What Is Neoliberalism? It’s Market Fundamentalism

Neoliberalism has had a titanic effect on the world, but it’s the worst-named political-economic doctrine there is. Robert Kuttner explains neoliberalism at length below (you can read the even longer original for free if you register at the New York Review of Books):

Beginning with the presidency of Jimmy Carter, a succession of Democratic presidents joined Republicans in turning away from the New Deal model of regulated capitalism toward what has come to be known as “neoliberalism”. The neoliberal credo claims that markets work efficiently and that government attempts to constrain them via regulation and public spending invariably fail, backfire, or are corrupted by politics. As public policy, neoliberalism has relied on deregulation, privatization, weakened trade unions, less progressive taxation, and new trade rules to reduce the capacity of national governments to manage capitalism. These shifts have resulted in widening inequality, diminished economic security, and reduced confidence in the ability of government to aid its citizens.

The Republican embrace of this doctrine is hardly surprising. Given the lessons learned about the necessity of government interventions following the 1929 stock market collapse and the success of the Roosevelt administration as a model for the Democratic Party, the allure of neoliberalism to many Democrats is a puzzle worth exploring.

The term “neoliberalism” itself is confusing, because for at least a century “liberalism” in the United States has meant moderate left, not free-market right.

Neoliberalism in its current economic sense draws on the older meaning of “liberalism”, which is still common in Europe and which holds that free markets are the counterpart of a free and democratic society. That was the claim of classical liberals like Adam Smith and Thomas Jefferson.

Only in the twentieth century, after the excesses of robber-baron capitalism, did modern liberals begin supporting extensive government intervention—the use of “Hamiltonian means” to carry out “Jeffersonian ends,” in the 1909 formulation of Herbert Croly, one of the founders of The New Republic.

This view defined the ideology of both presidents Roosevelt and was reinforced by the economics of John Maynard Keynes. In Britain, the counterpart in the same era was the “radical liberalism” of social reform put forth by the Liberal prime minister David Lloyd George.

The term “neoliberalism also gets muddled because some on the left use it as an all-purpose put-down of conservatism—to the point where one might wonder whether it is just an annoying buzzword. But neoliberalism does have a precise and useful meaning, as a reversion to the verities of classical economics, with government as guardian of unregulated markets.

In his new book, The Rise and Fall of the Neoliberal Order, Gary Gerstle, an American historian, … argues that neoliberalism needs to be understood as a “political order,” which he defines as an era in which a certain set of ideas and policies have become politically hegemonic. “A key attribute of a political order is the ability of its ideologically dominant party to bend the opposition party to its will,” he writes. “Thus, the Republican Party of Dwight D. Eisenhower acquiesced to the core principles of the New Deal order,” just as “the Democratic Party of Bill Clinton accepted the central principles of the neoliberal order in the 1990s.” Gerstle’s lens helps us appreciate the self-reinforcing power of neoliberalism. As government became a less dependable source of economic security, people were made to feel that they were on their own, thus internalizing an individualist rather than collectivist view of citizen and society.

What differentiates neoliberalism from the older ideal of laissez-faire is the recognition that a free market will not reemerge if the government simply gets out of the way. The neoliberal perspective, as first articulated in the 1930s by the Austrian economist Friedrich Hayek and by Henry Simons of the University of Chicago, holds that if we want entrepreneurs, financiers, and ordinary citizens to be liberated from state regulation, strong government rules must protect the market from the state. Milton Friedman, in a 1951 essay titled “Neo-Liberalism and Its Prospects,” agreed that this project went well beyond laissez-faire. Gerstle writes, “This strategy was built on a paradox: namely, that government intervention was necessary to free individuals from the encroachments of government.” The historian Quinn Slobodian, in his authoritative intellectual history of neoliberalism, Globalists (2018), goes further: “The neoliberal project was focused on designing institutions—not to liberate markets but to encase them, to inoculate capitalism against the threat of democracy.”

