The economics of anxiety: neoliberalism as obsessional neurosis By Japhy Wilson

6 June 2014 — openEconomy

Neoliberalism is not a monolithic shock doctrine. It is an anxious form of crisis management, which evolves through its failed attempts to conceal a repressed truth.

Image from Marc Bauder's film Master of the Universe
Image from Marc Bauder’s film Master of the Universe (2013)

Neoliberalism remains the dominant economic ideology of our times. For over three decades, economic reforms have adhered to the neoliberal principles of privatization, deregulation, and the dismantling of the welfare state, on the assumption that free competition would ensure the best of all possible worlds. In contrast to this utopian vision, the outcome has been persistent poverty, economic oligarchy, and a whirlwind of financial crises that spiralled around the world before finally entering the heartlands of global capitalism with the financial crash of 2008 and the ensuing ‘Great Recession’. Yet in the aftermath of this unprecedented crisis, neoliberalism has once again emerged as the hegemonic ideology of western capitalism.

This seemingly irrational persistence has led many to perceive neoliberalism as a psychotically self-assured and one-dimensional orthodoxy. But close attention to its evolution reveals it as an anxious and contradictory process, which has morphed continuously over the course of its history, while retaining an obsessive commitment to an underlying vision of the world. In order to make sense of this peculiar combination of resilience and transformability, we need to reject critical understandings of neoliberalism as a monolithic ‘shock doctrine’.

Instead, neoliberalism should be interpreted as an anxiety-ridden form of crisis management that is constantly attempting to cover over the gaps and ruptures in its own ideological fabric caused by the contradictions that it is structured to conceal. According to the psychoanalytic theory of Jacques Lacan, anxiety is caused not by the fear of separation from an object of desire, but by the overwhelming proximity of that object in the Real.

In this article I reconceptualise neoliberal ideology as an anxious social fantasy structured against the Real of Capital. I argue that the resilience and transformability of neoliberalism can be explained as a form of obsessional neurosis, in which the neoliberal subject engages in frenetic activity to prevent anything Real from happening. I conclude with some reflections on ‘zombie neoliberalism’.             

Neoliberal fantasy and the Real of Capital

Neoliberalism differs from other utopian ideologies in the way that it understands its own project. For the neoliberal, the acquisitive individual is the essence of human nature, and market society is the natural order of the social world. The aim is not to create a world that never existed, but rather to liberate a pre-existing reality of ‘spontaneous market forces’, and ‘entrepreneurial zeal’ from beneath the dead hand of the interventionist state. Neoliberals therefore see their project as ‘pragmatic’ and ‘non-ideological’, in contrast to the failed utopian ideologies of the past.

According to Slavoj Žižek, however, “it is precisely the neutralisation of some features into a spontaneously accepted background that marks out ideology at its purest”.[i] From this perspective, the representation of neoliberalism as non-ideological and anti-utopian constitutes a particularly insidious form of ideology. In its deepest and most powerful form, Žižek argues, ideology operates not as an appearance projected onto reality, but as a ‘social fantasy’ structuring reality itself against what Lacan called the Real – an ominous presence that is unconsciously excluded from everyday reality. Without fantasy, reality itself disintegrates, and the subject confronts the Real as a traumatic and incomprehensible force.

Far from being ‘pragmatic’ and ‘non-ideological’, neoliberalism should be understood as a social fantasy that structures ‘reality’ against the Real of Capital. Neoliberal ideology is based on Adam Smith’s vision of a natural and harmonious market society, in which the self-interested activities of individual entrepreneurs are mediated by the invisible hand of the market to ensure the optimal allocation of resources.

As a system of norms, individuals and institutions (such as private property, entrepreneurs and markets), capitalism is incorporated into neoliberal ideology. But the Real of Capital is excluded from this symbolic order. The source of profit in exploitation is concealed by the understanding of economic value as an expression of subjective preferences, rather than as a measure of labour time.

The antagonistic relationship between capital and labour is obscured by the conceptualization of workers as entrepreneurs selling their own ‘human capital’ on the market. The inherent tendency for capitalism to generate vast economic crises is papered over by the assumption that efficient markets operate under conditions of ‘perfectly competitive equilibrium’. And capital’s relentless transcendence of collective social control is represented as the benign operation of the invisible hand of the market.

