under monetary and fiscal austerity after 2008, the economic and health consequences of the COVID-19 pandemic, and global stagflation amid the Russian war in Ukraine in the 2020s were opportunities to amass even greater profits under a model thriving on chaos and disorder.¹⁹

The media, corporate and political lobbyists, business consultants, think tanks and business-linked academics have been dogmatic about perpetuating the very system that failed amid early 21st-century crises and led societies deeper into authoritarianism’s embrace. Contrary to optimistic scenarios that the global economic crisis of 2008 and the pandemic, supply-chain bottlenecks, war in Ukraine, and Western sanctions would lead to systemic changes mitigating socioeconomic marginalization under the neoliberal model, none of these predictions came true. Even during the pandemic that shattered the myth about the state’s role as essential for collective public health and an end to vaccine apartheid at the expense of the Global South, neoliberals dogmatically insisted on adherence to a socially-destructive model born out of a sociopathic hysteria against the concept of the social which Hayek dismissed as a weasel word par excellence.²⁰

The ultimate contradiction of neoliberalism is market hegemony over the state and outsourcing public agency functions to buttress the private sector unable to survive on its own without massive public income transfer from labor and the middle class. Furthermore, neoliberalism theoretically entails a decentralized state structure and a weak social welfare component with a strong corporate welfare dimension. When factoring into the mix of geopolitics amid the US-China competition, the state’s role becomes even more significant. This has been the case in the US-China inimical relationship which the US has used as the pretext to withhold technology transfers, especially semiconductors. Competition to secure rare earth elements neodymium and praseodymium used for medical devices, motors, and turbines has been a part of the US-China rivalry as well.²¹

In the struggle for global hegemony, the US has responded differently from China. The Chinese government consults the corporate sector in pursuing pro-business economic policy by central planning and social development goals. In the US, corporate lawyers and lobbyists draft regulations that government agencies and elected officials endorse. Globally, neoliberals demand even lower tariffs, the end of price controls, privatization of public assets, accommodative monetary policy, corporate welfare incentives, and state intervention to bail out larger businesses, especially banks. At the same time, where geopolitics transcends the global market to serve national capitalism, tariffs become policy benefiting corporations of the country imposing them. Not only is there no Keynesian regulatory state except for geopolitical considerations, but as Craig Berry argues analyzing neoliberalism in the UK, the substitutive state has taken over statecraft.²²

If neoliberalism stopped with the substitutive state, one could argue that its apologists are merely building upon and expanding Adam Smith’s (An Inquiry into the Causes of The Wealth of Nations, 1776) laissez-faire ideology by creating a hybrid model to efface all traces of the Keynesian state. Intending to save the bourgeois social order and avert social revolution, Keynes (The General Theory of Employment, Interest, and Money, 1936) offered a holistic vision of society beyond employment theory, inflation, aggregate demand, and output, all of them ultimately aiming to save capitalism from inherent contradictions and the bourgeois social order and civilization.

Hardly a theory of everything like Stephen Hawking’s unifying astrophysics cosmological model explaining nature’s interwoven interactions, neoliberalism’s global reach into markets, government, and institutions including religion, and culture is far from what 18th and 19th-century liberals envisioned. It is farther afield from any ambitious goals rooted in rationalist Enlightenment principles upon which modern Western Civilization was built.

The theory of everything construct goes to the heart of the debate on whether neoliberalism is merely a finance ideology or an all-inclusive model subsuming every institution more rigidly than any previous phase of capitalism. Other symptoms of the neoliberal transformation’s global reach include a shift in labor-capital relations under the economy’s financialization and rentier capitalism. The quintessence of capitalism’s parasitic nature under its neoliberal phase, financialization places all emphasis on the financial market’s preponderate role in the economy, while rentier capitalism entails concentrated ownership of key assets reducing the majority to servile status.²³

Contrary to claims that neoliberals favor a weakened state structure as a means of strengthening capital, they only advocate a weak social welfare and regulatory state in the name of market efficiency; a concept narrowly defined to exclude regulatory mechanisms applied to business. Corporate welfare, corporate bailouts, and commodifying domestic and foreign policy to buttress the corporate sector are integral parts of the neoliberal state which is more bureaucratically parasitic than the Keynesian social welfare state. This is partly because the former outsources services previously carried out by the state bureaucracy at a much higher cost to the consumer without public scrutiny and accountability of a public entity.

