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How Milton Friedman's Neo-Liberalism Destroyed the Economy of the US and the UK

Growing up in a political family, Tessa joined her first political party at 14. Her interest in progressive politics & economics continues.

The butcher's daughter, the ex-actor, and a  Nobel prize winner were responsible for neo-liberalism.

The butcher's daughter, the ex-actor, and a Nobel prize winner were responsible for neo-liberalism.

How Neo-Liberalism started

Somewhere around 1966/7, my late father arrived home from the business he owned. He was chatting to my mother about an article in a business magazine. I asked him about it. He explained to me that laws involving business practice had changed, and that it would have a disastrous effect on his business. He explained to me business need no longer sell goods according to the price set by wholesalers, but that they could now sell at whatever price they preferred.

This would mean that businesses with more capital could bankrupt their competition through the practice of selling goods below cost. It would result in small business with little capital to sustain themselves eventually filing for bankruptsy. He was right. As a consequence, within a few short decades, there was little competition. Wal-Mart bankrupted tens of thousands of small manufacturers and business as a result.

Thus came my introduction to Chicago economist, Milton Friedman’s Neo-Liberalism, initially proposed by American/Austrian ecoonomist, Ludwig von Mises. The 'free market' would rule all.

A Brief History of Mixed Economies

The prosperity of the 50s and 60s had its roots in the early progressivism of the late 19th century and the 20th century. Those movements came about as a result of the rise of the robber barons. The robber barons became extremely rich as a result of wage slavery and the long, inhumane hours that they enforced on their workers. By the 50s and 60s, strong unions prevented the abuse and underpayment of labour. A strong middle class was born.

In addition, these progressivism politics (another name is democratic socialism) ensured that government provided excellent services and a strong safety net for those who needed social welfare during times of difficulty.

High taxes prevented the rise of more robber barons, and this money was used for the betterment of we-the-people.

Business was seen as a social good.

Milton Friedman, an Economist, Changed that Success Story of the 50s and 60s

Milton Friedman was a Chicago economist who said that business was more efficient than government in running services for the people and that by taxing business as high as government did, it prevented business from expanding. He maintained that lower taxes with less regulation, plus the removal of power from the unions, would result in more business ownership, and more busines ownership would result in greater prosperity and better jobs for everybody.

Ronald Reagan, the president of the USA, and Margaret Thatcher, the Prime Minister of the United Kingdom believed Milton Friedman’s doctrine, and they both set about lowering taxes for the rich. This, in turn, meant less funds for the State, so consequently, government needed to cut down on various services. Free, or relatively cheap education, was a thing of the past.

From energy, through communications and postal services, to public transport – all took a hit. Over a period of 30 years, this trend continued until the middle class started disappearing as a result of services becoming more and more expensive through privatization. More people sunk into debt as a result of less and less pay and pricier goods everywhere. Student debt reached oppressive heights and became a life-long burden. The Unions were thrashed and much of their power was removed.

In addition, many mom-and-pop businesses closed their doors as powerful, rich corporations waged financial war against them, and far from there being more business ownership, there was less.

So Why Didn’t Neo Liberalism Work?

