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The neo-liberal execution of democracy

By Ken Wolff

In my inbox each day I get an e-mail from The Washington Post called The Daily 202. This year it has been, as is to be expected, mostly about the American Presidential primaries and forthcoming election but, in reporting Bernie Sanders’ primary win in West Virginia back on 10 May, it stated the win was not really about ideology but disaffection:

Americans, collectively, are not as angry as watching cable TV would lead you to believe. But many poorer, less-educated folks who have been left behind in the 21st century — the ones who have seen their wages stagnate, their opportunities for upward mobility disappear and their life expectancies shorten — are looking to disrupt a status quo that has not worked for them.

That’s what Sanders and Trump are both promising to do.

So how did the septuagenarian socialist do it? The bottom line is most people are not voting for Bernie because he is liberal. They are voting for him because they perceive his promised “political revolution” as a challenge to the system that has failed them.

“West Virginia is a working-class state, and like many other states in this country, including Oregon, working people are hurting,” Sanders said last night at a rally in Salem, Oregon. “And what the people of West Virginia said tonight, and I believe the people of Oregon will say next week, is that we need an economy that works for all of us, not just the 1 percent.”

We are seeing the same phenomenon around the world: the election of Jeremy Corbin to the Labour leadership in the UK; the rise of anti-establishment parties in Spain and Greece; and, unfortunately, it has also meant the rise of extreme right (and sometimes neo-fascist) parties that tap into that disaffection with the political system.

How has it come to this?

Basically, as Sanders alluded to, it is the economic approach followed by governments that, since the Thatcher and Reagan years, has been based on a neo-liberal economic philosophy which appears to be benefitting the wealthy rather than society as a whole. We know the shortcomings of that approach, based as it is on supply-side or ‘trickle down’ economics, but we have seen little discussion (at least here in Australia) on the broader impact it is having on democracy.

We live in a system where a democratic form of governance is coupled with a capitalist competitive free-market economic system.

In a democratic political system all people are meant to be equal — one person, one vote, and all votes of equal value.

The neo-liberals also base their political approach on the individual but tend towards the libertarian view that governments should have no role in an individual’s life choices. Thus, in Australia, we have a libertarian, Leyonhjelm, arguing against anti-smoking regulations and the mandatory wearing of bicycle helmets. While that may support individual freedom, it ignores the wider social benefits of those approaches and the cost to the community, through our taxes, of hospitalisation and associated services for smokers or cyclists suffering head injuries. If the wider community bears the cost of such ‘freedom’, then surely it has a right to say that in the community interest some individual freedoms can and should be curtailed.

The neo-liberals, however, would argue that the community concern is overcome by privatising health services: then the individuals who suffer health problems from smoking or cycling accidents have to meet their own costs — but so does everyone else, including the less well-off and those cast out of their jobs by the neo-liberal economic approach.

This emphasis on the individual, as applied to economics, creates even more problems. A philosopher in the 1970s, Robert Nozick, basically set out a philosophical underpinning for neo-liberalism.

There is no such thing as the ‘common good’ in Nozick’s (and the neo-liberals’) approach, only individuals:

While it is true that some individuals might make sacrifices of some of their interests in order to gain benefits for some other of their interests, society can never be justified in sacrificing the interests of some individuals for the sake of others. [emphasis added]

Nozick considered that the state’s single proper duty is the protection of persons and property and that it requires taxation only for that purpose. Taking tax for redistributive purposes is on a par with forced labour, he wrote. So government should play little or no role in regulating the economy: the state then can be seen as an institution that serves to protect private property rights and the economic transactions that follow from them regardless of whether we think some people deserve more or less than they have.

The neo-liberal economic approach also emphasises debt. I used this quotation in my previous article but it is also relevant here. Although written about the US, it could readily apply in Australia:

Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers. Workers have become so deeply indebted on their home mortgages, credit card and other bank debt that they fear to strike or even to complain about working conditions.

The sale of public assets to relieve debt and the emphasis on the individual means the areas in which government can exercise control in the interests of the wider society are diminishing.

