Neo-liberalism is both an economic and a political doctrine. Its economic policy is the unrestricted pursuit of private profit. The political policy is called small government, meaning that governments should not regulate or engage in economic activity. They believe these two policies will produce the best outcome for all of society. What I have called the four pillars of neo-liberalism are 1) privatisation of most government services including health and education, 2) serious reductions in government expences, 3) no tax increases, only tax cuts, and 4) deregulation of all economic activity.(1)
Australians must realise that these neo-liberal policies are applied to varying degrees in virtually all Western countries. They are not unique to Australia. They are part of an open conspiracy organized by some of the wealthiest people in the world to remove all the positive, progressive political and economic policies from the Depression until the 1970s. The neo-liberals might claim to be supporters of “liberal democracy”, but in the end they are happy to toss democracy aside because people elected in democracies tend to ask for policies which put limits or restrictrions on the maximisation of profit.
It is an “open” conspiracy because as we will see there is a reasonable amount of information on where it was first formunated and how it has been spread around the world. However it is an open “conspiracy” because these details are seldom explained in the mass media and the media always presents the policies as beyond political discussion and dispute. In the words of Margaret Thatcher “There Is No Alternative” or TINA. In reality it is an economic/political dogma which if considered as a theory would be found to be false.
NEO-LIBERAL POLICIES IN AUSTRALIA
We have seen all of these neo-liberal policies in Australia starting with the privatisation of the Commonwealth Bank between 1991 and 1996 under both Labor and the Liberals. In 1992 the Keating Labor government in effect privatised the age pension by setting up the current superannuation system to replace it. In this system money for each persons' old age is invested in the financial system. This system is deregulated and liable to sustain significant losses. In the meantime the money becomes a plaything of the super-rich investors and the system as a whole does not provide adequate support for many older people. Since then most public utilities and public transport systems have also been privatised by state governments. In 2014 Medibank was privatised by the Abbott government. Recently the LNP has started to privatise Medicare and “outsource” work from Centrelink.
Neo-liberal “austerity” has been with us for some time. For example, the unemployment support now called Newstart has not been raised for 20 years, so it has been a policy for both the ALP and the LNP. It is hard to find a sector of government other than “security” that has not had its funds cut. It is clear that broadly speaking “welfare” takes up a significant part of the Federal Budget.
“According to the the pie chart titled “Total Social Security and Welfare expenditure” in the 2014-15 Budget, the vast majority of expenditure on social security and welfare, excluding tax expenditures, goes to support seniors (29%), family tax benefits (13%), people with disability (12%), carers (5%), veterans (5%), parents income support (4%), and child care assistance (4%) and “other welfare expenditure” (21%). Only 7% of the “welfare bill” goes to support the unemployed and sick.”(2)
However, all discussions follow on from the logic of the so-called “Audit Report” which only concentrates on cutting payments and cuting taxes. The most recent suggestion is the LNP plan to cut taxes for big business with a loss of $15 billion in income per year. The Audit Report was funamentally flawed because when any business is audited, one looks at both expenditure and income. Increasing income of course means increasing taxes, which is not part of the neo-liberal agenda.
Deregulation has taken many forms in Australia. One example is the recent abolition of penalty rates for weekends and holidays. Another form of deregulation can be found when the organisations which are required to assess and collect taxes like the ATO, or Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) which regulate the financial sector, either do not do their job, or are hindered from doing their job by a shortage of staff. The current Banking Royal Commission has found many “irregularities” which should not have happened with adequate supervision.
WHERE DID NEO-LIBERALISM COME FROM?
The first international gathering to discuss what we now know as neo-liberalism was held in Paris 1938, just before the start off WWII in Europe. The meeting was made up of intellectuals mainly from France and Germany to discuss the ideas put forward by Walter Lippmann in his work The Good Society published in 1937.
