The neoliberal revolution started with the election of Ronald Reagan in the US and Margaret Thatcher in the UK.
The climax occurred via the Chicago Boys, acolytes of Milton Friedman who arose after 1980. These people came out of the Chicago School of Economics that Friedman chaired where Friedman developed his radical free market economics.
This was really the birth of neoliberalism, which is really nothing other than neoclassical economics, with classical economics heralding from Adam Smith and especially David Ricardo, who was much worse. This school arose via a selective reading of Smith, who actually viciously condemned radical free market economics and always argued for government regulation of business and government social programs.
Otherwise, he said, you had nothing but the law of the jungle and a Hobbesian war of all against all. Smith phrased it along the lines of “every man against the entire world.” Literally, he said it boiled down to each citizen thinking:
Everything for me and nothing for anybody else.
Smith actually described this as one of the most evil systems ever designed by man.
Well, the classical school and its descendants forgot to read that part or deliberately passed it over because this was exactly what Friedmanite capitalism boiled down to.
Typically, radical neoliberalism almost inevitably causes a crisis at some point due to the failures programmed into it, and this is exactly what happened when the Chicago Boys were turned loose on Chile. A crisis rapidly followed in 1982 with the crash of the entire system. Though folks like Ron Paul cherish such events as “the natural ups and downs of the business cycle” and assure us that some magical “invisible hand” of the free market, which is so mysterious that we can’t even see it to prove it’s there, will intervene soon enough and set everything right.
Sure worked great in the Depression, huh? Which, by the way, was directly caused by classical economics. After eight years of this mystical hand working its wonders, the Chilean economy was still below that of Allende in 1973 when Pinochet resigned in 1990.
But no matter, as a massive wealth transfer from the bottom 2/3 of society to the upper 1/3, an outcome guaranteed in all neoliberal economies, had occurred.
I would argue that this is what Friedmanism is really all about. Reverse Robin Hood economics. Steal massively from the poor and the workers and give to the rich and the upper middle classes. Almost everywhere neoliberalism was tried, especially in Latin America which was the original petri dish for the growth of this harmful bacterium, only the top 20
Neoliberal economists are undeterred by failure or instead somehow believe that failure constitutes success, as neoliberal economics is notoriously bad theory and in practice is not even falsifiable. So neoliberalism is worse than merely being false theory. It’s not even wrong! It’s also a classic “ideology” in that the theory is always right and where the facts don’t match the theory, then the facts are wrong, and alternative facts need to be invented. This is going from facts to theory whereas true empiricism is the other way around.
Theory to facts or empiricism (the scientific method): Facts do not match theory. Ok, theory is false. Back to the drawing board to get another theory.
Facts to theory or ideology or as I call it, Politics with a capital P: Facts do not match theory. Ok, the facts are wrong! Back to the Fact Sausage Factory to manufacture some new facts.
When social scientists try to do science, it’s pretty hit and miss, and this is why we have such things as Physics Envy. This is where social scientists envy physicists who can actually make mathematical proofs to conclusively prove their theories are correct, whereas in social science, even the conclusions tend to be pretty mushy.
I say that when social scientists try to do science, they do either of two things: They either do actual science or empiricism (see above) or they engage in “Politics.” The former is objective and the latter is subjective and everything subjective tends to be outside of the realm of science.
Hence in 1991, fresh from their failure in Chile, Milton’s boys headed off to Russia to wave their magic wands over there.
There were ten years of that under Yeltsin where the looting and corruption was actually much worse, the oligarchs more powerful, and state critics were much more endangered than under Putin. The killing of journalists peaked under Yeltsin, and most of it was the state killing journalists who were on the side of the rebels in the Chechen War.
The entire decade was a lootfest where banksters in Berlin, New York, and Tel Aviv, along with many helpful Russian oligarchs, stripmined the country bare by buying up everything from mineral rights to factories for a dime on the dollar.