Yet, the US and the West argue that China’s state bureaucracy is burdensome to the private sector merely because Beijing has been pursuing a hybrid development model integrating much of the world economy under its aegis. Competing with the Washington Consensus neoliberal model, the Chinese mixed economic model (Beijing Consensus, followed by the Belt and Road Initiative, BRI) has resulted in competition with the US-led Western coalition. Confined with IMF austerity, deregulation-privatization, and anti-labor policies that the US urged Latin American governments to adopt, after 1989 the Washington Consensus became globalized at the same time that China was integrating rapidly into the world economy.²⁴

The resounding success of the Beijing development model has been evident in its rapid rise to global hegemony. Going beyond the Shanghai Cooperation Organization (SCO), representing the largest regional block with close to half of the world’s population and more than 30% of global GDP, the model has come at the expense of workers domestically and globally, while aiming at upward social mobility and poverty elimination at home. US-China competition aside, inherent dynamics slowing capital accumulation in the Western core, neoliberalism has been on the path of authoritarianism as a means of realizing even greater concentrated capital and global market share at the expense of workers. Ironically, to deflect attention from Western neoliberalism, Western politicians and analysts castigate China as an authoritarian anomaly in an otherwise ‘democratic’ neoliberal world.

Resorting to sanctions, tariffs, technology transfer restrictions, and investment regulatory obstacles, precluding third countries from signing contracts with Chinese firms, to mention just a few tactics, US-G-7 and NATO members leverage to gain global market advantage works short term. This is merely by weakening the target seeking continued integration while undermining the global neoliberal transformation model, thus, self-defeating. Besides the dollar’s prevalence as a reserve currency in the IMF Special Drawing Rights basket over other currencies, choosing to buy government bonds as a means of strengthening one reserve currency over the other, combined with sanctions and a myriad of national security restrictions on trade, and punishing third parties that violate such restrictions are all examples of how the neoliberal state sabotages the transformation model’s global reach by opting for trade fragmentation as a short-term strategy.

To reach domestic social consensus and serve national capitalism’s appetite for market share by using geopolitical considerations as a pretext, neoliberalism deviates from its own free market principles which are hardly meaningful both at the microeconomic and macroeconomic level. The very contradictions involving greater reliance on state intervention entail losing the ability to deliver on capital appropriation and accumulation on a world scale, amid eroding consumer-citizen freedom and mobility which neoliberalism claims is at the core of sociopolitical consensus. After the dot.com bubble of 2000 and the Great Recession of 2008, deepening systemic contradictions caused market disequilibrium amid the shifting core of the world economy. Greater inequality under the rise of autocratization coincided with US-NATO interventionism in 2010 and into the 2020s.

In the post-WWII era, Pax Americana’s management of the world economy with the help of the multilateral institutions, while simultaneously the US has been leveraging its military superpower status ran its course of maturity and set course toward decline. The pattern of Pax Americana’s twilight was not so different from Pax Britannica’s during the Age of Imperialism (1870-1914) when Germany, the US, and Japan emerged as newly industrialized powers challenging the British Empire with London as the world’s financial center. Under neoliberalism coinciding with the war on terror replacing the Cold War, Pax Americana provided greater impetus for the rise of authoritarianism on a world scale, including parts of Asia where there was a rise in domestic struggles and conflicts.²⁵

Although the capital has always gone where it realizes the highest, safest, and most promising return on investment, everything from war, sanctions, tariffs, and geopolitical considerations impedes its flow on whose logic neoliberalism operates. This is not to suggest that non-market factors related to foreign and defense policy are divorced from capital accumulation on a world scale as a goal. Under exigent geopolitical conditions, the nation-state supersedes the market to serve it, both short-term and especially longer-term. Hence, inherent contradictions inevitably arise, as the US-China competition has demonstrated in the early 21st century.

A US-China power struggle amid rising geopolitical tensions in a multipolar world capitalist system poses challenges for the Global South states decision is whether to serve the militarized declining Pax Americana-led trading blocs or to opt for trade and investment terms under Chinese tutelage promising better terms of a dependency relationship. No matter which regional trading bloc countries choose, conditions rooted in global trade fragmentation dilute the neoliberal transformation’s global reach.

