[Part 11]Neoliberalism broke economics not simply as a matter of flawed theory, but as a deliberate political project that turned economic thinking into an instrument of power. From the late 1970s onward, economic orthodoxy shifted away from Keynesian ideas of state responsibility and collective welfare, and embraced the notion that markets, if left to themselves, could efficiently organise society. This belief was canonised in policy through the deregulation of finance, the privatisation of public assets, and the weakening of labour protections, measures justified by economists who claimed to be merely “scientific” but were in fact acting as ideological gatekeepers. As Philip Mirowski argues in Never Let a Serious Crisis Go to Waste (2013, Verso), neoliberalism did not retreat in the wake of the 2008 financial collapse; rather, it used the crisis to entrench itself more deeply, shifting the blame onto governments and households while sparing global finance. Similarly, David Harvey in A Brief History of Neoliberalism (2005, Oxford University Press) demonstrates how neoliberalism has been less about liberating markets than about restoring class power to economic elites, eroding democracy and public accountability. The tragedy of economics under neoliberalism is that it ceased to be a social science concerned with human flourishing, and instead became a kind of market theology that normalised inequality and legitimised austerity. In this sense, neoliberalism did not merely “break” economics—it colonised it, stripping away its ethical core and leaving a hollow shell that serves global capital above all else.Neoliberalism’s devastation of economics becomes clearer when one examines concrete historical episodes in which ideology translated into policy. In Britain, the privatisation of railways during the 1990s was hailed as a triumph of efficiency, competition, and consumer choice. In practice, it created a fragmented system plagued by higher fares, safety failures, and a reliance on state subsidies larger than those under public ownership. As Christian Wolmar explains in On the Wrong Line: How Ideology and Incompetence Wrecked Britain’s Railways (2005, Aurum Press), neoliberal dogma overrode common sense, producing a dysfunctional system that prioritised shareholder profit over public service. Similarly, in Latin America during the 1980s and 1990s, the so-called “debt crisis” became the testing ground for neoliberal prescriptions enforced by the International Monetary Fund and the World Bank. Countries like Mexico, Brazil, and Argentina were compelled to slash social spending, privatise state industries, and open markets to foreign capital in return for loans—policies that deepened poverty and inequality while serving creditor interests. Joseph Stiglitz, in Globalization and Its Discontents (2002, W. W. Norton), chronicles how these structural adjustment programmes undermined sovereignty and devastated local economies. Finally, in the United States, the 2008 financial crisis laid bare the moral bankruptcy of neoliberal economics: banks that had fuelled the collapse through reckless speculation were bailed out with public money, while millions of ordinary Americans lost their jobs and homes. The bailouts, defended as “too big to fail,” revealed how neoliberalism had transformed economics into an apologia for concentrated financial power rather than a tool for protecting the public. Taken together, these cases demonstrate that neoliberalism broke economics not only in theory but in lived reality, turning what could have been a social science into a legitimisation of inequality and exploitation.
What follows from the wreckage of neoliberalism is a pressing need to recover economics as a genuinely social science, one rooted not in abstract models or blind faith in markets, but in the lived realities of human beings. The failures of privatisation, debt restructuring, and financial bailouts reveal that markets left unchecked do not naturally produce fairness or efficiency; instead, they generate concentrations of wealth and power that undermine democratic life. As scholars such as Mariana Mazzucato argue in The Value of Everything (2018, Allen Lane), it is time to rethink what value means, to distinguish between wealth creation and wealth extraction, and to restore the role of the state as a dynamic actor in innovation and social welfare rather than a passive servant of capital. Likewise, Kate Raworth’s Doughnut Economics (2017, Chelsea Green Publishing) offers a vision of economics that balances ecological limits with human needs, reclaiming the discipline’s moral purpose. The end of neoliberalism, if it comes, will not be a mere technical adjustment of models, but a profound reimagining of what economics is for: not the enrichment of a few, but the flourishing of the many.
