The slow demise of neoliberalism
That’s the headline for my latest piece in Inside Story, a review of Brad DeLong’s Slouching Towards Utopia and Sebastian Edwards The Chile Project . Some extracts
The Chile Project, of which Edwards was a generally sympathetic observer, ranks with Thatcher’s Britain as the paradigmatic case of what I’ve called “hard neoliberalism,” which combines authoritarianism and radical free-market policies …Outside the United States, soft neoliberalism was often described as the Third Way. Its central theme was the idea that the goals of social democracy (or liberalism in the US sense) could best be achieved by embracing market-oriented reforms, and particularly financial deregulation, while maintaining a generally redistributive welfare state.
Edwards sees the protest movement that launched in 2019 as the beginning of the end for Chilean neoliberalism. Taking account of global trends, DeLong marks 2010 as the year when the “slouch towards utopia” slowed to a crawl or stopped altogether. Either way, neoliberalism had gone from unchallenged hegemony at the turn of the twenty-first century to full retreat twenty years later.
DeLong argues, correctly I think, that social democracy was a victim of its own success. Everyone expected accelerating growth in their incomes combined with a continuation of full employment and low inflation. When the system failed to deliver at quite the expected level, neoliberalism promised a return to prosperity. By the time it became clear that this promise would not be realised, expectations had been lowered so much that (for example) a 5 per cent rate of unemployment was seen as a success rather than the disaster it would have been perceived as in the 1970s.
Again taking the optimistic view, we are seeing a gradual rehabilitation of the institutions of the mixed economy, including activist governments, public enterprise and trade unions. At least for the moment, we don’t have to worry that our limited successes will recreate the hubris of the 1960s. Perhaps we can finally put the era of neoliberalism behind us. •
Read the whole thing at Inside Story, then come back here to comment if you would like.
I also recommend on this subject the recent work by UK Cambridge-based US historian Gary Gerstle - The Rise and Fall of the Neoliberal Order. Gerstle makes the point that the post-WWII accommodation between business and labour under Keynesianism was helped by the existence of an alternative political/economic regime in the Soviet Union. Capital was more ready to accommodate with labour when there seemed a real prospect of capitalism losing the great competition of the mid-20th century. Politicians nominally of the right (like Eisenhower) accepted a high-tax mixed economy as a given. But the breakdown of Keynesianism in the 70s under stagflation and then the fall of the Soviet order in the 80s led the triumphalism as epitomised by the Fukuyama and Friedman books you mentioned. From that point and without a foil for capitalism, the shoe was on the other foot and the politicians of the nominal left (Clinton, Blair, right up to Obama) worked off the neoliberal template. As for today, it’s clear our own political institutions haven’t caught up to the market and economic reality. Hence an unmoored Liberal Party has drifted further and further to the Far Right and the Labor Party is marooned at a Karaoke Bar with Keating’s greatest hits as the only option.
"By the time it became clear that this promise would not be realised, expectations had been lowered so much that (for example) a 5 per cent rate of unemployment was seen as a success rather than the disaster it would have been perceived as in the 1970s."
But what caused the lowering of the expectations? I think there's something or even much to unpack in why social democracy collapsed so easily. I think it was mostly atherosclerosis, a failure to provide useful new analyses in response to new problems, the complacency of the unionized workforce, and the internal lines of communication available to the neoliberal-friendly business community.