Neoliberalism, the highest stage of capitalism of the late 20th-early-21st century, encompasses all of the structural aspects of late-19th-early-20th century imperialism. Liberal reformist (John Hobson) and Marxist intellectuals Rosa Luxemburg, Rudolf Hilferding, V.I. Lenin, and Karl Kautsky described the Age of Imperialism as detrimental to the working class and society. History proved them correct, given that imperialism inevitably led to wars of imperialism culminating in WWI and to the Bolshevik Revolution. Amid its underlying crisis and dangerous course of global division for markets and raw materials, combined with heightened militarism, neoliberalism’s contradictions amid a US-led massive arms buildup amounting to 40% of the world’s total defense spending is as dangerous as the British-German arms race during the Boer War in South Africa (1899-1902).

Behind the thin ideological veil of free efficient market and non-state intervention, neoliberalism relies heavily on state power which has surrendered policy and many essential functions of public agencies to corporations and the billionaire investor class. Corporations aggressively seeking markets at any cost, including the risk of mutually destructive wars for the entire world economy, as was the case of Russia’s invasion of Ukraine in 2022, are ominous signs of a self-destructive model taking society down with it.

Promoting global integration for resource concentration, neoliberalism is caught up in the myth of its own making about boundless growth which is nothing more than resource allocation from the bottom up on a world scale. Along with geopolitics fragmenting the world economy, and incessant class war manifesting itself in everything from declining workers’ living standards to attack on social justice, neoliberalism contains the seeds of the model’s demise as it serves an ever-smaller percent of the population, repressing the majority, undercutting the Enlightenment ideal of improving human welfare through liberal-democratic institutions in the age of mass politics.

Introduction: An Overview of Neoliberalism’s  Historical Antecedents

Rooted in the 19th century Age of Imperialism that produced monopolies, trusts, and cartels, neoliberal ideology is counterrevolution against liberal democracy and the working class in reaction not just to fear of socialism, but of Keynesianism. The ideology on which an eclectic blend of policies is based began taking shape in Europe during the Great Depression amid the global popularity of Keynesian policies and the fear of the Bolshevik Revolution spreading beyond the USSR. By the early Cold War amid the East-West world order, neoliberalism found the perfect political environment to propagate its ideology.²⁶

If one accepts the wave theory that Nikolai Kondratieff (Long Wave Cycle, 1926) developed to explain capitalism’s long cycles of 40-60 years, neoliberalism was the outgrowth of new technology from the late 1970s to the present. Even if Kondratieff’s technologically/scientific wave theory is taken at face value, there are questions about cycles so rigidly tied to a time frame, complicated by the short-term and intermediate contracting cycles determining the long cycle’s course, duration, and above all the role of capital accumulation in the process.

In The Curve of Capitalist Development (1923), Leon Trotsky writes: "Entire epochs of capitalist development exist when several cycles are characterized by sharply delineated booms and weak, short-lived crises. As a result, we have a sharply rising movement of the basic curve of capitalist development. There are epochs of stagnation when this curve while passing through partial cyclical oscillations, remains on approximately the same level for decades. And finally, during certain historical periods the basic curve, while passing as always through cyclical oscillations, dips downward as a whole, signaling the decline of productive forces."

Although neoliberalism on the surface appears to fit into the Kondratieff cycle theory because it roughly coincides with the new technology era following the long wave of Keynesianism, and it is rather typical of past cycles building on existing layers of capitalist development. An even more atomistic, anti-social, and anti-labor ideology than classical liberalism found in the works of Adam Smith, David Ricardo (On the Principles of Political Economy and Taxation, 1817) and John Stuart Mill (On Liberty, 1859), neoliberalism was initially a reaction to the Bolshevik Revolution’s global influence, the rise of the welfare state in the 1930s and Keynesian macroeconomics that most capitalists and politicians wanted diluted, if not eliminated.

In August 1938, French and American scholars participated in a colloquium - Comité international d'étude pour le renouveau du libéralisme (CIERL) which American journalist/political analyst Walter Lipmann headlined in Paris. Ideological nuances emerged between the faction that Lippmann and Austrian scholar Friedrich Hayek headed against that of militant anti-Keynesian Étienne Mantoux and the Manchester School economists, especially Ludwig von Misses who favored pure market economics without any state involvement.

Making the state-backed market the core of the social contract, everything in society from personal freedoms and rights to privileges rested on the market, without a social safety net or the state assuming any stimulative role in the economy through public enterprises to address unemployment amid contracting cycles. The welfare-state bureaucracy was the enemy to be replaced with a business-welfare state structure aiming to shift public resources to support private capital. This was based on the theme of private appropriation of public income and greater redistribution from labor to capital.²⁷

Arising from the chaos of transitioning out of the war economy to the unregulated civilian economy in the 1920s during postwar reconstruction, American interwar isolationism combined with lingering chaotic market-based conditions in Europe and the colonies, global dislocation was a prescription for economic disaster. The 1920s was the decade of market preeminence with trading blocs, uncoordinated, if not clashing central bank monetary policies, and reckless bank lending linked to unregulated stock market speculation.

