The Global Failure of Neoliberalism: Privatize Profits; Socialize Losses


Michael Peters
Professor, Educational Policy Studies, University of Illinois at Urbana-Champaign
Adjunct Professor, Communication Studies, Auckland University of Technology

A groundswell discourse of ‘the end of neoliberalism’ is jamming the Left blogosphere. It has been building for some time. The Nobel prize-winning economist Joseph Stiglitz (July 7, 2008) [1] in Project Syndicate begins his column with the assertion that the ideology of ‘market fundamentalism’ has failed:

The world has not been kind to neo-liberalism, that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently, and serve the public interest well. It was this market fundamentalism that underlay Thatcherism, Reaganomics, and the so-called “Washington Consensus” in favor of privatization, liberalization, and independent central banks focusing single-mindedly on inflation.

Writing before the collapse of Wall Street’s investment banks—the bankruptcy of Lehmann Brothers, the sell off of Merryl Lynch, the Federal bridging loan of $85 billion to AIG, and the massive $700 billion assistance to the U.S. financial sector —Stiglitz criticized neoliberal policies and their costs to developing economies. [2] He faulted the financial market allocation of resources to housing in the 1990s and the sub-prime crisis that has precipitated a global financial crisis and credit squeeze he thinks will be prolonged and widespread. He criticized the selective use of free-market rhetoric used to support special interests and the way that Bush’s policies have served the military-industrial complex. He concluded:

Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning  this lesson may be the silver lining in the cloud now hanging over the global economy.

John Quiggin (September 8, 2008), [3] the Australian social-democrat, following Stiglitz’s lead and spurred by the nationalization of Fannie Mae and Freddy Mac (that between them held some 5$ trillion of mortgages), under the same banner ‘The End of Neoliberalism?’ remarks:

The fact that the credit crisis has reached this point marks the failure of the central claim of the neoliberal program, namely that private capital markets, free from intrusive government regulation, can enable individuals and households to handle the risks they face more flexibly and efficiently than a social-democratic welfare state.

Others made similar claims and raised similar doubts concerning the march of neoliberalism after the Federal Reserve’s bailout of Bear Stearns. Thus, Lance Freeman (18 March, 2008), [4] for instance, comments:

The Federal Reserve’s bailout (arranged liquidation to some) of Bear Stearns over the weekend seriously calls into question the headlong march toward neoliberalism that has been ascendant for the past few decades. Roughly speaking, neoliberalism called for a retrenchment of the state in favor of deregulated markets. As an ideological force neoliberalism held great sway in trade policy, the overall management of the economy and even at the local level where most planners operate.

He continues:

Once a government lifeline is thrown to Wall Street the whole philosophical underpinnings of neoliberalism would have to be called into question, even among the most faithful adherents of neoliberalism. The question of government intervention becomes a matter of degree rather than kind. That is, a strong central authority is needed to guide the economy. Left to its own devices the “free market” can run off the rails. Critics of neoliberalism have pointed this out for years. But as long as most of the pain was confined to the more disadvantaged members of the world proponents of neoliberalism could wave the misfortunes off as the forces of creative destruction, etc. With the whole system under strain, that is no longer the case. The notion that reducing government and deregulation is the answer to all our problems seems laughable now.

In some sense the current series of crises that have rocked Wall Street to its foundations and threatened to destabilize the world financial system and its major banking and insurance institutions is just the latest round of failure for the global justice movement that has coordinated worldwide demonstrations against neoliberalism, ‘the American imperialist project’, the Iraq War, and strands referred to since the early 1980s as ‘Monetarism,’ ‘Supply-Side Economics,’ ‘Reaganism/Thatcherism.’ Longtime critics of neoliberalism and its policies of privatization, state non-interference and deregulation summed up in the so-called ‘Washington consensus’ [5] such as the economists Stiglitz, and Robert Polin (2003), sociologist Pierre Bourdieu (1998), geographer David Harvey (2005), philosopher/linguist Noam Chomsky (1999), as well as the anti-globalization movement in general, [6] have consistently argued that neoliberalism is a class project that benefits the rich and leads to ever-increasing inequalities both within and between states.

One of the most objectionable and inconsistent aspects of the neoliberal doctrine was the way in which market fundamentalism was imposed on developing nations as part of structural adjustment loans or simply forced through political and military measures, starting with the CIA-backed coup against a democratically elected government in Chile in 1973 (supported strongly by Milton Friedman) and becoming the policy stable for World Bank loans and prescriptions especially in Latin America during the 1980s. The imposition of market fundamentalism runs in complete opposition to neoliberalism’s own libertarian premises and emphasis on negative freedom.

