Those on the Left often see the deregulatory ideologies of neoliberalism as a primary cause of the global economic crisis. Given this perceived failure, neoliberalism’s persistence can seem puzzling. But, as I argue in my new book The End of Laissez-Faire?: On the Durability of Embedded Neoliberalism, this view ignores actually existing neoliberalism policy; a clearer focus on the reality of neoliberalism can reveal the source of its resilience.
In April 2014, at its Spring meeting, the International Monetary and Finance Committee of the IMF was treated to a statement on the economic prospects of the Eurozone by Mario Draghi, President of the European Central Bank (ECB). Draghi called on European states ‘to strengthen their efforts to reform their labour and product markets in a decisive way in order to improve competitiveness’ through more labour market flexibility and ‘growth friendly taxation’.
The statement seems to have passed with little media comment, yet it contained telling insights into the economic agenda of one of the world’s most powerful supra-national institutions. Decoding Draghi’s technocratic Newspeak, he calls for lower corporate tax rates and the deregulation of product and labour markets—the removal of restrictions on business including those designed to protect workers and consumers. In short, more neoliberalism and lots of it.
This should not come as a surprise. The neoliberal agenda of deregulation, privatisation, marketisation and working class austerity has been at the heart of the rescue packages peddled by both the IMF and the ECB since the onset of the global financial crisis. Greece’s austerity budgets are perhaps the most visible manifestation of this neoliberal approach to economic management, but they are hardly the exception.
The end of neoliberalism?
Neoliberalism is clearly alive and well, yet just a few short years ago many thought it was on its last legs. In July 2008, Nobel Laureate and dissenting economist Joseph Stiglitz held out hope of neoliberalism’s imminent demise: ‘Neo-liberal market fundamentalism … was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.’
Across the spectrum of progressive thought, leading commentators concurred with this analysis. From centrist Labor Prime Minister of Australia, Kevin Rudd, who published a 5000-word essay on the topic, to Marxist historian Eric Hobsbawm, the Left lined up to consign neoliberalism to the dustbin of history.
Partly this was a case of understandable wishful thinking on behalf of progressive commentators. Neoliberalism was clearly in crisis. There seemed to be a glimmer of hope that the system which had ravaged the lives of so many millions across the globe for the last several decades might be in terminal decline
But there was a deeper reason for the misdiagnosis. On the whole, progressive commentators failed to appreciate the durability of neoliberalism in the face of crisis because of their idealist, or ideas-centred, understanding of neoliberalism. Put simply, they viewed neoliberalism simply as a set of ideas. Underpinning the prediction of the death of neoliberalism was an assumption that the major policy changes of the last thirty years were a reflection of the utopian visions of neoliberal fundamentalists such as Milton Friedman and Friedrich von Hayek. Politicians and bureaucrats, it was argued, had come under the sway of free market fundamentalism and made the utopian blueprint of unregulated capitalism a reality. The onset of crisis exposed the failings of the neoliberal model and heralded its swift demise. Or so the story went.
The problem with this formulation was that actually existing neoliberalism turned out to be quite different to the fundamentalist neoliberal blueprint. From the beginning of the neoliberal era in the 1970s, state expenditure as a proportion of GDP actually grew. Meanwhile the regulatory scope of states continued to expand. Deregulation often entailed reregulation, while privatisation often went hand in hand with the creation of new regulatory agencies to oversee the markets in which the newly privatised corporations operated.
The notion that the neoliberal era was about the rise of free markets was thus a nonsense. Yet, it continues to exercise a powerful hold over progressive intellectuals.
This leads them to miss the ways in which neoliberal policies have become deeply embedded within a growing bureaucratic apparatus of rules that commit states to further neoliberalisation. Signing up to supranational bodies such as the WTO and EU, for example, effectively constitutionalises neoliberalism for member states, while various forms of competition policy benchmark state policies against neoliberal norms.
The tendency to understand neoliberalism as an ideas-driven system of free markets also obscures the ways in which actually existing neoliberal policies are embedded within a set of class relations which favour the owners of capital. Years of labour market deregulation and attacks upon trade union rights have weakened the ability of labour to organise collectively. Concurrently the global reorganisation of production, in part facilitated by the deregulation of capital controls and the reduction of tariff protections, has weakened organised labour in areas where it was traditionally strong.
On the one hand this has made the profit generating strategies of capital dependent on further neoliberalisation, as business models nowadays are premised upon the flexibility and prerogatives granted to management by labour market deregulation. On the other hand it has also strengthened the ability of capital to push for such changes, as the ability of organised labour to assert a countervailing power is considerably diminished.
Such features lend considerable inertia and resilience to neoliberal policy. Yet, those who viewed the neoliberal era through the lens of its dominant ideas are hard pressed to explain this durability. One sees this in the writing of scholars who write of neoliberalism as a ‘zombie doctrine’. They are puzzled as to why it isn’t dead, despite the obvious signs of its passing. Yet, their answer that neoliberalism is a ‘zombie doctrine’ [the beginning of the end of the neoliberal era], which like the undead just keeps coming, is about as analytically useful as the fictional stories from which this trope is taken.
Moreover, by insisting on a rather monocausal ideas-centred narrative, they also miss the other important drivers of change—the balance of class forces, institutional path dependency and political interests more generally. None of this is to suggest that fundamentalist neoliberal doctrines have been negligible to the rise of neoliberalism, nor to its continued durability. Rather, it is to highlight that such neoliberal doctrines need to be put in their proper place. They are a malleable set of discursive weapons that can be selectively appropriated to justify all kinds of neoliberal policies, and which have worked in combination with class forces and institutional biases to ensure that neoliberal policies have been the ‘go to’ form of economic crisis management since the onset of the global economic downturn. Many thought this economic crisis heralded neoliberalism’s demise. They were mistaken.