The modern neo-liberal policies were formulated in the 50s and 60s at the University of Chicago by economists like Milton Friedman. They were first enacted in Chile after the 1973 coup against the Allende government. They have been imposed by the International Monetary Fund (IMF) on most 3rd world countries. While the neo-liberal, free-market ideas did not gain acceptance immediately in the West, they were spread through the creation of “think tanks” in many different countries. These organizations were funded by corporations and banks to teach and develop ideas which were first ignored by mainstream economists and politicians.
The first of these think tanks, the Mont Pelerin Society, was created in April, 1947 at a conference organized by Friedrich August von Hayek (1899-1992) in Switzerland. 39 economists, political scientists, and philosophers attended this conference including Milton Friedman and Karl Popper. Von Hayek wanted to combat the "state ascendancy and Marxist or Keynesian planning [that was] sweeping the globe". Keynsian economics was adoped by the USA in the New Deal and advocates a managed market economy with a significant private sector, but also advocates an active role for government intervention during recessions and depressions.(3) Of course complete central planning of the economy was fundamental to the socialism of the USSR.
While the Mont Pelerin Society itself was new, the ideas behind it were as old as economics itself. The first economist, Adam Smith (1723- 1790), wrote in his book The Wealth of Nations that if people pursue their own interests they frequently promote the wealth of society more successfully than when they really intend to promote it. He held there was an “invisible hand” in the market which would turn each individuals' private pursuit of profit into the greater good for all. In other words, a free market in society without any government intervention is actually the best economic – and political – policy. This idea never had the universal assent of economists before 1947, and it was considered completely discredited after the results of the 1929 Depression. The goal of von Hayek and his friends in the Mont Pelerin Society was to bring these ideas back to life.
Sir Antony Fisher (1915-1988) was a British businessman and a member of the Mont Pelerin Society who organised free-market think tanks during the second half of the twentieth century, including the Institute of Economic Affairs (1956) and the Atlas Network (1988). He was impressed with the ideas of Friedrich August von Hayek. In The Road to Serfdom, von Hayek insists that central planning inevitably erodes individual liberty and enables tyranny. The Institute of Economic Affairs gradually gained credibility in the UK and laid the intellectual groundwork for what later became the Thatcher Revolution. The Atlas Network now consists of over 450 free-market think tanks in 90 countries.
Historical Note: The Atlas Network is no doubt named after the well-known free-market bible by Ann Rand, Atlas Shrugged, first published in 1957. Ann Rand was born Alisa Zinovyevna Rosenbaum in Russia in 1905. She became one of the first women educated at no cost in the USSR after the fall of the Tzarest regime. At the end of her life, despite her initial objections, she allowed Evva Pryor, an employee of her attorney, to enroll her in Social Security and Medicare, the kind of safety net institutions she opposed most of her life. Nothing like biting the hand that feeds you.
NEO-LIBERALISM IN AUSTRALIA
The reason the Mont Pelerin Sociey and the Atlas Network are of great importance to Australia can be seen by looking at the list of Australian members in Appendix 1. Of the 187 members of the Mont Pelerin Society listed in Wikipedia, the 17 Australian members given here make up about 10% of the total. Seven of the 450 neo-liberal think-tanks in the Atlas network are in Australia and can also be found in Appendix 2.
Probably the best known Australian members of the Mont Pelerin Society are John Howard, Prime Minister from 1977 to 1983, and John Stone, Secretary to the Treasury between 1979 and 1984. Members who are more prominent today are Janet Albrechtsen, a journalist and Director of the Institute for Public Affairs, Bob Day, Senator from South Australia from 2014-2016, and John Roskam, Executive Director of the Institute for Public Affairs.
What we know as the IPA – the Institute of Public Affairs – is older than any of the think-tanks discussed so far and did not begin with a neo-liberal approach to economics. 1943 it was created as the Institute of Public Affairs Victoria, with Charles Denton Kemp as the first director and George Coles as the first chairman. The founders were prominent businessmen, and current executive director John Roskam admits: “Big business created the IPA.”(4)
The founders of the original IPA are a virtual who's who of Australian business at the time including Sir Keith Murdoch. In the beginning the IPA advocated anti-socialist Keynesian economics and protectionist policy for industry. However with the appointment of Rod Kemp, the son of C.D. Kemp, to the position of executive director in 1982 it changed its policies to the neo-liberal and free-market ideas we see today.