This understanding of neoliberalism can help to explain the resilience and transformability of the neoliberal project. For the neoliberal subject, market economics is not a policy framework that can be easily discarded, but is a structuring principle of social reality, which protects the subject from the traumatic Real of Capital.

The failure of the neoliberal fantasy is thus experienced, not as the disproving of a theory, but as the inexplicable violation of reality, in the form of financial crashes, credit crunches, economic depressions, and so on. Rather than responding to such traumatic events by discarding their economic model, neoliberals attempt to hold their sense of reality together by explaining their failures in terms that leave their fantasy intact.

Understood in this way, the evolution of the neoliberal project appears not as the unfolding of a Machiavellian master-plan, but as a series of failed attempts to prevent the Real of Capital from disturbing the fantasy of a harmonious market society. This is important not only conceptually, but also politically. By understanding neoliberalism as an anxious form of crisis-management, we can strip it of its seemingly all-encompassing power. And by demonstrating the continuity of neoliberalism within more ‘progressive’ projects and discourses, we can attempt to jam the gears of its relentless ideological shape-shifting.

Neoliberal neurosis

If we consider the history of neoliberal ideology, we can see that it has always been driven by an anxious desire to hide the ugly realities of capitalism beneath a fantasy of harmonious order. Adam Smith’s original theory of the invisible hand of the market was born in the midst of the violent establishment of capitalism in eighteenth century Great Britain, providing Smith with a reassuring vision that concealed the harshness of the world around him. The first great experiment with economic liberalism in the nineteenth century led to the Great Depression, the Second World War and the rise of communism. These violent upheavals triggered the formulation of the neoliberal project by Milton Friedman, Friedrich Hayek and the other founders of the Mont Perelin Society in the late 1940s. These right-wing economists have described themselves as “drawn together by a common sense of crisis”, and “huddled together… for warmth on a cold dark night”.[ii] In this traumatic moment, the neoliberal fantasy acquired “an irresistible attraction… the almost silent hum of a perfectly running machine; the apparent stillness of the exact balance of counter-acting pressures; the automatic smooth recovery from a chance disturbance”.[iii]

Neoliberalism rose to dominance by representing subsequent economic crises as crises of Keyensianism or developmentalism, against which the neoliberal project could be advanced as a return to the natural order of a market society.

Yet ever since it became hegemonic in the 1980s, neoliberalism has been plagued by a return of the repressed, in the form of financial volatility, spiralling inequalities, and innumerable social conflicts. In response, the neoliberal project has evolved from the stripped-down fundamentalism of Reaganomics and the Washington Consensus to the more complex interventionist policies such as Third Way social democracy and ‘globalization with a human face’.

An analysis of these interventions reveals that they are aimed not at challenging market society, but at making reality conform to the neoliberal fantasy. The principles of free trade and macroeconomic ‘responsibility’ remain sacrosanct, and the invisible hand of the market remains the guiding force of economic activity, while the role of the state is restricted to providing the economic infrastructure, human capital, and ‘investment climate’ required for markets to operate efficiently.

In the world of international development, for example, the World Bank and the International Monetary Fund have replaced the Washington Consensus with the ‘Post-Washington Consensus’. Whereas the Washington Consensus entailed the dismantling of public health and education systems in the name of austerity and privatization, the Post-Washington Consensus insists that health and education should be valued, but only to the extent that they improve labour productivity. Poverty should be alleviated, but this should be achieved through philanthropy and corporate social responsibility rather than the mandatory redistribution of wealth. And development must be ecologically sustainable, but only as a means of ensuring the sustainability of economic growth and capital accumulation.

Through a multi-dimensional process of ideological and institutional modifications of this kind, the neoliberal project has created an ever more elaborate system, in order to cope with the proliferating contradictions of capitalism in such a way that the fantasy of a harmonious market society is preserved. This frenetic activity resembles the behaviour of the obsessional neurotic, who “builds up a whole system enabling him to postpone the encounter with the Real ad infinitum”.[iv] The resilience and transformability of the neoliberal project can therefore be understood in terms of a neoliberal neurosis.

Portrait of a neurotic neoliberal

Many key figures in the history of neoliberalism can be diagnosed as neurotic neoliberals. These include the economist Jeffrey Sachs. In my book on Jeffrey Sachs, I show how his career has evolved in parallel with the twists and turns of the neoliberal project.

