How I Learned to Stop Worrying and Love the Free Market
By Anonymous / Winter 2021
“Whatever you choose to study in college will end up consuming a lot of your time and will frame your future job opportunities, so think carefully about it,” my high school councilor told me, in an empty and dry tone; it was as if I was the tenth student receiving the speech that day. We had been discussing my college plans as a prospective university student with very little money. He advised me to look into private schools because they offer more financial aid; he also nudged me toward STEM, as schools tend to provide more funding for STEM.
I had other aspirations. Like millions of others, 2008 had ruined my parents; for three years, our family performed a balancing act to avoid homelessness. We saved everything we could, my dad and mom worked extra hours on the weekends, and my parents even took out sketchy loans just to make payment deadlines. Their straining finances soon bled into their marriage. They fought for hours about what to do: when to spend money, how we can ration our savings, how to eat less, etc. I started taking refuge at the library after school to avoid the turmoil at home. I experienced the effects of a massive recession without understanding any of its components. Frankly, I did not know what the economy was, yet it profoundly shaped my outlook.
These memories stuck with me – they haunted me. I used to have nightmares of my parents splitting up because of money problems, having to leave my childhood home, losing a parent at a young age. As the time to select a college major rolled around, I opted for Economics. I was inspired by something I read in Marx’s German Ideology: “Philosophers have hitherto only interpreted the world in various ways; the point is to change it” (Marx). What a short, punchy mantra. This line made me think of the effects of 2008: as someone who had lived through it, I was drawn to study the theoretical underpinnings of the economy to understand how 2008 could have happened, and what we could have done to avoid it. Much like how Marx sought to expose the false promises of Industrial Capitalism – more prosperity, higher wages, innovation, freedom – I sought to expose the wrongdoings of bad economic actors. I felt a deep inspiration from Marx to not only study the prevailing economic systems of the time to understand them, but to change them for the better. His humanist goal resonated with me: reducing needless suffering and cruelty should be the goal of Economics.
As I started my official Economics courses, though, I see a much different approach to thinking about humans in an economy. We are taught to reduce people down to categories in an economy: producers, consumers, regulators, investors. We are taught to assume that economic actors are rational, utility-maximizing agents whose preferences we can clearly understand. There is a perverse reduction of humans, the real people behind those interactions of supply and demand, to mere financial forces. What does it mean for Economics to treat people as if they are manipulatable variables in a model? People with different lives, dreams, and fears all turn into faceless statistics.
“Philosophers have hitherto only interpreted the world in various ways; the point is to change it.”
Studying Economics reveals a different mindset, a different way of viewing the world. Economists are taught to always look at the deeper issues of value, exchange and decision-making. We are taught to look at the implicit costs of doing something – do I value two hours of playing video games or two hours of studying? What are the results of my decisions? What are the trade-offs? These are all legitimate behavioral economic issues. The thing that some economists tend to overlook, though, are the deeper, more troubling effects of viewing people as rational actors that know their preferences precisely.
Let us go back further than 2008. Examining Ronald Reagan’s legacy, a few things come to mind. He was a Cold Warrior, a proponent of supply-side economics, and sought to promote personal responsibility. Focusing on the economic axis, Reaganomics had big promises. Reagan claimed his tax cuts would “cut [government and deficit spending] out of our system with a single, sharp slice” (Reagan). But, why? Kimberly Amadeo outlines four goals of the Reagan tax cuts: reduced “government spending,” reduced “income taxes and capital gains taxes,” reduced “regulations,” and “expansion of the money supply” (Amadeo). As such, Reagan advertised the bill as a way to save all Americans money and reduce the bloated spending of the government.
