We are awash with critiques of neoliberalism. It is abundantly clear that a mantra of “small state, low tax, individual freedom” has failed to deliver security and prosperity to the vast majority of those in the countries that have adopted it as their governing philosophy. However we are now past the point where further highlighting where it is failing is useful. We need better understanding of where neoliberalism came from and what the roots are from which it draws credibility in order to properly disassemble the philosophy and understand it in its proper context so that then we can see why it does not work.

It is well known that the origin of the philosophy was a reaction to the totally centralised social orders of communism and Nazism in the early 20th century. But what seems to be rarely discussed is why it is that it has any purchase at all on our imaginations. It is insufficient simply to dismiss it as a provenly failed strategy, because then we miss the opportunity to really dissect and understand what is going on.

Whether you want to believe it or not, neoliberalism has credibility because it is a representation of a functional part of human social structure. Over on the motivational side of a fundamental axis across which all human societies are organised, it is necessary for there to be an open space that is absent of state (group) intervention within which the magic of innovation occurs. Neoliberalism’s failure is not that it got this wrong, it is that it looks at this as if it is exclusively the progenitor of prosperity. In fact this is just one part of a spectrum which has to be seen in the whole in order to understand its functionality in totality.

The full spectrum of this axis goes from the importance of social cohesion on one side and the equal importance of individual motivation on the other side. It is not possible to have individual specialisation without a social structure, which allows all of the roles to get filled by the various individuals that make up the group, however it is also true that the group that enables the highest degree of functional specialisation will also have advantage. It might seem a bit chicken and egg, however if you sit down and work it out you realise that the social structure must preexist the emergence of specialisations. Neoliberalism’s fundamental failure is that it assumes that specialisation can emerge without social organisation. This is a really basic and fundamental flaw, however it does not take away from the fact that the bit that neoliberalism does describe is in fact real and functional.

Within this analytical framework we need not be pejorative of the ideas in neoliberalism, but simply constrain them to the relevant portions of activity for which they are functional. That realm is in the area of innovation, and refers to a relatively small part of total social function but within which we are reminded to keep space open for those who do not think like us and who are prepared to experiment unnecessarily, for those are the innovators who will provide the solutions to the new problems that we will face in a future in which change is the only guaranteed constant.

So let’s put neoliberalism where it deserves to be: somewhere in the intersection between the personal freedom to experiment unnecessarily, the economic incentives that direct such experimentation towards socially recognised goals, and the protection of the legal system. In that space we can have small state presence and possibly even low taxes, but everywhere else we will need something different in order to make that space viable.