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Greetings, Yves here. Richard Murphy highlights a crucial observation: fear, rather than the anticipated advantages of so-called magical markets, has emerged as the primary argument in favor of neoliberal policies. Remember, free markets were once praised for generating prosperity and freedom that exceed those offered by more regulated economies or stronger social safety nets, especially regarding labor rights.
Before the full adoption of neoliberalism, many individuals experienced significantly less anxiety due to real wage levels that allowed even blue-collar workers to afford a home, a vehicle, and for a spouse to stay home. In my youth, adults could usually find new employment quickly if they lost their jobs, often at similar pay rates.
Literature from the 1970s began reflecting growing resentment toward workers’ rights and income levels, particularly targeting unionized workers who were sometimes labeled as “uppity.” In his efforts to combat inflation, former Federal Reserve Chairman Paul Volcker famously carried an index card to track average construction wages. As William Greider discussed in his book, *The Secrets of the Temple*, Volcker made it clear he sought a decrease in wages as proof he had diminished labor’s bargaining power: “I want unions to get the message.”
The fear-centric narrative that Murphy describes logically follows this trajectory. Neoliberalism fundamentally aims to redistribute power and wealth from ordinary individuals to elite capitalists.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and Director of Tax Research LLP. Originally published at Funding the Future
Neoliberalism once promised us prosperity, security, and freedom through the magic of markets. However, it increasingly delivers insecurity instead. What remains to offer? Fear, plain and simple.
We are bombarded with fears surrounding government debt. Fear of the bond markets. The idea that governments must maintain “fiscal credibility,” often at the expense of higher taxes, diminished public services, reduced living standards, and fewer job opportunities.
Martin Wolf’s recent commentary in the Financial Times exemplifies this mindset. However, the issue transcends individual opinions; it represents an economic ideology that places satisfying financial markets over addressing human needs.
Part of this argument hinges on the household analogy: the notion that governments must financially manage themselves similarly to households. Yet, a currency-issuing government is not a household. This fundamental misunderstanding leads to disastrous economic policies.
In this video, I discuss how neoliberalism increasingly thrives on fear due to its failure to deliver promised prosperity. However, as insecurity becomes commonplace, the effectiveness of such threats diminishes.
We must shift our political goals to focus on freedom from fear.
This entails ensuring economic security, adequate housing, fulfilling work, healthcare, stability in old age, and protection from climate change.
Is it possible to create an economics that prioritizes these needs over pleasing financial markets? That is the fundamental question.
This is the audio version:
This is the transcript:
It appears we have reached a stage where neoliberalism has only fear left to offer us. Fear that government debt will collapse upon us. Fear that financial markets will retaliate if we defy them. Fear of job loss if we challenge the status quo. Fear that we will fail if we do not consume enough. Fear of retribution if we ask too many questions, risking our jobs and branding us as outsiders deserving of abuse. Fear has become the mechanism by which the economic system demands our compliance.
This fear is pervasive. In a recent article, Martin Wolf stoked anxieties in the Financial Times, insisting that Labour must enforce significant fiscal tightening as part of its economic strategy. But what does that mean? It translates to rising taxes under the notion that spending is unsustainable.
His assertion emphasizes that public debt must decrease to create what he calls fiscal headroom, which translates into a reserve fund for potential future crises. Yet the core takeaway is clear: bond markets must be appeased.
Let’s be explicit: Wolf’s suggestions mean that everyday people will foot the bill for this fear-driven agenda. He implies that income tax and VAT increases should be anticipated without offering any additional benefits in return. This is precisely his forecast.
Moreover, the fiscal tightening he advocates would intentionally hinder the economy. We would suffer as jobs and living standards decline due to the very policies he endorses. And who will suffer the consequences? It will be us.
We will be sacrificed for the new deity: the market.
We are told that governments must appease this deity.
We must comply.
Failure to do so invites fiscal punishment upon us.
The City has become the master that governments must placate, sacrificing us in the process.
Democratic choices are constrained by alleged market necessities, even when such necessities are unfounded.
This mirrors historical fears, where obedience was demanded by priests and emperors, threatening dire consequences for disobedience. This fear-based reasoning is echoed in the Financial Times today. We find ourselves sacrificed on the altar of a balanced budget.
Fear shapes our daily economic lives. People dread job loss, despite dissatisfaction with their work. Debt amplifies insecurity about housing and maintaining living standards. Consumption is equated with success, while advertising continually defines what success looks like, turning life into a competition full of intimidation.
However, the promised rewards of this system have evaporated. Real incomes are stagnant. We are not experiencing the promised prosperity. Many can no longer afford what they desire, and housing has become out of reach for growing numbers, particularly the younger population. Parents worry about their children’s futures, and some express concern for their grandchildren too. Climate change only adds layers of insecurity.
It is essential to acknowledge that it is neoliberalism that breeds this fear. It once offered prosperity through markets and competition, claiming consumption would lead to fulfillment and participation would ensure economic security. Yet, these promises are failing on their own terms.
The foundation of neoliberalism rests on a fallacy—the household analogy. I have examined this before and will likely revisit it. Individuals like Martin Wolf, a senior economic commentator at the Financial Times, subscribe to this analogy, misinterpreting government finances as akin to household budgets.
Households depend on income or loans to spend, while a currency-issuing government can create money as needed when it spends, putting it into circulation. Taxation simply withdraws some of that money post-spending. Relying on the household analogy leads to erroneous policies due to a fundamental misunderstanding of government’s role in the economy, which Martin Wolf clearly lacks.
Let’s highlight the main point: the government exists to fulfill the needs of citizens. Political considerations cannot reduce to mere cash flow management. People require housing, healthcare, training, and economic security. Furthermore, the government must shield citizens from both economic and physical threats. It should protect us from inflation, especially rooted in global conflicts, yet it fails to do so.
The government also has the obligation to protect us from powerful entities seeking to exploit us. A tidy government balance sheet cannot replace these responsibilities, yet that is the message from individuals like Martin Wolf and the Financial Times.
Why is fear being amplified at this moment? What prompts comments from individuals like Martin Wolf? My hypothesis is that these stakeholders recognize that the neoliberal system they have supported is faltering. Neoliberalism can no longer convincingly tout its successes. Its once-optimistic promises of prosperity have come to an end. Asserting that abandoning the system would worsen conditions now necessitates ramped-up fear tactics, which reflect what we are currently witnessing.
However, the arsenal of threats is running thin. When insecurity permeates every facet of life, fear tactics lose potency. Market punishment appears less intimidating when the current system already inflicts harm—evident in issues like climate change and food and energy supply challenges. Why should we fear market retribution now? The market is failing us.
Many can see that the neoliberal framework itself is a barrier that we must confront. Amplifying fear now might reveal not their strength, but rather the vulnerabilities of those who uphold this system. The real question is whether their fear-mongering showcases their weaknesses while indicating the potential for collective empowerment.
The solution we need is freedom from fear. Neoliberalism fosters fear. We need a political framework that emphasizes liberation from that fear.
Economic policies should not be centered around appeasing financial markets. Instead, they must focus on providing citizens with housing, meaningful employment, healthcare, and stability in old age. We need protections against climate change and economic instability.
Politics must establish whose needs and interests it serves. A commitment to freedom from fear can spark imaginative solutions for a better future. This vision inspires my current writing project—a book titled *How to Govern: Creating the Courageous State*. I anticipate its release early next year and am actively engaging with publishers. My core message is this: we can achieve a new political and economic landscape and live free from fear, which is the mission behind this platform.
