'Oxymoron': Nobel Prize economist dismantles 'neoliberal theorists' and 'unrestrained capitalism'

The late conservative economist Milton Friedman was an aggressive promoter of the "shareholder theory," arguing that corporations' main obligation was not to society on the whole, but to their shareholders. Friedman influenced many libertarians and neoliberal thinkers who equate a laissez-faire or hands-off approach to economics with personal freedom.

But in an in-depth essay/think piece published by The Atlantic on April 24, Nobel Prize-winning economist Joseph E. Stiglitz challenges those beliefs and stresses that "unfettered" capitalism isn't necessarily synonymous with freedom.

"(Economist) F.A. Hayek and Milton Friedman were the most notable 20th-Century defenders of unrestrained capitalism," Stiglitz explained. "The idea of 'unfettered markets' — markets without rules and regulations — is an oxymoron because without rules and regulations enforced by government, there could and would be little trade. Cheating would be rampant, trust low."

READ MORE:'The end of democracy': Bernie Sanders says 'humiliated' Trump could cause 'collapse'

The economist continues, "A world without restraints would be a jungle in which only power mattered, determining who got what and who did what. It wouldn't be a market at all. Nonetheless, Hayek and Friedman argued that capitalism as they interpreted it, with free and unfettered markets, was the best system in terms of efficiency, and that without free markets and free enterprise, we could not and would not have individual freedom."

Stiglitz goes on to lay out some reasons why his "conclusions" about economics are "radically different" from Hayek and Friedman's laissez-faire views — and why "neoliberalism" isn't necessarily an antidote to authoritarianism.

"It was because of democratic demands that democratic governments, such as that of the U.S., responded to the Great Depression through collective action," Stiglitz argues. "The failure of governments to respond adequately to soaring unemployment in Germany led to the rise of Hitler. Today, it is neoliberalism that has brought massive inequalities and provided fertile ground for dangerous populists. Neoliberalism's grim record includes freeing financial markets to precipitate the largest financial crisis in three-quarters of a century, freeing international trade to accelerate deindustrialization, and freeing corporations to exploit consumers, workers, and the environment alike."

Stiglitz adds, "Contrary to what Friedman suggested in his 1962 book, 'Capitalism and Freedom,'' this form of capitalism does not enhance freedom in our society. Instead, it has led to the freedom of a few at the expense of the many."

READ MORE: Wealth of the top 1 percent in U.S. hits all-time high of $45 trillion

According to Stiglitz, "neoliberal theorists and their beneficiaries" are promoting — not discouraging — a dangerous "polarization."

The economist writes, "They forget that, for all the rhetoric, free markets can't function without strong democracies beneath them — the kind of democracies that neoliberalism puts under threat. In a very direct way, neoliberal capitalism is devouring itself."

READ MORE: Economist Paul Krugman: Health care reforms could be 'gone by 2026' if Trump wins

Joseph E. Stiglitz's full essay for The Atlantic is available at this link (subscription required).