Neoliberalism and Neoclassical Economics

One of the major challenges the LGBTQ* movement faces nowadays is the side-effect of the deep-rooted neoliberalism in the U.S.

society: egotism. This virtue and the transformation of society into an egoistic and ignorant construct will be a significant factor of this thesis and will therefore be extensively discussed. The egotism of our time threatens the mobilization of activists and the coherence of the movement. Moreover, it has successfully stimulated a climate that creates individuals whose concern is exclusively focused on their own well-being and personal development and aspirations. A precondition to comprehending the socio-economic occurrences of the last years is the understanding of the neoliberal system dominating Western societies. Neoliberalism is the philosophy that has impacted our current economic system most severely.

The theory of neoliberalism first arose at the beginning of the 20^th century when the U.S.’ political leaders and its citizens were agonized by the Great Depression. However, neoliberalism as a fluid economic concept did not exist until the easing of the next major economic crisis affecting the Western industrial world. The 70s and 80s witnessed the rise of a neoliberal philosophy which was destined to dominate the political and economic system for the next decades – not only in the United States but also in Europe and Australia and in some parts of Asia. From the 70s onwards, the Chicago School of Economics influenced the philosophical theory of neoliberalism and aligned it with economic empiricism. The expression neoliberalism consists of the Greek word “neo” which means “new” and

“liberalism” – a political and moral philosophy that has reigned the U.S.

since Franklin D. Roosevelt’s presidency. The policy of liberalism was meant to implement distinctive liberal values like freedom of expression,

33 human rights, rule of law and the freedom of choice. However, liberal thinkers, especially the Austrian Friedrich von Hayek and the philosophers of the Chicago School, realized that liberal values can only be maintained if specific instruments and mechanisms serve as protections:

[T]echnical instruments can defend political ideas and values, but the reverse is not true. […][M]arket competition could be a guarantor of democracy, but not vice versa; consumer rights could be a guarantor of human rights, but not vice versa; economic choice could guarantee political freedom, but not vice versa.⁵²

Therefore, neoliberalism stands for a fluid project to protect liberal values by imposing an economic system that highlights the values it is supposed to protect. It correlates with economic concepts that contain the approaches of the free society and the free market. Over the course of the 20^th and 21^st century, the dominant economic concepts were the theory of neoclassical economics and the Keynesian economics. The neoclassical economics’

basic principle is the rule of supply and demand. Individuals choose specific products and thereby ascribe a certain worth to it. The total of the demands contributes to the determination of the product’s value. The correlation of supply and demand was thought of as the manifestation of liberal values.

Individuals practice their freedom of choice in the open market-economy and become a formative factor in assessing products’ prices. In addition, deregulation and the liberalization of entry were consequences of the neoclassical concept. Restrictions on financial transactions were almost completely removed.⁵³ Privatization was promoted and implemented; the U.S. education system was one of the spheres where privatization was most massively spread. According to the neoclassical economics, the government is only supposed to pursue an active role if exceptional cases accrue such as an economic depression.

52 William Davies, “The Emerging Neocommunitarianism,” The Political Quarterly, 2012, Vol. 83, No. 4, 770.

53 Heikki Patomäki, “What Next? An Explanation of the 2008–2009 Slump and Two Scenarios of the Shape of Things to Come,” Globalizations, 2010, Vol. 7, Nos. 1–2, 70.

34 The approaches of the Keynesian economics integrated the likelihood of economic fluctuations due to the trend towards economic speculations anticipated by John Maynard Keynes. The economist has always been a proponent of governmental intervention to counteract depressions – especially by following the strategies of deficit spending.

However, the neoclassical and neoliberal system which dominates our current economy determined economic crises as the only exceptions – apart from that, the market should balance itself. In theory, neoliberalism, in combination with neoclassical economics, would therefore be dominated by individuals who efficiently use the economic conditions and try to achieve the greatest possible satisfaction for themselves as individual beings. The concepts presume that individuals will not exceed the level of basic needs to live a fulfilling and happy life. Nevertheless, the assumption that “self-interest and markets are mutually supportive”⁵⁴ to realize this concept has been inaccurate. “Selfishness can spiral out of control, to the point where the price system is unviable.”⁵⁵ The trust system, which is a precondition of the functionality of neoliberalism, was proven to be frail. Greed and hedonism have destabilized the system and contributed to the failure of the initial aspiration inherent in the concept of a symbiosis of neoliberalism and neoclassical economics. The economic depression of recent times, which ultimately emerged in late 2007 and early 2008, was a reflection of the selfish and ravenous economic conduct of billions of citizens worldwide.