George Monbiot, writing in The Guardian (UK) in April said:

Perhaps the most dangerous impact of neoliberalism is not the economic crises it has caused, but the political crisis. As the domain of the state is reduced, our ability to change the course of our lives through voting also contracts. Instead, neoliberal theory asserts, people can exercise choice through spending. But some have more to spend than others: in the great consumer or shareholder democracy, votes are not equally distributed. The result is a disempowerment of the poor and middle. As parties of the right and former left adopt similar neoliberal policies, disempowerment turns to disenfranchisement. Large numbers of people have been shed from politics.

Chris Hedges remarks that “fascist movements build their base not from the politically active but the politically inactive, the “losers” who feel, often correctly, they have no voice or role to play in the political establishment.” When political debate no longer speaks to us, people become responsive instead to slogans, symbols and sensation. To the admirers of Donald Trump, for example, facts and arguments appear irrelevant.

The remarks by Chris Hedges explain the rise of the far-right and capture the same disillusion referred to in The Washington Post article. Consider also the initial success of Tony Abbott: ‘slogans, symbols and sensation’ and ‘to [his] admirers, … facts and arguments appear irrelevant’. It certainly fits!

We can also go back to Naom Chomsky in 1999 when he wrote:

… to be effective, democracy requires that people feel a connection to their fellow citizens, and that this connection manifests itself though a variety of nonmarket organizations and institutions. A vibrant political culture needs community groups, libraries, public schools, neighbourhood organizations, cooperatives, public meeting places, voluntary associations, and trade unions to provide ways for citizens to meet, communicate, and interact with their fellow citizens. Neoliberal democracy, with its notion of the market uber alles, takes dead aim at this sector. Instead of citizens, it produces consumers. Instead of communities, it produces shopping malls. The net result is an atomized society of disengaged individuals who feel demoralized and socially powerless.

Basically, democracy is being undermined, leaving people disaffected, unable to foresee how they can influence the political process for their benefit. As Monbiot pointed out, the range of politically influenced decisions is contracting. Privatisation of former public assets mean governments are controlling less and less, their decisions also cover less and less. If all our services are privatised and the individual is placed above society, what role is left for government? And in that circumstance, what is the point or the value of voting?

I wrote about this previously in relation to the situation in Greece and noted this comment from eminent economist Joseph Stiglitz:

Seldom do democratic elections give as clear a message as that in Greece. If Europe says no to Greek voters’ demand for a change of course, it is saying that democracy is of no importance, at least when it comes to economics.

We know that the bankers and financiers did say no to the democratic wish of the Greek people.

People are also further and further removed from influence over the economy, and yet the economy relies on people. The neo-liberal economy has seen the rise of inequality in most countries around the world. The neo-liberals see no inconsistency in inequality.

To return to Robert Nozick’s philosophy: as each individual owns the products of his or her own endeavours and talents, it is possible for an individual to acquire property rights (as long as they are not gained by theft, force or fraud) over a disproportionate amount of the world; once private property has been appropriated in that way, it is ‘morally’ necessary for a free market to exist so as to allow further exchange of the property. And the individual then has complete control as to how that property is passed on. So it is logically okay for someone to inherit a fortune having contributed nothing to gain that wealth: reward for effort or just desert do not come into it for Nozick — it is only property rights and market mechanisms that count. That, of course, is the neo-liberal approach.

Piketty made this clear in his work Capitalism in the twenty-first century in which he explained the rise of rentiers (those who gain their income from rents, dividends and interest) and that the growth of such wealth is outstripping the rise of earned income.

Monbiot also quoted another author who was making a similar point:

“Investment”, as Andrew Sayer notes, means two quite different things. One is the funding of productive and socially useful activities, the other is the purchase of existing assets to milk them for rent, interest, dividends and capital gains. Using the same word for different activities “camouflages the sources of wealth”, leading us to confuse wealth extraction with wealth creation. [emphasis added]

Too much economic activity now seems to be based on ‘wealth extraction’ rather than genuinely productive activity. In Australia, the increase in the number of investment houses is a symptom of this, particularly when it is an existing house and provides no new productive activity (construction) and relies on rent and/or capital gains for a return on investment. The negative gearing tax incentive and capital gains tax concessions have distorted the market and made it more profitable to put money into ‘wealth extraction’ rather than ‘wealth creation’. And our government intends to do nothing about it because it may curtail the rights of some individuals — what it falsely called the ‘mum and dad’ investors.