At the end of the decade, 15 million Russians were dead. Yes, Yeltsinism resulted in 15 million excess deaths in Russia! In fact, excellent analyses have shown that the neoliberalism in the Third World of 1980-2000, in addition to being a notable failure (especially in Latin America), killed millions of people, mostly by health care cutbacks.
Fresh from their failure under Yeltsin in 2000 (although they redefined this failure as a massive success), the Chicago were back in business loosening banking regulations under Bush (the dismantling had begun under Clinton with the repeal of the Glass-Steagal Act).
As I said, this type of economics always leads to a crisis sooner or later, an event so sure that it is nearly a physical law of economics. Hence in 2008, as a direct result of Chicago Boys neoliberalism, the entire US finance banking industry collapsed, taking much of the accounting and insurance industries down with them on the plunge. Yes, the Crash of 2008 was directly caused by the radical neoliberalism of Friedmanite economics.
But neoliberals are a curious sort. You can see above that they renounce science, so it doesn’t matter that they do hocus pocus and call it economics. Their reaction to the crash of 2008?
I headed over to the den of iniquity itself, the pages of the Economics Department at the University of Chicago to see what people were saying.
I checked out individual professors’ pages, and one after one, they were saying that the crash occurred not due to radical neoliberalism but instead it happened due to not enough neoliberalism. What little government regulation remained firing away after the ramparts had been destroyed was what had caused the whole mess. These regulations had to go! We needed to double down on the failed theory! That’s the ticket. This is akin to injecting snake venom into a snakebite victim. And they dare to call this a science!
Incredibly, the entire Republican Party embraced this view, but then, they make money off of the catastrophe called neoliberalism, and besides, no one wants to admit they were wrong especially when the ideology is baked into the very party itself.
Adding insult to injury, Steve Sailer, never failing to find a racial vein in whatever rock he’s handed, managed to create a new theory called Niggers and Beaners Caused the Crash. The theory was that niggers and beaners, being irresponsible wastrels, took out huge house loans that they couldn’t afford because they were stupid and couldn’t figure out that they couldn’t afford them.
Sure, of course, this is actually true in part in the sense that they took out loans that they could not pay back, but the part he leaves out is that scumbags, mostly White people, sold them those loans knowing full well that there was no way they could pay them back.
The loans had time bombs programmed into them written into their fine print so even if you could afford the initial mortgage payment, the payments kept going up to the point where you couldn’t afford it anymore. But that was the whole idea. These loans themselves were designed to make it so people couldn’t pay them back!
These junk mortgages were then packaged into investment vehicles and sold to suckers as perfectly good loans taken out by responsible borrowers. Of course pretty soon, these packages were worth less than the paper they were printed on, but as long as the banksters weren’t left holding the bag, they were fine with this. But it turns out that a lot of big finance companies had bought up a lot of these Suckers ‘R US investment packages and when they went bad, it started a chain reaction that led to a toppling of the houses of cards that we call corporations.
So, yeah, in a way, sure, niggers and beaners caused the crash, but there were a whole lot of nasty White people involved too, and the poor Blacks and Browns were not at fault and were in fact victims of the rich White dudes.
Never failing to learn a lesson from failure, Donald Trump came into office and immediately began loosening regulations on everything and anything he could find. No catastrophes have ensued yet, but don’t worry. Just give it some time. All good things happen to those who wait.
The alternative theory is that on some level, the Republicans know they’re blowing up the economy, but they just don’t care. Sort of like a gambler who loses his shirt but keeps gambling because he remembers the winning streaks of yore and the glorious spending sprees that splayed out afterwards. The pathological gambler’s solution to any losing streak is simply to double down on the failure.
Is it possible that the Republicans make so much money on the neoliberal run-ups that they don’t really about the landslide that follows. Anyway those Republicans with enough cash can always swoop in and buy all those failed business and belly up mortgages for a dime on the dollar. For the banks, they really don’t care if your mortgage goes sour because if it does, guess who owns your house? The bank!