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Neoliberalism is dying – now we must replace it

By:   []

Date: 2021-09

Could it be that the free-market policies that have dominated policymaking for the past 40 years are finally on their way out? In the past six months, the Conservative government in the UK has nationalised a steelmaker, threatened major football clubs with fan ownership, and moved to block the sale of silicon chip designer ARM to a US manufacturer. Such moves towards more assertive state intervention are not limited to the UK.

In Europe, the EU is in the process of overhauling its State Aid rules to allow greater government support to industry, citing the need to meet competition from China. In the US, Joe Biden’s administration is not only committing $3.6trn to spend on health and education – it is expanding trade union rights, raising taxes for the rich and corporations, and has successfully led the push for the introduction of a global minimum corporation tax. None of this would fit easily into the ‘neoliberal’ playbook of previous decades, when anti-union, tax-cutting and market-first policies dominated government thinking.

Debate over neoliberalism’s future is not new, and has been reignited since the COVID-19 pandemic disrupted economies across the world. But this isn’t simply an academic matter: whether we think neoliberalism is dead, dying, or in rude health has strategic consequences for political activity. If neoliberalism – meaning the way in which capitalism has been run for the past three decades (and in some parts of the world, for longer) – is really on its way out, we need to be alert to the ways in which the system is changing, and perhaps update and refresh our own slogans and demands and strategies accordingly.

But if neoliberalism remains firmly in place, there might appear to be fewer challenges for the Left and progressives in dealing with the situation. All our slogans, policies and strategies, honed over the last decade, will still basically apply: a case of better the devil you know, and an opportunity to stay in our collective comfort zone.

Shifting paradigms

Whether we are seeing a real break in global capitalism’s mode of operation, a temporary deviation from the neoliberal norm during a global pandemic, or simply a continuation of business as usual depends crucially on what we think neoliberalism was and is. Those stressing that we are seeing a break, like French economist Cedric Durand in two recent New Left Review essays, tend to view the shift as pre-dating the pandemic. Durand has described the Biden administration as “1979 in reverse”: instead of driving up interest rates, cutting social expenditure, and attacking trade unions, Biden is overseeing a regime that is suppressing interest rates, driving up social spending, and expanding trade union rights. Crucially, however, he locates the breach with neoliberalism before the COVID-19 pandemic. And, like others stressing a significant shift, he points towards material factors driving the ‘contradictions’ facing capitalists, such as the difficulties in securing profitable investments. In this reading, neoliberalism was related primarily to the restructuring of capitalism from the 1970s onwards.

Those seeing the current period as mainly a continuation of the neoliberal era stress the specificity of the pandemic in forcing temporary actions, much like the temporary ‘Keynesianism’ that followed the 2008 financial crisis. Crucially, they view neoliberalism as primarily an intellectual movement. Writing in Tribune magazine, historian Quinn Slobodian argued that the intellectual forebears of today’s nativist and government-friendly radical Right – the Steve Bannons or Marine Le Pens of this world – can be found amongst the ranks of neoliberal gurus like Friedrich von Hayek. Far from wanting a pure free market everywhere, Slobodian claims, Hayek and his co-thinkers were only too happy to see authoritarian governments erect barriers to markets. Far from promoting the unfettered free market of libertarian fantasy, neoliberals were very happy to use the ‘strong state’” if doing so meant building support for their vision of society. Economist Grace Blakeley, meanwhile, has also argued that governments across the globe still see themselves as working to a neoliberal playbook.

This way of seeing neoliberalism, as an intellectual movement above all, is most associated with Philip Mirowski and his work on the ‘Neoliberal Thought Collective’. It turns the history of neoliberalism into a story about the role of the Mont Pelerin Society, established in the eponymous Swiss town in 1947 by Friedrich von Hayek, Milton Friedman and other neoliberal thinkers. In this version of events, the Neoliberal Thought Collective then spent decades nurturing their vision of a market-organised world before the crisis of the 1970s gave them their opportunity to mould governments in their image. This version of history has gained some support in the past decade amongst the broader Left in the form of the idea that the 1970s and 1980s were a ‘paradigm shift’ in economic thinking – with neoliberalism replacing the earlier ‘paradigm’ of Keynesian government intervention in the 1970s crisis. What is needed now, in this view, is a similar paradigm shift, but in the opposite direction.

