Dissection of a doomed doctrine

By 2016, the once hegemonic neoliberal order came apart

This article is taken from the November 2022 issue of The Critic. To get the full magazine why not subscribe? Right now we’re offering five issues for just £10.

If you have spent any time in leftist spaces over the past twenty years, you’ll have heard repeatedly that the cause of our many social and political ills is neoliberalism. It is rather like the experience of the great social anthropologist, E.E. Evans-Pritchard, during his time living among the Azande people of Central Africa. Evans-Pritchard noted the ubiquitous tendency of the Azande to attribute bad events to the effects of witchcraft. Blight ruined the groundnut crop? Witchcraft! No game to be had in the bush? Witchcraft! Wife sulky and ignoring you? Witchcraft! Banged your toe and now it’s infected? Witchcraft! Everything bad, it seemed, the Azande attributed to the malicious activities of bewitching enemies. 

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era, Gary Gerstle (Oxford University Press, £21.99)

“Neoliberalism” functions similarly among large portions of the left today. Growing economic inequality? Neoliberalism! Run-away climate change? Neoliberalism! The Iraq war? Neoliberalism! The 2008 financial crisis and resulting austerity policies? Neoliberalism! And so on.

This penchant for blaming everything on neoliberalism is unhelpful. Most basically, something that explains everything actually explains nothing. The world is complicated, and rarely monocausal, so to claim that everything is simply the result of some overarching phenomenon called neoliberalism is really to say nothing substantive at all.

Such catch-all use of “neoliberalism” was never helpful because neoliberalism really did exist, and really was a powerful force that shaped global politics profoundly. Understanding how and why requires correctly identifying and understanding the phenomenon. Typically, however, when people on the left say “neoliberalism”, it is just shorthand for “stuff I don’t like”.

Most importantly, whatever neoliberalism was, it is now dead. The 2016 Brexit referendum in the UK, and the election of Donald Trump in the US, marked its end. Accordingly, it would be a good idea to stop citing neoliberalism as the cause of our various ills. Better, at this point, to conduct an autopsy.

Neoliberal chickens came home to roost with a vengeance

In this regard, Gary Gerstle’s The Rise and Fall of the Neoliberal Order is most welcome. A critic of neoliberalism from the left, Gerstle nonetheless understands that it was a hugely complex phenomenon with deep intellectual roots (most especially in the work of Friedrich Hayek and the Chicago school of economics). 

A historian of American politics, however, Gerstle is primarily interested in how ideas about reducing the role of the state and increasing the freedom of the market went from strength to strength not merely in right-wing intellectual circles, but in US political practice. His is a story about how the received wisdom of the “New Deal Order” inaugurated by Roosevelt came to be replaced by a “Neoliberal Order” that was hegemonic by the close of the 20th century, but then collapsed. 

The earlier parts of Gerstle’s account — about the end of Keynesian economic orthodoxy in the 1970s, the rise of Reagan and the deregulatory reforms of the 1980s — are familiar enough. What really shine, though, are his depictions of the consolidation, hubris and then unravelling, of American neoliberalism. 

On Gerstle’s telling, Clinton is the reverse Eisenhower. Whereas the Republican Eisenhower in the 1950s accepted the New Deal Order as a baseline political reality, the Democrat Clinton played the same role in the 1990s by accepting free market tenets. Principally, these were the deregulation of financial services, the reduction of the role of the state in the welfare provision and a faith in the market — Wall Street in particular — to deliver American prosperity in a globalised economy. 

Clinton made peace with massive cross-border capital flows that enriched American corporations, regardless of the long-term impact upon low-skilled and low-waged American workers. These neoliberal chickens flew for a whilst, but they would eventually come home to roost with a vengeance.

As Gerstle shows, this was not just a story about political policy, but also about wider change. The emergence of new media technologies — first cable news, then the internet — changed the landscape in terms of both how information was disseminated, and how business could be conducted. Both shifted the norm in political discourse firmly to the right. Crucially, the collapse of the Soviet Union in the early 1990s removed the one serious competitor-ideology to US capitalism on the global stage. This encouraged the assumption that markets must inevitably triumph, whilst removing the worry that governments had better look after domestic populations or face the threat of socialist takeover. 

On Gerstle’s telling, following the upheaval of the 9/11 attacks, the Bush administration was so locked into neoliberal orthodoxy that it assumed that postwar reconstruction of Iraq would require nothing more than clearing a space for the market to spring up and deliver freedom and prosperity. Things, of course, did not work out that way — not least in the trillions of dollars the US government wasted on an unwinnable and pointless conflict that seriously eroded domestic faith in the trustworthiness of governing elites. 

On the home front, the political-economic order rejected serious welfare measures and eschewed state-directed programmes to secure investment and employment in deprived (especially post-industrial) regions. This combined with a repressive carceral system, which doled out severe punishments for involvement in the illicit drug trade that took over where legal employment was in short supply. 

Anti-globalist and populist Trump sounded its death-knell

The only coherent response within the neoliberal order was to double down on mass incarceration: the explosion of a prison system which sees the US jail more people in absolute terms and per head of population than any other country (and that disproportionately hurts African Americans).

As with the Iraq war, such was the paradox of neoliberalism in practice. A creed ostensibly built on shrinking the size of government to make way for the market, in practice saw the American state get bigger and more aggressive both at home and abroad. At the same time, economic inequality, and discontent among those increasingly left behind in a globalised economy — much of it exacerbated along racial lines — grew and grew. This was especially so in the wake of the 2008 financial crisis, when the deregulation licensed by neoliberal faith in unfettered markets imploded spectacularly.

The result was that, by 2016, the once hegemonic neoliberal order dramatically came apart. The election of the openly ethnonationalist, anti-globalist and populist Trump sounded its death-knell. The rise of Bernie Sanders on the left (who in many ways shared Trump’s rejection of the internationalist market orthodoxies of the previous 30 years), and the failure of the conventionally neoliberal Democrat Hilary Clinton to win the presidency, showed just how far things had unravelled. 

The next four years brought the ideologically unmoored chaos of the Trump administration, and then the Covid pandemic — the state-centric response to which was many things, but none of them neoliberal. A new order has yet to replace the old. Neoliberalism in America, as Gerstle confirms, is dead. But the zombie politics it bequeathed stumbles on.

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