The rise of the global economy has transferred jobs. Chinese manufacturing has replaced significant portions of manufacturing in the US and the UK, as well as in Australia. Even work in call centres has been ‘off-shored’. There is some evidence that the Brexit vote in the UK was influenced by the loss of traditional employment in particular areas, not just by immigration: some of the strongest ‘leave’ vote occurred in areas where major industrial plants had closed in the preceding decade and jobs had not been replaced. Some predict that ‘jobs’ will be the major political battleground in coming years arising not just from a globalised economy but from the increasing spread of robotics.

When people feel economically threatened they look to their government to relieve the situation but governments will not intervene, or intervene minimally, while they continue to pursue neo-liberal economic approaches. As Monbiot pointed out, one’s capacity to participate in this new world is determined by spending power but as more people lose jobs they have little or no capacity to participate.

The next step in the process, which has already begun, is that people also then feel that the political system is failing them and will turn to those offering either radical or more despotic (even fascist) solutions. They will be attracted to solutions harking back to a ‘golden age’ — whether it is myth or reality. But in the neo-liberal world the government will have almost no capacity to respond: it will be in debt; it will not have control over major economic areas that have been privatised (sold off to meet ‘debt’); it will believe it should not intervene in ‘the market’; it will continue to believe that people improve their situation only by their own individual effort; it will have no answer to those offering alternative solutions that may be attractive to the masses.

If governments across the Western world continue to follow neo-liberalism in both their social and economic policies we will also see the continuing slow death of democracy, including in Australia, with more people disaffected and disillusioned with the economic and political systems and that may well lead to a willingness to embrace non-democratic solutions.

So governments beware! Your support of neo-liberalism is planting the seeds for your own downfall.

What do you think?

Is One Nation and the rise of right-wing parties around the world simply a reaction against neo-liberalism?

How long can democracy survive if governments continue pursuing neo-liberalism?

This article was originally published on The Political Sword

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28 comments

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  1. Trish Corry

    “We are seeing the same phenomenon around the world: the election of Jeremy Corbin to the Labour leadership in the UK; the rise of anti-establishment parties in Spain and Greece; and, unfortunately, it has also meant the rise of extreme right (and sometimes neo-fascist) parties that tap into that disaffection with the political system.”

    Jeremy Corbin is right wing and a fascist? His leadership will be destructive?
    Sorry, I’m not following.

  2. Ken Wolff

    Sorry Trish, perhaps I did confuse a couple of issues. But at the start I am talking about a general reaction (not just right-wing) against the established neoliberal orthodoxy. I start with Sanders, then mention Corbin. The anti-establishment parties in Greece and Spain are also left-leaning. So it is not just a move to the right – it can also be a move to the left. But both are a reaction to the neoliberal approach.

  3. Ricardo29

    Corbyn, i think we should get his name right. Apart from that everything you say is relevant and depressingly correct. The point is made, though not specifically about Australia, that leftish oppositions are also mostly neo-liberal as seen with Shorten and Labor’s willingness to support the attacks on personal liberties for a supposed benefit in national ‘security’, completely specious argument. These security enhancements are all part of ensuring control of the 99%.

  4. The Faceless Man

    I hope these central latin American immigrants bring with them their willingness to protest hard. Our protests are a bunch of fairy congregations compared to what they are willing to do, which I believe is whats needed. Like this facade of a government is ever going to empathize with its people, or more importantly, respect them, and most importantly love them if they’ll only ever view us as less than ants. To them we are but fleshy atms. Whilst I would love to believe that labor and liberals are different, such a belief is too dumbfounding for myself.
    Oligarchs, corporate chameleons and the nobility will always use both parties as their pawn and why blame them? You would too if given such opportunities. It’s not the elites fault that the people they are leeching are too stupid and cowardly to do something about it.
    A crazy example, the video games industry. Every gamer loves to whinge about the indiscriminate rise of bs ‘dlc’
    While clearly no gamer (or parent paying for it) likes this, obviously it will not end and is here to stay. That same mentality is prevalent in the attitudes towards government and the outcome is the same. Like dlc, this bs ruling class of ‘nobility’ pretending to be prime ministers and politicians that hold this society back is here to stay.
    Ignorance is bliss.