Socialism, when distinguished from communism, can be seen as a possible remedy to the excesses and failures of neoliberalism because it does not demand the abolition of private property or the total centralisation of power, but instead seeks to embed markets within a framework of social justice and collective responsibility. Unlike communism, which historically has often been associated with authoritarian control and the suppression of pluralism, socialism in its democratic and reformist forms aspires to reconcile economic efficiency with fairness, ensuring that the benefits of growth are distributed more widely rather than hoarded by elites. This vision is not utopian: it has concrete precedents in the Nordic social democratic model, where strong welfare systems, robust labour protections, and active state participation in key sectors coexist with vibrant private enterprise. Such arrangements directly challenge the neoliberal dogma that the state must retreat and leave everything to the market, showing instead that public institutions can tame inequality and provide security without extinguishing innovation.From a theoretical standpoint, democratic socialism restores economics to its moral foundation by insisting that the economy must serve society, not the other way around. Thinkers like Karl Polanyi, in The Great Transformation (1944, Farrar & Rinehart), warned that markets disembedded from social and ethical constraints would tear societies apart, a lesson that neoliberalism has spectacularly proven true. Meanwhile, more recent voices like Thomas Piketty, in Capital in the Twenty-First Century (2014, Harvard University Press), argue for progressive taxation and wealth redistribution as necessary correctives to runaway inequality. Socialism in this sense is not about abolishing markets, but about civilising them, ensuring that they operate within rules that prioritise human dignity, ecological balance, and democratic accountability.In practice, this could mean reasserting public ownership in essential sectors like transport, healthcare, and energy, while allowing private initiative in areas where competition genuinely drives innovation. It could also involve strengthening trade unions, expanding universal basic services, and designing fiscal policies that shift the burden away from ordinary workers towards those who extract disproportionate wealth from the system. Unlike neoliberalism, which normalises precarity and glorifies “winners” at the expense of the collective, socialism offers a framework for solidarity—acknowledging that prosperity is not just an individual pursuit but a shared achievement.Neoliberalism emerged in the mid-twentieth century as both a reaction against classical laissez-faire liberalism and a rejection of Keynesian state interventionism. Its intellectual roots can be traced to the 1938 Colloque Walter Lippmann in Paris, where European and American thinkers discussed how to revive liberalism in a way that could resist both socialism and fascism. The movement gained coherence in the 1940s with the establishment of the Mont Pelerin Society, founded in 1947 by Friedrich Hayek, Milton Friedman, and other like-minded economists and philosophers. Their ambition was to defend the principles of a competitive market economy, private property, and limited government at a time when state planning and welfare expansion were widely celebrated. Neoliberalism was thus conceived not merely as an economic theory, but as a political project to reshape society by embedding market logic into every sphere of life. It became politically dominant in the late 1970s and 1980s under leaders such as Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States, who used it to justify deregulation, privatisation, and the shrinking of the welfare state. Its original purpose, as articulated by its architects, was to safeguard individual liberty by constraining state power, but in practice it concentrated wealth and influence in the hands of corporate elites while eroding the social protections that had been painstakingly built in the post-war era.Neoliberalism entered the developing world primarily through the influence of international financial institutions such as the International Monetary Fund (IMF) and the World Bank, especially from the late 1970s onwards. After the oil shocks of the 1970s and the debt crises of the 1980s, many countries in Latin America, Africa, and parts of Asia found themselves unable to service their external debts. The IMF and the World Bank stepped in with financial rescue packages, but these came with strict conditionalities known as Structural Adjustment Programmes (SAPs). These programmes required debtor nations to liberalise trade, privatise state-owned enterprises, reduce public spending, and deregulate domestic markets. The underlying assumption, inspired by neoliberal thought, was that markets would allocate resources more efficiently than states and that foreign investment would flow once barriers were dismantled.In reality, these reforms often inflicted heavy social costs. Public services such as health, education, and housing were cut back, making life far harsher for the poor. State