How Neoliberalism Transformed the United States
新自由主义如何改变了美国
By Zhou Haosheng (周皓生)
【Editor’s Note: Neoliberalism, a capitalist ideology championed by Ludwig von Mises, Friedrich von Hayek, and Milton Friedman, has profoundly reshaped the U.S. since Ronald Reagan’s presidency in 1980. Rooted in deregulation, privatization, tax cuts, and reduced government spending, it transformed industries from education to healthcare. Reagan's tax cuts and Clinton’s 1999 Financial Services Modernization Act paved the way for the 2008 financial crisis, triggered by subprime mortgage collapses. Trump’s dismantling of pandemic response units in 2018 exemplified neoliberal priorities, exacerbating COVID-19's deadly impact, with 840,000 deaths by 2021. Wealth inequality widened as the wealthiest 1% now controls half the nation’s assets, while half of the population holds negative wealth. Public services like healthcare and education became market-driven, burdening citizens with higher costs and debt, including $1.6 trillion in student loans. Despite political shifts, neoliberal policies endure, with Trump pledging deeper tax cuts and privatization, leaving America’s "new society" at an impasse.】
This November, with Trump (川普) reelected, I was given an opportunity to reconsider the current American reality from a broader perspective. After reviewing several books and materials, a single concept gradually crystallized in my mind, one that has spanned nearly forty years of American history: neoliberalism (neoliberalism, 新自由主义). This essay will introduce and discuss neoliberalism in four parts. First, I will present an overview of neoliberalism; second, examine the disasters it has wrought; third, consider the consequences of America’s implementation of neoliberal policies; and finally, offer a brief outlook on what may lie ahead.
1. Neoliberalism
Neoliberalism (新自由主义) is one strain of capitalism. Its three founders were Ludwig von Mises, Friedrich August von Hayek, and Milton Friedman. On April 1, 1947, they and thirty-four other economists gathered in Switzerland, issuing a statement afterward that marked the birth of neoliberalism. Neoliberalists put blind faith in market regulation and believe the government should not intervene in any way. They argue that the market is governed by supply and demand: for example, if the price of ice cream suddenly rises, more capitalists will rush to produce it, thereby increasing supply and lowering the price. They often selectively quote Adam Smith’s notion of the “invisible hand” and treat the market’s regulatory power as all-encompassing. The core tenets of neoliberalism are: (1) privatization of state-owned enterprises—including power plants, water utilities, hospitals, healthcare systems, and even public schools; (2) deregulation of businesses; (3) lowering personal and corporate taxes; and (4) cutting government spending.
On September 11, 1973, with U.S. support, the Chilean military chief, Pinochet (皮诺切特), staged a coup that toppled the democratically elected government of Allende (阿连德). American neoliberals regarded this as an ideal laboratory for testing their theories. Milton Friedman and his students traveled to Chile to oversee this grand experiment firsthand. The Pinochet government privatized most state-owned enterprises, opened the retail market to imports, abolished wage and price controls, dismantled labor protections, drastically cut government spending (except the military), and handed the social welfare system over to private banks. More radically, even public schools, kindergartens, and medical care were privatized. Pinochet’s bloody rule lasted seventeen years, and after his regime ended, neoliberal policies persisted. The outcome was severe wealth polarization: a small minority profited immensely while the majority struggled to make ends meet. By 2022, the wealthiest one percent controlled half the national wealth, and the poorest fifty percent—possessing negative net worth—had nothing (data from www.statista.com). This was the first test of neoliberalism.
On October 1, 2019, Santiago’s subway fares rose by thirty pesos, sparking days of large-scale protests that soon spread to other cities. On October 25 of that year, 1.2 million people took to the streets of Santiago to protest social inequality. Someone scrawled on a wall: “Neoliberalism is born and dies in Chile.”
Now, let us consider American neoliberalism. Ronald Reagan (里根) won the presidency in 1980, symbolizing the dawn of neoliberalism in the United States. Reagan’s neoliberal policies repeated a familiar pattern: suppressing unions, cutting welfare, embracing free trade, and dismantling regulations. From Reagan’s time until now, neoliberalism has pervaded the United States for over four decades. What has this brought to America and the world?
2. The Disasters of Neoliberalism
Two events are worth noting here: the 2008 financial crisis and the COVID-19 pandemic starting in 2020.