Leftist theorists had long appreciated the role of the state in defining the market. As Karl Polanyi famously wrote, relishing the paradox, “laissez-faire was planned.” And indeed it was. To function at all, even “free” markets require extensive rules defining property itself, the terms of credit and debt, contracts, corporations, bankruptcy, rights and obligations of labor, and so on. The difference between the New Deal or social-democratic view of markets and the neoliberal ideal is that progressives want the government’s rules to act as democratic counterweights to the abuses of capitalism, while neoliberals want them to protect market freedoms. But both accept that capitalism requires rules.

As a dissenting remnant of pre-Keynesian economics, neoliberalism languished until the New Deal model faltered in the 1970s with the improbable combination of inflation and stagnation [“stagflation”]. Classical economic liberals like Friedman, who had been politically marginal, got a fresh hearing. Carter, never much of a Roosevelt liberal and facing political fallout from stagflation, hoped that deregulation and market competition might restrain prices. Reduced government intervention was congenial to the business elites who were again ascendant during the Reagan presidency. Neoliberalism became the ideological underpinning of a relentless turning away from a managed form of capitalism.

Gerstle explains how the cultural left also found the libertarian and antibureaucratic aspects of neoliberalism appealing, weakening the New Deal order and its political coalition in yet another way. In the culture wars of the 1960s, the New Left rejected corporate cold war liberalism and unresponsive big government in favor of a wished-for “participatory democracy.” Some of this entailed challenging public institutions. “Both left and right … shared a deep conviction,” Gerstle writes, that the bureaucratized system “was suffocating the human spirit.” A few years later, Ralph Nader became convinced that several regulatory agencies had become hopelessly captured by the industries that they regulated and helped persuade Carter that the remedy was deregulation.

Despite neoliberals’ embrace of economic liberties, they can be cavalier about political liberties. As theorists such as Isaiah Berlin appreciated, people depend on positive as well as negative rights. The freedom to get an education or receive medical care regardless of one’s income exists in the realm of citizenship. These are freedoms that markets don’t provide and that proponents of neoliberalism ignore….

Neoliberalism not only protects the market from the regulatory state; more radically, it expands market principles to realms thought to be partially social. Whereas Polanyi, for instance, warned about the tendency of a market society to relentlessly “commodify” social relations, neoliberal theorists embrace this as a virtue, arguing that market measures can be efficiently applied to value everything from human life to the environment.

In the neoliberal view, labor is better understood as “human capital,” a concept associated with Friedman’s University of Chicago colleague Gary Becker. According to Becker, markets pay workers precisely what they deserve, even though in some cases wages are insufficient to sustain a decent life. Conversely, even rapacious billionaires merit their earnings, by definition, because markets are presumed perfectly efficient when protected from government interference.

In the absence of counterweights such as government regulation and strong unions, these dynamics become more intense over time. Since labor is just another commodity, production can be offshored to countries where it is cheapest. More recently, with computer-aided innovations such as ride-sharing platforms like Uber, delivery services such as Instacart, and odd-jobs bidding sites like TaskRabbit, workers compete directly against one another as vendors in an open marketplace while being monitored minute by minute for efficiency. This was the sort of pure “spot market” in labor celebrated by Friedman and abhorred by Karl Marx.

Corporations, though creations of the democratic state, are said by neoliberal theorists to have no reciprocal responsibility to communities or employees, only to shareholders. Public education is not a public good but another marketplace with mechanisms such as vouchers, which give families money toward tuition at the school of their choice. In health care, cost disciplines are deemed to operate best with the use of market incentives and for-profit vendors. Retirement income is better served by private accounts rather than by public social security. Environmental goals are to be achieved with marketlike measures, such as auctioning the right to pollute, not “command and control” regulation. Taxation rates should be low and consistent across all income levels, rather than redistributive. Antitrust enforcement is gratuitous and even perverse, because markets police themselves through supply and demand.

Government’s role should be largely reduced to maintaining physical security and protecting markets from state interference—the “night-watchman state.”

