From the American Dream to the American Nightmare: How neoclassical neoliberalism is destroying people, society and democracy. The example of the USA

Novum publishing, April 16, 2024

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Summary

It is thanks to economic neoclassicism, neoliberalism from Hayek to Milton Friedman, that income and wealth disparities are constantly increasing not only in the Western world compared to the global South, but just as dramatically in the countries of the West itself. At a global level, this development is leading to the majority of the world breaking away from the 30-year hegemony of the USA - the center of neoliberalism - and the world moving towards multipolarity; in the countries of the West itself, neoliberalism is leading to a strengthening of right-wing populist to far-right parties. This trend is generally attributed to the economic disparities caused by neoliberalism, i.e. economic and materialistic. However, this explanation clearly falls short: in this logic, the left-wing parties, which stand for material equalization, should be experiencing an upswing, not the right-wing populist to far-right parties. In short, the economic and at the same time purely materialistic explanation overlooks something very important: neoliberalism not only leads to material hardship, it not only works on an economic level, but also has destructive effects on a social level - societies are disintegrating - and on the level of people's psyche: The dissolution of the social leads to a serious loss of meaning for individuals. It has even been proven that people can cope with material hardship, but that the loss of meaning in life is unbearable for them in the long term - loss of meaning cannot be compensated for by anything in the long term, especially not by ever more consumption and material wealth. The meaning of life is the real life force, and neoliberalism destroys it by destroying not only a lively, innovative, creative economy, but also people's social relationships. Margret Thatcher, the icon of neoliberalism and thus also of Reaganomics, put it in a nutshell: "There is no such thing as society! There are only men, women and families!"

The following questions need to be answered!

1.????? Why is meaning an irreplaceable elixir of life for people?

2.????? What does individual meaning have to do with society?

3.????? How does neoliberalism destroy society?

4.????? A US-American tragedy

5.????? USA, what next?

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1.????? Why is meaning an irreplaceable elixir of life for people?

After Sigmund Freud and Alfred Adler, Viktor E. Frankl is the youngest of the famous triumvirate of the Viennese school of psychiatry. Simply speaking, Frankl concedes that, according to Freud, man has a will to lust and, according to Adler, a will to power, but points out that what makes man human in the first place is his will to meaning. As a meaning-centered being, man looks beyond his natural drives and instincts, his gaze opens up to his natural, social and symbolic-cultural environment. In their interaction with these, people have a space of freedom and responsibility.

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2.????? What does individual meaning have to do with society?

Man finds meaning in life by turning to something that is not himself again, but by looking beyond his own drives and instincts and placing himself at the service of other people or in the service of "things" that are greater than himself, e.g. in the service of justice, the preservation of life and the alleviation of suffering, etc. In such service, people experience that they themselves have meaning, that it is good that they exist, that they have a place in life. Seen in this light, experiences of meaning are fundamental to human existence. The natural, social and cultural environment always demands a service from people, but what this service is lies in the freedom and responsibility of the individual. This is the basis of human civilization, and historically it finds its highest expression in liberal democracy. However, it should by no means be absolutized! The Aboriginal civilization is now 15,000 years old, while the Egyptian and Chinese civilizations lasted for thousands of years - in other words, they also met human needs for meaning for a long time and in this sense (like many others) can be regarded as functional.

A phylogenetically fundamental characteristic of humans and their civilization is their capacity not only for emotional empathy - which also exists in the animal kingdom - but also for cognitive empathy. This ability to empathize allows humans to put themselves in the shoes of others and to view themselves from the perspective of others. This means that people not only act towards a "you", but can also understand emotionally and cognitively what this action triggers in the "you" - e.g. love or hate - and how the "you" reacts to the "I" acting. People are therefore always both the subject and the object of their actions. Anyone who treats others with love experiences themselves as loved and ergo lovable through the you; the same applies mutatis mutandis when I treat someone with hate... Our self-image, our identity, arises from the interaction with the you, i.e. in social interaction.

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3.????? How is neoliberalism destroying society?

In his work from 1759, The Theory of Moral Sentiments, Adam Smith, the founding father of social sciences, makes man's capacity for empathy the basis of his social and economic theory. According to this theory, people's need to be considered lovable (Adam Smith: praiseworthy) is THE driving force behind their social and economic actions. What Adam Smith established 250 years ago on the basis of empirical observations has since been scientifically proven time and again, not least by neurobiology and evolutionary biology. This capacity for empathy and the associated need for praiseworthyness also determines Adam Smith's ideas of fair economic (and social) interaction. In the sense of Michael Tomasello, this could be expressed as follows: Human communication is a priori oriented towards understanding, towards the mutual reconciliation of interests to the point where the needs of the interaction partners are considered balanced - fair - by both. According to Adam Smith, economic and social interactions are based on the social value of balance and understanding, on the principle of live and let live, i.e. in the reciprocal responsibility for “you”! Above this concept stands Adam Smith's belief in an ultimate balancing justice. Under its star, the economy and society can continue to flourish (Adam Smith speaks of a flourishing society). For Adam Smith, man was certainly a selfish, greedy creature, but he saw empathy as a balancing, intrinsic countervailing power.

