2.4 Comparison to neoliberalism

Neoliberalism is an approach which favours private ownership, competitive markets, free trade, reduced regulation, and private provision in place of direct State production. It is particularly associated with the governments of Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States during the 1980s.

Social liberals and other critics on the political left, including Noam Chomsky, have been strongly antagonistic towards neoliberalism. They argue that it produces an enormous loss of democracy and of people's ability to have a meaningful say in the decisions which shape their lives, widens the gap between rich and poor, and empowers corporations and the very rich at the expense of the wider population. Chomsky goes further, arguing that neoliberal methods created the Third World and that their modern application has produced disasters in developing countries which followed them most rigorously.

Critics frequently associate neoliberalism with Margaret Thatcher's statement that “there is no such thing as society,” interpreting it as the elevation of individual interests over collective responsibility. In context, however, Thatcher also emphasised personal obligations towards families and neighbours. The quotation should therefore not be treated as proof that neoliberalism recognises no collective responsibility. It nevertheless captures the individualistic image against which many critics define neoliberalism.

The original neoliberals and their literature

The word neoliberalism did not originally denote a single settled doctrine or simply a return to nineteenth-century laissez-faire. It emerged as a name for attempts to reconstruct liberalism after the political and economic crises of the interwar period. The decisive early gathering was the 1938 Walter Lippmann Colloquium in Paris, convened by Louis Rougier to discuss Walter Lippmann's An Inquiry into the Principles of the Good Society (1937). Its participants included Alexander Rüstow, Wilhelm Röpke, Friedrich Hayek, Ludwig von Mises, Jacques Rueff, Raymond Aron, Michael Polanyi, and other liberal intellectuals. They agreed on the importance of private property, market prices, competition, and the rule of law, but disagreed substantially about the State's proper role and the defects of classical liberalism.

Rüstow, Röpke, and the German ordoliberals most clearly represented the new departure. They argued that a competitive market is not a natural condition which the State can merely leave alone: it requires a legal and institutional order capable of restraining cartels, monopolies, private concentrations of power, and political privilege. Rüstow's later Freedom and Domination, a condensed translation of his three-volume Ortsbestimmung der Gegenwart, placed the market within a much wider historical and social critique. Röpke's The Social Crisis of Our Time (1942), Civitas Humana (1944), and A Humane Economy (1958) defended markets while stressing decentralisation, social cohesion, widely dispersed property, and moral limits on economic life. Walter Eucken's posthumous Principles of Economic Policy (1952) supplied the most systematic ordoliberal account of the rules and institutions required to preserve a competitive order.

Mises and Hayek shared the defence of markets but occupied different positions within this coalition. Mises's Liberalism (1927), Socialism (1922), and Human Action (1949) presented the strongest case for classical liberalism, private ownership, and market coordination, and he resisted proposals which he thought conceded too much to interventionism. Hayek's The Road to Serfdom (1944), Individualism and Economic Order (1948), and The Constitution of Liberty (1960) developed the case for dispersed knowledge, general rules, limited government, and a competitive order. The differences among these writers matter: the original movement contained laissez-faire liberals, ordoliberals, and socially oriented liberals rather than a uniform programme.

The movement was renewed after the Second World War when Hayek brought many of these thinkers together in the Mont Pèlerin Society. Its 1947 Statement of Aims is the clearest short collective text, although it records broad common concerns rather than a detailed policy platform. Milton Friedman's Neo-Liberalism and Its Prospects (1951) is also notable because it explicitly used the label for a position between collectivism and old laissez-faire. Friedman's later Capitalism and Freedom (1962) and Hayek's later works helped shape the more market-radical meaning commonly attached to neoliberalism from the 1970s onward. Consequently, claims about “what neoliberalism says” should identify the author, period, and branch of the tradition rather than treating the modern label as though it described every participant at the movement's origin.

Neoliberalism and democracy

Modern critics sometimes say that neoliberalism is inherently opposed to democracy because it places property, markets, central banks, and other economic institutions beyond popular control. This criticism identifies a real tension in neoliberal thought, but it becomes misleading when it treats opposition to unlimited majority rule as opposition to every form of democracy. The original neoliberals did not hold a common position. Most defended representative government while insisting that a democratic majority, like every other holder of State power, must be constrained by constitutional rights and general laws. Some, however, were markedly distrustful of mass politics and assigned the protection of the market order a higher priority than democratic control of economic policy.

Mises gave democracy a clear and important place in liberalism. In Liberalism, he defended majority government principally as a means by which rulers can be replaced peacefully when public opinion changes. Without that mechanism, a government which loses the support of the governed can ultimately be removed only through revolution or civil war. Elsewhere he demanded freedom of political expression, representative government, and a State constituted according to the will of the majority. This was not a claim that a majority may do anything: majority rule selected the government, while liberal principles limited what any government could rightfully do.