This has indeed been the dominant set of beliefs behind the policies of the past four decades. Was it a success or a failure? That depends on who you are. For economic elites and the Republican Party, it has been a splendid success. For the Democratic Party, the neoliberal order has been a catastrophe, eviscerating the core claim of progressives since FDR that government can serve the common people. Neoliberalism has thus been both antidemocratic and anti-Democratic.

As economic policy, neoliberalism largely failed to improve economic performance. Growth rates were far higher between the 1940s and early 1970s, when the economy was governed by principles of managed capitalism. However, neoliberal policies did drastically increase income inequality, with virtually all economic growth benefiting the top few percent, while earnings and job security for most people stagnated or declined.

With concentrated wealth came concentrated political power to promote even more neoliberalism, as countervailing institutions such as labor unions were weakened and direct public programs like Medicare were partly privatized.

Notwithstanding the ubiquity of computers during the neoliberal era, productivity growth has been no better than it was in the postwar period. Health insurance became more costly and less reliable as both insurance companies and hospitals were increasingly transformed into for-profit institutions, avoiding unprofitable patients. Retirement security was weakened, as guaranteed pensions were shed by corporations in favor of marketized 401(k) accounts that shifted all the risk and most of the cost to workers. The deregulation of financial markets led to innovations, but they mainly served speculation by insiders and resulted in the financial collapse of 2008….

Why, then, did Democratic presidents embrace an economic credo that annihilated their own public philosophy and its appeal to the electorate? As Gerstle recounts, it was Bill Clinton who turned the Democrats to full-on neoliberalism. Clinton, who had been attracted to the New Left in his youth, began as more of an economic progressive, espousing New Deal–scale programs such as universal health insurance. The early Clinton presidency was a tug-of-war between more left-wing advisers … and free-market conservatives…

But Clinton was unable to get major progressive legislation through Congress, and Republicans became the congressional majority after 1994. A centerpiece of Clinton’s early program was NAFTA, a “free trade” initiative…. Clinton also made common cause with Republicans in Congress to “end welfare as we know it,” repealing the New Deal’s Aid to Families with Dependent Children program in favor of a stingier and more punitive alternative….. Budget balance, a core neoliberal principle, became an article of faith for Clinton….Federal spending [was reduced] to its lowest share of GDP in decades.

Gerstle characterizes these shifts as mainly opportunistic, and he’s not wrong. Neoliberalism also allowed Democrats to compete with Republicans for business support and campaign money. By the end of his two terms, Clinton … had sponsored more financial deregulation than Reagan or Bush, allowing the growth in speculative credit derivatives and subprime mortgages that set the economy up for a crash. Clinton also made budget balance the centerpiece of his economic program, at the expense of social spending and needed fiscal stimulus. Obama then pursued deficit reduction instead of economic recovery in 2010, when unemployment was still far too high….. As Gerstle observes, Obama was “a captive of the moment…. Obama would also prove captive to his own inexperience and resulting caution”….

The book’s lack of attention to globalization as both emblem and vector of neoliberalism [is a problem]…. The era between Roosevelt and Reagan was one in which capitalism was substantially national. This was a deliberate legacy of the Bretton Woods system, which was established in 1944 and provided for fixed exchange rates and controls on the movement of private capital. Those rules made it more feasible to regulate capitalism …because capitalists could not do an end run around the nation-state… Governments could pursue full employment without pressure from financial markets to pursue austerity—the favorite neoliberal remedy for loss of investor confidence….

In the 1980s and 1990s, … “hyper-globalization” became an important neoliberal instrument for weakening the nation-state in favor of a global market that would be much more difficult to control..Many forms of financial regulation were defined as improper barriers to free trade….

With the Biden presidency, we have seen a welcome turning away from neoliberal ideas more generally. His administration has sought to move back to something closer to the New Deal, with greater public investment, more regulation, progressive taxation, skepticism about free trade, and increased support for labor unions. But unlike FDR and LBJ, Biden does not have a working legislative majority. [There are other] obstacles to Biden’s success: the climate calamity, racial divisions that the right deftly exploits, the lingering political power of liberated finance, the continuing appeal of T____ism, and a gridlocked Congress.

