Yves here. This article is better than its title. It recounts the origins and the evolution of neoliberalism, arguing (and I agree) that it became established not under Reagan and Thatcher, but Clinton and Blair. It also does offer support for its contention that neoliberalism is losing its hold, ideologically and in practical terms.
Of course, that view presupposes sincerity among the proponents of neoliberalism, as opposed to simply seeing it as the best available tool for gutting social safety nets and reducing worker bargaining power. Now that that aim has been accomplished, with corporate profit share of GDP holding firm at levels nearly double one that Warren Buffett deemed to be unsustainably high, and income and wealth inequality still rising, there’s no need to bother with principles.
By James Meadway, an economist and writer. Originally published at openDemocracy
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.
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 intellectualmovement. 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.
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.
At each stage in these early years, the alternative to a neoliberal turn was on the cards, but it was only in the success of the ruling-class offensive that neoliberalism truly took shape. Moreover, it did so on the basis of the new economic circumstances that had been opened up in the course of the offensive: the incredible fall in the price of transporting goods and materials, primarily through containerisation; the huge expansion of the global labour force (via China and, to a lesser extent, eastern Europe); and, in financial markets, the continuing dominance of the US dollar – the lynchpin of the global financial system that allowed the booming of a global credit bubble. This bubble kept consumers supplied with money for purchases even as real wage growth was suppressed. Multinational companies, which had begun to rise to dominance in the post-war years, became the cutting edge of the neoliberal global economy, becoming increasingly adept at exploiting weaknesses in the global tax system through avoidance and the use of havens. These material conditions were collectively the basis for dramatic catch-up growth in China and parts of the less developed world and, by the 2000s, of an unstable, debt-funded version of prosperity across the developed world.
In other words: neoliberalism was formed in the West not at the start of the 1980s, but at its end. The combative years of the 1980s often attract too much attention, which means we end up seeing neoliberalism as a kind of permanent ruling-class offensive against its enemies, rather than it being what happened when the ruling-class offensive had essentially won. This is where neoliberalism comes into its own as a set of automatic rules that, in the ideal society, no longer require intentional government action to function.
The peak neoliberal governments – those that perfected the form – were not Thatcher and Reagan’s, but those of Blair and Clinton. And the peak neoliberal moment in history was not the defeat of the British miners’ strike, but the entry of China into the World Trade Organization in 2001. If we think of neoliberalism as primarily an intellectual struggle, dictating a form of ruling-class combat against its opponents, we will view this history the wrong way round. It wasn’t the most ideological governments who were the most neoliberal: it was those who came afterwards, who proclaimed themselves to be ‘beyond ideology’ or ‘beyond Left and Right’.
This should alert us to a second point: whilst governments have used spending cuts and austerity to drive through neoliberal programmes of change, there is no necessary attachment of neoliberalism to austerity. For all the early rhetoric about ‘rolling back the frontiers of the state’, neoliberalism in practice has accepted a significantly expanded state sector. And however grudging the acceptance may be by neoliberal ideologues, neoliberal governments in practice have accepted many ‘Keynesian’ or social-democratic institutional hangovers, like the institutionalised trade union bargaining that many European countries still maintain.
Although neoliberalism came together in a disparate way, this doesn’t mean it is a system without its own principles, or that there is no logic to what neoliberal governments did beyond responding to circumstances. Quite the opposite: neoliberal thinkers, whatever their tactical manoeuvrings and opportunistic alliances, have been very insistent on two related values: firstly, the supremacy of law and, secondly, the centrality of markets and the price mechanism in organising society. Neoliberals like Hayek and Friedman may have disagreed on much, but both would insist on the need for society to operate automatic mechanisms that regulate it. In other words, that there would be no place for interventions by government or other public bodies if a society was well run. And a well-run society would (of course!) be one where the automatic social stabilisers of law and the market could operate freely, independently of political intervention. This belief is the ‘liberalism’ of neoliberalism. Like the classical liberals of the 19th century, neoliberals viewed a society with the rule of law and free markets as a society in its ideal form. Its clearest expression is perhaps Hayek’s book ‘The Constitution of Liberty’, which is an extended argument for a (limited but fundamental) rule of law and the operation of the price mechanism as the cornerstones of meaningful human freedom.
From these two underlying values, neoliberal governments tended towards three principles. First, that law and the market should work together, with well-designed protections for private property that ensure markets can find the correct price. These private property rights should be extended as far as possible, particularly in the field of information and knowledge to cover software, for example, making it possible for Microsoft to copyright a program or to lay claim to genetic information, and allowing Monsanto to patent genetically modified crops. This is despite the fact that Intellectual property right extension was contested by some leading neoliberal thinkers – a further example of how it is the institutions, not the ideas, that define the period. Even if temporary, the Biden administration’s support for the ending of intellectual property protections on COVID-19 vaccines marks an important blow to this concept.
