This is a modified version of the talk I gave at the Sydney and Naples launches of my book, The End of Laissez-Faire? On the Durability of Embedded Neoliberalism.
The genesis of this book was my dissatisfaction with dominant accounts of the global financial crisis and its implications for the future of neoliberalism.
I remember back in 2008 reading a short opinion piece by British social democratic intellectual Will Hutton, situating the global financial crisis within the broader context of the historical development of capitalism. While there was much with which I agreed in that article, I was irked by his suggestion that ‘It looks ever more likely that, again, we will see recession – and then a period of managed capitalism’. The implication was clear: the neoliberal era was one in which capitalism wasn’t managed – the state had evacuated its role within the economy leading to the triumph of free markets.
Soon after – perhaps even that same day – I read an editorial in The Economist newspaper titled ‘The World Economy: Capitalism at Bay’ which, while coming from a different ideological position, adhered to a similar conceptual framework. It argued that the nationalisations, bank bailouts and the mooted financial sector regulations that followed the onset of the global financial crisis were a setback not just for individual liberty, but for capitalism itself. Somehow, according to The Economist, the state and state regulations of the economy were inimical to the capitalist system.
These articles had two things in common.
First, both viewed states and markets as antithetical spheres of human society. Implicit in both articles was an understanding of economic history as embodying a pendulum movement between these two poles – sometimes the balance shifts towards states (as in the post-world war two era of Keynesian style ‘managed capitalism’), sometimes it shifts in favour of markets, as in the neoliberal era.
Second, implicit in both articles was that the past few decades were characterised by the triumph of free markets over states. In other words, they assumed that the major transformations to states and economies that swept across the globe since the 1970s – privatisations, deregulation and marketisation – had created a world in the image of the utopian free market ideals of fundamentalist neoliberal theorists like Milton Friedman.
I found this line of reasoning frustrating because my study of capitalist history, and of political economy theory, had convinced me that states and markets were not antithetical spheres of human activity. Rather, states had always been central to the development and expanded reproduction of capitalist markets.
Moreover, I’d already been researching neoliberalism and writing about it for some ten years and I’d come to the view not only that the state was central to the expanded reproduction of neoliberalism, but that instead of withering away in the neoliberal era and giving rise to a system of free markets, state regulations and institutions had been transformed, and, in some instances, strengthened through neoliberalisation.
After this I found myself encountering more and more arguments of the type that I’ve just described. Most often they came from progressive scholars, sometimes even from Marxists, and, indeed, from some of the world’s leading progressive critics of neoliberalism – including Paul Krugman, Joseph Stiglitz and Eric Hobsbawm. And of course, in early 2009, by then-Australian Labor Prime- Minister, Kevin Rudd.
But I also detected another layer of argument. Not only were these critics of neoliberalism arguing that the neoliberal policy revolution created a world that mirrored the way in which the likes of Milton Friedman and Friedrich Hayek thought the world should be organised, also implicit in the arguments of such critics was the assumption that the neoliberal policy revolution was driven and primarily caused by policy makers coming under the influence of fundamentalist neoliberal ideas.
Once again I found this line of reasoning very frustrating. My studies of neoliberal think tanks in Australia had led me to the conclusion that the notion that neoliberal intellectuals were responsible for the neoliberal policy revolution, was at best problematic, and at worst, an infantile fairytale-like misrepresentation of much more complex processes of historical change.
In the early years after the onset of the crisis, each of the conceptual frames just outlined were being used by progressive critics of neoliberalism to make the argument that the global financial crisis had demonstrated, for all to see, the flaws in unregulated markets, and that the return to regulation in the wake of the crisis signalled the beginning of the end for neoliberalism. Because neoliberalism was simply the product of politicians coming under the sway of irrational neoliberal ideas, all that was needed, now that the crisis had delegitimated such ideas, was for good, rational progressive ideas to drive out the bad, irrational neoliberal ideas.
This way of thinking about neoliberalism and the global financial crisis seemed to be pervasive, particularly among progressives.
Moreover, the more I examined scholarly analyses of neoliberalism that existed prior to the onset of the crisis, the more I detected a pervasive ideas-centred bias in the way neoliberalism was understood.
This is the context out of which The End of Laissez-Faire? emerged. I wrote the book not simply to make the point that the ideas-centred, or idealist, critics of neoliberalism were wrong. Rather, I wanted to demonstrate that they were wrong so as to put forward a more satisfactory understanding of neoliberalism. It was my feeling that the ideas-centred view of neoliberalism led to an unfounded optimism about the prospects for both the imminent collapse of neoliberalism, and for progressive social transformation.
I wanted to offer a more sober assessment based upon a re-examination of the material foundations of neoliberalism, particularly its class dynamics and its institutional features. In doing so I also hoped to offer a reinterpretation of the role that fundamentalist ideas have, and continue to, play in the expanded reproduction of neoliberalism – that is, as contributing to a pervasive ideological framework that simultaneously misrepresents, justifies, but also bears some correspondence to people’s lived experiences under neoliberalism.
The central conceptual framing device I use in the book is that of the socially embedded economy. This of course is taken directly from the work of Karl Polanyi. I did this not because I think that Polanyi offers the best or most cogent analysis of either neoliberalism, nor of capitalism more generally. Rather, for me, the beauty of Polanyi’s concept that economies are always embedded in institutions is that it very quickly cuts through the ‘states-versus-markets’ framework that is so pervasive in contemporary accounts of neoliberalism, and indeed of the economy more generally. If markets are always embedded in social institutions, then the idea that states are somehow external to markets, or that markets are natural, self-adjusting spheres of human activity, and that when states regulate they intervene or interfere in an otherwise autonomous market mechanism, is rendered a nonsense.
But to understand the nature of markets and states under capitalism, and indeed under its neoliberal expression, Polanyi’s concept of embeddedness, in my view at least, needs to be filled out with Marxist political economy. Only Marxist political economy, it seems to me, allows one to get a handle on the specific social relations that are unique to capitalism, and that give this system its particular dynamics and contradictions. Not that all the answers are to be found in Marx. But for me at least, Marx provides the crucial foundations.
My hope in writing this book was to provide a ‘diagnosis of the times’ so as to form the basis for a more realistic understanding of the prospects for progressive social transformation. My hope was to provide a conceptual toolkit upon which progressive activists could draw upon to understand the social forces which stand against any progressive programme for winding back neoliberalism, and to navigate their way through such forces in order to achieve a more humane and socially just future.