Gerstle’s title refers to the “fall” of neoliberalism. But … that characterization may be premature. Neoliberalism has indeed been discredited, as both theory and practice…. Yet because of the residual power of financial elites and their intellectual allies, the appeal of market fundamentalism is far from dead.

This political moment is not necessarily a turning point. It could be an inconclusive stalemate that will produce even more mass disaffection from democratic government and politics (and from the Democratic Party), along with more support for autocrats. As the Italian Marxist Antonio Gramsci wrote of an earlier period, “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”

It’s Right/Left But Also Fantasy/Reality

This is a somewhat edited Twitter thread from Steve Schmidt, a political strategist who used to work for Republicans. His comments were precipitated by a CNN podcast (referenced at the bottom of this post):

The debate is around how to think and talk about Fox News. What is it? [CNN journalist] Brian Stelter thinks about this directionally and ideologically: describing Fox as moving further right. He is correct, as is [journalism professor] Jay Rosen, who evaluates Fox News along a different axis. For him, it is the drift into fantasy and the unreal.

The authoritarian movement in America is real, powerful and present. All authoritarian movements are nourished by an ecosystem that includes three powerful components:

A. The Financiers. “No Bucks, no Buck Rogers” said the PR man to the disdainful test pilots who were to become America’s Mercury astronauts in one of the all time great movies “The Right Stuff”. There is no autocratic movement without money and they have a lot.

B. CYNICAL ELITES.  Rep. Elise Stefanik, Sen. Ted Cruz, Sen. Josh Hawley and Sen. Mitch McConnell are but a few examples of people who have tried to manage the toxic reverberations from [the former president’s] cult by manipulating it for power, self interest and vanity. They have aligned with the fringe and venomous ideas.

C. PROPAGANDISTS. All authoritarian movements rely on propaganda sustained by a particular type of lie. THE LIE OF AUTHORITY requires the abandonment of belief, truth, ethics, values and intellectual agency. It demands submission to the lies of the Leader/Party.

. . . Right-Left, in the tradition of American politics, has long been explicable with a two dimensional rendering, specifically, a horizontal line. It doesn’t work any more. When [Brian Stelter] talks about Fox and moving “Right”, it is important to pause and look at the [system of measurement].

Trying to explain the metastasized conservative media by marking a point on a line [that could be] used to measure ideological distance between [Republican moderate] Christie Whitman and [Republican conservative] Orrin Hatch [fails to capture reality].

The “Right” we are talking about here is a very specific variant, that no matter how easily identifiable, seems to induce a blindness in people who should see it clearly and an allergy towards confronting it by the people who have the most at stake in the fight.

We are talking, of course, about an authoritarian Right that is steeped in fantasy, delusion, hate, scapegoating, scientific racial theory, menace, violence and coercion.

This American Right is cousin to the noxious movements that have long been built on a fetid marsh of lies, grievance, scapegoating, hate, menace, fear and fantasy nostalgia for a world once pure. That fallen world, is the nucleus of a powerful and evil fantasy at the core of a terrible and dangerous mythology. The mythology is fear-based and architected around the imagined birthright of one group to feel superior to others.

It always leads to subjugation under the power and boot of the state for the purpose of preserving the power of the few and the fabulously corrupt over the common good of the great many.

Fox News is moving in a new direction and has been for some time. . . It is getting worse and more extreme every day. . . . The [metastasizing] ideological drift and the demand for submission to fantasies is at the core of understanding what all of this is. I hope enough people can see the totality of it all before we lose it all.


The CNN podcast is called Reliable Sources. From the description of this episode:

Jay Rosen, who teaches journalism at NYU and authors the PressThink blog, discusses the devolution of Fox News; the difficulty of describing a “shifted political universe” in the United States; and the need for news outlets to be “much more explicitly and aggressively pro-democracy.”

He says “Fox is becoming in some way more demand-driven” because “its audience is in the driver’s seat in a way that’s more extreme than when Roger Ailes ran the network.” For example, Rosen comments, “Do you want January 6 to be the fault of Antifa? You can have that. Do you want [somebody else] to have won the 2020 election? You can have that.”