Against the background of minimal government market interference and lack of international monetary coordination, world trade fragmentation, banking speculation and rising tariffs, a deep cyclical economic depression was inevitable, built into the system. The political question was whether to save capitalism under an authoritarian regime and sacrifice liberal democracy, try to save both, or possibly face social revolution as did Russia in 1917, if nothing else succeeded within the system intended to preserve the capitalist system.

As a result of the stock market and banking speculation, combined with the debt crisis in the Caribbean and Latin America, the New York stock market crashed in 1929, unveiling jungle capitalism beneath the illusion of postwar economic expansion. Governments and politicians around the world, especially in the US, found the solution in Keynesian economics to sustain the capitalist system and preserve social harmony by building and strengthening the social welfare state with the support of trade unions. It was against this backdrop that neoliberalism as an ideology emerged to reaffirm the validity of a political economy in ruins. At the Paris conference that Lippmann hosted, one of the proposals was to convert the social welfare Keynesian state into a corporate welfare state. The far-fetched idea in 1938, the corporate welfare state proposal became institutionalized four decades after Lippmann’s Paris conference.²⁸

After WWII, the Truman administration focused on integrating as many countries as possible under America’s aegis to manage the capitalist world economy through various programs, including the Bretton Woods System. The Truman Doctrine, the Marshall Plan, and the General Agreement on Tariffs and Trade (GATT), all with geopolitical and geoeconomic goals, intended to generate capitalist growth. However, they were also a means to prevent workers from gravitating toward trade unionism and leftist movements, guiding them instead toward the pro-business mainstream.

Breaking from FDR’s policies, Truman was responsible for promulgating the Cold War and laying the groundwork to shift from social welfare Keynesianism to military Keynesianism, prioritizing the defense sector as Pax Americana’s global geopolitical and geoeconomic leverage. Using the Cold War as justification, President Dwight Eisenhower continued to strengthen the military-industrial complex which absorbed the surplus capital and mitigated contracting economic cycles. By the late 1950s, the balance of payments surplus of the late 1940s turned into a chronic deficit. The IMF privately informed the Eisenhower administration that the chronic current account deficits placed the dollar’s integrity as a reserve currency at risk and posed long-term problems to the US and global economy.²⁹

Continuing to roll back Keynesianism at home, the US expected the rest of the world to go along with the transformation policy by IMF and World Bank guidelines on economic development, trade, fiscal, monetary, foreign investment, and labor policy. The two international lending institutions based their policies on a free-market model which necessarily entailed eroding the Keynesian welfare state, reducing tariffs, opening the economy to foreign capital, weakening and/or privatizing public enterprises, and weakening trade unions.

A prelude to neoliberalism, the strategy intended to strengthen capital, especially multinational enterprises at the expense of workers in core nations and periphery alike. Against the background of the nascent Soviet-American confrontation, Austrian scholars Hayek, Ludwig von Mises, and Karl Popper, along with American economists George Stigler and Milton Friedman reignited the neoliberal flame by forming the Mont Pelerin Society, which coincided with the Truman Doctrine and IMF launching global operations in 1947.³⁰

Three years before the Mont Pelerin meeting held in Switzerland, Hayek published The Road to Serfdom, castigating as authoritarian not just Soviet Union and socialism in any form, but Keynesianism for its extensive income redistribution policy component, and the social welfare system as part of market equilibrium strategy. Ignoring the fiscal structure’s historic role as an instrument of hierarchical income distribution at the core of the market economy, Hayek criticized Western progressives for advancing the thesis of Nazism as a manifestation of the dying capitalist system. Somewhat typical of early Cold War thinking, his critique implied that the enemy was not the Nazi state, but socialism and Keynesianism that defeated the Axis Powers.

Among scholars arguing that neoliberalism was not consistent with Adam Smith’s laissez-faire economics, French philosopher/historian Michel Foucault noted that neoliberalism advocated market construction through active political intervention. From Harry Truman to Jimmy Carter, the US, Western Europe, and most of the capitalist world pursued a policy mix that retained a weakened social welfare component as a means of sustaining the market and sociopolitical equilibrium during the Soviet-American confrontation.