The second principle is that both law and the market take precedence over democracy, and even government itself. In other words, democratic demands to change how markets operate, or to change the law on property – removing intellectual property protections on HIV medicine, for example – should be pushed aside.
The early legal offensive on trade unions was an important aspect of this primacy of law. In the early 1980s, Hayek recommended to Thatcher that her government should repeal the 1906 Trade Disputes Act, which would allow unions to be sued for actions undertaken by their members during a strike. The effect would be to reset decades of accepted practice in British industrial relations, in which the unions and employers would each bargain from positions of organised strength, and instead turn unions back into something more like any other voluntary association, lacking the capacity to act collectively.
In the end, Thatcher didn’t go this far, but the succession of trade union laws passed by Conservative governments in the 1980s and 1990s very significantly undermined trade unions’ abilities to organise and bargain. It was the legal victory that was the real strategic goal for neoliberalism, building out from the industrial defeats (of car workers, steelworkers, miners, and printworkers), since it was the means to preserve those victories. It is why the proposals by the Biden administration to reverse some of the neoliberal legal restrictions on US trade unions, introduced in the 1980s, are so important, and the biggest single breach he has proposed in the neoliberal system to date.
The third principle is that both law and the market extend beyond the boundaries of the nation-state and encompass (as far as possible) the international economy. The extension of the intellectual property regime via the TRIPS Agreement in the 1990s was a key moment in the development of a neoliberal global economic order. So, too, was the attempted creation of something like an international commercial law through the establishment of Investor-State Dispute Settlement (ISDS) mechanisms, in which trade treaties like the North American Free Trade Agreement would create independent court-like bodies that gave corporations the power to sue governments that had allegedly breached their ‘rights’ – for example by imposing environmental obligations on them.
This international dimension is what we might call ‘peak neoliberalism’. Once the neoliberal rules of the game were bolted in place internationally, it would become harder for individual countries to seriously breach them. It is in the sphere of international economic relations that neoliberalism is most apparent, since it is here that the separation of the activities of government and the activities of those in the market are most obviously separated, and even come into conflict. This is in contrast to Blakeley’s argument that, being capitalists, they are fundamentally the same. Different national governments have different interests that can conflict, but neoliberal institutions aim to smooth out these conflicts in deference to clear sets of rules – like intellectual property, or agreements on trade subsidies.
This international order helped create a certain ideal type of neoliberal business, one that depended on both the smooth global operation of the price mechanism, and on the legal protections of international commercial law and regulations. All multinational enterprises required both to some degree, but the companies that were most dependent on the neoliberal global order were the multinational investment banks like Lehman Brothers, RBS and Deutsche Bank – vast, powerful, global enterprises, at least until the credit bubble burst in 2007-08.
Domestic and International Dimensions to Neoliberalism
If we want to look for an ending to neoliberalism, then we need to look at both the domestic and the international spheres. The turn against neoliberalism from 2008 onwards has been more obvious in the international dimension than the domestic, at least for countries in the historic West. Global trade was already falling as a share of GDP after 2008, but it was Donald Trump’s dramatic assault on neoliberal trading rules, via his trade war with China, which really shifted the international political order.
That breach has been further reinforced by the recent G7 Global Tax Agreement, which paved the way for a global minimum rate of corporation tax. Driven by domestic political considerations, notably around the brazen way in which Big Tech has scarcely managed to wriggle out of its tax obligations, major economies like Britain and France had already begun seeking ways to impose new taxes on companies such as Facebook and Amazon. The US had robustly opposed this, and one way to view the G7 agreement is as a compromise between the desire of the US government to raise more tax revenues domestically, and the desire of other G7 members to prevent mainly US tech multinationals from undermining their own tax systems. The crucial point is that, just as in the 1970s and 1980s when neoliberalism first emerged as a rulebook for the major economies, a combination of domestic politics and shifting international conditions has moved the G7 countries to turn against the existing international rulebook.
Combined with the striking turn across the major economies towards government intervention in the form of industrial strategy, the anti-neoliberal tendency is clear. Governments across the world are pledging to spend more on investment and to act more directly to support their national businesses, and to shape economic outcomes through initiatives like Britain’s alleged ‘green industrial revolution’. The period since 2008 has been one in which states and businesses have drawn closer together, breaking the neoliberal claim that the two should be distinct.
But this is nothing new: states and businesses have always been mixed up with each other. Socially, those running major businesses are closer to senior civil servants, leading politicians or those who run newspapers, than they are to those who work for them. Politically, businesses have always actively sought the support of politicians and political parties, as well as seeking close relationships with those parts of the permanent state that deal with their interests. But stating this truism doesn’t get us any closer to understanding how the system has changed over time. If we turn ‘neoliberalism’ into merely a general description of how any capitalist state operates, the term is redundant. But if we want to understand how capitalism has come to operate, and the specific relationship between major businesses and capitalist states, we need to specify the term more closely. This is particularly the case given that the companies now dominant in the world do not correspond to the historic neoliberal ideal.