The catalysts of the economic crisis were manifold. However, the housing price bubble was the one which eventually sparked the global financial crisis to its fullest. Speculations and subsequent increases of housing prices as well as high interest rates created a bubble that burst when the debtors were unable to repay mortgages. The ensuing effect was a chain reaction that destabilized real estate companies as well as the financial sector – first in the United States and soon afterwards worldwide. Major investment funds as well as major stock indexes were shaken and the indexes sharply declined. In addition, the market value of commodities and housing suffered

54 Davies, “The Emerging Neocommunitarianism,” 771.

55 Ibid.

35 large reductions worldwide.⁵⁶ Among many other consequences, the ensuing financial crisis entailed a soaring unemployment rate in the United States which reached almost ten percent in 2010⁵⁷, a drop in consumer spending and the loss of housings since debtors were unable to pay back their loans. In addition, the overall socio-political situation became unstable and feelings of insecurity started to dominate. Feelings of panic, anxiety and fear were evoked more intensely by the economic situation and might have been related to the fear of job loss.⁵⁸ Frustration due to unemployment not related to one’s own job performance led to a more aggressive behavior.⁵⁹ The socio-political climate became rougher in the aftermath of the financial crisis; a polarization among different groups within the United States became visible. The economic crisis, but also the system that has been prevailing over the last decades, contributed to a climate of inequality and inner conflict within the U.S. society. Economics explained that markets are pareto-optimal which means: “no arrangement can improve the position of anyone without making worse the position of somebody else. The implicit background assumption of pareto-optimality is that markets distribute wealth in a just way: those who contribute the most are equally rewarded the most.”⁶⁰ Hence, the practical implementation of neoclassical economics implicates the development of unequal structures. The gap between the poor and the rich population has increased over the course of the last years. The fact that the bottom half of the world’s population own less than one percent of the global wealth while the richest one percent possess more than 40 percent of the total assets has gained dominance.⁶¹ The Occupy Wallstreet Movement embraced this as its slogan emphasizing the unequal structures.

Furthermore, this division is additionally aggravated by “changing patterns

56 Patomäki, “What Next? An Explanation of the 2008–2009 Slump and Two Scenarios of the Shape of Things to Come,” 69.

57 U.S. Bureau of Labor Statistics, “The Recession of 2007–2009,” U.S. Bureau of Labor Statistics, February 2012, accessed October 31, 2016,

http://www.bls.gov/spotlight/2012/recession/pdf/recession_bls_spotlight.pdf.

58 Veronica Momjian and Kaleefa Munroe, “Economic Insecurity, Mental Health, and the Economic Crisis in New York City,” The Western Journal of Black Studies, Vol. 35, No. 3, 2011, 197.

59 Ibid.

60 Patomäki, “What Next?,” 71.

61 “Richest 1% will own more than all the rest by 2016,” Oxfam International, accessed June 5, 2017, https://www.oxfam.org/en/pressroom/pressreleases/2015-01-19/richest-1-will-own-more-all-rest-2016.

36 of trust and altruism in America.”⁶² The sociologist Robert Putnam explains that there has been “a decline in civic engagement and social capital – people are socially isolated.”⁶³ Putman makes the technological advancements responsible for the isolation and the loss of social trust.

Competitiveness, self-reliance, ostracism, and sustainment of unequal structures are determinative within the neoliberal order dominating the United States as well as Europe; even though the effect has been the opposite of the one intended when the rise of the neoliberal order began.

However, in combination with the neoclassical economics, the pursuit of liberal values like human rights and the freedom of choice became corrupted. Selfishness became socially acceptable; the concept of hate crept into politics and social interactions. The division of the U.S. citizens has amplified and manifested itself in a multitude of social and political developments. The era of neoliberalism is the era of individualism but also of egotism. While the freedoms that came with the concept of individualism have been contributing to one’s individual fulfillment, the related egotism has corrupted these positive effects. The cohesion of society and the aspired achievements for minority interest groups are at hazard. We were raised in a society that accepts and even promotes egotism. The rise of social media even magnified this development. One’s participation in social interaction on Facebook, Twitter and YouTube are often simply autotelic. Self-staging is the core of participation. Selectivity of consumers also confines the range of information incorporated into ones stock of knowledge. While the neoliberal era also led to the advancement of gay rights as it constituted LGBTQ*s as consumers on the market and therefore challenged inequality⁶⁴, it has constructed a climate that simultaneously threatens the perseverance of the achievements and the advancement of more rights. As the social media analysis of direct violence will show, victims of direct violence can not expect much support of the LGBTQ* movement. Even though social media were embraced by the organizations, those affected by

62 Božo Stojanović, “Homo Economicus: The (Lost) Prophet of Modern Times,”

Panoeconomicus, 2015, Vol. 62, Issue 3, 403.

63 Ibid.

64 More on the construction of LGBTQ*s as consumers by the neoliberal developments in:

Michael Kimmel and Cheryl Llewellyn, “Homosexuality, Gender Nonconformity, and the Neoliberal State,” Journal of Homosexuality, 59 (2012): 1087–1094.

37 direct violence have to fight their struggles by themselves. Moreover, also those individuals suffering from structural violence are often left alone – particularly if the manifestation of structural violence is affecting only a minority of LGBTQ* people. The following analysis of social media activism will delineate the current strategies of LGBTQ* activists. It will expose that the movement faces a variety of challenges including the egotism of the neoliberal era that endangers the cohesion, diversity and success of the LGBTQ* social media movement.

38