Neoliberalism: It's Bad History, It's Bad Science, and It Doesn't Work -- Let's Read "Growth of What?" by L. Hunter Lovins (July 2023)

Neoliberal, business-as-usual capitalism has created a planetary emergency. The triple threats of the climate crisis, inequality, and biodiversity loss, if not reversed, will drive civilizational collapse. The inequality created by industrial capitalism already causes appalling death rates among the millions of slum dwellers in the megacities of Asia, Africa, and Latin America. Inequality now concerns even the apologists of capitalism. The loss of the planet’s wild spaces and intact ecosystems is spreading pandemics.

Capitalism, as currently practiced, has brought our world to the verge of collapse, made us all poorer and less equal, and failed to make us happy.

It’s time to ask what will.

- L. Hunter Lovins

There is a spectre haunting the world.

It’s more insidious than the inescapable heatwaves smothering the continents in its embrace, the encroaching quiet and growing emptiness of the Earth’s forests and oceans, the irrecoverable consumption of finite fossil fuels, or the dull ache of hunger shared by far too many across the planet. It even goes beyond the dragons that rule Spaceship Earth, who sit upon thrones of unimaginable wealth that they have stolen and hoarded away for themselves.

There is a spectre haunting the world, and its name is neoliberalism.

Now, I rarely venture into the realm of politics and show my true colours with flourish, but I will not shy away in criticizing this catastrophic ideology and its role in compelling contemporary civilizational collapse.

I am not embellishing facts or promoting any sort of political agenda when I say this: inequality is a principal driver of societal collapse, both historical and present. Neoliberalism just happens to be the most prominent and pervasive form of extractive “winner-takes-all” exploitation found all across the world today, and continued mindless adherence to this faith will result in our downfall.

Just as Eisenhower attempted to warn us about the MIC, Carter inadvertently warned us about this problematic path we’ve taken in his extraordinary 1979 Crisis of Confidence speech over four decades. To quote:

"We are at a turning point in our history. There are two paths to choose. One is a path I’ve warned about tonight, the path that leads to fragmentation and self-interest. Down that road lies a mistaken idea of freedom, the right to grasp for ourselves some advantage over others. That path would be one of constant conflict between narrow interests ending in chaos and immobility. It is a certain route to failure."

- U.S. President Jimmy Carter

It is an economic doctrine built upon the false foundations of both bad history and bad science, as articulated so well by L. Hunter Lovins in her piece titled “Growth of What?”. Beyond her litany of professional achievements and other written works, what Lovins has put together here in this article is one of the most succinct, scathing, and sensible summaries of neoliberalism that I’ve ever seen.

In the dog days of summer, where tempers flare and anger boils over, I’d like to direct this rage towards a more righteous cause. There is still joy and purpose to be had in understanding the shape of the neoliberal world that its architects have wrought. Besides, I’m told that knowing is half the battle when it comes to killing the monsters of our own creation before they completely undo everything we cherish dearly.

If you’re interested in reading more material like this, then you're in luck; this essay is actually only one short chapter in one of the Club of Rome’s latest publications: Limits and Beyond: 50 years on from The Limits to Growth, what did we learn, and what’s next? (2022). I strongly recommend checking out a copy for yourself!

Myth’s Note: First, forgive me for spelling errors, transcribing a physical copy takes some time; no digital copies of this essay exist online. Second, for the sake of improved legibility, structure, and pacing of today’s book excerpt, I’ve made a few modifications as follows: all quotes are italicized, and any new additions in the form of [brackets] are there to help separate the article out into three distinct sections. And third, due to the sheer number of citations used by Lovins, I’ve kept all footnotes intact, but I have not included her full bibliography; I’ll share that with anyone who makes a request.

And so, without further ado, please enjoy.

Growth of What? - L. Hunter Lovins

-

The crises facing us, predicted in the 1972 book The Limits to Growth are the result of exponential growth in population, industrial activity, pollution, and destruction of ecosystems.

Updates of the old The Limits to Growth collapse graph, plotting on top of it the actual data from 1972 to 2000,1 show we’re still on track for collapse.

