Notes on neoliberalism
Here are 15 of them:
From the Left. As a teenager, I might have first learned about neoliberalism from the Swedish left-wing magazine ETC. I remember reading about an economic theory called NAIRU which was used to justify high unemployment rates and low wages for workers. In that way, I believe, neoliberalism as a concept has been most valuable for the Left, helping them structure their social criticism and align around a common enemy. Instead of looking at a bunch of disparate things that are bad, it makes more sense if they're all part of a larger pattern, and even better if we know who’s responsible. So rather than Karl Marx’s ghost, we got this dark force lurking in the shadows. Its possessed victims preach the virtues of free markets, deregulations, trade agreements, privatizations, monetarism, and fiscal austerity, and behind the scenes, pulling the strings, are shadowy figures with thick wallets. There’s an array of writings decrying the evils of neoliberalism, such as: Democracy in Chains, Masters of the Universe, and the Shock Doctrine. The Guardian article Neoliberalism – the ideology at the root of all our problems- touches on many common themes. While some of this criticism is intellectually lazy and factually questionable, it does not mean critics don’t raise any valid points. One of my favorite (not-so-explicit) critiques is from the book Free, which describes Albania’s move from socialism to democracy. One of its characters is a soulless neoliberal technocrat from the IMF (or perhaps it was the World Bank) tasked with implementing "structural reforms".
I agree with the Left that it makes some sense to talk about a “neoliberal movement”. After New Deal Keynesianism fell apart in the 70s, something had to fill the ideological vacuum and neoliberalism stood ready. Mises, Hayek, Friedman, Stigler, Buchanan, and others supplied the intellectual framework. Having a rough set of coherent ideas about how to best advance liberal democracies also helped bring about a vision for the transition from the not-yet-liberal democracies in Eastern Europe and elsewhere.
Who are the neoliberals? Besides the intellectuals, political neoliberalism is, of course, mainly associated with Reagan and Thatcher. But others instead point to Clinton (and Blair). Why? Under Clinton, NAFTA was enacted, and the Glass-Steagal Act repealed. Clinton declared the era of big government to be over, cut public spending, and delivered balanced budgets. Here's a paper discussing this in more depth.
A bit tongue in cheek, but the Neoliberal Project recently attempted to reconquer the term. In the end, though, they decided to rebrand themselves as the Center for New Liberalism. Here's what they believe in. They also run the Neoliberal Podcast, which I recommend.
As Noah Smith points out, it’s hardly the case that neoliberalism was implemented across the board anywhere. Since the 80s, public spending and government programs also grew. Redistribution in the US has increased dramatically, and the tax-to-GDP ratio has flattened rather than decreased in many countries. Not to mention all the new regulations.
Perhaps the real story about neoliberalism isn’t about the West but South-East Asia, which radically transformed their economies into what looks pretty neoliberal overall, and at the same time, grew significantly richer. There is a debate about how much “industrial policy” played a part, but I don't think it changes the big picture much either way.
Has the culture war killed neoliberalism? The political divisions today don't look the same, and neoliberalism is a much lower energy force. The more liberal Right has lost a lot of ground. I guess the most striking example is what happened with the GOP, but another example is from Sweden. Sweden had a series of pretty neoliberal reforms between the beginning of the 90s and about 2010. Examples include deregulating finance, energy, transport, telecom, and healthcare, privatizing many state-owned companies cutting taxes, and even introducing K to-12 voucher schools. These reforms were mainly cheered on by the moderate Right, but Social Democrats often followed suit. At the same time, there are some significant exceptions with The Employment Protection Act (LAS) and rent control. The difference now compared to ten years ago is that there is currently little political will to move ahead with new reforms.
From an empirical perspective, I can speculate about reasons why some have turned away from neoliberalism:
The 2008 crisis made it clear that financial regulation is, in fact, important. Finance is very different from other markets—not least given the role of the central banks—but the idea that we can let finance self-regulate is no longer taken seriously.
