The rise and fall of neoliberalism

The term ‘neoliberal’ is used quite a lot these days (including by me), usually in a pejorative sense but like all umbrella political and economic labels, its boundaries that determine what falls under the umbrella and what does not, are a little fuzzy. In a review of the new book The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market by Naomi Oreskes and Erik M. Conway, Louis Menand traces the history of the neoliberal ideology and movement, in an essay that has the same title as this post.

What’s “neo” about neoliberalism is really what’s retro about it. It’s confusing, because in the nineteen-thirties the term “liberal” was appropriated by politicians such as Franklin D. Roosevelt and came to stand for policy packages like the New Deal and, later on, the Great Society. Liberals were people who believed in using government to regulate business and to provide public goods—education, housing, dams and highways, retirement pensions, medical care, welfare, and so on. And they thought collective bargaining would insure that workers could afford the goods the economy was producing.

Those mid-century liberals were not opposed to capitalism and private enterprise. On the contrary, they thought that government programs and strong labor unions made capitalist economies more productive and more equitable. They wanted to save capitalism from its own failures and excesses. Today, we call these people progressives. (Those on the right call them Communists.)

Neoliberalism, in the American context, can be understood as a reaction against mid-century liberalism. Neoliberals think that the state should play a smaller role in managing the economy and meeting public needs, and they oppose obstacles to the free exchange of goods and labor. Their liberalism is, sometimes self-consciously, a throwback to the “classical liberalism” that they associate with Adam Smith and John Stuart Mill: laissez-faire capitalism and individual liberties. Hence, retro-liberalism.

The label “neoliberal” has been attached to a range of political species, from libertarians, who tend to be programmatically anti-government, to New Democrats like Bill Clinton, who embrace the policy goals of the New Deal and the Great Society but think that there are better means of achieving them. But most types of neoliberalism reduce to the term “markets.” Get the planners and the policymakers out of the way and let the markets find solutions.

The scholarly literature on neoliberalism tends to focus either on the intellectual genealogy of neoliberal thought (which starts, more or less, in Europe in the nineteen-thirties) or on the political history of neoliberal policies (which start in the nineteen-seventies). Naomi Oreskes and Erik M. Conway’s “The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market” (Bloomsbury) adds a third dimension to the story. In their account, neoliberalism—they prefer the term “market fundamentalism,” which they credit to George Soros—represents the triumph of decades of pro-business lobbying.

The lobbying story is good to know. Most voters are highly sensitive to the suggestion that someone might take away their personal freedom, and this is what pro-business propaganda has been warning them about for the past hundred years. The propaganda took many forms, from college textbooks funded by business groups to popular entertainments like Laura Ingalls Wilder’s “Little House on the Prairie” books, which preach the lesson of self-sufficiency.

The key message that has been drummed into us by the advocates of neoliberalism is that economic freedom undergirds all other freedoms. But by economic freedom, they do not mean the feeling of freedom and liberation that comes with people having no fears about their own economic condition thanks to a good welfare state that provides free health care and a safety net in the event of some disaster. What they mean by economic freedom is the absence of regulations that hamper businesses in any way.

The endlessly iterated message of this lobbying, Oreskes and Conway say, is that economic and political freedoms are indivisible. Any restriction on the first is a threat to the second. This is the “big myth” of their title, and they show us, in somewhat fire-hose detail, how a lot of people spent a lot of time and money putting that idea into the mind of the American public. The book is an immense scholarly feat, but the authors insist that it is not just an “academic intervention. They have a political purpose. They think that one role of government has been to correct for market failures, and, if government is discredited, how is it going to correct for what may be the biggest market failure of all: climate change?

What hath neoliberalism wrought? On the plus side of the ledger: in 1980, about forty-three per cent of the world lived in extreme poverty (by the World Bank’s definition), and today the number is about eight per cent. Globalization has lifted a billion humans out of poverty in just forty years. And you own many household items, like batteries and T-shirts, that were manufactured in Communist countries—China and Vietnam—and that were very inexpensive. New parts of the world, notably East and South Asia, are now economic players. Technological knowledge is no longer a monopoly of the First World powers.