In 2021, Gaya Herrington brought the numbers up to date, with the same conclusion.2 The economist and aphorist Ken Boulding testifying on the seriousness of these projections remarked that, “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.”3

Much of today’s economic “growth” is speculation in the capital markets, financial transactions delivering no real economic benefit, or the conversions of one form of capital (natural capital in the form of minerals in the ground or timber on the hills) to money and stuff. World Bank Chief Economist Herman Daly warned that this is just bad accounting. It also risks life on earth.4

Undifferentiated growth is the ideology of cancer cells and neoliberal economists. The rest of us ask, growth of what? To solve the existential climate crisis5 we need more solar panels, powering more electric vehicles. We need a lot more regenerative agriculture sequestering carbon in the ground far faster and more cheaply than any mechanical form of carbon capture could ever achieve. People living on the margin need more stuff and material comfort. At the same time, those in the “overdeveloped world” might be happier with less junk. Both want clean water, healthy air and beauty in their lives, fewer oil wells, but far more wind turbines, more gardens and less industrial agriculture, more education, and health. Regenerative growth, if intelligently provided, does not cost the earth.

Dana Meadows, lead author of The Limits to Growth, believed that to avoid collapse we need to distinguish more and better. She observed,6

"People don’t need enormous cars; they need respect. They don’t need closetsful of clothes; they need to feel attractive and they need excitement, variety, and beauty. People need identity, community, challenge, acknowledgement, love, joy. To try to fill these needs with material things is to set up an unquenchable appetite for false solutions to real and never-satisfied problems. The resulting psychological emptiness is one of the major forces behind the desire for material growth. A society that can admit and articulate its nonmaterial needs and find nonmaterial ways to satisfy them would require much lower material and energy throughputs and would provide much higher levels of human fulfillment."

“Cheater capitalism” or “crapitalism” ignores such distinctions. It also has three fatal flaws:

[1] It’s bad history,

[2] It’s bad science,

[3] It doesn’t work.

To frame a new approach to economics, it’s important to understand where the system we seek to replace came from, what’s wrong with it, what’s worth preserving, and most of all, the future we want.

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[1] It’s bad history

Early economic theorists never envisioned a global, unregulated market. They understood that economies were nationally bounded; nations trade with each other. They might charter a corporation to do the haggling, but these entities (now endowed with “personhood”) were understood to be agents of nations, nothing more.

The real Adam Smith, not the caricature of Economics 101, never saw himself as an economist. His Chair at the University of Glasgow was in moral philosophy, and from it he denounced the gluttony of the rich as “unproductive labour.

Mishko Hansen, former investment manager, now researching ethical issues at the University of Cambridge, points out:7

"Smith was writing not about how economic growth was going to lead to happiness or wellbeing, but rather how a country became economically prosperous, and hence militarily powerful. He believed that people living in conditions of relative freedom and equality could be very happy with almost nothing in the way of material goods (i.e. his example of North American Indians), but that this could lead them to being subjugated and made miserable by more militarily powerful forces.

Smith was then, contrary to how he is usually (mis)interpreted, writing about how people can live in conditions of peace, freedom, and justice—which he believed were the prerequisites to happiness—and about the economy as a means to this, rather than an end in itself."

Smith rejected the notion that greed was good, stating:8

"Hence it is, that to feel much for others, and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consists their whole grace and propriety."

How did Smith come to be so misread?

To serve ideology. In 1947, 36 men met for ten days in Switzerland to frame the economic system they believed would deliver prosperity. Ludwig von Mises was appalled at what National Socialism had done to trash Europe in World War II. Friedrich Hayek feared the rise of Soviet collectivism in the east. Milton Friedman championed the freedom of the individual as the only legitimate actor to make economic decisions.

They called their ideology neoliberalism, restoring the irrefutable truths of the “liberal economics” set forth by Adam Smith.

The narrative is appealingly simple: You, as an individual, are the only legitimate economic actor. You’re greedy, but that’s okay because the market is perfect,9 and in a market, you against me will aggregate to the greater good for all. Those who deliver value should win. It’s just how the world works.

Neoliberals believe that maximizing individual desires is the force that drives maximization of what economists call “utility.” They tell us:

The sole goal of the economy and business is to generate financial wealth,

The freedom of the individual (person or corporation) is the primary societal value,

Government should be small, protecting individuals and their private property.

The fact that eight men now have as much wealth as the bottom half of humanity10 neoliberals say is not only inevitable but entirely acceptable.11 ,12 Are people poor or hungry? The market will fix it. Is the economy suffering? Implement greater austerity.