If we think like economists, we might think that the most rational thing for businesses to do is to use the tax cuts to increase the labor supply, increase research and development, or maybe even give bonuses to workers to incentivize them to do better. Though, if we view the potential downside of these tax cuts, we might concede the possibility of executives paying themselves that surplus money. How did the tax cuts pan out? Per David Hope and Julian Limberg at the London School of Economics, “reducing taxes on the rich lead to higher income inequality” while “not [having] any significant effect on economic growth and unemployment” (Hope and Limberg). This is also visible in a Pew Research article charting the rise of income inequality, starting in 1983 (Horowitz).
What was supposed to fuel economic growth ended up lining the pockets of the already-affluent. The poor and middle class were both worse off. This, coupled with Reagan’s doctrine of personal responsibility are both symptomatic of the Neoliberal doctrine. What is Neoliberalism? I think George Monbiot offers a great definition:
Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning (Monbiot).
This definition incorporates a number of important facets when discussing Neoliberalism as an ideology. Firstly, it emphasizes the aspect of competition in the marketplace. Since markets are fair, your “failures” in them are your fault. If you do not have a good job, somewhere along the way you must have messed up. Humans are reduced to consumers whose primary form of expression and liberty is in the marketplace. Like Nirvana? Buy a Nirvana t-shirt. The Neoliberal ideology dissolves the difference between personality and consumer choices. Your choices mold your personality, completely reducing human subjectivity to consumer subjectivity.
The Neoliberal emphasis on market-based distribution of goods is also shortsighted. The typical narrative is that markets are able to supersede all borders and barriers (national, parochial, etc.) in order to deliver goods to the consumers who “demand” them. This is how markets are taught in class. If we probe this notion, though, we reveal a nasty underbelly. What do we say for, say, insulin? Or water? Should those have a market? Markets indeed are good for distributing goods to people who demand them, but at what point should we say “this good does not need a market”? Or, at least, “this market needs intervention to lower prices.”
We never discuss the human side of these issues. When I asked my microeconomics professor whether we should always have markets, she simply laughed and said there is no alternative. Indeed, another symptom of Neoliberalism is a lack of creativity for alternative systems of governance. As Thatcher famously remarked, “there is no alternative” to Neoliberal Capitalism. In reality there are alternatives to market-based systems of distribution. Healthcare does not have to be mediated through private insurance; it can be regulated and distributed through the government. The fatalism of Neoliberalism can take a psychological toll on anyone wishing to improve the world.
The fatalism is responsible for every financial crisis. When Trump’s Tax Cuts and Jobs Act of 2017 passed, he and Treasury Secretary Steve Mnuchin insisted that the cuts would “pay for themselves” (Zeballos-Roig). They did not. Instead, they increased the deficit and reduced tax revenues. The economy grew “exactly the same as in 2015” per Scott Horsley at NPR despite cuts that primarily benefits the wealthy (Horsley). Again, we see a historical rhythm. Reagan’s tax cuts also increased the deficit and enriched the affluent. Emmanuel Saez and Gabriel Zucman, Economists at UC Berkeley, published a paper showing that the “400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data” (Leonhardt). But none of that matters to the Neoliberal economist, because markets are so efficient. Tax cuts and Neoliberal promises disproportionately helped the affluent, and yet some economists still advocate for them despite the plethora of data refuting these claims.
“Philosophers have hitherto only interpreted the world in various ways; the point is to change it.”
I think back to the young, budding economist who sought to change the world by understanding its intricacies. He wanted so much to help others. Upon entering the Economics classroom, we are never taught how to help others. We are instead taught that we should study models which have no empirical basis in reality. We are taught to blindly accept markets as the solution to any economic issue. What economists themselves fail to notice is the deeper ideologies that affirm their teachings. Their commitment to markets and Economics as a type of science is ideological—not part of some “natural” plan. I think that is the reason so many Economics majors go the finance and management route: it is easier to make money within the system, to uphold the system, rather than to challenge it. The question really becomes how one could even begin to change a system to avoid needless suffering.