  5. Trish Corry

    Thanks Ken. Maybe a quick edit? That really isn’t clear. To me it reads that unless you are a communist or a far left socialist, then you are in the same bucket as the fascists.

    I’m not a fan of Sanders. He used emotional marketing very well; but he never came up with any real solutions. I liked him at first, but there was no substance for me. It is easy to say things, It is easy to protest, but he was not good at defining real solutions

    1. How he would get these things approved in their system? Look at the difficulties with ObamaCare.
    2. How it would change USA and
    3. What were the positives and negatives. ie: Would Walmart be forced to start paying a living wage to their workers? Because they and those like them in their current industrial relations framework (which is not a consistent IR framework like Australia) is a huge problem. Workers do not have the same rights as we do here.

    People go on about Sanders as if he is the messiah with something new to say. Many of the things he talks about Australia already has and we take it for granted.

    Before other commentators attack me like they have before for ‘speaking against Sanders’ I’m not particularly enthused by Clinton either. I’d prefer Obama to stay there.

  6. Trish Corry

    Ricardo – Labor just got blamed for a severe weather event which destroyed electricity towers. I like the fact that the Liberals agree that Labor is God – but that is not my point.

    I can just imagine if Labor didn’t make over 45 changes to the data retention legislation before they approved it to put in place measures to prevent terrorism; that Man Haron Monis, would also have been Labor’s fault. In fact, they probably would have had a royal commission and then would have tried to jail Shorten for the deaths.

  7. Kaye Lee

    Governments and unions are the only organisations who can protect us against the exploitation of a profit driven society. With the undermining of the collective bargaining power of workers and the push for deregulation and privatisation by governments, we have become the victims of corporations who have abandoned their part of the social contract. If we liberalise markets then the need for legislation, regulation and an adequate safety net is even greater. Our governments have let us down and they have robbed the workforce of the ability to demand a share of the wealth their labour creates.

  8. The Faceless Man

    I’d agree with Trish that Sanders was never gonna get anywhere, even with sound policies and ideas that would enforce his benevolent ideology. The last thing capitalist America wants is workers rights and liveable wage protected by law.
    Bernie is another craven sadly.

  9. wammm

    I have read many scary articles but ‘debt’, the second (‘they’ being first) worst 4 letter word in the dictionary, sends shivers down my spine.
    This government has empowered private enterprise to take advantage of the poor and the under-educated, especially by allowing centrelink to set conditions and punishments. The former ruled by the base worker who is least experienced, poorly trained and lowest level of authority to vary conditions and the latter applied by the same people.
    Redress, for the collateral damage sufferers, is next to impossible.

    ps the many thousands with VET/TAFE debts from the rabbott’s shonky providers should be suing him to get the debt cancelled. For me this is catastrophic level of debt.
    When put next to labor’s ‘pink batts where 100s of 1000s were beneficiaries and millions spent on the rabbott’s personal vendetta against the woman, the VET fee help loans may have helped no worker and, instead, put them deep into debt accruing compound interest at alarming rates..

  10. Zathras

    Something I have noticed about the most devout adherents to such policies are that many are self-proclaimed evangelical Christians.

    I see many aspects of the two philosophies being mutually exclusive so there are a lot of people who are liars or hypocrites or simply just more likely to use any tool at their disposal to achieve their ends.

    They also have a tendency to throw around the term “socialist” without context or consideration to what it really means.

    They are Taliban-like in their fervour and hostility toward non-believers.

  11. wam

    I have read many scary articles but ‘debt’, the second (‘they’ being first) worst 4 letter word in the dictionary, sends shivers down my spine.
    This government has empowered private enterprise to take advantage of the poor and the under-educated, especially by allowing centrelink to set conditions and punishments. The former ruled by the base worker who is least experienced, poorly trained and lowest level of authority to vary conditions and the latter applied by the same people.
    Redress, for the collateral damage sufferers, is next to impossible.

    ps the many thousands with VET/TAFE debts from the rabbott’s shonky providers should be suing him to get their debt cancelled.
    For me this is catastrophic level of personal debt, NOW. So imagine 2040???
    When put next to labor’s ‘pink batts where 100s of 1000s were beneficiaries and millions spent on the rabbott’s personal vendetta against the woman, the VET fee help loans may have helped no worker and, instead, put them deep into debt accruing compound interest at alarming rates..