They drew from the Calvinist belief that being rich was a sign of being blessed.13 This framing guides politicians to cut taxes, especially on corporations and the wealthy.14 If wealth is the sign of success, shouldn’t we promote and increase it? Milton Friedman argued that the only legitimate goal of business is to maximize shareholder (owner) value in the short term.15 Any other action by a company is philanthropy at the expense of the corporate owners.16

How, then, did this wonkish ideology, flying in the face of New Deal success, conquer the world? The answer is story and strategy. Neoliberalism’s storyteller, novelist Ayn Rand, wrote: “Capitalism was the only system in history where wealth was not acquired by looting, but by production, not by force but by trade, the only system that stood for man’s right to his own mind, to his work, to his life, to his happiness, to himself.”17

Her books were credited by Alan Greenspan, the Tea Party, a Secretary of State and a US President as foundational. Her dismissal of the poor as parasites and celebration of naked greed, described as the philosophy of a psychopath, have been read by one third of Americans.18

The neoliberals helped create the Nobel Prize for Economics and got eight of its members as winners. They advised essentially every head of state on the planet. Three of them became heads of state, others central bankers.19

The strategy solidified in 1971. Lewis Powell, a corporate lawyer, was asked by the head of the US Chamber of Commerce to detail how business could relegitimize itself after the sex, drugs, and rock and roll of 1960s. Powell penned “Attack on the American Free Enterprise System”20 as the strategy corporate America should use to enshrine neoliberalism. It targeted 30 needed transformations, from local school districts to local judges and local and national media.

Powell stated,21

"Business must learn…that political power is necessary; that such power must be assiduously cultivated; and… used aggressively…without embarrassment… Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations."

Powell got that funding, aggressive use, and consistency of action. Foundations and donors assembled many millions to implement Powell’s strategy.22 The Koch brothers founded and endowed the Heritage Foundation, Cato Institute, American Enterprise, Hudson, Hoover, and others. They created and endowed such organizations as the Pacific Legal Foundation to embed the concept of tax cutting and protection of property rights into California law. They groomed a young actor named Ronald Reagan for the governorship of the state.23 The American Legislative Exchange Council (ALEC) wrote model legislation for newly elected republicans. The Federalist Society and the Judicial Crisis Network identified lower-court judges to climb the ladder to the Supreme Court.24 The best marketing firms massaged the neoliberal principles, sold them and created the intellectual architecture that propelled market fundamentalism as commonplace and neoliberal ideology to dominance. And over the last 50 years, they influenced the systematic dismantling of American democracy25 and government policies around the world that were designed to protect the wellbeing of people.26

In 1980, with the election of Ronald Reagan in the US and Margaret Thatcher in the UK in 1979, neoliberalism won. It became the economic ideology. In the Reagan Era of the 1980s, deregulation spread to many countries. Corporations assumed greater control and gobbled up smaller companies. With the fall of the Berlin Wall, and the collapse of the Soviet Union, neoliberalism became global.

Accounting scandals were predictable results.27 ,28 ,29 Financialization swept the economy.30 The orgy of outsourcing and offshoring jobs, costs, and profits cost millions of American jobs.31 Because neoliberals reject higher wages, taxes to support government programs and regulations of any sort,32 their systematic dismantling of government protections33 enabled the “Great Recession” of 2008 to evaporate $50 trillion and 80 million jobs.34 It sowed the seeds of the 2016 Electoral College victory in the US of a reality TV star, Brexit in the U.K, and nationalist populism across Europe.

Neoliberalism now underpins most economic policies, even in countries nominally labeled communist. It forms the basis for economics courses the world around, and if you’ve had one, this stuff is in your head.

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[2] It’s bad science

Smith and his compatriots never believed themselves to be scientists. But their successors did. Professor Robert Nadeau has described the physics envy of later economists:35

"Neoclassical economic theory was created by substituting economic constructs derived from classical economics for physical variables in the equations of a soon-to-be outmoded mid-nineteenth century theory in physics. The mathematical formalism that resulted from these substitutions was predicated on unscientific axiomatic assumptions that remained essential unchanged in subsequent extensions and refinements of neoclassical economic theory…

The strategy used by the creators of neoclassical economics was as simple as it was absurd—they wrote down the equations … and substituted economic variables for the physical variables. Utility was substituted for energy, the sum of utility for potential energy, and expenditure for kinetic energy. The forces associated with utility-energy were represented as prices and spatial coordinates described quantities of goods. In the mathematical formalism that resulted from these substitutions, the economic actor is presumed to operate within a field of force identified, in both figurative and literal terms, with energy."

Neoliberalism’s belief that markets are superior to any alternative is based on a neo-Darwinist theory that selfish individuals acting in their own selfish interests, fighting it out, will always deliver superior outcomes.