The U.S. economy’s plight driven by the insurance and banking failures on Wall Street has excited the Obama-McCain debate for the U.S. presidency with McCain glossing over his support of Bush’s policies and trying to play down the statement that the ‘fundamentals of the economy are strong’ while Obama plans to strengthen the economy through tax breaks to the middle classes, emphasis on ‘fair trade,’ job creation through investment in manufacturing and protection of home ownership. The issue of the economy seems likely to take pride of place in the election and to dislodge the Republican emphasis on ‘character’ and ‘leadership’ that has now degenerated into a series of scurrilous attacks on Obama as ‘terrorist,’ ‘secret Muslim,’ and ‘Marxist.’

The Wall Street fiasco has already adversely affected world stock markets in Asia, Europe and Russia (which experienced the largest one-day fall in ten years). There are network effects in terms of the global economy. Robert Reich (15 September, 2008), [7] former Secretary of Labor under Clinton, remarked that

Ironically, a free-market-loving Republican administration is presiding over the most ambitious intrusion of government into the market in almost anyone’s memory.

And he added that although ‘The sub-prime mortgage mess triggered it, but the problem lies much deeper.’ He argued Wall Street is facing a crisis of trust based on promises that weren’t worth the paper they were written on and he concluded:

If what’s lacking is trust rather than capital, the most important steps policymakers can take are to rebuild trust. And the best way to rebuild trust is through regulations that require financial players to stand behind their promises and tell the truth, along with strict oversight to make sure they do.

Irrespective of who wins the presidential race it seems clear that some major overhaul of the international financial system is required; that government regulation needs to be established, minimally, to ensure transparency and full disclosure, to spell out capital requirements and to avoid conflicts of interest; and that some new order is required with the participation of both China and India.

The move to state-centric policies and to forms of Federal regulation in the U.S. and elsewhere now seem almost inevitable. Government intervention is now suddenly back in fashion and on the books at the IMF and World Bank. The move to Federal regulation and a reform of the financial system seems to chime with the development of state capitalism elsewhere, especially in East Asia, [8] and other forms of state-centrism seen as necessary for job creation and national reinvestment in infrastructure.

Immanuel Wallerstein (2008), [9] the prominent world-systems theorist, also talked of the ‘demise’ of neoliberalism. He explained that ‘non-interference’ is actually an old idea that cyclically comes into fashion and that its counterview summed up in Keynesianism (mixed economies, protection of citizens from foreign monopolies, equalization and redistribution through taxation) has also prevailed in most western countries. He suggested that:

The political balance is swinging back. Neoliberal globalization will be written about ten years from now as a cyclical swing in the history of the capitalist world-economy. The real question is not whether this phase is over but whether the swing back will be able, as in the past, to restore a state of relative equilibrium in the world-system. Or has too much damage been done? And are we now in for more violent chaos in the world-economy and therefore in the world-system as a whole?

As the center of economic gravity shifts to East Asia it is not clear whether new Keynesianism will be embraced or whether in face of such intensive global competition and fierce economic nationalism whether Western economies can ever afford to reestablish it. There is never the option of an innocent return historically or a return to the golden days of the welfare state in Scandinavia or New Zealand, or to the ‘social model’ in Europe, especially as new costly environmental and energy contingencies begin to bite. What is required is a change of ethos—not ‘confidence’ and ‘trust’ of the market but rather the development of trust that comes with the radically decentered democratic participation, collaboration and co-production that epitomizes the creation of public goods and distributed political, knowledge, and energy systems.


Bourdieu, Pierre. (1998) ‘L’essence du néolibéralisme,’ Le Monde diplomatique Mars 1998.

Chomsky, N. (1999) Profit over People – Neoliberalism and Global Order. New York: Seven Stories Press.

Harvey, D. (2005) A Brief History of Neoliberalism. New York: Oxford University Press.

Khana, P. (2008) The Second World: Empires and Influence in the New Global Order. New York: Random House.

Pollin, R. (2003) Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. New York: Verso.



[1] See Stiglitz’s commentary at

[2] The global credit crunch started with the subprime mortgage problems in the U.S. in the three year lead-up to 2007 and the faltering of Bear Sterns which is acquired by JP Morgan Chase for $240m backed by $30b of central bank loans (March, 2008). In the UK the Government rescued Northern Rock (Feb, 2008) and Lloyds buys out HBOS. IMF warns that the credit crunch could be higher than 1 trillion dollars (April). Indymac collapses in July and U.S. government steps in to assist Fannie Mae and Freddie Mac (guarantors of $5 trillion in mortgages) and later provides the largest bailout in U.S. history. Major European banks falter. UK nationalizes much of its banking sector; other countries follow suit. U.S. passes $700b financial rescue plan (3rd October). World stock markets volatility with largest one-day gains and losses. See the BBC credit crunch timeline: World-wide network effects of credit crunch become evident, not well understood by economists because of the unregulated financial derivatives and complexity of credit default-swaps. Decoupling hypothesis (e.g., China and India insulated) seems disproven. Bank of England estimates 25% decline in value of global stock markets and $2.7 trillion in credit crunch.