I think a superficial way to look at the state of Economics and Neoliberalism is to resign all hope. To submit oneself to Thatcher’s Neoliberal fatalism is to renounce any and all hope for a better future. As I see it, there are three avenues of change: the political, institutional and social. The “political” refers to the regular political activism you often see: canvassing, voting in local elections, supporting politicians who promise to bring equality. On the institutional level, there are institutions like think tanks, political organizations and universities that are responsible for shaping public discourse and ideas. Think tanks especially can help frame the possibilities of change: they are the ones who do the creative work of finding solutions to problems. Finally, on the social level, we have individual acts of activism. Whether it be donating time or money to causes, or even trying to convince friends and family to support a certain cause, these social interactions can bring positive change.
Some of these aforementioned strategies may seem too farfetched. For example, it may seem unlikely that we could do anything to get a politician to enact a living wage, guarantee Medicare for all, or break monopolies. If these demands sound radical, one may take solace in knowing that Franklin Delano Roosevelt outlined them in 1944 (Roosevelt). FDR advocated for these in response to rapidly increasing wealth inequality, labor protests, and the Great Depression. He turned out to be one of the most popular presidents of all time. Think about how those rebel barons felt when they stood up to King John, paving the road for the Magna Carta. Or the Bolsheviks when they toppled the centuries-old Tsar. These are all acts of political will. Sometimes, opportunities for change present themselves in the form of politicians with agreeable platforms.
Change via institution can take a number of different forms. An institution can be as common as a college or as selective as a think tank. Neoliberal Economics is popular now because it represents the status quo. If university curriculum changed such that the study of Economics was more human, we would move in a much brighter direction. Indeed, this is what the Lumumba-Zapata College had hoped for. Its manifesto calls for “In-depth analysis of the historical and contemporary development of capitalism in the Western world, including the crucial roles played by colonialism, imperialism, slavery, and genocide” (Lumumba-Zapata College). The Black Student Union and Mexican American Youth Association rallied around the idea of a new, more humane college. A place where marginalized groups could study science as well as apply it to alleviate suffering.
On a different tack, think tanks currently propose policy initiatives to politicians. They have great control over public discourse of policy proposals. Is it any surprise that the most popular think tanks are funded by affluent donors? Are there any potential conflicts of interest there? I think that is one of the main reasons we see such a dogmatic adherence to the same policies: tax cuts, reducing governmental spending, abolishing unions, and so on. We need more think tanks to propose creative solutions to problems of income inequality, healthcare accessibility, affordable housing, just to name a few. It is not that progressive ideas “lost” the so-called “battle of ideas”; it is that affluent donors are able to exercise mass influence over the discourse. Neoliberalism is the dominant ideology with politicians; the real “trickle-down” effect is from politics to the institutions. The status quo vocabulary favors ideas. What progressive humanist think tanks need to do is create a new vocabulary for people to use to foster common hopes.
On the level of the social, we have protests, voting, and individual conversations which, en masse, can have large cultural effects. Think about the Civil Rights movement in the 1950s and 1960s or the labor protests of the 1920s. Martin Luther King Jr. was arrested for protesting legal injustices in Birmingham. In his famous letter from jail, he invokes Martin Buber’s dichotomy of segregation: it is an “‘I it’ relationship for an ‘I thou’ relationship” (King). I think this is one effect of the way in which economists focus on people as if they are statistics. They become “it” for all intents and purposes. They become the “it” that must consume, that must be means to an end, that must take responsibility for their precarity. On a more social level, we could all benefit from employing an “I thou” language when discussing Economics: the “thou” is a human being with real material needs. They are not just some faceless consumer that contributes to the GDP.
Likewise, beyond the ethical, we can look to the labor struggles of the ‘20s for more practical advice. Rose Chernin, writing about her experience as a labor organizer in the Bronx, “organized around [their] basic needs,” including food, water, milk for mothers, and housing (Chernin). She found solace in organizing with others. As she puts it: “when you are united, [you] lose the fear of being alone. You cannot solve these problems when you are alone” (Chernin). Indeed, if we plan to change society for the better, to build a more moral economy, we must not act alone. It is possible, but will take intense determination.