David Sloan Wilson observes: 36

"Evolutionary theory’s individualistic turn coincided with individualistic turns in other areas of thought. Economics in the postwar decades was dominated by rational choice theory, which used individual self-interest as a grand explanatory principle. The social sciences were dominated by a position known as methodological individualism, which treated all social phenomena as reducible to individual-level phenomena, as if groups were not legitimate units of analysis in their own right (Campbell 1990). And UK Prime Minister Margaret Thatcher became notorious for saying during a speech in 1987 that “there is no such thing as society; only individuals and families.” It was as if the entire culture had become individualistic and the formal scientific theories were obediently following suit."

People who believe the world is a nasty, brutish, competitive place are quick to cite Darwin’s misquoted “survival of the fittest.” By which they mean that the strongest, toughest, meanest individuals will triumph, because this is the way of nature.

What Darwin actually wrote about was the “survival of the best adaptive.” In 1909, he stated: 37

"The small strength and speed of man, his want of natural weapons, etc., are more than counterbalanced by his intellectual powers, through which he has formed himself weapons, tools, etc., and secondly by his social qualities which lead him to give and receive aid from his fellow-men."

Darwin also observed:38

"…that any animal whatever, endowed with well-marked social instincts, the parental and filial affections being here included, would inevitably acquire a moral sense or conscience, as soon as its intellectual powers had become as well, or nearly as well developed, as in man. For, firstly, the social instincts lead an animal to take pleasure in the society of its fellows, to feel a certain amount of sympathy with them, and to perform various services for them."

Biologists now know that nature is based more on cooperation than competition.39

The best of modern science tells us that the neoliberal narrative is just bad science. In his 2010 book, Driven to Lead: Good, Bad, and Misguided Leadership,40 Dr Paul Lawrence sets forth what he calls Renewed Darwinism, a correction to neoliberal dogma. Yes, Lawrence says, there is a human drive to acquire and defend, but, he adds, as Darwin noted, humans have an equally powerful drive to bond. They also have a drive to comprehend, to create, to innovate. To be happy, says Lawrence, to be truly fulfilled, humans need to meet each and all these drives.

The evolutionary biologists, the archeologists, the anthropologists, and the geneticists agree that caring is baked into what it means to be human; it was that which enabled prehumans to survive. Fossil records show that early hominids were not fearsome warriors, they were prey animals, dependent for their survival on working together. They were naked, their claws not worth much, their teeth puny. “Lacking size or weapons, this early human species most likely used brains, agility, and social skills to escape from predators,” says Dr. Robert Susman, author of Man, the Hunted.41

Prehumans faced species extinction on several occasions, their numbers reduced to a breeding population fewer than the now endangered gorillas.42 Yet we survived lions, bear-sized hyenas, volcanic eruptions, and ice ages because we formed tribes, and were creative, entrepreneurial creatures.43 We’re storytellers, meaning-makers. We’re puzzle-solvers and communitarians

Dr. E.O. Wilson, one of the planet’s most famous biologists, states that we are the dominant species on earth now only because we are inherently social beings: “super-cooperators, groupies of the group, willing to set aside our small, selfish desires and I-minded drive to join forces and seize opportunity as a self-sacrificing, hive-minded tribe.”44 To Ed Wilson, group and tribe formation is a fundamental human trait.45

These early people were kind and moral, prone to empathy and collaboration, quite the opposite of the neoliberal narrative. We know this from the fossil records that show that the tribe of prehumans that survived cared for old, toothless men, and those who had disabilities.46 If you’re in it only for yourself, you abandon those who slow you down, who take food that could sustain the more able. Why should old fossils influence our understanding of economics? The DNA found in those bones is in you. These were our ancestors.47

Traits like caring and empathy, says Wilson, are hardwired into us. These decision-making tools guide us towards the sorts of cooperative outcomes we call “morality.” We behave in ways that are genuinely altruistic because it is in our genes to benefit the group, not the individual. We aren’t all kind and loving, Wilson argues, because these behaviors are “prepared” and ready to be developed as part of our genetic makeup, but the implementation of them is learned.48

How then do we train our young business people? Economists are fond of saying that emotions cloud the mind of rational, utility maximizing Homo economicus. Business schools, economics classes, and corporate management drive caring out of us, tell us that rational people only maximize and defend their possessions, that wealth is the measure of worth. But this denies half of what makes us human. Education and socialization can make us more like the economic model of perfection but only by making us miserable. What has for millennia been critical for human survival is also essential to making us happy.

