The Chicago School of Economics has not only furnished the unbroken success of the hegemonic ideology of neoliberalism and the three great evils of the 1980s – Ronald Reagan, Maggie Thatcher, and Augusto Pinochet – it has also supplied us with l’idée fixe of behavioural economics. The belief is that when it comes to crucial decisions, almost all irrationalities miraculously disappear. It assumed that people think carefully about their options before they act. People make decisions in a cold and rational way based on a cost-benefit analysis. Historically, this idea has been supported by Adam Smith’s [ever illusive] invisible hand.
One of the key people advocating this ideology for decades was Alan Greenspan, the worshipped chairman of the USA’s Federal Reserve. Yes, in 2008, the demigod, Greenspan, told the US Congress that he was truly “shocked” that markets didn’t function as their neoliberal ideology predicted. The market had just failed to automatically self-correct as the market was supposed to. Greenspan was wrong, and we ended up with the global financial crisis. Today, many – and by no means all – know that relying on the crypto-religious catechism of neoliberal economics, a guiding principle for the elusive free market is, in fact, downright dangerous.
Marketing, for example, knows that we always look at the things around us in relation to others. Marketing – as we learn from Buyology – knows that we can be manipulated. Marketing also knows that we like to compare things with one another and that we like to focus on comparing things that are easily comparable. Simultaneously, we also avoid comparing things that cannot be compared easily. Knowing this makes “decoys” a handy tool for manipulating people. The so-called decoy effect serves as a point of comparison. Donald Trump may have been such a decoy. It made many voters vote for Joe Biden who might only represent a variation on a theme – capitalism – not much more. Yet, millions of Americans are happy to have replaced Donald Trump. Relativity helped many to make the right decision. And indeed, relative to Donald Trump, Joe Biden is relatively reasonable. We took the bait – the system of capitalism is fine.
Voters, just like consumers, can easily be manipulated as Trumpism has shown. It also means that many voters and consumers don’t have a very good handle on their own preferences and the political price they will have to pay. Some might even say we have the best politicians money can buy – some are actually free! In commercial marketing, the lure of the free is even greater than in politics. Offering something for free is as irresistible as it is manipulative. You can sell junk easily by offering free shipping. A free oil change on a car makes you buy it.
It works in politics as well. Make something free, and people want it. If salespeople want to sell more products, they offer something free, and they make this deal part of the purchase. On the upswing, society can use this notion of free to drive environmental policy. Suppose a government, for example, wants people to drive more electric cars. In that case, the state can not only lower the registration and inspection fees for electric vehicles, but it also can – with a bit of political will – eliminate the fees altogether. If the government does this, the uptake is almost automatically guaranteed. We had seen this already throughout 2020 when the Coronavirus testing was made free. People had the test, governments could intervene, and fewer people died unnecessarily. Yet, the problematic relationship between the social and economic perspectives can have other consequences.
The Christmas Dinner
Imagine you are at your mother’s house for the annual Christmas dinner. Your parents have laid on a sumptuous banquet. The lamb is roasted to a golden brown. The side dishes are homemade and exactly the way you liked them since you were a young boy. Your kids are thrilled. There are sweet potatoes with marshmallows, honey-baked ham, and a seafood platter. And your wife is grateful because her favourite pumpkin pie recipe has been chosen for dessert. The festivities continue late into the night. You have another glass of French champagne. Gazing fondly across the table at your mother, you rise to your feet and pull out your wallet and announce openly, Mom! for all the love you’ve put into this, how much do I owe you? As a stark silence descends on the guests, you wave a handful of 50-dollar bills towards your mother. Do you think two hundred dollars will do it? No, wait, I should give you two-fifty!
Suddenly, a glass of wine falls over. Your mother stands up red-faced. Your brothers and sisters give you angry looks and your teenage niece bursts into tears. Next year’s Christmas, it appears, will be a frozen ready-made dinner in front of the TV.
So, what has happened? Why does your offer of direct payment put such a muffler on the Christmas dinner? The answer is that we live simultaneously in two different worlds. At your Christmas party, these worlds collided. One world is a world where social norms prevail. The other world is where market norms make the rules. Both hardly mix.
Economists and sociologist have tested this. In one experiment, a circle was presented on the left side of a computer screen, and a box was presented on the right. Using a mouse, the task was to drag the circle into the square. Once successful, it disappeared from the screen, and a new circle appeared at the starting point. Participants were asked to drag circles into the box. It was measured how many circles people dragged in five minutes.
Some participants received money – for their work. They received $5 when they walked into the lab. At the end of their five minutes, the computer would alert them that the task was done. Because they were paid for their efforts, one expected them to apply market norms and work hard. People in other groups had the same task. Crucially, their reward was much lower. Some got 50 cents in one and others 10 cents in another experiment. The expectation was that market norms would win the day.
Finally, there was a third group. Here, the task was a social request. People were offered nothing in return for their work. No money was mentioned. It was merely a favour. It was expected that they would apply social norms. Here are the results of the experiment:
- Those who received $5, dragged on average 159 circles.
- Those who received 50 cents, dragged on average 101 circles.
As expected, the more money people made, the more they were motivated and work harder. But what about those who did not get any money? Neoliberalism would assume that they worked less than the ones who got the monetary payment. Yet, the result showed that on average, they dragged 168 circles. This is more than those who got 50 cents and more than those who received $5.
Surprisingly for neoliberalism, people worked harder based on social norms and not due to monetary or market conditions. Social norms over-turned the power of money. This simply cannot be. It contradicts neoliberalism. Yet, people will work more for a social or political cause than for hard cash.
