Commenting Yet Again on Martin Wolf: Why he is convincing me that, contrary to what I have thought since 2007, the Age of the Neoliberal Order is not over; call it the post-Antonine Dynasty Severan-Dynasty era of Neoliberalism...
Our text yet again this morning comes from the highly estimable Martin Wolf:
Martin Wolf: The bitter lessons of Brexit: ’A classic populist alliance of fanatics and opportunists mixed simplistic analysis with heated rhetoric and outright lies to weaken the UK’s most important economic relationship and threaten its domestic stability…. This supposed liberation has greatly curtailed the freedom of many millions…. Whose freedom has it increased? That of British politicians. They can act more freely…. What have they done with this freedom? They have lied about… the Northern Ireland Protocol… threatened to break international law… destroyed the country’s reputation for good sense, moderation and decency. All this is a natural result of the classic populist blend of paranoia, ignorance, xenophobia, intolerance of opposition and hostility to constraining institutions… <https://www.ft.com/content/717c3c59-795b-4620-ad9b-a44a359077ca>
Martin concludes that much depends on mending fences with the E.U., harmonizing rules on “movement of people and workers and over regulatory standards, especially in food and manufactures[, nor] would UK-specific regulation of artificial intelligence or a carbon-border adjustment mechanism make any sense. More boldly… rejoining the customs union…” In the hope that these plus other sensible policies will enable “the next government… to improve the economic trajectory…” In short, a return to not-stupid neoliberalism.
The problem is that nobody likes neoliberalism. And perhaps that problem is raised to critical mass by the fact that nobody is putting forward a clearly superior alternative. So nobody will be happy doing what Martin suggests.
But is there a better alternative? Right now I do not see one. So I think we are stuck.
Let me explain what I mean:
Recall that it was social democracy’s decline that paved the way for the rise of neoliberalism. And social democracy declined for reasons: a confluence of economic, political, and ideological factors that undermined its efficacy and appeal:
Economic Stagnation and Stagflation: The economic environment of the 1970s, characterized by stagnation and stagflation—a combination of high inflation, high unemployment, and slow economic growth. This challenged the Keynesian consensus that had underpinned much of social democratic policy. The oil crises of 1973 and 1979 were major causes, but they were not the only causes.
Globalization and Industrial Changes: The 1970s saw the beginning of the movement of manufacturing to lower-cost countries, weakening the traditional industrial base, undermining the union power and industrial sectors that were central to the base of support for social democracy.
Fiscal Crises and Government Debt: Many social democratic governments faced what at the time were seen as “fiscal crises”, due to rising public expenditures, some of it on welfare states, without corresponding revenue growth. Concerns about fiscal sustainability and economic efficiency—almost all of them grossly overstated, and many of them made up out of thin air—had remarkable traction.
Ideological Shifts in the Direction of the Neoliberal Critique: The Milton Friedmans continued to beat the drum that the system had been better under Calvin Coolidge, criticizing the inefficiencies of large government and the welfare state, advocating for freer markets, privatization, and deregulation. They were stopped clocks: free markets, privatization, and deregulation were the three parts of their answer to every question, and had always had been. But that the conventional wisdom no longer seemed to have a convincing alternative led the hour at which their clocks were stopped to finally chime.
Political and Social Changes: New social movements, a more educated middle class, the erosion of the traditional working-class base of social democracy, the focus of activist groups on non-lunch pail issues like environmentalism or on issues that could be manipulated to divide the working-class block like civil rights—add to these the demographic and social changes of the 1970s, so that even Democrats could make the sick joke that the party was no longer for high wages and strong unions, but for “acid, amnesty, and abortion”, and what had been a dominant political coalition since the 1930s was no longer one.
Increased International Competition: That put additional pressure on the high-wage, high-benefit economic model of social democracies.
Plus Policy Rigidity and Inflexibility: Social democratic governments often struggled to adapt to these rapidly changing economic and social conditions precisely because their old playbook had been so effective for so long, and so the balance of probabilities seemed to and the balance of political forces definitely did militate in favor of trying to run it again.
All these created great points of weakness.
Recall, even more important, that the ideological shift to neoliberalism in the 1970s was not an accident but a calculated move by a substantial intellectual movement that knew what it wanted. That movement constructed neoliberalism as a hybrid. Half of it was a nostalgic desire to return to the Calvin Coolidge administration. But half of it was focused—or was ostensibly focused—on addressing the real problems that plagued social democracy and the New Deal Order. The campaign for neoliberalism in the 1970s was a strategic adaptation, one that sought to redefine economic and political norms in the late 20th century.
The Claimed Victories of Neoliberalism in the 1980s: Neoliberalism then entrenched itself as the dominant ideology through a series of perceived victories. It claimed success in combating inflation, winning the Cold War, and promoting global trade through the expansion of global value-chain production. It claimed, falsely to drive a substantial increase in wealth. That was a lie. It merely redistributed wealth to the already wealthy. But it turned these claims into triumphalism: that the Neoliberal Order had demonstrated it offered answers to the challenges of the time.
The Absence of a Successor to Neoliberalism in the 2020s: Today, even as neoliberalism has faced growing criticism and disenchantment for a decade and a half, there is no evident successor waiting in the wings. There is no antiparticle to the Milton Friedman particle of the 1970s. Unlike the transition from social democracy to neoliberalism, where the latter was ready to take the helm, we now find ourselves in a vacuum of economic and political ideology. This absence is not just a temporary void but a critical juncture that could define the future trajectory of global economic policy.
The Neofascist Challenge: A Policy Disaster: The rise of neofascist ideologies and leaders as an alternative to the Neoliberal Order, as seen in British BREXIT and the Trump administration, has proven to be a policy disaster. The U.K.’s economic relationships and international standing are at rock bottom. Trump’s trade war with China and his other unpopular policies do little better. And few now feel like they can harness anti-Neoliberal energy and yet come out with a better policy portfolio.
The Potential Persistence of Neoliberalism: Thus right now we appear stuck. Given the lack of a clear ideological successor and the failure of neofascist challenges, neoliberalism may continue to linger. In the 1930s, even as the New Deal Order of social democracy was being built outside of Antonio Gramsci’s dwelling place inside one of Mussolini’s jails, talked of how the old was dying and the new was struggling to be born, and thus that it was a time of monsters. For us, the old is not dying—or, if it is dying, it is definitely shambling around as an undead zombie. And the new is not even struggling to be born: I cannot even see it in any embryo.
Thus we now live in a time of a double helping of monsters.
If I can go horseshoe a moment... I think the rise of fascism on the right is by far the stronger and more dangerous reaction to Neo-liberalism driven upward wealth distribution and other neoliberal failures. But it isn’t the only reaction. There has been a leftest version, espousing a degrowth, defund the police, tankie, self-loathing that I would argue was spawned by the same Neo-liberal failures that gave us Trump and Brexit.
I have trouble understanding the UK's macro #'s. Their real GDP doesn't look that bad, for Europe. But their business investment is bad and their retail sales are awful.