Neoliberalism, today's prevailing economic dogma, has turned this approach into its complete opposite: mutual understanding and live-and-let-live no longer apply, instead it is claimed that the economy and society function best when all individuals are radically oriented towards their own benefit. For neoliberals this is not a problem, because there is an mysterious "invisible hand" (what Voodoo in the 21st century!) that coordinates all diverging interests of the players in such a way that a dynamic balance develops in the markets and in societies - a dynamic equilibrium under the condition of complete competition. In concrete terms, this means: in the economy as in society, life is nothing other than a war of everyone against everyone else - i.e. only the social Darwinist law of the strongest applies: this is no longer human civilization or even democracy; this is wildlife. This is not just neo-liberal theory, it has been a tough neo-liberal practice since Reagan and Thatcher: look at the neo-liberal research, teaching and practice, look at the increasingly neo-liberal economic legislation and politics in the Western world (and its spread to the whole world via the World Bank and IMF).

In the war of everyone against everyone, the meaningful service to you or to a cause that is greater than ourselves is completely lost: the individual is radically thrown back on himself, completely at the mercy of economic and political powers similar to the forces of nature, the collective and individual meaning of existence, the experience of praiseworthiness, the experience that it is good that I exist and the certainty of having a place in life are disappearing more and more. Where the meaning of life disappers, ther is no room for the development of a mature personality, where the meaning of life disappears, fear and hopelessness, frustration, powerlessness, and despair spread and ultimately aggression and hatred take the place of the will to meaning.

This is precisely where the right-wing populist to far-right forces come in! They explain people's fears, frustration, economic worries, loss of meaning in life, their hopelessness and despair with the machinations of media and political elites, on which they arouse and direct people's hatred. Their oversimplified, power and violence-oriented explanation patterns are a substitute for meaning for many of their followers. Let us remember: meaning is of such fundamental importance to people that in crises of meaning they cling to anything that seems to have anything to do with meaning. That's why Trump's supporters forgive him everything. They are not stupid or evil, but are desperately trying to find their way out of their tormenting meaning vacuum. However, these right-wing populist to far-right forces are usurpers, because they themselves do not fight neoliberalism and its vacuum of meaning as the true cause of suffering, but on the contrary: they are the most ardent representatives of neoliberalism and social Darwinism - they do not strive for understanding, but fuel division and conflict even further, at best to the bitter end of a civil war: The success of these usurpers lies in the fact that they provide simple explanations for complex problems, and simple explanations are often the sign of power and violence, which are incompatible with the concept of mutual understanding and democracy. It is fatal that Trump's opponents also overlook the human dimension of meaning and believe that they can solve political and social problems with purely materialistic concepts - redistribution.

No country in the Western world seems more divided at the moment, in no other country in the Western world democracy seems more endangered than in the USA: Donald Trump is not a Nazi in the historical sense, but there are highly authoritative and even fascist elements in his thinking. Take a look at his presidential speech from January 2017, for example.

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4.????? A US-American tragedy

This is particularly tragic, as the USA is considered the cradle of democracy - in our opinion, the highest form of civilization to date. But even the pioneers of the USA saw the dangers as well as the opportunities. In his famous speech of 1630 entitled "A Model of Christian Charity", John Winthrop said the following (in modern English):

"We must be willing to abridge ourselves of our superfluities, for the supply of other's necessities. We must uphold a familiar commerce together in all meekness, gentleness, patience and liberality. We must delight in each other; make other's conditions our own; rejoice together, mourn together, labor and suffer together, always having before our eyes our commission and community in the work, as members of the same body.

We must be ready to free ourselves from our superfluities in order to provide others with what they need. We must maintain a bountiful trade together in all gentleness, kindness, patience and generosity. We must rejoice in one another; make the conditions of others our own; rejoice together, mourn together, labor and suffer together, always keeping in mind our mission and our fellowship in the work, as members of the same body.

So shall we keep the unity of the spirit in the bond of peace. The Lord will be our God, and delight to dwell among us, as his own people, and will command a blessing upon us in all our ways. So that we shall see much more of his wisdom, power, goodness and truth, than formerly we have been acquainted with.

But if our hearts shall turn away, so that we will not obey, but shall be seduced, and worship and serve other Gods, our pleasure and profits, and serve them; it is propounded unto us this day, we shall surely perish out of the good land whither we pass over this vast sea to possess it."

From the American dream of 1630 to the neoliberal American nightmare of 2024: Jeffrey Sachs describes today's state of the USA as follows:

"A large majority of Americans feel that the country is moving in the wrong direction (...). In domestic politics, the United States is squandering its affluences as the super rich relentlessly pursue more wealth at any cost. Meeting the needs of the poor, modernizing infrastructure, and protecting the environment are put aside in favor of cutting taxes for the rich, slashing public investments, and eliminating environmental regulations."