As Will Davies has written, the 1970s “inspired a vision of crisis as a wide-ranging shift in ideology, which has retained its hold over much of the Left ever since”. But this was – as the filmmaker Adam Curtis might say, himself a proponent of the paradigm shift view – an illusion. Neoliberalism didn’t arrive on tablets of stone, brought down from the Swiss mountains. What became neoliberalism in government was the product of actions by different governments, at different times, under different guises. For governments in the West, the process in the formation of neoliberalism was strikingly uneven. Margaret Thatcher’s British government led the charge in western Europe, but it was only through successive victories – both industrially, against a series of trade unions, and electorally – that a decisively neoliberal domestic regime was installed by the end of the 1980s, along with Thatcher’s exit from office.

But the process was not confined to separate national governments. Eric Helleiner’s classic book, ‘States and the Rise of Global Finance’, shows how, across the major developed economies, domestic crises from the end of the 1970s pushed countries towards building a new international order for capitalism. Although many countries were partly influenced by neoliberal think tanks, they were also responding ad hocly to changing global circumstances. It was the 1974-79 Labour government, for example, which first removed exchange controls, not from a commitment to neoliberal ideology but in the belief this would help domestic manufacturing investment. As Slobodian argues elsewhere, it is at the level of international organisation and global rules that neoliberalism can best be understood. Crucially, however, those rules emerged from specific domestic circumstances and the outcome of uncertain struggles in different countries. It was in responding to different domestic circumstances, as the world around them changed, that different national governments – led by the largest economies in the West – pulled together the neoliberal global regime.

Heroic neoliberalism

To understand the world today, we need to shift the focus away from neoliberalism’s heroic years in the 1980s, when it acted as an injunction to attack and destroy the enemies of capital such as the miners in Britain or the air traffic controllers in the US. This account of neoliberalism’s early combative years offers a clear, simple story, with obvious goodies, baddies, winners and losers. But the severity of the class struggle then can lead us to misunderstand its real triumphs globally. The years of struggle can be found not in the period of neoliberalism’s completion and triumph, but its difficult and contested emergence.

This period, from the end of the 1970s through to the early 1990s in Britain, when strike days and union membership collapsed never to recover, is the period during which the neoliberal style of government was contested and other competing options were still on the table. The National Union of Mineworkers could have won in 1984-85, as we now know the government feared; ‘shock therapy’ in Eastern Europe was not at all what reformers and dissidents wanted or expected; and although now largely presented in the West as a student struggle, the convulsions across China around the Tiananmen Square protests that were brutally suppressed on 4 June 1989 drew in far wider layers of Chinese society – crucially including workers on a mass scale.

Neoliberal governments tore down controls on the movement of capital across borders, ripped up protections on labour and the environment in the interests of multinationals, and instituted a global race to the bottom on tax that saw major corporations often pay less in tax than their workers. International organisations like the IMF and the World Bank were repurposed, new agreements on intellectual property were signed, and the World Trade Organization was established. This triumph meant that even where there were domestic differences in how different countries organised their economies, the general tendency everywhere was for all national economies to come increasingly into alignment with the neoliberal international order. At varying speeds, and from different starting points, almost every country on the planet found itself adapting to the same neoliberal rulebook for its domestic economy. “There is no alternative,” was Thatcher’s striking phrase, but it was only after she left office that this began to ring true.

What’s crucial about all this is that neoliberalism didn’t arrive fully-formed. The ‘shock therapy’ reformers in eastern Europe certainly had some ideas about what they were trying to eventually create, but the drivers of change were the freeloaders from inside the old nomenklatura who took advantage of privatisation and liberalisation to steal billions from their local populations. Thatcher did not enter office anticipating that she would decimate British manufacturing and create a monstrous debt bubble – quite the opposite, her rhetoric was about Britain becoming once more the “workshop of the world” and about the virtues of thrift – but that is where she ended up regardless. It was only after the dust settled from the great class battles of the 1980s that, in the West, we could see the shape of the neoliberal system that had been created. And it was only by the early 2000s that we could see the shape of it everywhere.
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