Dr. Michael Pirson, founder of the Humanistic Management Network,49 is countering the neoliberal pathology with a global network of scientists and academics using the best of modern science50 to emphasize respect for human dignity. This approach is spreading, helping organizations become caring communities to produce wider benefits.51 Positive Psychology practitioners52 study what makes people happy, fully functioning humans, not what makes them neurotic and self-destructive. Biologists explore the “wood wide web,”53 the notion that in nature organisms communicate and cooperate more than they engage in cutthroat competition. Policy officials at OECD and in various national governments develop Better Life Initiatives,54 move beyond GDP,55 and create happiness indexes.56

The best businesses operate on this basis. When Paul Polman, CEO of Unilever, rejected a lucrative offer from corporate raiders to take over his company, he replied that his obligation was not to owners, but to the world as a whole.57 “Do you run this for society or not?” Polman queried,58 answering, “The real purpose of business has always been to come up with solutions.” Unilever stock soared 300% under his leadership, the raiders’ stock suffered a 124% decline.

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[3] It doesn’t work

Neoliberal, business-as-usual capitalism has created a planetary emergency.59 The triple threats of the climate crisis,60 inequality,61 and biodiversity loss,62 if not reversed, will drive civilizational collapse.63 The inequality created by industrial capitalism already causes appalling death rates among the millions of slum dwellers in the megacities of Asia, Africa, and Latin America.64 Inequality now concerns even the apologists of capitalism.65 The loss of the planet’s wild spaces and intact ecosystems is spreading pandemics.66

Neoliberal mythology aside, there are no free markets. Classical economists identified 18 aspects that must characterize free markets. None are present in what we call markets today.67 Market theory assumes that all actors have perfect information. Was this ever true? There are assumed to be no barriers to entry, or to exit. There must be equitable access to capital. Few assumptions could be further from the truth today. Adam Smith was clear that markets only serve the common good when no buyers or sellers have enough power to affect market outcomes, and when all players are moral actors. Seriously?! In most markets, neither of these conditions exists. Antitrust policies, however poorly implemented by nations, are nonexistent at the international level. Digital platforms like Google and Facebook (which along with Netflix and Amazon are called FANG) are creating powerful new international monopolies that drive “winner takes all” outcomes, economically, and increasingly, politically. 68

Market ideologues even reject policies to address monopolies as interference with the free operation of the market. But without them, markets cease to be anything but a cruel fraud. When companies become more powerful than most nations, change is needed. Unless we reduce national and international inequality, control monopolies, and oligopolies and ensure that we live within the earth’s means, capitalism itself is at risk. As businessman Ray Anderson asked, “What’s the business case for ending life on earth?”

Market forces are powerful, but they must be managed. Industry apologists suggest that all the economy needs is government to get off the back of business. That’s like a bad light bulb joke: How many economists does it take to screw in a more efficient light bulb? None, the free market will do it.

Except it won’t.

Regulations that ensure the fair operation of markets safeguard public services. Ball bearing factories and local restaurants need little management outside of rules to ensure fair employment and health and safety. But zealotry about evil regulations serves us badly. What one set of players label “burdensome” are precisely what another, typically less powerful set, calls “protection.”

Well-managed markets can empower the new narrative of an economy in service to life. Markets make good servants, but bad masters. They’re a terrible religion.

Bernard Lietaer points out that Homo sapiens has: 69

"…this odd tendency to create a world, forget that we have created it, and then throw up our hands and proclaim our inability to change the system. Capitalism (and socialism for that matter, which is equally unsustainable) is not a set of natural laws that Adam Smith discovered. It is our creation, constantly evolving and changing."

People hunger for a sense of who they are, where they belong and what they believe in. Think about it. You are here because your distant ancestors cared more for the good of the whole, than any one of them cared for themselves. It’s literally in your DNA to care, and to act to create a greater good.

Capitalism, as currently practiced, has brought our world to the verge of collapse, made us all poorer and less equal, and failed to make us happy. It’s time to ask what will. And the answer is not undifferentiated growth.

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If you enjoyed today’s piece, and if you also share my insatiable curiosity for the interdisciplinary aspects of “collapse”, please consider taking a look at some of my other written and graphic works at my Substack Page – Myth of Progress. That said, as a proud member of this community, I will always endeavour to publish my work to r/collapse first.

My work is free, and will always be free; when it comes to educating others on the challenges of the human predicament, no amount of compensation will suffice.... and if you've made it this far, then you have my sincere thanks. Here's one last reward for your troubles!