However, the crisis goes much deeper - it affects the core of society. This is not least confirmed by a representative population survey by The Harwood Group (1995):

?"People describe a society at odds with itself and its own most important values. They see their fellow Americans growing increasingly atomized, selfish, and irresponsible; they worry that our society is losing its moral center. They believe our priorities are mixed up" - an impressive document of the gradual decay of society and the associated loss of individual meaning and ultimately self-worth among people.

The seeds of neoliberalism have sprouted; its un-spirit has mercilessly destroyed the spirit of the pioneers.

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5.????? USA, what next?

The two US political parties and their respective media are so deeply divided that no solution can be found from this side - a dialog no longer seems possible. A third, mediating force is needed. Just as neoliberalism ruined both the economy and society via the economic world, it could also be healed via the economy.

After 50 years of neoclassical-neoliberal dominance in the name of efficiency, it sounds almost heretical to ask: Can the economy be freed from the end in itself of meaningless short-term profit maximization and shareholder value maximization and put at the service of people, society and the natural environment?

This question is anything but new in economics! As early as the mid-1920s, empirical work on the subject of people, human dignity and industrial work was produced, most famously Elton Mayo's 1926 work on the Western Electric Company's Hawthorne Experiment. Since then, numerous bright minds have dealt intensively with the subject of "economy and the human condition". Here are a few names from the tip of a huge iceberg that has long been "efficiently" pushed under water by neoliberalism: Amartya Sen, John Kenneth Galbraith, Jerry I. Porras, Jim Collins, Thomas Peters & Robert H. Waterman Jr, Nitin Nohria, James Heskett, Henry Mintzberg, Edgar Schein, Peter Drucker, Charles Handy, Michael Porter, Dave Ulrich, Jim Clemmer, Gary Hamel, Morten T. Hansen and, more recently, authors such as Mariana Mazzucato, Rana Foroohar and Rebecca Henderson, to name just a few representatives of alternatives to neoclassical neoliberalism - whereby Michael Porter describes himself as a neoliberal, but critically points out the devastating consequences of neoliberalism:

• "In recent years business increasingly has been viewed as a major cause of social, environmental, and economic problems. Companies are widely perceived to be prospering at the expense of the broader community. (...) The legitimacy of business has fallen to levels not seen in recent history. (...) A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation. (...) They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success."

The St. Gallen management teacher Fredmund Malik [2005] also reminds us how counterproductive neoclassical-neoliberal economic theory is for the business world and how necessary it is to replace it:

• "A company with satisfied customers will always be able to satisfy its shareholders. But it doesn't work the other way around. The shareholder value approach must become a thing of the past, because it is causing irreparable damage to the economy. We are already seeing this today. (...) Shareholder value thinking prevents long-term thinking, because it prevents investments, as it costs money, and because it prevents innovations, as these are always loss-making in the start-up phase. There are already many business leaders who are unhappy with the situation. Analysts, bankers and the media are vehemently demanding that they focus on shareholder value, but many managers have a bad feeling about it. And they do it anyway, because otherwise they'll be out of a job, but in the knowledge that they can't actually run their company that way."

August 19, 2019 was a memorable day for the corporate and business world in the US, probably not least because of such insights: the US Business Roundtable made a highly remarkable statement. In a media release, it distanced itself from the neoclassical-neoliberal economic philosophy of short-term shareholder value and profit maximization:

• "WASHINGTON - Business Roundtable today announced the release of a new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders - customers, employees, suppliers, communities and shareholders. Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version of the document issued since 1997 has endorsed principles of shareholder primacy - that corporations exist principally to serve shareholders. With today's announcement, the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility."

"All cheap window dressing!", as the critics insinuate? Not at all, because it will be shown that this new attitude is a matter of survival for the economic and corporate world: a manager who still acts according to neoliberal principles today is an objectively bad manager - a train driver who still uses coal and water in the days of electric locomotives.

One of the most prominent economists who called for a meaningful - synergetic, co-evolutionary - connection between the economy and society and made this the ceterum censeo was Peter F. Drucker:

• "Business enterprises - and public-service institutions as well - are organs of society. They do not exist for their own sake, but to fulfill a specific social purpose and to satisfy a specific need of a society, a community, or individuals. They are not ends in themselves, but means. (...). There are three tasks (...) that management has to perform to enable the institution in its charge to function and to make its contribution: establishing the specific purpose and mission of the institution, whether business enterprise, hospital, or university; making work productive and the worker effective; managing social impacts and social responsibilities."
• "Free enterprise cannot be justified as being good for business, it can be justified only as being good for society."

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The keystone of this argument: A business world that defines itself through service to people and society fulfills a purpose. In the context of this fulfillment of purpose, the business world also becomes a source of meaning for employees, customers and other stakeholders of these companies. The principle is: co-evolution as the basis of a flourishing economy, society and citicens.

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