    How does the basic/cashless cards for Aborigines fit the concept of ‘individuals’? Why no opt in or out provisions?

  12. babyjewels10

    Myopic simpletons. Leyonhjelm, Hanson and most of the LNP, some of the ALP. That’s the problem, as I see it. Perhaps our education system is to blame. Most, if not all of these, had expensive private school educations.

  13. Trish Corry

    Zanthras
    “They also have a tendency to throw around the term “socialist” without context or consideration to what it really means.

    They are Taliban-like in their fervour and hostility toward non-believers.”

    Interesting. I find the same with self-proclaimed ‘socialists’ against Laborists all the time. In fact ‘the left’ can be more rabid than the right.

  14. Andreas Bimba

    Bernie Sanders is no fraud. MMT economists like Stephanie Kelton were part of his economic advisory team and any government which has currency issuing powers is not financially constrained. Bernie Sanders is a Senator and knows very well that progressive members must gain a majority in both houses of Congress. So the financial resources exist and eventually the parliamentary majority will hopefully exist. He also knows how to build support and win elections but was cut off at the knees by the bankers and corporations that control the Democratic Party.

    Neoliberalism and Monetarism are horrible cancers that must be cut out and it still dominates the mindset of so called Labor progressives as can be seen by some of the comments for this article. Educate yourselves about Modern Monetary Theory economics and then you will see we can do better than just a slight turn to the left after every hard turn to the right with every appalling Conservative government.

  15. Jennifer Meyer-Smith

    Well said, Andreas.

  16. Harquebus

    Symptoms of the disease. Cancerous economic growth.

    Don’t bother with Andreas Bimba’s MMT rubbish. Economics is not going to save us.

    “They are trying to do with surplus money what surplus energy has always done.”
    http://seekingalpha.com/article/4009854-still-desperately-need-pickens-plan

    “our system, of debt-fueled economic growth, of ineffective democracy, of overloading planet Earth, is eating itself alive.”

  17. Ken Wolff

    Kaye: your point that corporations have abandoned their part of the social contract is well made. The neoliberal approach has led to corporations intruding into what should be ‘natural monopolies’. Services like water, electricity and railways should be natural monopolies because it is not efficient to have, say, three different water companies each laying their pipes past every dwelling in an attempt to provide and sell ‘their’ water. But the neoliberals and corporations have worked around this by breaking those services down into smaller parts: thus, trains are a separate service to the tracks and electricity generation is separated from the ‘poles and wires’ and from the ‘retailers’ selling the electricity to consumers. To my mind, that is a ridiculous situation but now it has been done it will be hard to undo.

    wamm: I agree that the ‘profit motive’ leads to the type of abuses you describe in the VET sector. As often said, when profits come first, people come last.

    Andreas: yes, even progressive parties have adopted neoliberal approaches and monetarist economics and we need to move past that. Hawke and Keating started that in Australia but, at least, they tried to maintain a social contract to offset the worst effects of the new economic approach. It was Howard who pursued the neoliberal agenda but unwound the social contract that Hawke and Keating had tried to build with it. So we now have the worst situation and Abbott and Hockey, and now Turnbull, have continued unravelling the social contract to give corporations free rein.

  18. paulwalter

    Klingons..society is under attack from unrecognised states within states like Murdoch and the banks.

  19. paulwalter

    Re Trish Corry and the weather, it is true Labor was blamed, but the blame there rests with corrupted media and press. How are people to know when they are constantly lied to. If a person draws attention to this should she be dismissed as a “socialist”?

  20. diannaart

    Trish, I understand your point regarding the Inclusion of Jeremy Corbyn. I had to read Ken’s article a couple of times to be sure that the intention was the ‘outsider’ who is garnering the votes, regardless of whether the ‘outsider’ on on the left or the right.

    Neo-liberalism has indeed infected the art of governance for the community – on both sides. The idea of the freedom of the individual has fans from the usually authoritarian right (do as I say, not as I do) and the freedom from oppression from the left.

    Neo-liberalism only works at the top of the pyramid.

    As a result of the complete disillusion of politics, the ‘outsider’ is perceived a an opportunity for substantial change – unfortunately without thinking things through, for example, Brexit & Trump, Hanson.

