Anything but Normal: The Failures of Neoliberalism in Light of COVID-19

By SMSBF Staff Writer, Monica Plawecki

As we enter another month of social distancing amid the ongoing COVID-19 pandemic, we’re continuing to adapt to a new “normal.” For many of us, our new normal consists of adjusting to life almost entirely inside the four walls of our homes. But for many others, normal is now characterized by financial troubles, online schooling, unemployment or precarious employment situations, uncertainty, and anxiety. It is yet to be seen what aspects of our pre-pandemic daily life will remain forever altered post-pandemic. 

The question we bring you today is, “What was normal before the pandemic, and should we be striving to restore the status quo?” Bear with us here, but what if returning to our previous “normalcy” isn’t the best case scenario? In fact, we should consider how we can avoid returning to certain aspects of the “the way it was,” because the policies and thinking that have defined our socioeconomic and political landscape for decades are no longer viable for the vast majority of Americans.   

Long before the pandemic, there were visible cracks in the surface of an overarching American system designed to work for a select few–a system that has largely been guided by a singular ideology that tends to remain anonymous and, thus, that many are unfamiliar with. This ideology, neoliberalism, has been in practice in our policymaking since the late 1970s, and is the prevailing philosophy that defines our present-day political and economic landscape. 

What exactly is neoliberalism, and what does it look like? In simplest terms, neoliberalism calls for a self-regulating free market unencumbered by government intervention. In theory, neoliberalism is purported to foster greater liberty and freedom of choice. 

In practice, though, neoliberalism provides ideological justification for many of the issues we now face: a healthcare system that runs on financial incentives, which has led to recent layoffs at major hospitals to cope with the losses caused by pandemic, as well as essential grocery store workers surviving on scarcely livable wages, many working without hazard pay. In its most extreme form, it manifests as armed protesters decrying stay-at-home orders that “infringe on personal freedoms” and calling for loosened government restrictions to “save” the economy. 

In the recent years, neoliberalism fueled the fire for the 2008 financial crisis, has obstructed policymaking that would curb the effects of global warming to increase business profits, and has allowed for the success of politicians that prioritize an economy that works only for the wealthiest, often at the expense of lives and livelihoods. 

 

A Historical Perspective on Neoliberalism

You may be wondering, “How did we get here?” A quick lesson in political theory will explain that neoliberalism is the ideological brainchild of Austrian economists, Ludwig von Mies and Friedrich Hayek, the latter of whom argued in his 1944 book, Bureaucracy, Road to Serfdom, “that government planning, by crushing individualism, would lead inexorably to totalitarian control.” (The Guardian) This thinking came in opposition to Keynesian economics and the existence of social democracies, epitomized in the social programs and economic policies of FDR’s New Deal. 

In the U.S., these ideas were embraced by American economist Milton Friedman as well as by a “network of academics, businessmen, journalists and activists” and wealthy individuals who saw an “opportunity to free themselves from regulation and tax.” (The Guardian) Several think tanks still in existence today were also founded to promote these principles, including the Heritage Foundation, the Cato Institute, and the American Enterprise Institute, among others. 

While neoliberal ideas were not immediately popular in policymaking, the economic crises of the 1970s, characterized by rising unemployment and high inflation, shed light on the insufficiencies of Keynesian economic policies. Such policies had long been popular in the post-war era, particularly as the federal government instituted poverty relief programs, a wider social safety net, and an expansion of public services. However, with an economy in crisis, President Carter began to adopt some aspects of neoliberal monetary policy. Later, President Reagan warmly embraced all aspects of neoliberalism: “massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services,” as well as controversial trickle-down economic policies. (NPR and The Guardian)

 

Neoliberalism and its Far-Reaching Effects Today

Since the adoption of neoliberal policies in the 1970s and 1980s, we have watched as the decline of unions, the suppression of wages, and more regressive tax distributions have become normalized. All have adversely affected not only the lowest earners, but also the middle class, whose wages have remained stagnant since the late 1970s, in part because of these policies. (Economic Policy Institute)

Elites and proponents of neoliberal policies had promised that these “policies would lead to faster economic growth, and that the benefits would trickle down so that everyone, including the poorest, would be better off. To get there, though, workers would have to accept lower wages, and all citizens would have to accept cutbacks in important government programs.” (Columbia Business School) In reality, however, economic growth has slowed, income inequality has grown, average wages have remained stagnant for nearly 40 years, and the federal minimum wage still sits at a meager $7.25/hour–28.6 percent less than it was worth in 1968. (Economic Policy Institute 1 and 2)

Neoliberalism is scarcely mentioned in policymaking and political discourse today, but its effects are pervasive and its principles shape many Americans’ political ideologies. Proponents of small government believe in the power of an unchecked free market and view government interventions, including social programs, tax increases, and poverty relief, as socialistic infringements on freedoms. Calls for minimum wage increases are incontrovertibly met with backlash from the right, who argue that the increases will crush small businesses and slow economic growth. What’s worse, this ideology has ultimately created “winners” in society–the wealthiest few who often believe they have earned their wealth strictly on merit–and “losers,” or the economically disadvantaged, who are cast as “unenterprising,” despite existing in a system that provides little help to change their circumstances. (The Guardian

Perhaps ironically, neoliberalism has also put democracy in peril. Unchecked spending by wealthy factions and individuals, often disguised as PACs and super PACs, helps sway elections, undermining the principle of “one person, one vote.” The poor and lowest earners and even the middle class are largely disenfranchised, as the wealthiest elites are able to use their resources to lobby, affect policymaking, and back candidates who protect their interests. (The Guardian)

 

A Way Forward

With millions of Americans currently out of work or facing financial catastrophe and a federal administration that has favored keeping up appearances over genuine efforts to help struggling Americans, our system seems to be teetering on the brink of collapse. In fact, the current pandemic has made the issues and inefficiencies of our current system even more apparent. 

To illustrate, hospitals, which are “winners” of our neoliberal system in normal circumstances, are losing in the current COVID-19 crisis, as coronavirus patient care is largely unprofitable and the more profitable elective surgeries routinely performed in hospitals have been put on hold. Losing out on profits, hospitals are resorting to layoffs, despite nationwide staffing shortages. 

Meanwhile, many workers, including grocery store employees, essential business personnel, and those restaurant workers who haven’t lost their jobs, risk being exposed to the virus at their workplaces, yet earn an hourly wage that equates to less than they would earn with combined state and federal unemployment benefits. 

Certainly, there is no obvious replacement for neoliberalism; in fact, “the left and centre [sic] have produced no new general framework of economic thought for 80 years” which is surely a contributing factor for why neoliberalism has persisted for as long as it has. (The Guardian) At the very least, though, we can use the evidence put before us during this pandemic to consider serious changes to our business as usual, including healthcare reform; a push to guarantee fair, liveable wages for all workers; and reform to the campaign finance laws that allow for nearly unlimited spending on elections. We can advocate with renewed certainty for the importance of public services and social safety net programs that enhance citizens’ quality of life. 

The blunt reality is that America’s “normal” way of life stopped working for the non-wealthy years ago. The current pandemic has, in many instances, brought more clearly to light the issues that existed long before March of this year. It would benefit us all to look around while the issues are clearly lit and use this time to brainstorm more just alternatives to our flawed reality, finding a better way forward out of this dark era in American history.

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