  1. The goal of business is not benevolent. Benevolence was forced on business by progressive and democratic socialist governments - in other words, by the law. In the 50s and 60s socialism was not a dirty word. Ask anyone who is older than 70.
  2. The goal of business is profit for the owners. Owners do not automatically expand business and create jobs because they feel it is their duty. They only do so if they see the opportunity to make even more money. If they do not see the opportunity to make more money, or if they are perfectly happy with the amount of money they are already generating, they do not invest in creating more businesses and/or generating jobs. It can also be argued that, currently, with the advent of intelligent robots (AI), it is cheaper to buy a robot than to hire a human being.
  3. Business is not better than government at managing services. Certainly, they may cut costs, but they do so at the expense of safety for workers and the general public. Nor do the services become less expensive to those using them. The opposite occurs. Because the motive of business is profit, services become more expensive.
  4. Removing regulations from business may well result in higher profits for business. However, as we have already established, higher profits for business do not necessarily mean better paid (or more) jobs for the workers. It does, however, result in toxic rivers, wage slavery, over-production of needless goods involving massive advertising (brainwashing) of the general public, and overflowing landfills. It results in plastic filled seas and climate changing consumerism.
  5. Limiting taxes on the very wealthy and big business has resulted in extreme differences between .01% of the population and everybody else. Throughout history, this scenario has led to revolution and class war (populism). Both the French Revolution and the Russian Revolution were the result of excessive differences between the rich and the poor. Billionaire Nick Hanauer has warned his fellow billionaires that the reckoning is coming in his article The Pitchforks are Coming. Arrianna Huffington, founder of Huffington Post has spoken about this outcome on radio.

Business Propaganda

For the past thirty years, there has been a concerted effort in both the United Kingdom and the United States of America to discredit Progressivism and Democratic Socialism (mixed economies). In reality, the world was a much happier and more prosperous place for most people with the previous economic system. While there has been an increase in civil liberties in terms of gay marriage, abortion being accepted, etc. none of these factors intrinsically affect the wealth of those who are now rolling in it.

Advertising, which is nothing more than soft brainwashing and indoctrination, has assured people that they will be happier if they buy this and that. Public relations and spin has consistently discredited the victims of this inhumane economic system. They have been called lazy, no-goods, a drain on the government, and losers. One of the bigger lies that people have come to believe is that anyone can become rich - without capital and resources.

Margaret Thatcher and Ronald Reagan were the first political leaders to implement the tenets of this inhumane economic system. Subsequent governments have carried on implementing what they started. However, without sufficient resources to live, the average human lives a stressful life filled with misery. Rising mental illness, obesity, heart conditions, etc. have all been the outcome of Milton's Friedman's economic theory. His Nobel prize should be rescinded.

Business has now amassed such power that in both the United Kingdom and the United States, business influences the outcome of government policy. This has seen an even higher increase in prosperity and profits for these big businesses. They have become international power houses at the expense of small countries and have ruined the lives of large numbers of people in their own countries.

This is increasingly leading to the power of a few over the many. Whether you wish to call this fascism, a plutocracy, or an oligarchy is up to you. The end result is that we-the-people are now without representation, and we are - again - at a point in history where revolution once more appears to be the only answer.The evidence is all there.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2017 Tessa Schlesinger


Tessa Schlesinger (author) on November 23, 2019:

You have a point! I do think, however, that with climate change, the internet, etc. that historical patterns may no longer apply.

More and more people are beginning to see the light (I hope).

Rupert Taylor from Waterloo, Ontario, Canada on November 23, 2019:

Hi Tessa

Friedman's theory could be called greedonomics; it succeeded only in creating a massive transfer of wealth from the poor to the rich.

It created an environment in which:

Banks knowingly sold people dodgy investments

Volkswagen lied about emissions to increase profit

Boeing cut corners to maximize profit resulting in 346 people dying

A pharmaceutical company raises the price of a drug by a factor of 56

In the United States it has meant that big business interests have bought and paid for the people elected to do the bidding of the general population, but they only do the bidding of the wealthy. The right wing has succeeded in making the word “taxation” toxic even in the minds of the people most likely to benefit from the services taxes pay for.

Revolution to end the inequity? I doubt it. The general population is kept docile by having just enough to get by. The real revolutions happened when people had nothing left to lose.

Julia Ann on September 01, 2019:

We also have Ronald Reagan to thank for all the homeless sleeping on the streets. I only regret that he isn't here to see what closing down all the mental institutions did to this country.

