Reality bites
Neoliberalism’s greatest success is about to be revealed as its greatest weakness. In the 1970s – the previous inflation that the central bank generals are trying to fight – the perceived threat came from over-powerful trade unions and a too-protective welfare safety net, which together, the neoliberals argued, had driven inflation out of control. Neoliberalism’s solution was to use recession to break the power of the unions and to use law to break the social security system. And it appeared to work. By the early 1990s, the economy was booming again, and the economic and political strife of the 1980s seemed to have faded into history.
Unfortunately, this mainstream economics fable turns out to have been a myth at every turn. The true cause of inflation in the 1970s was rising energy prices – including the 1973 OPEC oil embargo – which drove the cost of everything upward. Even the recession – which economists and bankers credit Paul Volcker with creating – turns out to have been the result of the oil shock from the Iranian revolution and the Iran-Iraq war. And while neoliberal governments took the opportunity to crush unions and tear holes in social safety nets, what brought a brief return of prosperity in the 1990s was the opening up of new oil deposits in Alaska, the Gulf of Mexico and the North Sea, together with a banking deregulation that generated billions of dollars, pounds and euros in debt-based derivatives, underwritten by the anticipated profits from that new oil.
So much for neoliberalism’s supposed success. But what about its weakness? An often-unseen consequence of the destruction of the traditional protections afforded to ordinary working people is that millions of us cultivated a wilful blindness to all of the things wrong with the way our employers were operating their organisations. We quickly learned that workers who spoke out or blew the whistle got fired. We also saw that once they’d been fired, they faced a lifetime of impoverishment on inadequate benefits supplemented with occasional, low-paid gig and zero-hours work. And so, we learned to turn a blind-eye, tick the boxes and settle for picking up our wages at the end of the week.