“Philosophers have hitherto only interpreted the world in various ways; the point is to change it.”
If I have not yet convinced you, dear reader, of the magnitude of this problem, then I would like to take a moment to do so. For, the economy is not a trivial matter. If we have an economy oriented around Neoliberal principles, we have an economy that rewards greed, selfishness, and amorality. We reward people for following the “I it” compass. Do we really want that sort of society? A society that incentivizes people to sell predatory loans to unwitting homebuyers? If you do, then you must feel nothing at the fact that these risky bets on housing mortgages caused roughly 3.8 million foreclosures (Dharmasankar and Mazumder). I think part of being in a community is watching out for one another, because the principles of democracy mandate that no one is above or excluded from the law.
I entered university the product of the Neoliberal rat race. I thought scoring higher than my peers on standardized tests would bring me happiness. All my life I was trained to compete with my peers in school. Everyone wants to be the one to set the curve on the exam. No one wants to fail. Now, having more knowledge of the prevailing philosophy of our time, I want no part in such a system. I do not want to compete, but to collaborate. I don’t want us to be subjected to a standardized test; I want us to creatively solve problems facing our society today. Simply training to be an office drone in not enough; it does not instill a burning passion for anything.
The false promise of Neoliberalism is that competition brings out the best in us and pushes us to succeed. I know for a fact that my parents worked harder than any executive on Wall Street in 2008, and they were rewarded with bad credit, threats of homelessness, an unstable marriage, and three scared children. Long hours with little pay left a lasting impression on the entire family. Knowing that things could have been different, though, leaves an even longer impression.
“Philosophers have hitherto only interpreted the world in various ways; the point is to change it.”
Works Cited
Amadeo, Kimberly. “Would Reaganomics Work Today?” The Balance.
Chernin, Rose. “Organizing the Unemployed in the Bronx in the 1930s (1949): Rose Chernin.” Organizing the Unemployed in the Bronx in the 1930s (1949) | Rose Chernin, 1949.
Dharmasankar, Sharada, and Bhash Mazumder. Have Borrowers Recovered from Foreclosures during the Great Recession? - Federal Reserve Bank of Chicago, 2016.
Hope, David, and Julian Limberg. “The Economic Consequences of Major Tax Cuts for the Rich.” International Inequalities Institute , Dec. 2020.
Horowitz, Juliana Menasce, et al. “Trends in U.S. Income and Wealth Inequality.” Pew Research Center's Social & Demographic Trends Project, Pew Research Center, 17 Aug. 2020.
Horsley, Scott. “After 2 Years, Trump Tax Cuts Have Failed To Deliver On GOP's Promises.” NPR, NPR, 20 Dec. 2019.
King, Martin Luther. Letter from a Birmingham Jail , 16 Apr. 1963.
Leonhardt, David. “The Rich Really Do Pay Lower Taxes Than You.” The New York Times, The New York Times, 6 Oct. 2019.
“Lumumba-Zapata College : B.S.C.-M.A.Y.A. Demands” UC San Diego Library | Digital Collections, 2017, library.ucsd.edu/dc/object/bb2392060k.
Marx, Karl. Theses on Feuerbach.
Monbiot, George. “Neoliberalism – the Ideology at the Root of All Our Problems.” The Guardian, Guardian News and Media, 15 Apr. 2016.
Reagan, Ronald. “Address to the Nation on Federal Tax and Budget Reconciliation Legislation.” Ronald Reagan, Reagan Library.
Roosevelt , Franklin Delano. “The Economic Bill of Rights.” Ushistory.org, Independence Hall Association, 11 Jan. 1944.
Zeballos-Roig, Joseph. “Treasury Secretary Mnuchin Keeps Insisting Trump's Tax Cuts Will Pay for Themselves despite Consistent Evidence They Exploded the Federal Deficit.” Business Insider, Business Insider, 23 Jan. 2020.