[3] See his blog at

[4] See his blog at

[5] The original consensus was based around the following tenants: 1. Fiscal discipline; 2. Reorientation of public expenditures; 3. Tax reform; 4. Financial liberalization; 5. Unified and competitive exchange rates; 6. Trade liberalization; 7. Openness to DFI; 8. Privatization; 9. Deregulation; 10.Secure Property Rights.

[6] I take Susan George’s ‘A Short History of Neoliberalism’ as emblematic of this movement, see

[7] See Robert Reich’s Blog at

[8] In this regard see, in particular, Parag Khana’s (2008) The Second World: Empires and Influence in the New Global Order.

[9] See Wallerstein (2008) ‘The Demise of Neoliberal Globalization’ at


8 Responses to “The Global Failure of Neoliberalism: Privatize Profits; Socialize Losses”

  1. After The Washington Consensus, The Beijing Consensus? | The Global Sociology Blog Says:

    … The consensus seems to be that we are due for an overhaul of the global financial system after what can be definitely be seen as a failure of the neo-liberal order.

    And so then goes the Washington Consensus. Read more

  2. Cushla Kapitzke Says:

    Yes, the bailout is ironical, and you’re right that social democracy is unlikely to rise from the ashes. I agree—and the recent US election confirms—that decentred democratic participation is a cause for hope. The reference to openness (open access, open education etc) is timely also. Nevertheless, without vigilance this movement too will be colonized by the captains of industry. I say this because Rupert Murdoch is in Australia at the moment presenting the influential Boyer Lectures. Rather than the ‘golden days’ of Keynesianism you refer to, Murdoch has coincidentally called the series of lectures, ‘The Golden Age of Freedom.’ Many are familiar with the notion of regulated freedom as code for market fundamentalism and, true to form, Murdoch’s mantras include free trade, reform of public education (i.e. marketisation), human capital development, and the need for Australia to develop a ‘frontier’ culture that will usher in a ‘golden age for humankind that is just around the corner.’ Radical changes in the newspaper industry from distributed mess media are mentioned and naturally ‘creative destruction’ is central to this bright new age. Collaboration and co-production are part of Rupert’s vision of the future too, so I’m keen to hear more about what the ethos you mention might look like in politics and education.

  3. Michael Peters Says:

    The 2008 Boyer Lectures with Rupert Murdoch, ‘The Golden Age of Freedom’ is a disappointment to say the leats. Thanks for alerting me to this series of talks – .

    Startung from a stockman scene that points to the future by Drysdale, a modernist Australian painter, a canvas that hangs in his Wall Street office, Murdoch discusses how Australian identity has been fashioned by external influences and then begins a standard neoliberal rant concerning the unleashing of human talent; the rise of global middle class (3-4 billion in India/China within the next few years); and the importance of cultivating human capital. he asserts that Australia is not prepared to face challenges of the global economy; that is has a nineteenth century education system even although it is wedded to the world in the new century. As a ‘new frontier territory’ in a globalized world Australia has to cultivate less dependence on government and reform its education system. His mantra is
    pro market, pro business, pro globalization. The fist speech in the series was lackluster performance full of tired cliches. Frankly, in the era of what Soros calls the ‘age of the destruction of capital’ an age of the largest bailouts in U.S. and world history (in both Europe and China), there are signals that we are moving back to forms of State-centrism based on a better understand of network effects of globalization and the risks of systemic failure. Personally, I thin that radical decentered forms of distribution political, knowledge and energy systems provide an emergent answer where the state provides a framewrok regulation and infrastructure that encourages a new ethos of participation and collaboration. This is not a polar public-private opposition but rather complementary and parasitic.

    The question is what alternative vision is possible and necessary for Australia – not only for Australia but Oceania, for Australia and Australia’s neighbors.

  4. Ramnik Singh Walia Says:

    The Boyer Lecture 2008 was presented by Rupert Murdoch under the title “A Golden Age of Freedom”. Mr Rupert Murdoch is the chief Executive and chairman of News Cooperation who depicts the current issues of Education and various aspects of media in the changing society. In his six lectures, Mr Murdoch has mainly emphasised on the Australian Perspective comparing it with the global issues of education, rise of middle class and how spread of information through globalisation has brought change in the society. Thus this review will analytically asses Murdoch lectures leading to key ideas which he has presented .Then in this Review, I will also be discussing how these lectures are significant and I would be presenting an argument regarding any gaps or structural problems with the significant examples .In the End, the Review will lead to a conclusion by looking at arguments whether this reading should be listed in next time unit or not.

