In the 1980s, Ronald Reagan and Margaret Thatcher heralded neoliberalism as the savior to the failing Keynesian global economic system. The theoretical underpinnings of neoliberalism insist that little to no governmental regulations, taxes, etc. will result in a prosperous economy for all as the benefits reaped by the wealthy will trickle-down to the working class, i.e. the rising tide lifts all boats rhetoric.
Neoliberalism is still the dominant manifestation of capitalism in today’s global political economy; however, it has resulted in extreme wealth inequality that is unsustainable for a productive society and has infiltrated society’s conscious to accept corporate greed as the norm.
- Instead of wealth trickling down through the economic system, tactful corporate lobbyists and the fear that corporations will outsource the US labor force (more than they’ve already done) has pressured our government to allow corporations to severely underpay their employees while their executives sit on stacks of cash which one person or family physically cannot spend in a lifetime. One in nine full-time workers are paid poverty-level wages. Adjusting for inflation and cost of living, the federal minimum wage 50 years ago was equivalent to $11.76 compared to today’s $7.25. Instead of this money circulating through the economy, it is stagnant and unavailable to millions who could benefit from additional income. Jeff Bezos from Amazon has been under fire in the media for underpaying his workers, but Home Depot, McDonald’s, and Kroger among others can add worker exploitation to their list of accomplishments.
- Instead of paying taxes to the government to fund social welfare programs and the like (of which can alleviate some of the financial burdens for the underpaid employee), billionaires and their corporations are paying less in taxes than the worker. Not less in terms of percentage of their earnings, less hard cash. An estimated $70 billion per year is lost tax revenue because of corporate tax evasion. Yes, BILLION with a B. Why? Because the billionaires are also paying the government to maintain these tax loopholes and havens. Bermuda, Ireland, Cyprus, Switzerland, Hong Kong, and Panama are places where corporations can set up “headquarters” (i.e. a postal box) and instantaneously and without moral consciousness, hoard billions of dollars from our government and public services.
- Instead of corporations competing against each other and resulting in the lowest agreeable price for the consumer, large corporations can strategically undercut the price of their product and driving out the competition. Coca-Cola and Uber all well-known examples of undercutting prices to bankrupt their competitor in a strategy known as predatory pricing. Or these corporations can eliminate competitiveness and consumers’ negotiating power by merging with their competition to form powerful monopolies. Microsoft and LinkedIn merged, Amazon and Whole Foods merged, Monsanto and Bayer merged. In fact, 50,000 mergers occurred in 2017. And 2016. And 2015. Where are the antitrust laws? Among capitalism’s major tenets are sovereignty of the consumer and freedom of enterprise. However, under the neoliberal era of minimal regulations, the power remains in the established multinational corporations who have complete control of who enters the market and how much the consumer pays.
From corporations underpaying employees, evading taxes, and eliminating competition, the resulting society is one where an increasingly monopolised and polarized system benefit the wealthy and provide little opportunity for the not-wealthy to advance. In the US, the top 1% owns 40% of the wealth. I’m all for winners and losers, but running a race when the opponent is driving a golf cart, seems a bit rigged. The Gini coefficient, a measure of income inequality, for 1979 in the US was 34.6; in 2016, it was 41.5, and as you guessed it, the higher the value, the higher the wealth inequality.
It’s been forty years, why does neoliberalism persist? It shouldn’t have. George Monbiot, a columnist for The Guardian, said that neoliberalism should have gone out the window with the 2008 financial recession when suddenly “free-market” advocates needed the government to intervene to bail out the banks that were too big to fail. Instead of reinstating regulations on the financial sector that FDR put in place in the New Deal after the Great Depression (and then gradually dismantled under the Carter and Reagan administrations), these big banks skirted moral capitalism yet again and are on their merry way evading necessary regulations and paving the way for their corporate compadres in other sectors to exploit the average Joe and spread the gospel of neoliberalism.
Will we have to wait until the next economic collapse before dismantling this oppressive system? Or will be able to diplomatically move towards a more economically progressive capitalism that actually protects employees and consumers? I’m afraid that the latter possibility is much less feasible as people in power tend not to want to relinquish it.