Hayek drew the distinction even more explicitly. In The Constitution of Liberty, he described democracy as a method for deciding who governs, whereas liberalism concerns the limits upon the government's coercive power. He regarded democracy as the best available method of peaceful political change and an important safeguard for liberty, but not as an unlimited or ultimate value. A democratic government could still act illiberally by discriminating against minorities, confiscating property, granting privileges, or exercising arbitrary power. Hayek therefore favoured constitutional restraints, separation of powers, the rule of law, and rules applying generally to majorities and minorities alike. Critics reasonably reply that removing important economic questions from electoral decision also restricts democratic self-government; Hayek regarded that restriction as one of the purposes of a liberal constitution.

Rüstow and Röpke were more suspicious of mass democracy. Rüstow argued that the parliamentary State had become the prey of organised interests. Political parties increasingly acted as agents of industries, cartels, unions, and other pressure groups, exchanging interventions and privileges for political support. His proposed “strong State” was not intended to direct production, but to stand above these groups, resist their demands, and enforce the competitive order. His central fear was therefore not simply a numerical majority oppressing a minority; it was the capture and fragmentation of democratic government by organised minorities claiming to represent parts of the electorate.

Röpke's criticism went further. He feared that mass parties, welfare competition, organised interests, and the psychology of mass society could allow democracy to consume the liberal order which made it possible. He accepted democracy only when bounded by constitutional safeguards, decentralisation, federalism, secure property rights, and institutions insulated from immediate political pressure. His language about the “tyranny of the masses” and his reliance upon responsible social elites reveal a genuinely elitist strand. His later defence of white-minority rule in apartheid South Africa cannot be reconciled with equal democratic citizenship and provides strong evidence for critics who identify illiberal implications in his thought.

Friedman likewise presented competitive capitalism as a restraint upon political power and as a necessary, though not sufficient, condition for political freedom. Dispersed private ownership allowed people to work, publish, associate, and finance opposition without depending entirely upon the government. He favoured constitutional democracy, but wanted many decisions removed from collective political choice and left to voluntary individual choice in markets. The democratic objection is that market outcomes also distribute power unequally and that constitutional protection of those outcomes can prevent citizens from collectively changing the conditions under which they live.

It is therefore inaccurate to say simply that the original neoliberals were enemies of democracy. Mises, Hayek, and Friedman expressly defended democratic institutions, while Rüstow and Röpke also distinguished their preferred limited democracy from dictatorship. It is accurate to say that they rejected the principle that an electoral majority should possess unlimited authority over economic life. Their project sought to place private property, competition, monetary stability, and general market rules outside ordinary bargaining among parties and interest groups. Whether that arrangement protects democracy from arbitrary majority power or subordinates democracy to a market constitution is the genuine disagreement between neoliberals and their critics.

A false history of neoliberalism

George Monbiot's film The Secret History of Neoliberalism presents a false and materially misleading history of neoliberalism. The film says that neoliberalism cannot be understood without first understanding the “true nature” of capitalism. It then locates the beginning of capitalism in the Portuguese colonisation of Madeira, where slave labour was used to produce sugar and natural resources were exhausted before production moved to new colonial frontiers. It presents colonial seizure, slavery, imperial extraction, and ecological destruction as intrinsic to capitalism rather than violations of a free market.

After this extended account, the film introduces the 1938 Walter Lippmann Colloquium in Paris, notes that Ludwig von Mises and Friedrich Hayek attended, and describes them as two of the people who came to define neoliberalism. It later describes the policies of Thatcher and Reagan as the application of a doctrine created by Mises, Hayek, Friedman, and others. This sequence constructs an apparent lineage from slavery and colonial seizure, through capitalism, to neoliberalism and its leading liberal thinkers.

The historical facts do not establish that lineage. Colonial enterprises employed capital and pursued profit, and Mises and Hayek attended the Paris meeting. It does not follow that their liberalism endorsed colonialism, slavery, or imperialism. Their political economy was founded upon private property and voluntary exchange. Slavery is the antithesis of voluntary exchange, colonial seizure violates property rights, and imperialism substitutes conquest and political privilege for free trade.

Mises was explicit about this distinction. In Liberalism, he described the subjugation of peoples, robbery of their property, and their enslavement under colonial policy as being in the sharpest contrast to liberal principles. He associated modern imperialism with European States abandoning free trade in favour of politically controlled colonial markets. Hayek likewise made limitations on coercion, general rules, competition, and individual choice central to his liberalism, and opposed privileged or monopolistic organisations using coercion to prevent competition.

Mises also argued that liberalism demands:

• equal legal rights;
• abolition of distinctions based on birth, rank, race, nationality, or religion;
• elimination of State-created privileges;
• laws applying generally rather than benefiting selected groups; and
• free competition without tariffs, subsidies, or protection granted to particular interests.

