In the aftermath of the global financial crisis of 2008/9, many commentators argued that the old neoliberal consensus had finally been dealt a hammer blow. If 9/11 had been a wakeup call for the West to recognize the weaknesses in the global system, due to its inherent inequality and the problems of globalization, now the impact of neoliberal disequilibrium would be felt at home, and domestic politics would be forced to drive change. People and leaders suffered – bankers were fired, governments replaced, and companies destroyed – but new people and companies replaced them, and appeared to resume the old model. For the past ten years or so, it’s been difficult to figure out what’s been going on. We know it’s a failed model – so why do we persist with it?

A pattern is beginning to appear, however, where western capital, locked its neoliberal constraints, is being replaced by political and global economic oligarchy. The first wave came from Russia, even before the financial crisis, accelerating thereafter, slowing after the invasion of Crimea and the Donbas, and grinding to a halt with the full-scale invasion of Ukraine. The second wave came from China, peaking with the failed attempt at football hegemony and fading with Covid and Jack Ma’s wing-clipping, as the Chinese economy began to stall. The third wave has come from the middle east, in waves from Qatar, the UAE and most recently Saudi Arabia. None of these capital migrations have been market driven, at least in a straight-forwardly financial sense. Neoliberal theory has been supplanted.

Neoliberal theory had it that markets drive invisible forces, orchestrated by the desires and needs of people, translating into demand, entrepreneurial supply, and regulated by the price mechanism. The theory applies in all economies – not just financial – and is an extension of laissez faire, without the theological fervour of providence. Order emerges from human interactions spontaneously, as Mr Hayek had it, and government only got in the way. Thus Reagan and Thatcher drove agendas of privatisation, withdrawing their respective governments from the operations of countless market elements, not least the telecom and electricity industries, heavy industry such as mining and natural resources, as well as state services including healthcare, prisons, and education.

It’s not completely clear yet that what has emerged is a replacement for neoliberal market economies (or ‘market states’, as Philip Bobbit called them), but there does appear to be a pattern where global groups (it’s hard to call them countries, or states, or nations) like Chinese and Russian oligarchs, and the Saudi PIF, are acquiring western – particularly European – assets. There has been some evidence of cultural appropriation also through movie making (e.g. support for the Mission Impossible franchise from China), sports (World Cup, soccer investments). There has been a considerable amount of property acquisition by these groups, and more recently core infrastructure has been invested in, including power and communications infrastructure. Just last week, STC (Saudi Telecom Company) announced a 9.9% stake in Telefonica Group, making them the largest shareholder in the Spanish telecom concern, just shy of the 10% that would have triggered a requirement for Government authorization. E&, the extension of UAE Etisalat group, has been acquiring telecom assets in Europe, most recently acquiring a controlling stake in PPF Telecom.

This combination of property, sports, entertainment and infrastructure acquisition and control creates a network of influence and power that will allow formerly peripheral interests to have significant say in European affairs.  One of the key reasons for this pattern being illustrative of a breakdown in the market system is that the price mechanism has failed. These acquisitions are invariably being made above ‘market value’, whatever that may represent. This is not to say that they are setting the price by paying more than anyone else; it is that they are buying more than the asset themselves, as it is represented in its immediate context. They are making a new market, in a sense, one that values not merely the asset per se, but its political relevance, its political currency. This goes well beyond the normal asset valuation criteria, and represents a reframing of strategic assets.

Just as the market in the international economy morphs in front of us into something post-economic, if you will, or post-market, in the domestic economy democratic institutions and public services are failing. The persistence of neoliberal models in national economies is resulting in breakdown after breakdown, primarily in the absence of any coherent alternative. Public transport, healthcare and education are in various stages of decay in most western liberal democracies, with strikes, poor quality service delivery, and wage levels barely above the poverty line. In a limited historical sense, there are two alternatives – a high tax, state funded (and therefore by assumption inefficient) public service, or a low tax market driven public service. The first option is political cyanide, while the second struggles badly in the absence of any real competition.  

Take for example the Irish train service. There is no competition, and prices are relatively high, with the sixth or seventh highest fares in Europe (depending on how you measure), despite having seen ticket prices fall by 18% over the past five years. The service remains poor, however, with constant complaints about staff, services, facilities and reliability. Whether or not there is inefficiency in the service, it broke even (more or less) in 2022, including government subvention. With such poor performance, however, the question is – absent competition – how to incentivize and drive improved outcomes? The market-economist will consider that consumers ‘vote with their feet’, and if people are still using the trains, it’s because the level of quality delivered remains ‘acceptable’, and that functional alternatives like car, bike or bus are less acceptable to them. This ‘volume of journeys’ metric deliberately ignores quality, which is assumed to align with volume. Given what we know about the failure of market economics even in competitive markets (with cartel activity etc. that led to the crash in 2008), perhaps it is time to consider a move away from such blind faith in incentives and behavioural economics and recognise – as Hayek did – that we cannot simply do economics with only the stuff we can measure – that’s just convenient and lazy.

Alternatively put, rather than relying on market statistics to determine investment and subvention levels, is it not time to simply buy qualitative improvement? The result may not in fact be more passengers, or higher income, at least not directly. And that should not be the goal. The result may simply be happier passengers, and happier staff. Is that not something that government should aspire to?