Forty years of Neoliberalism has been a disaster

I was a young man in the eighties when Reagan, Thatcher and Mulroney were in power in the US, UK and Canada. I didn’t like them. I thought their naïve belief that the private sector could meet everyone’s needs was supremely misguided.

As I now understand, this unholy trio of politicians were under the spell of an economic theory known as Neoliberalism. Also known as market fundamentalism, this blind belief in the power of unfettered capitalism has formed the unacknowledged philosophical framework for government policy in most countries over the past forty years.

For the past four decades, governments, international financial institutions and elites have misled the world with a fictional story about trickle-down economics, in which low tax and high gains for a few would ultimately benefit us all. It’s a big lie! It’s time we acknowledge that Neoliberalism has failed miserably.

What is Neoliberalism?

Neoliberalism is not ‘liberal’ and is not particularly associated with the Liberal Party. Although all mainstream political parties in the US, UK and Canada support many of the tenants of Neoliberalism, those with the most conservative views are the most committed to Neoliberal ideas.

The key concept of Neoliberalism is that the goals of humanity are best advanced within an institutional framework characterized by free markets, a minimal state, free trade, little economic regulation, and strong individual property rights. Neoliberal market-oriented reform policies include eliminating price controls, deregulating capital markets, weakening unions, and lowering trade barriers. Neoliberal governments strive to reduce state influence in the economy through a range of measures including privatization and austerity, especially by reducing government funding of social programs.

Assumption of limitless growth

Neoliberal ideologues are preoccupied with economic growth. They evaluate corporations based on quarterly growth in sales and profit. They obsess over the most minute ups and downs of the stock market. They judge governments solely on the growth in gross national product.

Not only does this focus on economic growth ignore the natural, human and social components of a healthy life for humanity, but it also assumes that growth is limitless. 

Growth cannot be limitless! The natural world can only take so much.

We all know the litany of problems that has come from our blind faith in the Neoliberal credo — the climate emergency, biodiversity loss, pollution, widening inequality and political polarization to name the most obvious. The ecological footprint concept outlined next quantifies human impact on Earth in relation to the first three of these global issues (climate, biodiversity and pollution).

Ecological footprint

The ecological footprint comprehensively compares human demand on nature against nature’s capacity to regenerate. This analysis demonstrates that we have been demanding more from nature than it has the capacity to regenerate for decades. 

The Global Footprint Network estimates that carbon emissions combined with all other human demands on the biosphere consume an estimated 2.6 Earths.

It gets worse. The average American and Canadian uses 7.4 Earths while the average Brit uses 3.6 Earths. Special blame for these shameful levels of resource consumption and waste go to Reagan, Thatcher and Mulroney.

Clearly, this level of overconsumption and disregard for the natural world cannot continue without dire consequences that include more frequent and severe weather events, rising sea levels and accelerating degradation of nature.

Widening inequality

For the past few decades, financial inequality has increased dramatically, particularly since the start of the pandemic. According to Oxfam, since 2020 the world’s richest 1% have captured almost two-thirds of all new wealth. There are about 2,700 billionaires in the world, nearly twenty times the number in 1987.

The very existence of booming billionaires and record profits, while most people face austerity, rising poverty and a cost-of-living crisis, is evidence of an economic system that fails to deliver for most people.  

Looking at the distribution of wealth in the US and UK reveals two noticeably different trends. The top 20% of the population in the US and UK increased their already outsized share of wealth by about 12% from 1979 to 2017. The inequity in the US is particularly extreme with the top 20% owning almost 47% of the country’s wealth. Conversely, the bottom 40% reduced their share of wealth by 17% in both the US and UK. Happily, Canada has done better with very little change in the share of wealth by either the top 20% or the bottom 40% of the population in the past forty years.

Extreme concentration of wealth limits broadly distributed prosperity, corrupts politics, compromises the media, corrodes democracy and propels political polarization. The very rich are key contributors to climate breakdown: a billionaire emits a million times more carbon than the average person, and billionaires are twice as likely as the average investor to invest in fossil fuels.

Final thoughts

I’m a private enterprise person. My parents ran a small trucking company. I have been with small consulting firms for my entire career. I like the idea that people have the freedom to start a business and prosper financially based on their own skills and effort. 

However, once corporations become too big, the executives running them begin to exert too much power over their workers, the communities where they operate, and, worst of all, politicians and government officials. This is where our world has been for the past forty years of Neoliberalism.

In addition, there are things that strong, effective government can provide to humanity more effectively than the private sector. The Neoliberal idea that the private sector can do anything better than government is absurd. Profit is a strong motivator, but it doesn’t make sense in the provision of many essential services. 

Have I convinced you that the Neoliberal economic theory has been driving our world for the past forty years? More importantly, have I convinced you that our adherence to Neoliberalism has been a failure?