The film could reasonably argue that particular fortunes and businesses accumulated wealth through slavery, conquest, and State privilege, or that later policies promoted in the name of liberalism produced consequences which Mises and Hayek did not intend. It does not make that narrower argument. By defining capitalism through colonial coercion and then presenting Mises and Hayek as creators of the same ideological tradition, while omitting their opposition to coercion, colonialism, and imperial privilege, it reverses their stated principles. It teaches an association which its own account does not demonstrate and which the primary sources contradict.

The film is similarly misleading about trade unions. Monbiot says that neoliberalism requires trade unions and collective bargaining to be swept away, and later claims that the unions were crushed. Mises expressly allowed workers to form voluntary unions. In Human Action, he wrote that “the issue is not the right to form associations,” but whether an association should be privileged to use violence or intimidation with impunity. He distinguished the freedom to organise, bargain collectively, and withhold labour from compulsory membership, violence against non-participants, and preventing willing workers from accepting employment. Removing coercive privileges from a union is not the same as crushing voluntary unionism; voluntary collective bargaining is itself an exercise of free association and exchange.

The film is also self-contradictory when it associates neoliberalism with government bailouts following market failures. Mises and Hayek treated losses and business failure as indispensable parts of market competition: they remove resources from unsuccessful owners and make those owners bear the consequences of their decisions. A government bailout does the opposite. It protects selected businesses or creditors from loss, transfers the cost to taxpayers, creates moral hazard, and substitutes political selection for market selection.

The apparent resemblance

On a superficial reading, VoTa may appear neoliberal because it shares several of these features. It protects private property, leaves production to privately owned businesses, makes profit and loss the fundamental discipline governing producers, and eliminates direct taxation of producers. It also rejects every law and regulation which cannot be justified by the Non-Aggression Principle. The State cannot interfere with the free market through tariffs, subsidies, or licences.

The central difference: collective power

VoTa cannot be characterised as a system concerned only with the individual at the expense of the collective. The Constitution imposes a 50 per cent tax on every tax-inclusive taxable payment. It allocates 30 per cent to taxpayer-directed public services and 20 per cent to the Universal Basic Income. The collective therefore has control of 50 per cent of GDP, constitutionally dedicated to public services and redistribution. This is not a minor qualification to an otherwise individualist system. It is half of the economy.

Government expenditure as a share of GDP provides the most useful comparison with existing States. Tax receipts understate their effective claim on the economy when expenditure is financed through borrowing or money creation, since those costs must still be borne through future taxation, reduced future spending, or inflation. General government expenditure across the OECD averaged 42.6 per cent of GDP in 2023, while OECD countries which are also members of the European Union averaged 49.3 per cent in 2024. VoTa's 50 per cent collective share is therefore larger than that of the average OECD State and approximately equal to that of a European welfare State. VoTa is not a small-State system in economic scale.

Nor does VoTa transfer power from democratic government to corporations or the very rich. It abolishes politicians and places State power directly in the hands of the people through direct democracy. Citizens determine collective decisions themselves and direct public-service funding through tax choice. Private businesses may compete to provide services, but they do not acquire the State's authority or control its budget.

This directly answers the central criticism made by Chomsky and other opponents of neoliberalism. VoTa preserves private production and free exchange without sacrificing democracy, collective power, or universal redistribution. It gives individuals control of their peaceful private activity while giving the people collectively control of the State and half of the economy.

Money and neoliberalism

Neoliberalism does not provide a single clear position on monetary policy. States associated with neoliberal policies have retained central banks, interest-rate policy, and control over the money supply. Milton Friedman, one of neoliberalism's most influential economists, opposed discretionary monetary fine-tuning but advocated a rule under which the central bank would expand the money supply at a fixed annual rate. He and Anna Schwartz also argued that the Federal Reserve turned the recession of the early 1930s into the Great Depression by allowing the money supply to collapse, and that it should instead have expanded reserves and prevented that contraction. Friedman's free-market philosophy was therefore compatible with deliberate State control and expansion of the money supply.

VoTa takes a definite position which does not depend upon classifying monetary management as neoliberal or otherwise. The State cannot manipulate interest rates or the money supply. The supply of Central Bank currency is fixed, there is no central-bank policy rate, and lending transfers existing currency from a lender to a borrower. VoTa therefore rejects both responsive and rule-based monetary expansion.

VoTa is not neoliberalism

VoTa is consequently better understood as a distinct constitutional architecture. It shares neoliberalism's confidence in private ownership, voluntary exchange, competition, and market discovery, but rejects the continuing discretionary political authority with which neoliberalism ordinarily coexists. At the same time, it entrenches UBI and extensive taxpayer-directed collective funding more deeply than neoliberalism generally does. The resemblance lies principally in the organisation of production; the decisive differences lie in taxation, redistribution, public choice, money, and the structure of the State itself.