THE FIRST NEO-LIBERAL SUCCESS – PINOCHET'S CHILE
The economic ideas of the Mont Pelerin society were generally ignored in the 50s and 60s. However they were first implemented in Chile after the US-backed overthrow of the Allende Government in September 1973. At least 10,000 people were killed to establish the new regime of General Pinochet. So what did the new government do?
“Pinochet cut government spending by 27%, with education and health hit hardest, while adopting a 'pro-business package' and a move towards 'complete free trade' which removed 'as many obstacles as possible that now hinder the private market'.” (5)
Here we see two of the standard neo-liberal policies: (1) cutting governement spending on health and education and (2) deregulation of economic activity. The Pinochet government also deregulated the public school system. It was replaced by vouchers and private charter schools. Another neo-liberal policy (3) privatization was imposed on Chile. 500 state-owned companies, kindergartens, cemeteries and the country’s social security system were privatised.
These policies were justified by insisting they are “better for the economy”, but the results in Chile are scary. The neo-liberal guru Milton Friedman deliberately plunged the country into a recession by insisting on cuts to government spending. His neo-liberal “reforms” - called “shock treatment” - caused the economy to contract by 15% in its first year and unemployment hit 20%.
“Contrary to Friedman’s predictions, joblessness and recession persisted for years. Around 74% of the average Chilean income went to buying bread, forcing households to choose between bread or milk or a bus fare to get to work. (...) By 1974, inflation had reached 375%.” (6)
This is what this neo-liberal “experiment” did to Chile:
“By the end of Pinochet’s reign, 45% of the population was living below the poverty line. But over the same time period, this bloody, economic crisis saw wealthy Chileans catapulted into the ‘uber-rich’ category. The richest 10% of Chileans saw their incomes increase by 83%. The gulf between rich and poor continues to this day.”(7)
By the end of the eighties, neoliberals were able to put the theories of Friedman and Hayek into action in the USA, the UK, and with the help of the International Monetary Fund, eventually, almost everywhere. How have these policies been spread around the world?
“In countries where leaders needn’t be overthrown, Mont Pelerin Society members, affiliates and sympathisers have intellectually captured and taken over whole governments, from the US Republican & Democratic Parties, to Australia’s Liberal National Government, and the British Labour party who are the opposition, to Britain’s neoliberal Tories.”(8)
APPENDIX 1: Australian Members of the Mont Pelerin Society(9)
Director of the Institute for Public Affairs
Member of the Board of the Australian Broadcasting Corporation
Written for The Australian, The Age, Australian Financial Review
Garrick Professor of Law at the University of Queensland
Faculty member in the Research School of Social Sciences at the Australian National University
Bob Day OA
Federal chairman of the Family First Party
Previously member of Liberal Party of Australia
Senator for South Australia from July 2014 to November 2016
Day's Home Australia group went into liquidation in November 2016
Founder and President of H.R. Nichols Society
Executive Officer at Western Mining Corporation
Ronald Max Hartwell
Neo-liberal economic historian
President of the Mont Pelerin Society 1992-94
John Howard OM, AC
While Federal Treasurer (1977–83) adopted neo-liberal economics
Prime Minister from 1996 to 2007
Foundation professor of economics at the University of New South Wales from 1977 to 1999
Senior fellow of the Centre for Independent Studies (1999-2007)
Greg Lindsay OA
founded Centre for Independent Studies
President of the Mont Pelerin Society (2006-08)
Founder and formerly the Chairman of Croesus Mining
Founded Mannkal Economic Foundation
Board Member of Australian Taxpayers Alliance
Executive Chairman the Deutsche Bank Group in Australia (1985-1999)
Chairperson of the Australian Broadcasting Corporation
Chancellor of Macquarie University
Advocates market-based approach to higher education
Research Fellow at the Centre for Independent Studies
Higher Education Adviser to Dr David Kemp, Federal Minister for Education
Program Director of Higher Education at the Grattan Institute
His book Welfare State or Constitutional State? was awarded a Sir Antony Fisher International Memorial Prize
Editorial Advisory Council of the Centre for Independent Studies
Chief of Staff to Dr David Kemp, the Federal Minister for Employment, Education, Training and Youth Affairs
Executive Director of The Menzies Research Centre
Executive Director of the Institute for Public Affairs
Worked on a contract with the federal government to develop proposals to limit the role of nongovernmental organisations on public policy
Manager of government and corporate affairs for Rio Tinto Group
Peter Robert Saunders
Research Manager at the Australian Institute of Family Studies (1999-2000)
Social Research Director at the Centre for Independent Studies (2001–2008)
founded H.R. Nichols Society
Secretary to the Treasury between 1979 and 1984
Senator for Queensland representing the National Party from 1987 to 1990.