Rosen explains that “these kinds of maneuvers are attempting to sever people from reality so that you can do what you want with them… to just sort of de-anchor people from anything that they have in common with their fellow citizens so that they can be manipulated further. And that’s why it’s so insidious.” 

Ideology: A Very Short Introduction by Michael Freeden

This is volume 95 in the Very Short Introduction series published by Oxford University Press. I suppose it was worth reading, although I expected more about particular ideologies as opposed to the general nature of ideology.

Freeden defines a political ideology as: “a set of ideas, beliefs, opinions and values that

(1) exhibit a recurring pattern
(2) are held by significant groups
(3) compete over providing and controlling plans for public policy
(4) do so with the aim of justifying, contesting or changing the social and political arrangements and processes of a political community.”

He identifies four main political ideologies (socialism, liberalism, conservatism and fascism) but argues convincingly that none of them can be precisely defined. What they share are general commitments to certain fundamental principles, which can also be understood as preferred ways of applying certain key terms. For example, a liberal and a fascist may both be in favor of “freedom” and “justice” but define those terms differently and apply them to different situations.

Freeden doesn’t think that having an ideology is a bad thing. He clearly favors some ideologies over others, but suggests that having a political ideology is like having fundamental principles or preferences, and that it’s almost inescapable to have an ideology if you take politics seriously. At least in the Western world, the four mentioned above, although they have evolved through the years, have been the most frequently adopted.

Throughout the book, Freeden emphasizes the importance of language in the study of ideology:

Ideologies compete over the control of political language as well as competing over plans for public policy; indeed, their competition over plans for public policy is primarily conducted through their competition over the control of political language.

It Should Be Unbelievable, But Isn’t

As reported this afternoon on the NY Times website:

Senator Harry Reid of Nevada, the majority leader, called House Speaker John A. Boehner of Ohio on Wednesday to commit to negotiations on a long-term deficit reduction deal, but only after the House passes the Senate’s bill to reopen the federal government without policy strings attached.

[Reid called Boehner on the phone and also sent this in a letter:]

“Before the House you have the Senate-passed measure to reopen the government, funded at the level that the House chose in its own legislation. I propose that you allow this joint resolution to pass, reopening the government,” Mr. Reid wrote. “And I commit to name conferees to a budget conference, as soon as the government reopens.”

The speaker’s office dismissed it as a surrender demand.

“The entire government is shut down right now because Washington Democrats refuse to even talk about fairness for all Americans under Obamacare,” said Michael Steel, a spokesman for Mr. Boehner. “Offering to negotiate only after Democrats get everything they want is not much of an offer.”

Wait a minute. “After the Democrats get everything they want”? It’s what the Democrats and the rest of us already have! Except for the federal government being on life support, and presumably most Republicans want that little problem to be fixed too.

The Affordable Care Act has gone into effect. It’s not going away. It’s not something that has to be renegotiated. There was an election. The Supreme Court approved it. People are already signing up (although there is so much interest, the new websites are having trouble keeping up with the demand). 

Get over it, Boehner spokesman, and move on to the next crisis!

Earlier today I read a comment from a Republican at the Boston Herald site. She said that delaying the entire ACA for one year was “reasonable”, since some parts of it have already been delayed. She also said it was o.k. to delay it because the thing doesn’t work anyway (the evidence being that thousands of people who visited the websites yesterday had trouble getting through, because thousands of people were trying to get through).

This is the problem we’re having in this country. There are many among us who live in a different reality and use words like “reasonable” in a different way. “Extortion” becomes “negotiation”. As a result, communication becomes terribly difficult. Ideology can certainly cloud your perception of the world. 



PS — Someone just left a comment on the previous post asking why it’s bad for the Republicans to want to delay the ACA. That’s their right, of course. The question is how they try to achieve that goal. See the comments on the post below if you’re interested, including a link to another opinion piece.

In the meantime, I’m going to watch some soccer.