Big Tech as an ‘Anti-Neoliberal’ Formation
In 2009, the four largest corporations in the world were Petrochina, ExxonMobil, Industrial and Commercial Bank of China, and Microsoft. By 2019, they were Apple, Microsoft, Amazon and Google’s parent company, Alphabet. These digital platforms don’t correspond to the neoliberal ideal of a corporation. Notoriously, whilst they are happy to exploit elements of the neoliberal system (like intellectual property, and tax havens), the platform companies have spent the past decade or more busily pushing beyond the existing boundaries of law and regulations through their data-gathering operations. Investment banks certainly seek out ‘regulatory arbitrage’ opportunities in existing law and regulation (that is, loopholes to exploit), and try to create new financial products that can be traded beyond the point of regulation. But what they do is of necessity bound by existing property and contract law. You cannot trade a financial product if you don’t have a price for it, and if the property it lays claim to isn’t legally protected.
Financial companies also employ lobbyists to try and shape the law to their advantage. Crucially, however, the existence of a financial system, particularly in a neoliberal policy environment, depends on the existence of a law around which it can profit. At the most elementary level, it is the presence of both a government-backed form of money (including deposit insurance) and a government-backed central bank that allows finance to function. As a system, it is in continual tension with the law but it is ultimately the presence of law and, relatedly, regulation that determines its capacity to profit. It is impossible to understand the modern financial system without understanding it as a by-product of government decisions. It is, in the end, fundamentally subordinate to law – as the post-2008 bailouts graphically demonstrated.
This does not apply to the platform corporations in the same way. The major tech giants grew up in a neoliberal environment, and it is quite hard to see how they could have grown in the way they did if the internet itself was not left very significantly free of government regulation (in line with neoliberal principles pushed particularly hard by the US Democrats of the early 1990s). But as Shoshanna Zuboff’s ‘Surveillance Capitalism’ details, it was the first US crisis of the new millennium – that of the ‘dotcom crash’ of the early 2000s – that pushed Google and others into a distinctive new form of business organisation, based on the mass acquisition and analysis of user data.
Once the secret of monetising mass user data was unlocked, a path out of neoliberalism was opened. This happened in a number of ways. First, the most aggressive of the companies were immediately involving themselves in vast new areas of human activity where law and regulations did not exist, making their own policy and regulations as they went along. The driver of their business model, the acquisition of data, was a permanent – and increasing – extension beyond the reach of law. Blowback from this overreach has led to the creation of a quasi-judicial function by Facebook, establishing a supposedly independent ‘Oversight Board’ to rule on policy decisions, after Mark Zuckerberg had previously speculated about creating a “Supreme Court” for Facebook decisions. Neoliberalism – in practice and in theory – tended to view government sovereignty as something that should be limited in its extent, but that corporations and private individuals should ultimately be subordinate to it. The data giants fundamentally subvert this idea, starting to define what look very much like their own forms of sovereignty over the new domains of human behaviour they oversee and manage.
Second, the principle of price as an organiser of economic activity has become increasingly tenuous. The products of the platform giants, at least on the consumer side, tend to work against market mechanisms. Facebook still boasts that “it is free, and always will be”. There is no consumer market and no price being established, when a product like Facebook is free. Where a product is not obviously free, the platforms have attempted to push their customer base into a subscription model: not organising a market through price, but creating a continual flow of income, at a fixed rate, from the consumer to themselves. For example: Apple wants you to use their hardware to establish subscriptions to its services, and Netflix does not charge you per film viewed, but expects you to remain a subscriber in perpetuity. The ultimate expression of this has been the attempts, led by Facebook, to establish their own currencies, free from government, allowing them to operate their own payments system and so take a slice of every transaction made.
Continually expanding the boundaries of what can be turned into data is fundamental to the data-gobbling business model of the platforms. Like cuckoos in the nest, they grew up under the protection of neoliberal governments, but rapidly outgrew their limitations. ‘Move fast and break things’ is an anti-neoliberal statement. These are anti-neoliberal companies.
This has, in turn, produced an anti-neoliberal reaction from governments. The proposal for special new taxes, as made by Britain and France, to capture only the US digital giants, is a break with the neoliberal programme on tax, which has always sought to create a ‘level playing field’, culminating in the demand for flat taxes on all forms of income.
Or take the emergence of the ‘neo-Brandeis’ school of competition scholars, now firmly entrenched in the Biden administration with the appointments of radical legal experts Lina Khan as Federal Trade Commission chair and Jonathan Kanter as assistant attorney general for antitrust. Whilst for decades, neoliberal thinking has been thoroughly embraced by competition authorities, stressing that market structures matter less than presumed consumer benefits, the neo-Brandeis school stresses the importance of competition not only for consumers but for democracy itself.