Among the elites today, there is much more attention on inequality and focus on how to distribute the pie instead of growing it. In economics jargon, this is called the Equity-Effiency Tradeoff, and there has been a shift toward the Equity side.
Climate change has boosted the role of politics, and people mostly look for political solutions over market-based ones. In particular, climate change is viewed as an example of the market’s inability to accommodate negative externalities.
Free trade. The mainstream view now seems to be that losing manufacturing jobs is responsible for many crumbling communities and "deaths of despair" in the West.
Taxes. When Liz Truss tried to sell in their "mini-budget," which contained some tax cuts (and a lot of public spending) to boost economic growth, it was almost unanimously ridiculed and declared naive. Interestingly, the market also dissed it. The joke is that not even the most capitalist institution is neoliberal anymore. Another example is the (failed) Kansas Experiment.
New Public Management (NPM). At least in Sweden, neoliberalism has become strongly associated with public sector administration reforms. NPM was introduced in Britain under Thatcher, which I guess explains the link. But is the idea to run public sector institutions more like corporations—involving things like individualized salaries, clients as "customers", and incentive structures for improving efficiency—really neoliberal? The philosophy behind NPM doesn't seem to rhyme well with the intellectual heritage of neoliberalism. In particular, not with Public choice theory. The main point of Public choice—as far as I understand it—is to explain why we should not expect public institutions to be very efficient at all. Here's a paper that claims that NPM, in fact, sprang out of the management culture of the US military (and the RAND institute).
Quasi-markets. Another phenomena which is often ascribed to neoliberalism is the introduction of new quasi-markets where private companies perform some public duties. The Swedish voucher-school system is one example. Interestingly, companies that perform these services are often not allowed to use the price mechanism. If you're running a primary school, the price you charge is already fixed (per student), which, among other things, rules out differentiating services based on quality and price. It incentivizes corporations to compete mostly by cutting costs, and that often creates pressure to introduce new oversights and regulations. The challenge for politicians is essentially to come up with a bunch of rules that steer the private actors to align their goals with the public interest. That is more of an exercise in social engineering than laissez-faire capitalism.
A lot of the mainstream Left has now broadly accepted many neoliberal policies. The actual resistance often comes from the Right, which, most notably wants to limit free trade and immigration. Perhaps this is partly due to less trust in governments, and I think it’s now clear to most that the private sector has better capacity. Much of modern infrastructure (Google, Uber, Amazon, Facebook and the likes) is run by corporations. Not everyone loves these companies, but few claim that the government could operate them any better. What the mainstream Left seems to want is more taxes and public spending rather than renationalized industries.
I believe the story about how neoliberalism ruined society has been partly taken over by the Right, except they generalized and now blame the decay on liberalism more broadly. Consider, for instance, George Soros who used to be the face of global capitalism, and an enemy of the Left. Now he’s the enemy of the nationalist Right and gets to represent everything wrong with global liberalism in general.
Neoliberalism is sometimes bundled with libertarianism. However, neoliberals typically want a state way beyond the night-watchman one. Another difference is that neoliberals tend to be more utilitarian in their thinking rather than basing their arguments on moral grounds about individual liberties. They point to graphs about reduced global poverty, not slogans such as "taxation is theft".
Neoliberals ultimately take a positive view of humanity. As long as governments give their citizens some slack, they can care for themselves and achieve great things. Developing countries are poor because of lousy politics, not because of inherent cultural reasons, and when given a chance, they will catch up. There is less of zero-sum thinking and it applies to topics such as migration and trade, which are considered beneficial for all parties involved. In contrast, the New Right offers a darker worldview and tends to emphasize cultural differences—poor countries are poor because they either have a bad stock of people or there is something wrong with their culture.
Neoliberalism (and liberalism in general) is often accused of being shallow and to promote materialism/consumerism. However, advocating for a system that allows markets is not the same as embracing every good or market occurring in that system. Also, I don’t think there is anything contradictory between having a state that actively pushes a specific version of “good culture, norms and values” and at the same time implements neoliberal policies.