industries, sold off in the name of efficiency, frequently ended up in the hands of politically connected elites or foreign corporations, weakening national sovereignty. Countries like Mexico, Argentina, and Brazil in Latin America became testing grounds for this experiment, and while a few years of growth sometimes followed, inequality and vulnerability worsened in the long run. As Joseph Stiglitz later argued, in Globalization and Its Discontents (2002, W. W. Norton), these neoliberal prescriptions too often privileged creditors and investors over citizens, leaving developing nations trapped in cycles of austerity and dependency. What was presented as “modernisation” became, in effect, a mechanism for extending neoliberal hegemony across the globe.Neoliberalism is best understood as an evolution, or more precisely a reconfiguration, of capitalism rather than something entirely new. Classical capitalism, which gained strength in the nineteenth century, was anchored in the belief in private property, competitive markets, and limited state interference. However, following the Great Depression of the 1930s and the Second World War, pure laissez-faire capitalism lost legitimacy. For several decades, Keynesian economics dominated, with governments playing an active role in stabilising economies, redistributing wealth, and providing social protections.Neoliberalism emerged in the mid-twentieth century as a response to this Keynesian model, particularly from thinkers such as Friedrich Hayek and Milton Friedman, who believed that state intervention threatened both economic efficiency and individual freedom. In that sense, neoliberalism did not reject capitalism; it rather sought to revitalise it by stripping away what neoliberals saw as distortions created by welfare states and state planning. Instead of allowing capitalism to be moderated by strong governments and social safety nets, neoliberalism reasserted market supremacy, arguing that markets should govern not only economic life but also social relations.Therefore, neoliberalism can be described as capitalism in a sharpened, globalised, and financialised form. It represents a phase where capitalism turned more aggressive, prioritising deregulation, privatisation, and financial liberalisation. As David Harvey notes in A Brief History of Neoliberalism (2005, Oxford University Press), neoliberalism is less a departure from capitalism and more its reinvention under conditions of globalisation and corporate dominance. It is capitalism made leaner, harsher, and more ideological, seeking to universalise the logic of the market across every domain of human life.Capitalism and neoliberalism share the same foundation but operate with different intensities and emphases. At their core, both systems champion private property, profit-seeking, competition, and the belief that markets are the most efficient way to allocate resources. In this sense, neoliberalism is not a rejection of capitalism but a refinement—or even a radicalisation—of it. Both ideologies are deeply suspicious of collectivist alternatives such as socialism or communism, and both celebrate individualism as a moral and economic virtue.The key differences, however, lie in the role of the state and the extent to which markets are allowed to dominate. Classical capitalism, especially in its nineteenth-century form, assumed a relatively limited role for the state but still tolerated various forms of regulation, protectionism, and national economic planning. In contrast, neoliberalism pushes for deregulation, privatisation, trade liberalisation, and austerity. Where capitalism in its earlier forms could coexist with welfare states, neoliberalism emerged precisely as a reaction against Keynesian welfare policies. It demanded that the state retreat from direct economic management, restricting its role to safeguarding private property, enforcing contracts, and ensuring the smooth functioning of markets.Thematically, capitalism has historically been associated with progress, innovation, and the promise of prosperity through individual enterprise. Neoliberalism, meanwhile, frames its themes in the language of freedom, efficiency, and global competitiveness. It insists that the market is not only the best economic mechanism but also a model for organising social life, from education to healthcare. This is why scholars such as Wendy Brown in Undoing the Demos (2015, Zone Books) argue that neoliberalism represents a more intrusive ideological project, transforming citizens into market actors and reducing democracy to economic rationality.The actors of capitalism have historically included industrialists, bankers, merchants, and entrepreneurs—figures such as Andrew Carnegie, John D. Rockefeller, or Henry Ford who embodied the industrial age. Neoliberalism, by contrast, is more associated with political leaders and intellectual architects who advanced its global spread: Friedrich Hayek, Milton Friedman, and institutions such as the Chicago School of Economics