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What, if anything, is neoliberalism? (crosspost from Crooked Timber, repost from this blog 2002)

Summary:
The comments thread on my WTO post raises the much-argued question of whether the term “neoliberalism” has any useful content, or whether it is simply an all-purpose pejorative to be applied to anything rightwing. O In this 2002 post from the pre-Cambrian era of blogging, at a time when I aspired to write a book along the lines of Raymond Williams’ Keywords, I claim that neoliberalism is a meaningful and useful term, which isn’t to deny that it’s often used sloppily, like all political terms. Some thoughts seventeen years later First, this definition refers to the standard international use of the term, what I’ve susequently called “hard neoliberalism”, represented in the US by the Republican Party. I subsequently drew a distinction with “soft neoliberalism”, which

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The comments thread on my WTO post raises the much-argued question of whether the term “neoliberalism” has any useful content, or whether it is simply an all-purpose pejorative to be applied to anything rightwing. O

In this 2002 post from the pre-Cambrian era of blogging, at a time when I aspired to write a book along the lines of Raymond Williams’ Keywords, I claim that neoliberalism is a meaningful and useful term, which isn’t to deny that it’s often used sloppily, like all political terms.

Some thoughts seventeen years later

First, this definition refers to the standard international use of the term, what I’ve susequently called “hard neoliberalism”, represented in the US by the Republican Party. I subsequently drew a distinction with “soft neoliberalism”, which corresponds to US usage where the term is typically applied to centrist Democrats like the Clintons. I’d also apply this to Blair’s New Labour, although, as stated in the post, there were points at which Blair and Brown drifted back in the direction of traditional social democracy.

Second, the discussion of how the right (in Europe and Australia) is shifting away from neoliberalism towards “the older and more fertile ground of law and order and xenophobia” seems as if it could have been written today. These processes take a long time to work themselves through.

As a corollary, the idea of Trump as a radical break with the past is unsustainable. There’s been a qualitative change with Trump and the various mini-Trumps, but the process was well underway before this new stage.

Finally, my characteristic overoptimism shows up in various places.

Neoliberalism and Failure: Some definitions

One obvious problem with my claim that neoliberalism has failed is that I haven’t provided a definition of either ‘neoliberalism’ or ‘failure’. Taking the second point first, there are several ways in which a political ideology may be a failure.

First, it may never attract sufficient support to have a serious influence on political outcomes. In this sense, ideologies like libertarianism and guild socialism may be regarded as failures.

Second, an ideology may be adopted and implemented, then discredited and discarded, or superseded by some new idea. This is the eventual fate of most political ideologies. Communism is the most recent example of a failure of this kind.

Third, an ideology may fail to deliver the promised outcomes. This is much more a matter of judgement, since promises are never delivered in full and failures are rarely complete.

It is important to remember that failure is never final. Democracy, for example, seemed like a failure until at least 1800. Although many democratic governments arose before that time, all had either collapsed in anarchy, given rise to demagogues who made themselves tyrants or decayed into oligarchy. The United States was the first country to establish a sustainable democracy, and there were plenty who opposed it there. Abraham Lincoln was not engaging in hyperbole when he said at Gettysburg that the outcome of the Civil War would determine whether government ‘of the people, by the people for the people’ could be sustained.

Now for a definition of neoliberalism. As the name implies, neoliberalism is a descendant of classical liberalism, defined by the fact that it is a reaction against social democracy, which also draws heavily on the liberal tradition. The US use of ‘liberal’ to mean ‘social democrat’ reflects the latter point.

Because it is primarily based on a critique of social democracy, neoliberalism places much more weight on economic freedom than on personal freedom or civil liberties, reversing the emphasis of classical liberalism. Indeed, it is fair to say that on matters of personal freedom, neoliberalism is basically agnostic, encompassing a range of views from repressive traditionalism to libertarianism.

In terms of economic policy, neoliberalism is constrained by the need to compete with the achievements of social democracy. Hence, it is inconsistent with the kind of dogmatic libertarianism that would leave the poor to starvation or private charity, and would leave education to parents. Neoliberalism seeks to cut back the role of the state as much as possible while maintaining public guarantees of access to basic health, education and income security.
The core of the neoliberal program is
(i) to remove the state altogether from ‘non-core’ functions such as the provision of infrastructure services
(ii) to minimise the state role in core functions (health, education, income security) through contracting out, voucher schemes and so on
(iii) to reject redistribution of income except insofar as it is implied by the provision of a basic ‘safety net’.

With this definition, a reasonably pure form of neoliberalism (except for some subsidies to favored businesses) is embodied in the program of the US Republican Party, and particularly the Contract with America proposed by Gingrich in 1994. The ACT Party in New Zealand also takes a fairly clear neoliberal stance, as do the more ideologically consistent elements of the British Conservative Party and the Australian Liberal Party.

My claim that neoliberalism has failed therefore uses several different meanings of the term ‘failure’. In Europe, apart from Britain, neoliberalism has mostly failed in sense (i). The EU is inherently social democratic in its structure and attempts by poltical groups in some Eastern European countries (notably the Czech Republic and Estonia) to pursue a free market line have failed in the light of the superior attractions of the EU. It is true that the European social democracies have given some ground, notably with respect to privatisation, but no genuinely neoliberal party has arisen or seems likely to. The political right has moved back to the older and more fertile ground of law and order and xenophobia.

In Britain, neoliberalism has failed in sense (ii). The Conservative party is hovering on the edge of extinction and, as I have arged previously, the ‘New Labour’ government has shifted steadily away from neoliberalism and towards a mildly modernised form of social democracy. The same is true in New Zealand, where the advocates of neoliberalism, once dominant, are now completely marginalised.

Although the Australian government started out with a clearly neoliberal framework it has gradually dropped it in favor of the kind of law and order/xenophobia/militarist position that characterises the traditional right. The repeated resort to ad hoc levies as fixes for industry-specific problems is indicative of a government that has lost its economic bearings. Moreover, the Liberals look like being in semi-permanent opposition in most of the states and the Howard government is unlikely to survive the end of the housing bubble (although given the quality of Federal Labor, anything could happen).

Finally, in the US, neoliberalism remains the dominant ideology but is increasingly failing in sense (iii). Three years ago, American pundits could seriously predict a never-ending economic boom. The combination of continued prosperity and ‘the end of welfare as we know it’ seemed to be on the verge of eliminating crime and unemployment. Now the most charitable assessment of US economic performance is ‘better than average’ and even this cannot be sustained of the current recession/stagnation drags on much longer. The basic problem is that, given high levels of inequality, very strong economic performance is required to match the levels of economic security and social services delivered under social democracy even with mediocre growth outcomes.

John Quiggin
He is an Australian economist, a Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a former member of the Board of the Climate Change Authority of the Australian Government.

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