chapter  1
20 Pages

Introduction: Neoliberalism and governmentality

With the onset of a global financial crisis in 2007 and the return of depressions and mass unemployment across the industrialized and rich nations of the world, questions are being raised about the state of economics and about the way economies are governed. In economic crises of the past twenty-five years, in East Asia, Russia and Latin America, criticism has been focused on the dogmatism of international economic advisory bodies such as the International Monetary Fund, which have espoused a ‘Washington Consensus’ of market-based rules for economic policy.2 However, this time round, perhaps because of the scale of the economic crisis, or perhaps because the epicentre of the crisis has been in countries such as the United States and Great Britain, a far deeper questioning is under way. Rather than focusing on specifics, on particular countries, governments, policies or international agencies, much criticism is being set at a level that attempts to encompass the totality of economic theorizing and governance. One catch-all term for such a discussion is ‘neoliberalism’. What does this term mean or designate? Perhaps all that is meant when using it is the free market or laissez-faire. In this line of thinking, as with the Great Depression of the 1930s, unfettered capitalism is shown to be intrinsically unstable. Neoliberalism turns out to be no more than a return to the doctrines of the nineteenth century, a new-found liberalism, reimplemented in Britain, for instance, from 1979 by the Conservative Party led by Margaret Thatcher. However this kind of argument seems to fly in the face of so much academic wisdom: the tools of economic policy-making are meant to be that much more sophisticated now than they were in the nineteenth century, and the source of so much instability, the gold standard, was consigned to history in Britain in 1931. It certainly appears as if the excesses of laissez-faire, particularly with regards to the banking sector, caused the crisis, but the dramatic expansion of credit so often central to economic cycles of boom and bust in the past was not led by corporations and businesses; it would be difficult to say that there has been too much business investment with too little consumer demand. On the contrary, it

has been consumers in countries such as Britain and the United States who have been doing much of the borrowing and much of the spending that has supported economic growth in recent years. When Thatcher made her damning quip in 1975 that ‘never in the history of mankind has so much been owed’,3 household debt was under 40 per cent of household income. As of the end of 2007, the same ratio stood at 160 per cent. And whereas consumer credit (overdrafts, credit cards and unsecured loans) represented 4.8 per cent of disposable household income in 1979, by 2007 this ratio had risen to over 26 per cent.4