Sachs was imbued with the neoliberal fantasy at Harvard in the 1970s, and went on to implement his notorious ‘shock therapy’ programmes in Bolivia and Poland, based on the rapid and wholesale liberalisation of these economies. Despite their high social costs, these brutal reforms were celebrated by the neoliberal policy elite for rapidly opening up these countries to global capital, and seemed to confirm the ‘reality’ of the neoliberal fantasy, by stripping back the state to reveal the spontaneous order of a market society.

Sachs then implemented shock therapy in Russia. At this moment his neoliberal fantasy was ruptured by the Real of Capital. Shock therapy in Russia resulted in one of the longest and deepest recessions in modern history, confronting Sachs with the Real of Capital as a class-based and crisis-ridden system, which tore Russian society apart with a seemingly uncontrollable destructive fury. Sachs’s own words convey a sense of trauma, describing the experience as “Very painful, and not so easy to reconstitute in the end”.

In my book, I interpret Sachs’s entire subsequent career as a series of displacement activities through which he has sought to reconstruct his neoliberal fantasy while avoiding a repeat confrontation with the traumatic Real of Capital.

Unable to maintain his fantasy in its original form, Sachs has been forced to modify it to take into account certain symptoms of the Real of Capital, such as poverty and inequality. Rather than attributing these to the inherent contradictions of capitalism, however, Sachs has attempted to explain them away as ‘externalities’ and ‘market failures’ to be addressed with targeted policies that leave his fundamental fantasy intact.

The intensification of international inequalities, for example, is attributed not to free trade and privatization trapping post-colonial countries in primary commodity production, but to relative distances to sea-ports and the disease burden of tropical climates, and is to be addressed through infrastructure development rather than policies that promote economic sovereignty.

Through this process, Sachs has been reintegrated into the neoliberal policy elite, as one of the key figures in engineering the transition from the Washington Consensus to the post-Washington Consensus and beyond.

Sachs’s Millennium Villages Project would seem to mark the ‘logical’ end point of this process. Funded by multinational corporations and Wall Street billionaires, the Project aims to exemplify Sachs’s solution to extreme poverty in a series of model villages across sub-Saharan Africa.

It retains shock therapy’s faith in the market-based and entrepreneurial nature of social reality. But whereas shock therapy sought to shock this reality into existence, the Millennium Villages Project seeks to engineer it down to its very last detail, through a comprehensive set of interventions in every dimension of the villagers’ everyday lives. This, then, is the paradox of neoliberalism, which evolves through a series of neurotic displacement strategies, from the destruction of the interventionist state, to the total social production of a supposedly natural order.           

The sorcerer’s apprentice

The neoliberal neurosis is shared by other seemingly ‘reformed’ neoliberals, such as Joseph Stiglitz and Paul Krugman. Like Sachs, Stiglitz has made a name for himself as a critic of economic orthodoxy, while remaining wedded to neoliberal fundamentals, serving as Chief Economist of the World Bank from 1997 to 2000, and masterminding its transition from the Washington Consensus to the Post-Washington Consensus.

Similarly, in contrast to his current incarnation as a reborn ‘Keynesian’, Krugman served as an economic advisor in the Reagan administration, and played a key role alongside Sachs and Stiglitz in the development of ‘globalization with a human face’, which has been so central to the legitimation of the neoliberal project.

Not all neoliberals are neurotic. In fact, we could contrast Sachs and others like him to unreconstructed market fundamentalists such as Niall Ferguson and William Easterly, by drawing a distinction between neurotic and psychotic neoliberals, to the extent that the latter remain utterly unaware of any dissonance between their fantasy and the Real.

The contemporary spectrum of mainstream economic debate is limited to a discussion between neurotic and psychotic neoliberals, with the neurotic neoliberals constituting the leftward boundary of acceptable public opinion. Yet despite being attacked by psychotic neoliberals for their betrayal of the market, it is Sachs and his fellow neurotics who are the true guardians of the neoliberal project.