laid the groundwork; political figures such as Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States implemented the reforms; while international bodies such as the IMF, World Bank, and World Trade Organization carried them across the developing world. If capitalism’s actors were primarily economic pioneers, neoliberalism’s actors were political, academic, and institutional enforcers of market supremacy.Capitalism in its classical form has never been a coherent political programme; rather, it has functioned as an economic system shaped by the dynamics of trade, production, and profit. While it certainly influenced governments—because states often acted to protect merchants, investors, and industrialists—it did not necessarily come with an explicit ideological blueprint that dictated how states should legislate or govern. In other words, capitalism could thrive under monarchies, republics, empires, or democracies, adapting itself to whatever political structures prevailed, so long as private property and markets remained intact.Neoliberalism, on the other hand, emerged as both an economic theory and a political project. It was never content to be a background system; it sought to actively reshape state policy. Beginning in the late twentieth century, neoliberalism advanced the argument that governments themselves must be transformed to serve markets, not merely protect them. This is why Margaret Thatcher famously declared, “Economics are the method; the object is to change the soul.” Neoliberal reforms targeted the very architecture of governance: reducing the scope of welfare states, rewriting tax codes to favour capital, dismantling trade barriers, and rewriting labour laws to weaken unions. As Jamie Peck explains in Constructions of Neoliberal Reason (2010, Oxford University Press), neoliberalism is not simply an economic philosophy but an active political strategy to institutionalise market logic across all layers of society.The difference, then, lies in intentionality. Capitalism shaped policy indirectly, through economic interests and class power, but neoliberalism deliberately entered the policy arena with an agenda. It is not merely an economic system but a governing rationality, a worldview that demands states be remade in the image of the market. This makes neoliberalism far more invasive and politically ambitious than the broader, looser tradition of capitalism.The question now is, where should Indonesia stand? Is it communist? Is it liberal, capitalist, or neoliberal? The founding fathers of Indonesia, including Sukarno, Hatta, and Sutan Sjahrir, envisioned a nation built on principles of social justice, equality, and national unity, while preserving cultural diversity and sovereignty. They were not strictly aligned with Western-style capitalism, which emphasises private profit over collective welfare, nor were they advocates of orthodox Marxist communism, which calls for class struggle and the abolition of private property. Instead, they sought a middle path that combined elements of social equity with economic pragmatism, often expressed in the ideology of Pancasila and guided by the concept of “guided democracy” and cooperative economics. In essence, their vision leaned closer to a form of democratic socialism—prioritising social welfare and communal well-being while maintaining a space for private initiative under national control—rather than pure capitalism or communism.From an Indonesian perspective, “Democratic Socialism” or Sosialis Demokratis is not about copying European socialist systems or adopting rigid Marxist doctrines. Instead, it is about ensuring that economic and political policies prioritise the welfare of the people while respecting Indonesia’s cultural, religious, and social diversity. This means promoting social justice, reducing inequality, and encouraging cooperative businesses (koperasi) rather than leaving everything to market forces or state ownership alone. In practice, it blends democracy—people’s participation in government—with social responsibility, so that private enterprise can exist but is balanced by programs that support education, healthcare, and community development. It’s essentially socialism tailored to Indonesian realities, with a moral and communal flavour, rather than dogmatic ideology imported from abroad.Before continuing with the discussion about Socialism from an Indonesian perspective, let us take a brief look at the topic of Karl Marx.