Philip Angelo on February 26, 2019:

I detested Reagan and Milton Friedman from the moment I came to "know" them. I was thirty three when Reagan was elected. I would tell people "can't you see this man wants to destroy FDR's New Deal and the middle class?". I didn't understand economics that well but my moral framework was given to me by my parents and Catholic Social Justice which promoted concern for others and viewed extreme materialism as immoral. My whole being felt revulsion for these two men. They promoted a false understanding of what it means to be a human being. They did not acknowledge that we are not only individuals but also social beings. They did not acknowledge what a tremendous influence one's environment has on each of us. It was like we were descending into the Dark Ages, based on ignorance.I read many economic books so that I could challenge these men intellectually instead of by my gut instincts.I now know that Friedman, with the help of right wing think tanks, conned people into thinking his economic beliefs were based on Natural Law. Our society has finally come to realize the damage done, unstable economy, inequality, deregulation that caused the bank crash and the environment degraded, our democracy turned into an oligarchy, as money now determines our politics, etc. It is common knowledge and being reported, but never reported why this happened. It was these two who played such a big role in the disaster.

Tessa Schlesinger (author) on December 28, 2018:

The 'prosperity' between 2000 and 2010 was for the top 1% of the population. For the bottom 70%, it was misery. In the 2009 census, it was found that 50% of Americans were living either on the poverty line or below the poverty line.

E Neiman on December 28, 2018:

The incredible prosperity of the 50s and 60s pales in comparison to the incredible prosperity of the 2000s and 2010s.

Tessa Schlesinger (author) on December 04, 2017:

Wakan Tanka? I had to google that! :)

Mr. Happy from Toronto, Canada on December 04, 2017:

"We-the-people seem to take quite a lot before we finally make our feelings felt!" - Yes, we do indeed put-up with a lot of bullshit before we actually make the tough choices needed. I can say this from a personal level, having lived through the 80s in Romania when things had gotten so bad that people were nearly freezing to death in their homes during winter time. There was very little food, queues for bread were hours long and the people at the end of the line got nothing because there wasn't enough.

It boggles my mind why people wait that long. I guess the reasons are most likely many and together mount-up to non-action. I'm more of the type that would rather die than turn a blind eye to matters relating to morality. That's just how I am but that also comes from experiences.

Well, thank You for the conversation. May Wakan Tanka guide your path.

Tessa Schlesinger (author) on December 04, 2017:

Interesting, Mr. Happy. :) We-the-people seem to take quite a lot before we finally make our feelings felt! :)

Mr. Happy from Toronto, Canada on December 04, 2017:

Haha, the pitchforks are out already. I remember some years ago, after the financial meltdown and the bailing-out of banksters, I made a mention in one of my articles here about Mayor Juan Manuel Sánchez Gordillo. He was a Mayor in the Spanish city of Marinaleda and in 2012 when people were desperate and angry, he lead food raids on supermarkets.

There is no trickle-down economics. I don't want to say that Freedman was outright lying. I like to think that he was just being delusional when he came-up with this idea.

"Ultima solutie, inca o revolutie!" - "Last solution, another revolution!" - This was the slogan on the streets of Bucharest after the 1989 Revolution in Romania. We had gone through a revolution and things were looking bleak for democracy and the rule of law so, people came-out on the streets again and that was one of our slogans: "The last solution another revolution!"

It was just this last Spring that the streets of Bucharest had a quarter million people out, night after night because the Ministry of Justice was about to pardon some committed crimes and amendments to the Penal Code of Romania were to be made. Basically, some politicians were going to get away with stealing and corruption. Having that many people out on the streets, in cities all across Romania, day after day with no end in sight, brought the government to change its mind. There were resignations as well.

Things can change but we need unity and organisation. As the saying goes: "Together United We'll Never Be Defeated!"

Kari Poulsen from Ohio on December 01, 2017:

Very nicely written article on the Neo-liberalism and the (nonexistent) "trickle down effect". I'm not over 70, but socialism is not a bad word to me. I still think we need another president like FDR. The Glass-Steagal Act, the Social Security Act and the National Labor Relations Act, plus many more, came to law while he was president. The current state of affairs sickens me.

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