Among the debits: deregulation, which was supposed to spur competition, has not slowed the trend toward monopoly. Despite the Telecommunications Act, just three companies—Verizon, T-Mobile, and A.T. & T.—provide ninety-nine per cent of wireless service. Six companies dominate the media in the United States: Comcast, Disney, Warner Bros. Discovery, Paramount Global, the Fox Corporation, and Sony. Book publishing in the United States is dominated by the so-called Big Five: Hachette, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster. The music industry is dominated by just three corporate players: the Universal, Sony, and Warner music divisions.

And, as Martin Wolf emphasizes in his highly informed and intelligent critique of the global economy, “The Crisis of Democratic Capitalism” (Penguin Press), inequality is everywhere. At the level of the firm: in 1980, C.E.O.s were paid about forty-two times as much as the average employee; in 2016, they were paid three hundred and forty-seven times as much. At the level of the whole society: the three million people who make up the wealthiest one per cent of Americans are collectively worth more than the two hundred and ninety-one million who make up the bottom ninety per cent.

It is the rise in inequality abetted by the neoliberal system that poses the most immediate threat to civil society. Wolf doubts whether the United States will still be a functioning democracy at the end of the decade. Either way, the sun has set on neoliberalism.

I am not sure that I agree with Menand that “the sun has set on neoliberalism”. While it may be in decline as the problems of neoliberalism become ever-more apparent, the rightwing campaign to demonize government, as a way of preventing any limits on the activities of business, has been underway for a long time aided by neoliberal Democratic politicians as well as Republicans, and it will not be easy to entirely get rid of it.


  1. Allison says

    There’s a certain hypocrisy, or perhaps deceit, in the claim that government should not “interfere” with capitalism. “Capital” and markets only exist because there are rules defining what it means to own something (such as wealth) and how it may be transfered. And those rules are only meaningful because there is some government (or similar supreme power) to enforce them. Absent that enforcement, you only “own” something as long as nobody comes along who has enough force (guns, gangs, etc.) to take it from you.

    The neoliberals / laissez-faire capitalists aren’t actually objecting to the government intervention when it comes to enforcing the rules they like (the ones that work to their advantage), they just object to rules that interfere with them doing whatever they want, i.e., playing robber baron.

    People like to point to the USAan stock markets as examples of “free markets”, but those markets are actually heavily regulated as are the corporations whose stock (=ownership) is traded on them. And the success of the USA markets is directly due to that heavy regulation, because investors who aren’t insiders have faith that they won’t be cheated. When I lived in Europe, I asked about investing in stock, and was told that the financial markets are set up for the insiders who run them, and if you aren’t one of the insiders, you will get fleeced. I notice that the European markets are (grudginly!) introducing USAan-like rules to encourage investors to come back from the USA markets.

  2. KG says

    What hath neoliberalism wrought? On the plus side of the ledger: in 1980, about forty-three per cent of the world lived in extreme poverty (by the World Bank’s definition), and today the number is about eight per cent. Globalization has lifted a billion humans out of poverty in just forty years.

    The majority of that billion live in China. And while it’s certainly true that China is now part of global capitalism, and it is a highly unequal society, its rulers certainly don’t follow the nostrums of neoliberalism! The Communist Party (or more accurately its top leadership) retains effective control of the economy.

  3. John Morales says

    KG, are you suggesting that neoliberalism was not a major impetus to globalisation, but merely incidental to it?

    (Kinda hard to talk about the one without recourse to the other)

  4. says

    Great, you’ve given us MANY terms that better describe this bullshit “philosophy” than “neoliberalism.” AND you’ve shown how it’s neither “neo” nor “liberal.” So can we all agree to stop calling it “neoliberalism” now?

    You (and the articles you quote) have given us “market fundamentalism,” “retro-liberalism,” and “libertarianism.” And to that I can add “hyper-capitalism,” “faux-classical liberalism,” “anarcho-capitalism,” or maybe “pluto-libertarianism.” So can we maybe pick one or two, stick with it/them, and stop using “neoliberal,” except maybe to describe certain politicians who were once liberal but ended up caving to their ideological opponents?

    And who first coined the word “neoliberalism” anyway? I’m pretty sure it wasn’t a liberal. In fact, wasn’t it a conservative commentator telling liberals in 1981 that we should henceforth strive to create a new form of liberalism that was less liberal? WORDS MATTER, folks, and we shouldn’t let our enemies choose our words for us.

Leave a Reply

Your email address will not be published. Required fields are marked *