In 1999, Bill Clinton (克林顿) signed the Financial Services Modernization Act, removing numerous restrictions on financial firms (deregulation—one key policy of neoliberalism). This allowed banks to chase profits without restraint. Beginning around 2000, banks lent money feverishly to anyone who wanted to buy a home, even to those who clearly could not pay their mortgages—so-called “liar loans.” Floods of capital poured into real estate, sending housing prices soaring and inspiring a nationwide speculation frenzy. Risky loans multiplied. Banks bundled these obviously high-risk mortgages with lower-risk ones into “financial products” that were sold on the market like stocks. Within eight years, these products were distributed worldwide. In 2008, the housing bubble burst. Starting that January, bad bank debts increased visibly, and housing prices declined. Funds of all sorts, having purchased large quantities of these mortgage-based products, now scrambled to offload them, as did investors seeking to cash out. This stampede triggered a massive global financial storm. By the time the 2008 presidential election began, Congress had injected trillions of dollars into rescuing the market. Roughly ten million Americans lost their homes.
Now to the COVID-19 pandemic. In 2018, following the neoliberal creed of cutting government spending, President Trump dismantled the pandemic response unit under the National Security Council, established by Barack Obama (奥巴马). On January 20, 2020, the United States recorded its first COVID-19 case. Trump adopted a laissez-faire approach. By August 31 of that year, with U.S. COVID-19 deaths reaching 187,736, Trump said, “We use the word ‘herd.’ Once you get to a certain number, it’s going to go away.” Almost simultaneously, Boris Johnson (约翰逊), the neoliberal Prime Minister of the U.K., was also promoting “herd immunity.” In the U.S., COVID-19 claimed 380,000 lives in 2020 and 460,000 in 2021, totaling 840,000 fatalities over two years.
Both of these events are inextricably bound to neoliberalism.
3. How Neoliberalism Changed the United States
From Reagan’s inauguration in 1981 until now, over forty years of neoliberalism have utterly transformed America.
Taxes and deficits: Reagan cut taxes for the wealthy, slashing the top marginal rate from 74% to 25%. With insufficient revenue, the government borrowed heavily, pushing national debt from $800 billion to $2 trillion. This set a precedent, and debt continued to soar. During Trump’s first term, he again cut taxes for the wealthy while borrowing roughly $8 trillion. In 2023, the U.S. national debt soared to $33 trillion.
Healthcare: Reagan removed some regulations on healthcare enterprises, turning hospitals into profit-driven entities and causing medical costs to skyrocket. The average annual medical expense per person rose from $353 in 1980 to $13,439 in 2022 (data from www.statista.com). Half of American adults say they struggle to pay medical bills, and even among those insured, about half worry they cannot afford their monthly premiums. Tens of thousands of American families declare bankruptcy each year because of medical bills—an outcome unseen in other developed nations.
Primary and secondary education: From 1980 to 2019, the proportion of public schools within the entire primary and secondary education system fell from 72% to 46%. In their place arose publicly funded private schools (voucher/charter schools). Research suggests such schools can affect academic performance (e.g., pubs.aeaweb.org/doi/pdfplus/10.1257/app.20160634).
Higher education: Starting in 2010, student debt soared to $830 billion, surpassing credit card debt. By 2024, student loan debt had reached $1.6 trillion.
Finance: Clinton’s Financial Services Modernization Act led to the 2008 financial crisis and remains in force, allowing banks to continue high-risk gambits.
Wealth distribution: The middle class has shrunk, and inequality has widened. In 1971, among American adults, 25% were low-income, 61% were middle-income, and 14% were high-income. By 2021, the low-income group stood at 29%, the middle at 50%, and the high at 21% (data from www.pewresearch.org).
4. A Brief Outlook
Neoliberalism will likely persist in the United States, regardless of who holds power. According to Trump’s stated intentions, he would again cut taxes for the wealthy, further increase the national debt, and continue privatizing public schools. He would also likely dismantle the pandemic response unit once more. Should another infectious disease break out, he would probably return to his policy of noninterference. It is anyone’s guess when neoliberalism might vanish. After the financial storm, Obama took office, and people expected him to curb neoliberalism. Instead, he saved it. Prior to 1980, American capitalism followed Roosevelt’s (罗斯福) economic policies. But that was the “old society.” Now we inhabit a “new society”—what can be done?
December 2024
This translation is an independent yet well-intentioned effort by the China Thought Express editorial team to bridge ideas between the Chinese and English-speaking worlds. The original text is available here:
Kindly attribute the translation if referenced.