Once Margaret Thatcher took office in 1979 and Ronald Reagan in 1981, fundamental differences between classical liberalism and neoliberal ideology intended to transform the world looked very different from what Foucault had speculated. In Critiquer Foucault: Les années 1980 et la tentation néoliberale, Daniel Zamora points out that Foucault betrayed the left by mis-analyzing neoliberalism. This was during the post-Vietnam Western economic and foreign policy malaise marked by defaulting all structural problems to Keynesianism, without uttering a word about military Keynesianism.

After Thatcher took over, she adopted Freidman’s monetarist dogma and Hayek’s harsh anti-society (anti-Keynesian) beliefs. Long before Thatcherism, IMF policies contained neoliberal elements imposed on developing nations trying to secure monetary stabilization loans in return for adopting austerity measures as a prelude to borrowing from private financial institutions. The IMF’s long-standing practice entailed income transfer from the working class to domestic and foreign businesses, and from the periphery to the metropolis.

Disillusioned with Keynesian capitalism, Foucault ignored such important historical facts, perhaps because IMF-World Bank policy and its impact on the Global South was outside of his research focus. Although he delivered the lectures (The Birth of Biopolitics, 1979) before Thatcher and Reagan implemented neoliberal policies, his initial analysis of neoliberalism was in part a reaction to the French and global economic crisis of the 1970s. Like many analysts, Foucault was in search of an alternative model to the stagnation of Keynesian statism that yielded low growth under high inflation without offering much growth prospects after the Arab-Israeli War of 1973 and the OPEC reaction precipitating the oil crisis.

Foucault did not place the proper weight on several salient factors, including the arms race and containment militarism that the US and its junior partners had embraced as a cause of stagflation. This oversight further obfuscated the larger picture of the world capitalist system’s postwar evolution, including the empirically baseless assumption that the development model after Keynesianism would somehow benefit society more. Nor did he take into account that the IMF and World Bank had already established the foundation for neoliberalism on a world scale since the late 1940s and the transition was about to start in the UK and US. At the very least, he could have considered that neoliberals were using Chile as an experiment when Foucault was writing.³¹

For its part, the US had another pretext to pursue military Keynesianism to manage its imperial interests; most notably, to maintain growing non-Western markets, and access to energy and minerals for industrial expansion. As reflected in the chronic balance of payments deficits and the dollar’s artificially high value and subject of international speculative profiteering, the price paid for military Keynesianism was to drain precious resources from the civilian economy. No country other than the US enjoyed the privilege of borrowing on its own currency, in essence writing a blank check when the account showed deficient funds. Given the dollar’s global use for trade and investment, the value was artificially high amid chronic current account deficits at the expense of its partners, causing trade imbalances due to the artificial value that the dollar determined.³²

Two years after Nixon de-linked the dollar from gold in August 1971, a Western-wide economic dislocation followed the energy crisis of 1973. In retaliation for the US supplying Israel weapons during the Yom Kippur War (October 1973), the OPEC oil embargo triggered the energy crisis which turned into a global economic crisis. Against the background of the post-Vietnam stagflation economy, the capitalist class was eager to further weaken the Keynesian social welfare state that on the surface appeared to be the cause of limiting capitalist appropriation. In the absence of catalytic geopolitical developments, neoliberalism would not have taken place based solely on Keynesianism’s failure to deliver optimal returns to capital and economic growth, as Foucault argued in his lectures.³³

The convergence of geopolitics and economics played a salient role in the weakening of the US at the core of the world capitalist system. Neoliberalism’s embryonic evolution took place against such a global context at the end of the Vietnam War amid internal dynamics determining each country’s struggle with economic growth that appeared to be part of a long cycle that had run its course. From the late 19th century to the present, the geopolitical-geoeconomic nexus and shifting core in the world system have played a contributing role in the social structure cycles of capitalist appropriation and accumulation.