If we accept the conclusion that authoritarian outcomes in the Soviet experience were the result of a combination of ideas, institutional forms, and crisis conditions, then the verdict is nuanced. On the one hand, Marx’s and Lenin’s doctrines did not mechanically or inevitably dictate the emergence of repression. Historical contingencies such as civil war, foreign invasion, and economic collapse were decisive in shaping the Soviet trajectory. On the other hand, the language and concepts embedded in the doctrine itself undeniably contained openings that could be — and were — exploited by political leaders to legitimise coercive practices.From this perspective, it is not unfair for critics to call the doctrine “dangerous.” The danger lies less in an unavoidable blueprint for dictatorship, and more in the way its core formulations — revolutionary overthrow, the dictatorship of the proletariat, and the role of the vanguard party — reduce the space for pluralism and provide moral justification for the suppression of opposition. Once crisis conditions appear, these formulations can be, and historically were, reinterpreted in authoritarian directions.Thus, the balanced scholarly position is that Marxist-Leninist teachings, while not deterministically guaranteeing terror, do carry political risks. The doctrines themselves supply a repertoire of concepts that can be, under pressure, bent toward coercion. This is precisely why academics label them as potentially dangerous: not because they compel repression in every case, but because they lower the intellectual and institutional barriers to repression when crises strike.Karl Marx’s intellectual project was profoundly this-worldly. His analysis of society, history, and economics deliberately rejected metaphysical or spiritual explanations. Instead, he sought to ground all social phenomena in material conditions, particularly the relations of production and class struggle.Marx’s early writings already reveal his critical stance towards religion. In his 1843 essay Contribution to the Critique of Hegel’s Philosophy of Right, he described religion as the “opium of the people.” By this phrase, he did not mean merely that religion was a drug-like illusion, but that it provided comfort to the oppressed while also dulling their awareness of the real causes of their suffering. For Marx, the problem with religion was that it displaced the struggle for real, earthly emancipation into the sphere of the afterlife, thereby preserving unjust social arrangements.He therefore argued that true human liberation required a critique of religion, but only as the prelude to critiquing earthly structures of power. In his words, “the criticism of religion is the premise of all criticism.” This indicates his conviction that belief in God or transcendence was not only false but also socially harmful because it legitimised oppression.In his mature works, especially The German Ideology (1845) and Das Kapital (1867), Marx shifted his focus to materialism as a historical method. He argued that material production — the way human beings organise labour, produce goods, and divide resources — determines social consciousness, not the other way around. Thus, religion, morality, and even philosophy are understood as “superstructures” arising from the economic “base.” This is the essence of what later came to be called historical materialism.Marx consistently denied the existence of God and dismissed religious faith as an illusion. His worldview was explicitly atheistic and materialistic. He believed that humanity should stop projecting its essence onto a divine figure and instead recognise that “the human is the highest being for the human.” This conviction placed him firmly in the Enlightenment tradition of radical secularism.In short, Marx prioritised the worldly over the otherworldly, the material over the spiritual. He denied the existence of God, rejected religion as both false and politically conservative, and argued that genuine human emancipation could only be achieved by transforming material conditions through collective, earthly struggle.Karl Marx’s atheistic materialism stands in sharp contrast to the perspectives of religious thinkers, both in the Western philosophical canon and in Islamic intellectual traditions.Take, for example, Søren Kierkegaard, the 19th-century Danish philosopher and Christian existentialist. Kierkegaard emphasised the individual’s “leap of faith” as the essence of authentic existence. Whereas Marx argued that religion is an illusion that distracts people from their earthly struggle, Kierkegaard believed that only in faith does the individual confront despair and find true meaning. To Kierkegaard, Marx’s insistence on purely worldly emancipation would appear superficial, because it ignores the existential depth of the human condition, which includes the inevitability of sin, suffering, and mortality.Similarly, in Islamic thought, religion is not viewed as an “opium” but as a framework for justice, accountability, and spiritual balance. Thinkers such as Muhammad Iqbal in the 20th century argued that Islam integrates both material and spiritual dimensions of life. For Iqbal, material progress without spiritual grounding risks producing arrogance and social imbalance, while spiritual devotion without worldly engagement neglects human responsibility on earth. This dialectic view directly opposes Marx’s reduction of religion to a superstructure of economics.Moreover, classical Islamic scholars like Al-Ghazali or Ibn Khaldun stressed that human