In their willingness to engage in ever more invasive forms of intervention to sustain the coordinates of their fantasy, the neurotic neoliberals exhibit the peculiar combination of transformability and resilience that has made neoliberal ideology so irrationally persistent in the face of its repeated failures. The evolution of the neoliberal project towards increasingly intensive forms of social engineering should therefore be understood not as the meticulous manipulation of social reality by a conspiratorial technocratic elite, but rather as a series of increasingly desperate attempts to hold reality itself together, against the relentless pressure of the Real of Capital.

Paradoxically, the obsessive-compulsive rituals of the neurotic neoliberals have only served to intensify the very contradictions they are struggling to contain. The neoliberal project is defined by the drive to liberate capital accumulation from all ‘external’ constraints, either by removing all impediments to the efficient functioning of the price mechanism (as in the case of shock therapy and the Washington Consensus), or by designing interventions to compensate for ‘market failure’ (as in the case of the Millennium Villages Project and the Post-Washington Consensus).

But the Real of Capital does not correspond to the neoliberal fantasy of a naturally harmonious market order. No matter what the neurotic neoliberals do, their actions do not result in the smooth tranquillity of ‘general equilibrium’, but only serve to further empower capital itself as an increasingly volatile and destructive force, which is spiralling beyond the bounds of social control and driving inexorably towards economic and ecological collapse.

The predicament of the neurotic neoliberal thus recalls that of the sorcerer’s apprentice, who, having summoned the forces of the underworld, finds that he is unable to control them, and that his every attempt to do so only serves to strengthen their diabolical powers.

The zombies of Zucotti Park

The relentless persistence of the free market revolution in the aftermath of the Great Recession has been described as “zombie neoliberalism”. This metaphor perfectly captures the disturbing ideological panorama of post-crash capitalism, in which neoliberalism staggers forward, deprived of its fantasy frame, yet still blindly performing its prescribed functions.

According to psychoanalytic theory, the destruction of a fantasy results not in a clear perception of the ‘reality’ beneath it, but in the loss of reality itself in the face of the incomprehensible and traumatic Real.  Like Kurtz in Heart of Darkness, whispering ‘the horror, the horror’, Jeffrey Sachs’s response to the collapse of Lehman Brothers in 2008 indicated the disintegration of reality beneath the crushing weight of the Real of Capital: “The US walked headlong into the fury … the rest of the world has been carried with it into the fury.

Yet despite the final shattering of his fantasy, the neurotic neoliberal remains gripped by what Freud called ‘the death drive’ –  a “blind insistence that follows its course with utter disregard for the requirements of our concrete life-world”. Freud’s account of the death drive is reminiscent of the Real of Capital as an abstract form of domination, which drives beyond all ecological and social limits, and transcends all forms of collective resistance and institutional control. Deprived of his social fantasy, the neurotic neoliberal becomes a zombie neoliberal, directly animated by the death drive of global capital, and lurching spasmodically into the ruins of a crisis-ridden future.

Like all zombies, the zombie neoliberal hungers for living brains to revitalise his moribund ideology. Perhaps this explains why Sachs, Stiglitz, and Krugman all staggered into Zucotti Park during the Occupy Wall Street protests in 2011. All of them appropriated the discourse of the protesters, delivering pseudo-radical speeches that attacked the behaviour of bankers and corporations, while criticizing the free market system that they had helped to create.

Yet they all anxiously insisted upon the sanctity of a good and pure market economy, transforming greedy bankers and corrupt corporations into the latest symptoms through which the Real of Capital could be disavowed. If there is a lesson for those struggling against zombie neoliberalism, it must be to keep a close eye on those who appear to be fighting alongside you. As Žižek warned during his own appearance at Occupy, “Beware not only of enemies, but also of false friends who pretend to support us, but who are working hard to dilute our protest”. In other words: Watch out! That zombie wants to eat your brain!


[i] Slavoj Žižek, Violence (Profile), p. 31.

[ii] Jamie Peck, Constructions of Neoliberal Reason (Oxford University Press) p. 50, 66

[iii] Joan Robinson Economic Philosophy (Penguin) p. 77-78.

[iv] Slavoj Žižek, The Sublime Object of Ideology (Verso), p. 192.

About the author

Japhy Wilson is Lecturer in International Political Economy and Hallsworth Research Fellow at the University of Manchester. He is the author of Jeffrey Sachs: The Strange Case of Dr Shock and Mr Aid (Verso). Email: japhy.wilson@manchester.a


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Posted 10th June 2014 by InI in category "Capitalism

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