John Howard's Shadow Finance Minister
Policy director of the Institute of Public Affairs
Australian Human Rights Commissioner from 2014 to 2016
Represents Goldstein in the Australian House of Representatives since 2016 as a member of the Liberal Party.
APPENEDIX 2: Seven Neo-liberal Think-tanks Connected to the Atlas Network
AUSTRALIAN INSTITUTE FOR PROGRESS (nd)
The AIP promotes the classic rights – freedom of expression, freedom of association, property rights, freedom of worship, and freedom of markets. It is the view of the AIP that human ingenuity is indomitable and lies at the heart of human progress. We believe that individuals – not governments – are best placed to direct their own futures, and that it is their ideas and efforts that help shape a collective future.
AUSTRALIAN TAXPAYERS' ALLIANCE (ca 2012)
The Australian Taxpayers' Alliance believes in advocating of behalf of taxpayers' rights, ensuring that they are fairly and accurately represented in the political process.
Promoting a fair tax system and less government regulation.
Australian Taxpayers Alliance (ATPA) is the parent organisation of Menzies House, a website for "conservative, centre-right and libertarian thinkers and activists".(10)
Menzies Research Centre (1994)
The Menzies Research Centre promotes freedom, enterprise and empowerment to Australia and the world through an extensive national research, communications and engagement program.
Since its establishment in 1994, the Centre has been an independent voice for liberty, free speech, competitive enterprise, smaller government and democracy through its policy research, publications, public lectures and discussions.
CENTRE FOR INDEPENDENT STUDIES (1976)
The Centre for Independent Studies seeks to create a better Australian society through ideas, research and advocacy that support individual liberty and responsibility, free enterprise, the rule of law and limited, democratic government.
The Centre for Independent Studies (CIS) is an Australian libertarian think tank. It was founded in 1976 by Greg Lindsay. In 2018 Tom Switzer became the new Executive Director. The CIS focuses on classical liberal issues such as free market economics and reducing the size and scope of government.
According to the 2014 Global Go To Think Tank Index Report (Think Tanks and Civil Societies Program, University of Pennsylvania), CIS is number 101 (of 150) in the "Top Think Tanks Worldwide"
Simon Cowan, Research Manager and Senior Research Fellow (11)
H.R. NICHOLLS SOCIETY (1986)
To promote discussion about the operation of industrial relations in Australia including the system of determining wages and other conditions of employment.
To promote the rule of law with respect to employers and employee organisations alike.
To promote reform of the current wage-fixing system
To support the necessity for labour relations to be conducted in such a way as to promote economic development in Australia.
The Society supports the deregulation of the Australian Industrial Relations System, including the abolition of the award system, the widespread use of individual employment contracts and the lowering of minimum wages. The Society only believes in limited labour market regulation, as it believes that excessive minimum wages and employment inflexibility lead to higher unemployment and lower productivity.