    Australia needs a compassionate ‘outsider’ from the left. While Bill Shorten is looking better by comparison every day to Malcolm Turncoat, Bill remains very much a traditionalist – he is not the force for economic and political change towards people and away from big business. He could be a good start if somewhere in the ranks of Labor, the Greens or where ever, by supporting the egalitarian outsider. Would Bill support an ‘outsider’?

  21. Jennifer Meyer-Smith

    diannaart,

    “Australia needs a compassionate ‘outsider’ from the left.” 100% correct. Your final paragraph sums it up for me.

  22. Bolly

    I think its not quite correct to plant the neo-liberals and the libertarians in the same camp. Neo-liberal economics is based upon utilitarian principles. Utilitarianism is about maximising ulitility across society. That’s the basis of conventional economics. From JS Mill onwards the positivists in the economic camp argued that utility was impossible to observe so you would only infer utility by observing expenditure. This somewhat circular definition allowed neo-liberal economists to argue that economic freedom would maximise social utility. The patron saint of these “libertarian utilitarians” was Hayek. The trouble is, Hayak’s work was based on zero evidence, only thought experiments. ie using prejudice to masquerade as observation. The whole neo-liberal economics movement was founde don this quicksand. It had a plausible world model to back its claims and a host of vested interests ready to promote its world view. Trouble is, there has been a lot of water under the research bridge since then and a plethora of work by Nobel prize winners has undermined the claims of the libertarian utilitarians (eg Stiglitz, Kahnneman). This work has been supported by social epidemiologists (eg Marmot, Wilkinson, Pickett) and economic psychologists. The evidence base is now quite clear that free markets do not maximise social utility. [Read Layard on Happiness]. This means that you can choose to be a libertarian or a utilitarian. That is a value choice. But if you choose the libertarian path you need to be honest about the implications for society. You cannot pretend that economic libertarian policies will maximise social utility (welfare). Libertarian economic prescriptions will have quite the opposite impact. If you persist in that pretense you are either ignorant or an opportunistic liar.

  23. diannaart

    Jennifer

    Too frequently, I have heard Bernie Sanders placed as the left equivalent as the very scary and freaky Trump – must’ve been the ABC because I don’t listen to commercial radio. I don’t believe Trump stands for anything but himself, whereas Bernie actually has ethics. Both neo-libs & libertarians are all about themselves.

  24. Alan Baird

    diannaart,
    Yep.

  25. nexusxyz

    Irrespective of how they project neoliberalism and globalism the end point WILL ultimately be a collapse. This pointless debate is just a staging point to that collapse. No more than a mental jerk-off on an unstoppable a journey to economic and social collapse. The whole premise of neoliberalism is poisonous and putrid. The idea that everything is a ‘market’ is a concept that only someone of a dull and limited mind would support. Perhaps that’s why I’m not a member of the IPA.

  26. mikebull1

    Zathras wrote: “Something I have noticed about the most devout adherents to such policies are that many are self-proclaimed evangelical Christians. I see many aspects of the two philosophies being mutually exclusive so there are a lot of people who are liars or hypocrites or simply just more likely to use any tool at their disposal to achieve their ends.”
    Something you might have missed is that Christians believe the Church’s job is to deal with people’s selfish hearts (sins) and the State’s job is to deal with people’s selfish deeds (crimes). So if you don’t factor that into the equation, you are not going to understand where Christians are coming from. If you believe the Church has no place in a secular society, then the State becomes your saviour, or, more correctly, more legislation and less freedom. Unfortunately, while welfare seems an attractive option, history shows that it actually compounds the problem. Giving away other people’s money is not generosity but robbery. Envy and theft are no cure for laziness or greed.
    I hope that explains why many Christians are liberal in their thinking (personal freedom coupled with personal responsibility, including personal generosity) when it comes to economics. The real solution is not better legislation but better people. This is something secular statists will never understand.

  27. Matters Not

    mikebull1: Some interesting thoughts but can you explain:

    then the State becomes your saviour,

    Re this ‘saviour’. From what? Religious nonsense?

    Over to you. What ‘saviour’ are you talking about. Is it the one who encourages you to transfer your personal responsibility to the other? Like ‘the Devil made me do it’?

    Please explain.

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