A social organisation had asked lawyers if they would offer less expensive services to needy unemployed people, at $40 per hour. The lawyers declined. Then one organiser had another idea. She asked lawyers whether they would offer their services for free to the needy unemployed. Overwhelmingly, the lawyers said yes. Why did this happen? Contrary to neoliberal assumptions, how on earth could no money be more attractive than $40 per hour?
Here is the clue: once money is mentioned, people use market norms, and when an offer is below market value, they decline. When no money is mentioned, people use social norms. They are willing to volunteer their time. In short, once market norms enter our considerations, social norms disappear.
This is the ideological side of neoliberalism. Neoliberalism is not only about destroying trade unions, the privatisation of everything, the annihilation of the welfare state, taxes for the poor – not the rich – political conservatism, etc., it is also about the destruction of the social world. Habermas calls this the structural transformation of the public sphere. It means the public domain has been truly commercialised. News and information, for example, are no longer a public good for the benefit of society but a commercial good to be sold and, of course, made sellable.
As German philosophers, Edmund Husserl and Jürgen Habermas would say, the replacement of social norms with market norms represents the colonisation of the lifeworld. Neoliberalism infiltrates those parts of society that are not already dictated by the market (economics) and neoliberalism (ideology). Habermas and Husserl see the lifeworld as a shared common ground of human understandings and communalism. This includes social and moral values which are developed through face-to-face contacts inside non-commercial groups, families, and communities.
The moment market norms enter the picture, social norms are pushed out, and our lifeworld is colonised. Neoliberalism knows this and, as a consequence, works relentlessly towards the destruction of the social world. The ideological goal of neoliberal demagogues is to switch our social and moral norms towards market norms – the eradication of the lifeworld by replacing solidarity with competition. To master that, neoliberalism focuses very strongly on money as the ultimate object. Neoliberal economists know that the social lifeworld dies whenever money is mentioned. Hence the relentless monetisation of everything and eventually of human life.
So far, we still live in the two worlds mentioned above. We live in a lifeworld characterised by social relationships, but we also live in a market-driven world characterised by commercial exchanges. We sell our labour to make a living, but we don’t sell our children. Children are seen as being part of the social world, while work is locked into the commercial world.
On the ideological side, capitalism has lost some fights (child labour, slavery, etc.) but has won others. Still, neoliberalism is about switching society from social to market norms. Capitalism only partially lost the fight over a state-run health service in the USA’s Affordable Care Act (2010). As a consequence, Americans still pay more for health care than people in other advanced nations while receiving worse health outcomes. By 2019, 30 million Americans had no or insufficient health cover. In short, market norms still dominate health care in the USA.
Yet, there is worse to come. Sociologists conducted a follow-up experiment on the issue of social versus market norms. It delivered even more discomforting evidence. It shows that when both social vs market norms collide, social norms can be replaced for a very long time. In other words, when neoliberalism is able to eliminate social norms like solidarity and replaces it with, for example, competition based on markets, the replacement stays with society for years to come.
This tells us that neoliberalism, once successful in replacing our social rules of the lifeworld, does so almost permanently. In short, society’s human relationships are not easy to rebuild once neoliberalism has destroyed them. Once a natural habitat is concreted over for a parking lot – once neoliberalism’s market undermines social norms – these norms will, just like the natural habitat, rarely return. As soon as neoliberalism has won and we have lost, it will be hard for human society to win back the lost territory of humanity.
This has severe implications for the world of work as well. Increasingly, the previously established separation between the sphere of work and the sphere of leisure has become hazy. At least in the white-collar service industry, many managers who run workplaces and corporate offices want us to think about work while we are sitting in busses and trams, driving home, and even while we are taking a shower. Corporations are happy to give us laptops, free(!) Internet access, cell phones, and so on to slowly but surely destroy the traditional gap between corporate workplaces and private homes.
The Coronavirus induced push to the home office – which is rather often the kitchen table – only accelerates this process. Relentlessly and often unnoticed, the secret neoliberal code of replacing human life and the lifeworld with commercial market imperatives runs in the background slowly eating away the human foundation of a humane society. Finally, in his exquisite book Foundations of Economics, the former Greek Finance Minister Yanis Varoufakis offers the following case:
A major finding of one study was that the quantity of blood donated was higher in countries where no money was offered to those who gave blood. Why on earth are people more reluctant to give blood when they are offered money for it? It makes no sense to those thinking in terms of the neoliberal economics. For if there is an opportunity cost to giving blood – inconvenience, slight pain, the needle – surely people ought to be encouraged by payment.
Even if there are many altruists who would give blood regardless of payment, there is no explanation as to why the offer of payment discourages them from giving blood. According to neoliberalism, this should not exist – Greenspan would be shocked again.
To finish, police officers, firefighters, doctors and nurses currently fighting the Coronavirus don’t die for their weekly pay. Instead of neoliberalism’s cost-benefit analysis, it is the social, human and moral norms, the pride in their professional work and a deep sense of moral duty that motivate them to give up their lives and health to save the lives of thousands of people.
In conclusion, if we contemplate on how market norms have gradually eroded our lives in the past few decades – with a relentless and never-ending prominence of higher salaries, more income, more spending, and more Affluenza so that we can buy more things we don’t need with money we don’t have to impress people we don’t like or even know, we may find ourselves in a situation when we realise that a return to some of the old social norms might not be bad after all.
This post was originally published on Radio Free.