flourishing involves a balance between dunya (the worldly life) and akhirah (the hereafter). Marx’s theory of historical materialism, which makes economic structures the ultimate determinant of culture and belief, reverses that balance entirely, elevating the dunya as the only realm of significance. From a religious standpoint, this is seen as both reductive and spiritually dangerous, since it denies transcendence and divine accountability.Thus, while Marx stripped human emancipation down to economic liberation achieved through collective action in the material world, religious thinkers across traditions argue that emancipation is incomplete without addressing the eternal dimension of the human soul. The tension here is fundamental: Marx’s framework is horizontal and historical, whereas religious worldviews remain vertical, pointing towards God and eternity.Mao Zedong approached Karl Marx’s works not as a detached scholar but as a revolutionary strategist operating within the conditions of semi-colonial, agrarian China. He admired Das Kapital and other writings by Marx and Engels, but his engagement was selective and practical rather than purely theoretical. Mao once confessed that Das Kapital was “a thick and difficult book” and that he had to read it many times to understand even the basics. Yet he insisted that the essence of Marx’s thought lay in its method: historical materialism and the analysis of class struggle.Unlike Marx, who focused on industrial capitalism in advanced European societies, Mao confronted a peasant-dominated country under foreign imperialist pressure. His great innovation was to adapt Marxism to Chinese conditions, arguing that peasants, rather than the industrial proletariat alone, could serve as the main revolutionary force. This was a radical departure from classical Marxism but one he justified as faithful to the “spirit” of Marx’s method.Mao’s interpretation of communism emphasised permanent revolution and continuous class struggle even after the seizure of state power. He argued that new bourgeois elements could arise within the Communist Party itself, requiring vigilance and campaigns (such as the Cultural Revolution) to prevent “capitalist roaders” from restoring exploitation. In this sense, Mao radicalised Marx’s concept of the dictatorship of the proletariat, transforming it into a call for ongoing mass mobilisation and ideological struggle.Mao also gave a distinctively Chinese, almost philosophical spin to Marxist ideas. He frequently drew upon dialectics — not only the dialectical materialism of Marx and Engels but also traditional Chinese notions of contradiction. In his essay On Contradiction (1937), Mao argued that identifying and managing contradictions was the key to understanding society and revolution. This shows how Mao read Marx not as rigid scripture but as a flexible toolkit.In summary, Mao revered Marx as the intellectual founder of communism but felt compelled to reinterpret Marxism for China. He saw communism not just as the abolition of private property and classes but as a process of continuous struggle, driven by peasants, shaped by contradiction, and guarded against betrayal. For Mao, Marxism was less a finished doctrine than a living weapon of revolution.Karl Marx envisioned revolution primarily in advanced industrial societies where the proletariat—the factory-working class—would eventually overthrow the bourgeoisie. Mao Zedong, however, transplanted this vision to agrarian China and elevated the peasantry as the decisive revolutionary class. This was one of Mao’s most significant departures from orthodox Marxism.For Marx, revolution was conceived as a punctual event, a dramatic seizure of state power followed by the transitional dictatorship of the proletariat and then the eventual withering away of the state. Mao reimagined this as a process of permanent revolution, insisting that class struggle must continue even after the Communist Party had taken control, because new bourgeois elements could arise within the system itself.Marx predicted that with the elimination of class divisions, the state would ultimately “wither away” as its coercive functions became unnecessary. Mao, by contrast, treated the state as a permanent battlefield, where vigilance, ideological campaigns, and sometimes violent purges were necessary to prevent capitalist restoration. In Mao’s thought, the state never weakens; it tightens its grip to defend communism.Finally, Marx employed dialectical materialism primarily as a method of analysing historical change. Mao gave it a practical, activist twist, particularly in On Contradiction and On Practice. For him, dialectics were not simply analytical tools but instructions for revolutionary action, framed in terms accessible to peasants and cadres.Thus, Marx’s communism was largely theoretical and oriented toward an industrial future, while Mao’s communism was pragmatic, peasant-driven, and designed for continuous mobilisation in a semi-colonial setting.
[Part 9]