Most studies on neoliberalism have a trans-Atlantic (northwest Europe-US-Canada) focus, placing secondary significance on the periphery’s role; a thesis which several scholars developed, among them Samir Amin (Accumulation and Development, 1974). While the state’s role assumes great significance in the political economy, the unequal relationship based on the patron-client (core-periphery) integration model is considered only on the margins, if at all. Policy transition from the Keynesian era to neoliberalism required not just the international financial institutions setting the ideological groundwork, but forging of a political consciousness at the national level in developed and developing nations.³⁴

Contrary to the neoliberal model’s claims under Thatcher and Reagan, no economy in history has ever existed in the absence of the state’s interference in terms of fiscal, monetary, trade, investment, labor, and tariff policy. From Lipmann’s Paris Colloquium to the IMF and World Bank analysts preaching the gospel of free enterprise as a means of making neoliberalism widely acceptable in developing countries, neoliberal apostles have been deceiving governments and the world, if not themselves. Neoliberalism engenders and preserves market hegemony over every sector for the sake of securing appropriation and accumulation at labor’s expense. From the 1980s to the present, the neoliberal political economy’s goal has been to mold all institutions, public and private, while transforming society by re-writing the social contract.³⁵

Ever since Hayek’s conference in Mont Pelerin, neoliberals have failed to address the contradiction of transitioning from the social welfare state to corporate welfare, while insisting that they are advocates of free enterprise. Promising that market hegemony would result in society’s ‘modernization’ whose benefits would filter down to all classes, commonly baptized trickle-down economics under Reagan, the result has been a wider socioeconomic gap, marginalization, and democracy’s steady decline along with living standards, while rightwing populism was gaining momentum.³⁶

Replete with modernization theory assumptions, a theory that emerged after WWII when the US took advantage of its preeminent global superpower status to impose a transformation model on much of the non-Communist world, neoliberal ideology was creeping into the mainstream in the 1970s. In an influential work entitled The Stages of Economic Growth: A Non-Communist Manifesto, (1960), Cold War liberal Walt Rostow articulated the modernization development model that neoliberal ideology ultimately absorbed.

At the center of the US-Communist rivalry rested the struggle for global markets, raw materials, especially strategic minerals, and geopolitical advantage to secure economic benefits. Transcending macroeconomic perimeters, Rostow’s modernization theory was based on imperialist assumptions about the Western patron-client model which reflected US global hegemony determining the world order through both economic and military means. This necessarily entailed supporting military Keynesianism as a means of undermining and ultimately defeating the Communist bloc. Although the enemy was hardly a monolith, considering the Sino-Soviet split after 1956, which coincided with the Hungarian Revolution against the USSR, it was in the US interest to present Communism as monolithic to justify the Western geopolitical and geoeconomic bloc.³⁷

The challenge for the post-WWII bourgeois political class operating on consensus-building assumptions was to mobilize a popular base that would afford legitimacy to the social contract with a Cold War dimension intertwined with the political economy. The issue for mainstream political parties was never whether there was systemic injustice with the social contract. Rather, it was the degree to which the masses would be co-opted through various methods to support the status quo at home and the capitalist world order against the Communist bloc. In so far as Keynesian social welfare remained a viable policy, it was to stimulate consumer demand that political parties needed as a tool to prevent working-class radicalization.

Considering that America’s social contract reflected the Soviet-American confrontation justifying military Keynesianism, it was inevitable that all non-Communist countries would follow the Western superpower’s lead. Foucault’s assumptions about the quasi-statist model’s bankruptcy by the 1970s notwithstanding, the Cold War, especially the Vietnam War which much of the world opposed, was both a contributing factor to the decadence and fanatic dogmatism of that era, while serving as an impetus for the neoliberal model’s global ascendancy.

A generation ago, Josh Friedman and Michael Lind pointed out, the country’s [USA] social contract was premised on higher wages and reliable benefits, provided chiefly by employers. In recent decades, we’ve moved to a system where low wages are supposed to be made bearable by low consumer prices and a hodgepodge of government assistance programs. But as dissatisfaction with this arrangement has grown, it is time to look back at how we got here and imagine what the next stage of the social contract might be.³⁸

Disagreeing only on how best to achieve capital accumulation, while retaining sociopolitical conformity, Keynesianism and neoliberalism operated under the same social order. Friedman and Lind’s argument illustrates how some analysts easily misinterpret nuances within the social contract, attributing them to the covenant’s macroeconomic goals. Similar to the view expressed in the article above, the New America Foundation’s publications identify specific aspects of Arthur Schlesinger’s Cold War militarist policies enmeshed with social welfare Keynesianism.

This mix represents the evolving social contract and the new reality of the US at the core of global capitalism. Rooted in the 19th-century Manifest Destiny philosophical doctrine, American political elites and academics in their quest to justify foreign intervention and the patron-client relationship with the Global South assumed that the US had earned the right to determine the world balance of power under the Cold War-Bretton Woods transformation model.³⁹

Identifying the Cold War-Bretton Woods social contract with a specific set of policies