    The Six lectures on “A Golden Age of Freedom” provides the reader with the critical analysis on the Murdoch view on Australia’s Proficiency. In his lectures, Murdoch clearly states that Australia could only overcome the problems of 21st century by adopting new ways of technology and study patterns. The main claim which Murdoch put in his lecture is the Rapid achievement and growth of third world countries such as India and China. Thus in comparing developing countries with a developed country like Australia Murdoch wants to highlight the main reason of success is the hard work and high expectations which has brought developing countries in a competitive context. In his argument Murdoch ,depicts how Australia should improve its literacy standards in the time of transformation .In, the end lecture Content clearly highlights how poor people without any support are rising their standards by studies whereas people of Australia who have all the support from government are still stagnant due to lack of education .

    In the review of the above argument I, totally agree with Murdoch because as stated in his lecture, people of Australia are very much dependant on the government subsidiary and financial support .Seeing the scenario in developing countries the people need to work themselves to improve their living standards .So this dependency on the government is making people more lazy and creating gap between them and education. For Example: A person in Australia is aware that if he is not working or educating himself a hope of Centre Link is there to help him. Whereas in developing countries no financial Institution of government is available .Thus it is up to the person to starve and die or receive good education to get a good job.

    Murdoch presents a clear argument that he is in strong favour of developing countries .Thus he explain that developed countries growth has been stagnant by stating an example of Europe which has lost the will to confront aggression .He also pointed out reckless nature of aggression of invasion on Georgia by Russia and Terrorist Bombings in Islamabad. During his assessment of Positive and Negative developments in the global world .Murdoch strongly believes that Australia should be part NATO which will enhance its chances to take part in global issues. Taking example of Global economy, Murdoch clearly defines that financial crisis around the world are the greatest challenges to the countries and explain that NATO should involve every country based on common values instead of specific geographical locations.

    Another key point which Rupert Murdoch emphasis is migration of skilled immigrants to the country .In his lecture Murdoch praises the Australian immigration for opening doors for the skilled workers and explains how these workers add to the economic and technological prosperity of the country .To this point, I would like to raise a contradiction stating that more immigrants to Australia will definitely lead to a multicultural society. But what will be the future?

    According to me, Murdoch fails to analyse the far reaching effects of migrants’ problems which create an imbalance in the domestic labour market .For an Example people coming from developing countries on skilled visa don’t work in the specific skilled field instead of that they do other casual jobs leading to taxi and working in farms .Thus the population of immigrants keeps on increasing whereas the position for skilled work remain stand still because nobody is ready to work .In the end Murdoch should widely think about the negative effects which migrants can bring to the country and how to overcome this problem by controlled migration.

    The key flaw in the Murdoch article is the discussion about the human capital and education to the generation. He specially pinpoints Aboriginal generation as its key target to reform by the means of educating and giving them benefits. Considering Educational point of view I totally agree with educational reform because it is education which is going to create skills and develop the young generation .But Contradictory part is why more importance is levied on Aboriginal. I agree that they are the oldest settlers but in the developed world Australia has achieved a status of Multicultural Society where everybody is equal .Thus by giving special preference to Aboriginal people will create a level of difference in the society which can erupt riots or fights in future.

    It is clear that Murdoch lecture is inspired by Era of Globalisation and Technological advancement .In his lecture which emphasis stress on how technological change had brought change in society and condition of working class which is specifically middle class in the developing countries. He has beautifully presented an example of his own life experience about how media has changed rapidly from papers to availability on the internet. He explains that technological change is for the betterment and creates new ideas for innovation and expression of freedom. According to Murdoch only way to defeat technology is to get ahead of it .To this I want to say that availability of free trade and global market is a Neo liberal view of Murdoch which gives an upper hand to developing world like India and china.

    But in Relation to this I want to say that India and china are able to achieve progress due to growth of privatization of market socialism .Thus Privatisation of market has led to building up a strong relation between government and business which has resulted in the progress of the state.


    After reading Murdoch Lectures, it is necessary that it should be listed as a required reading in various universities which teaches government and business relationship .It is necessary because it allows readers to formulate their opinions regarding the lectures based on “A golden age of Freedom”. It makes people aware of the rising technological changes as well as informs them about different prospects of Education and global world. Another reason which, I would like to put forward in relation to these lectures is that these lectures gives a nice opportunity to the reader to form an argument because according to me Murdoch is forming one sided debate .Thus he lacks in Unfolding the alternatives and fails to discuss about the effect globally in accordance to the environment ,that how the new era of freedom changed the environment globally .In the end the lectures are great source to political science as it will help the political thinkers to review Murdoch argument carefully and make future modifications ranging from précising it into more qualitative than quantitative source.

  5. kurt Says:

    As Quiggin states, Neoliberalism has most certainly been called into question here.

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    the illusion of wealth in the general population which was based on the bubble of over-inflated property prices, cheap and easily obtained credit, cheap Chinese imports and the restructuring of society so that two people at least in a household had to go out to work, each working longer hours as well than ever before.

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