It was created in March 1986 after John Stone, Peter Costello, Barrie Purvis, and Ray Evans organised a seminar aimed at discussing the Hancock Report and other industrial matters. (12)
INSTITUTE OF PUBLIC AFFAIRS (1943)
Does not seem to have a clear mission statement or set of aims posted on the Internet.
The Institute of Public Affairs (IPA) is a public policy think tank based in Melbourne, Australia. It advocates free market economic policies such as privatisation and deregulation of state-owned enterprises, trade liberalisation and deregulated workplaces, climate change skepticism, the abolition of the minimum wage, and the repeal of parts of the Racial Discrimination Act 1975.
The Institute of Public Affairs was founded in 1943 as the Institute of Public Affairs Victoria, with Charles Denton ("CD") Kemp as its inaugural director and George Coles as its inaugural chair.
The appointment of Rod Kemp (CD Kemp’s son) as executive director in 1982, along with other administrative changes that had occurred in the late 1970s and early 1980s, marked a shift to neo-liberal ideology that continues to this day.
The IPA was not influential again until the 1980s, when C.D. Kemp's son, Rod Kemp took up the leadership. Rod Kemp transformed it from a conservative organisation to a neoliberal one, funded mainly by major corporations groups, and pursuing a pro-free-market, pro-privatization, pro-deregulation and anti-union agenda.(13)
LIBERTYWORKS INC. (nd)
The mission of LibertyWorks is to:
1. Stand firm and protect our current freedoms from regulatory attack, and
2. Expand liberty further by campaigning for change and further adoption of our principles.
LibertyWorks Inc. is an Australian based not-for-profit organisation that advocates for a drastic reduction in government control over people’s economic and personal lives.
Free Market Capitalism is a Win-Win System
Free markets allow buyers and sellers to willingly engage in interactions that create value for both parties. Buyers reward sellers who produce goods and services that appeal to them and sellers are encouraged to take risks and work hard to develop new ideas, products and services to appeal to potential buyers. Neither buyers nor sellers are coerced into proceeding with any transaction, they are entirely voluntary, and move forward if both parties perceive they get something out of it. It’s only free markets that produce these voluntary win-win interactions and each time they do, they economic pie expands.
Governments Operate Win-Lose Systems
In contrast to free markets, government provided services are always win-lose transactions. Governments tax unwilling citizens to redistribute the proceeds to others in the form of cash or “services”. While the recipients of the largess are typically happy to take the handouts, we should remember that everything that is given to them has been forced from someone else.
Under this system, “winners” seek to maximise their wins and the coerced seek to avoid additional losses. Government created transactions do not create value, they take value from some people and give it to others without increasing the economic pie. Therefore, Government heavy economies produce poor economic results and are morally inferior to free markets because they rely on coercion to function.
Individuals should be free to lead their lives in the way that they believe is best for them provided that in doing so they do not diminish anyone else’s right to do the same. Free markets operate best when individuals are free to pursue their interests. It’s the combination of empowered and unfettered individuals living and operating in efficient free markets that powers progress for all.
MANNKAL ECONOMIC EDUCATION FOUNDATION (1997)
Mannkal Economic Education Foundation is a private, not-for-profit organisation established in 1997 by Mr Ron Manners. Mannkal’s mission is to develop future leaders of the free market. We promote free enterprise, limited government and individual initiative for the benefit of all Australians.
As enthusiasts of the economist F. A. Hayek, our Mannkal team believes that insights from classical liberal thinkers and their application to local conditions are important for understanding why Australia has been successful. Mannkal has published a detailed history of the Australian experience in The Libertarian Primer which serves as the definitive introduction to students and scholars on this vital topic.
1. I have written another article which goes into neo-liberalism in more detail entitled: Do You Know How Ruthless The Neo-Liberals Are? https://australianvoice.livejournal.com/35684.html