What a Pandemic Teaches Us About Neoliberalism

Social distancing is giving us a lot of time to think.  And except for keeping each other safe from this disease, what could be more useful than trying to learn from the pandemic for the future.

This is not a commentary on the abject failure of the Federal government to deal with the pandemic in a timely and effective manner.  These failures are well documented elsewhere.  The Lexington columnist in the Economist explains this well by saying, “It’s hard to pick the best illustration of the administration’s failings on covid-19.  There have been so many.”

Rather, this is an examination of how the embrace of the ideology of neoliberalism in the United States led inevitably to these failures.  The term neoliberalism is sometimes given to the ideology (or world view) that so-called “free markets” are almost always the best way for societies to allocate goods and services and to mitigate social risks.  The efficiency of markets is lauded and the role of government is diminished.

Neoliberalism calls for smaller government, less regulation of business, and suspicion of expertise in any realm, particularly in science.  The belief is that markets provide participants with complete information for making rational decisions and firms will avoid risky behavior (producing unsafe products for example) for fear of being penalized by market forces in the future.  In this ideology government regulation to prevent unsafe products, environmental pollution, or fraudulent financial services is unnecessary.  Supposedly, markets will penalize such behaviors and cause the businesses that do these socially undesirable things to fail.  This risk of failure is claimed to prevent undesirable outcomes, like pandemics and financial crises.

The wholehearted embrace of neoliberal ideology over the past three years led to a smaller role for government, particularly in the area of health and safety.  Nowhere is this intentional reduction in health and safety clearer than in the public health infrastructure that should be ready to deal with a global pandemic of a novel infectious disease.  This “small government” policy is part and parcel of the broader distrust of scientists and other experts throughout the federal government.  Even for positions in public health that have not been cut in the wake of the neoliberal small government movement, it is hard to attract and retain talented professionals, when their advice is ignored and their expertise is devalued.  This is true from the Centers for Disease Control to the National Security Council to the Department of State.  Cuts in their budgets and missions left them unprepared and the nation at risk.

Of course, even with a robust and empowered Federal public health infrastructure, this pandemic was going to affect Americans.  Not because the virus was part of some secret political conspiracy, as first claimed by the administration, but because we are part of a global society.  What the small government fetish and trust in markets did was delay the response and reduce its effectiveness.  The result will be that more Americans will get sick and more will die than would have been the case.  Markets cannot address public health crises.

This is not to say that markets are inherently undesirable parts of the American economic and social infrastructure.  Markets are wonderfully effective means of processing a lot of information and sending signals (prices) to both consumers and producers.  But free market ideologues seem to have stopped paying attention in their college principles of economics class after the module on perfect competition.

In the real world there is no such thing as perfect competition.  Unregulated markets produce goods that are hazardous to your health (cigarettes), injure children they are supposed to protect (child safety seats), and promote deceptive financial instruments that lead to Great Recessions (mortgage backed securities).   Unregulated markets lead to increasing inequality (witness the last 50 years in the U.S.) and the growth of monopolies (think American technology firms).  And markets have no way to address effectively the threats to health and safety from a global pandemic.

Once we have weathered this storm we will need to restore a proper role for government and be willing to tax ourselves sufficiently to pay for the services only a government is able to provide.  It is not a matter of big government versus small government.  Rather it is a matter of good government, an understanding that government employees should be appointed or hired based on competence rather than loyalty.  Government agencies should be empowered to use good science to make sound decisions.  When it comes to pandemics, evidence-based decisions informed by experts are not perfect, but they are better than political decisions informed by ideology.

One of the common law traditions we inherited in the founding of the United States was the obligation of governments to exercise the police powers, the duty to provide for the health, safety, and general welfare of the people.  This duty is not left to markets, rather it is what we should expect from our governments.  This is the hard lesson we need to learn from the pandemic.

Mark W. Anderson

About Mark W. Anderson

I am proud to be a Mainer, born in Caribou and schooled at Brewer High School, Bowdoin College, and the University of Maine. I am grateful for a 35 year career at UMaine, the last decade in the School of Economics.