Neo-liberalism and the political economy of austerity: Dr Ray Kiely addresses spending cuts and “aus
Last Thursday, the Oxford Institute of Social Policy hosted the second installation of its new seminar series, Austerity and Beyond?. Dr. Ray Kiely, Professor of International Politics at the Queen Mary University of International Relations, joined the department to give a lecture on the complex interplay of neo-liberalism and the political economy of austerity.
Image provided by Dr Ray Kiely
Speaking from a historical perspective, Kiely illustrated the ways neo-liberalism has continuously found itself at odds with democratic powers. Citing key theorists such as Hayek and Weber, Kiely mentioned that a common argument in neoliberalism is that democracy is problematic, “because too many demands are being placed on government”. While he argued that there is no intrinsic relationship between neo-liberalism in austerity, he suggests austerity is a problem of collective action where the economy is run like a single household. Although cutting back for one individual makes sense, he further commented, if everyone cuts back at the same time, it creates a recipe for a downward spiral.
MPhil student Isobel Montgomery caught up with Dr Kiely following the seminar, to discuss neo-liberalism, its contribution to austerity policy and where the paradigm might lead us in the future.
Ray, your lecture was on the intersection of neo-liberalism and the political economy of austerity. What styles of neoliberalism have contributed to the kinds of austerity policy we see in the UK today?
It is very mediated. In the Thatcher era, you had very direct links to neo-liberal intellectuals like Hayek. But since then, it’s become much looser. I think what’s interesting is [now] that neoliberalism has established itself, indirectly there might be links. For example, in the Blair era you had the extension of public sector reform, which started under Margaret Thatcher with the Next Steps program in 1988. Now, some of this stuff about new public management is about essentially trying to make state officials [and] public sector workers act as if they were in a competitive market. You have reforms to make schools compete with each other, to make the NHS compete with each other, to have much more private sector involvement.
It’s not necessarily direct, but some of that can be traced back to things like the Chicago School of Economics, and in particular, someone like Gary Becker who believed that basically human life was about economic transactions. And I think that has, either directly or indirectly, influenced various strands of neo-liberalism to this day. And I think that’s true even in the Cameron era and so on, where we still get continued public sector reforms which are basically about auditing people and the audit is proxy for the market.
You’ve also previously referred to the ways that neo-liberalism dominates politics as “inverted totalitarianism”. Can you explain what you mean by that term?
Totalitarianism was basically the dominance of the state over populations- the total dominance of state. Now, it’s questionable over whether that ever really happened, but obviously the two examples are Nazi Germany and Stalinist Russia. Inverted totalitarianism is the idea that in fact, the principle of economics, and the principle of certain kinds of economics, have come to dominate our lives - so we do see everything in terms of individual transactions and we become consumers. Or we become consumers rather than citizens, or we become entrepreneurs rather than citizens.
It’s essentially this idea that everything should be increasingly individualised and we should get rid – as much as we can, you never can – of some kind of collective endeavour, and some kind of politics where you can have change and transformation. Politics is reduced to simply exercising choice in the ballot, although you’re choosing between Heinz Baked Beans and another brand of baked beans.
How would you react to someone suggesting that neo-liberalism, in any of its forms, is fundamentally dehumanising?
I would agree. I think it is dehumanising, but I think that it’s also a project that can never completely win. It’s a project, and a project that can never complete itself, because there’s always going to be something outside of the market. In a sense, neo-liberals know that. Now, that’s not to say that thing outside the market is necessarily humanised, because the state’s become more marketised and there are plenty of examples of non-neo-liberal states that have been utterly dehumanising in other ways. We know this through the horrible experiences of the 20th century.
We can use Weber here. Weber is often seen as an ally of neo-liberalism but in many ways, he’s a critic of neo-liberalism as well. Disenchantment and rationalisation is essentially where we’re at. Everything has to be rationalised in a very instrumental way, so everything is a means to an end rather than things being an end to themselves.
Now think about that in terms of education. Higher education is the most obvious one. We’re basically human capital. You have to pay £9,000 a year and do a cost-benefit analysis – are you going to end up with earning more money at the end with £27,000 debt or should you not go to university? Rather than see education as an end in itself the end is actually that you are learning and you are aspiring to be a better human being, which is humanising.
Going back to your talk, you mentioned the downward spiral of austerity. How does that spiral develop?
It may make sense to cut because [the state] faces a deficit and are racking up lots of debt. The problem is, if everyone’s got to cut at the same time, then who are you going produce and sell to? Because there’s no one to produce and sell to, because everyone else is cutting. So then we get a downward spiral. You can get out of that downward spiral, it’s not like it will go on indefinitely, but it might be that if you intervene to stop the downward spiral you might get higher rates of growth. And the state, as an institutional actor, might be the institution that can do that better than any other because each individual private actor – each individual capitalist, if you want to use a more Marxist term – may be cutting. But that’s not good for the capitalist economy as a whole. And that’s where the conflict starts.
Keynes called this “the paradox of thrift”. It makes sense for one of us to cut, but it doesn’t make sense for all of us to cut.
You also mentioned at one point, that austerity policy blames the victims. What’s the rationale of going after the people in society who are the most vulnerable? Why would someone cut services that contribute to overall safety?
I’m probably not the person to ask – you’d better ask the policy maker! But I suppose one way of thinking about that is that neo-liberalism is focused on the short term. So let’s do the short term cuts, but not think about what might be, in very narrow, instrumental terms, short-termist. That leads to long term problems that in human terms are awful, but in financial terms, it’s not costless. So that’s the problem, I think. It’s very short-termist and if you think about this in terms of incarceration, it’s dehumanising, but it’s also very expensive. Let’s even talk about, in neo-liberal terms, [it being] a waste of human capital. So there are these contradictions. It may be that they talk about markets in the short term but there’s no vision of the long term. Hayek at least argues that knowledge is basically what we think at that particular point in time.
In a world where the pursuit of free market capitalism is becoming increasingly incompatible with sustainability and environmental protection, should we be concerned about neo-liberalism’s continued influence on the future?
Absolutely. I mean, there is an argument that neoliberalism is being undermined because of the rise of right wing populism. I think one of the problems with that is that right wing populism is just another mutated neo-liberalism, what Nancy Fraser calls a socially reactionary neo-liberalism rather than a “progressive” neo-liberalism that might be associated with Clinton or Blair. Not to say that they were that progressive, but they were not as bad as the rhetoric of Trump on race. Now in terms of the environment, yes – I mean, this is why we need things like Green New Deals. Again, it’s a collective action problem. We need policies that are going to get beyond this kind of short term rationalisation and forget-the-consequences. The market will not sort these problems out.
A short audio excerpt of Isobel Montgomery’s interview with Dr. Kiely is available below.
Isobel Montgomery is the University of Adelaide's 111th Rhodes Scholar, and former Marketing & Communications Engagement Officer of Women's Safety Services SA. Having completed a Bachelor of Arts and Media with honours, she is currently undertaking an MPhil in Evidence-Based Social Intervention and Policy Evaluation at Oxford's Department of Social Policy and Intervention. Her current research interests are focused on the potential of creative therapies to reduce symptoms of complex trauma in young people. She is also a passionate advocate for the eradication of gender-based violence. For more of her work, follow her on Twitter under @isobelmonty.
The views expressed in this article are the author's own and do not necessarily reflect any editorial policy.