the neoliberal corpse

The question of whether or not 'neoliberalism' is currently alive or dead depends, as David Harvey keeps repeating, on what you mean by neoliberalism. I opt for a definition of neoliberalism that is, I guess, somewhat idealist, in the sense that it focuses on rationalities, ideas and ideals, rather than on interests, money and class. But at least that way it becomes easier to distinguish it from 'capitalism' or 'financialisation'.

Put simply, neoliberalism is an attack on the conscious, collective pursuit of economic outcomes. Against unions, cartels, socialists, professions, bureaucrats and traditions, it offers the haphazard and unconscious emergence of prices and entrepreneurial success. Hayek's definition of liberalism was a form of political blindness, which trusted that unplanned outcomes were a priori superior to planned ones. And I think we can now safely say that this aspect of neoliberalism has now died. Ironically, this may involve politicians getting even more intimate with business than they were previously, as the news about Ministerial-corporate 'buddy' arrangements indicated. Take the following examples.

Firstly, today's headline news is that the British Prime Minister has pledged to get energy costs down, via a 'summit' between the government and the energy suppliers. This - seemingly - represents a loss of faith in the price mechanism, as an honest representation of the value of energy. Or rather, it represents a significant departure from the Thatcherite and Blairite assumption that well-designed regulators were sufficient to serve the public interest. What, it would be interesting to know, is the regulator not doing or unable to do, that politicians are now holding 'summits' with company bosses? Are the energy companies to be asked to do something other than maximise return to shareholders? Who is to decide what this 'other' thing is (Hayek would demand to know)?

Secondly, Treasury officials have worked closely with British banks, to persuade them to take a 'haircut' on Greek government debt. Arguably this remains consistent with the precepts of rational choice economics, in that banks are in a prisoner's dilemma situation, of requiring some third party intervention, to help them agree to take a shared loss. But again, the spectre of the planner, seeking conscious coordination of goals and desires, appears here, rendering it entirely at odds  with the Hayekian view of freedom.

And thirdly there is the rise of behavioural and wellbeing economics, both of which abandon the 'revealed preference' theory of consumer choice, which (in true Hayekian spirit) assumed that individuals could never be 'wrong' about their desires or values. In place of this, the 'nudgers' and the 'happiness' gurus work to help individuals take choices that they will later be glad of, and gradually learn to take again in future. This may be simply an expanded form of neo-classical economics, which costs in longer-term outcomes for health, environment and mind; but it nevertheless assumes some vantage point for the policy-maker that is superior to that of the consumer (at least in the short-term). This, too, would represent the 'road to serfdom', for the notoriously paranoid early neoliberals. Minimum alcohol pricing could be the thin end of a wedge, which turns against the trust in markets to deliver goals that nobody could foresee. Once competition authorities start to permit price-fixing for public ends, a crucial line hass been crossed - for Hayek, the only line that matters.

The fact that bankers continue to pay themselves vast bonuses, or that the interests of government bond-holders are prioritised over those of citizens, might signify to many that 'neoliberalism' has never been more dominant. Giovanni Arrighi argues that capitalist powers experience a belle epoque of finance-driven prosperity, in the twilight decades of their global dominance, which is how the US experienced a splurge of growth from the late 1980s onwards. In a sense we're now witnessing the belle epoque of the belle epoque: particular interests squeezing whatever is left from a system that is effectively finished, including governments. Like a fractious family descending on the possessions of a deceased relative, this situation brings the various parties together face-to-face, to an extent that was never necessary previously.

The representation of neoliberalism as a corporate-government stitch-up (as Colin Crouch's new book seems to propose) makes considerable sense, but it's important to specify what sort of stitch-up. It wasn't a stitch-up of realpolitik or fraternity (save for the sort of Texan mercantilism that George W Bush brought to Washington, with very poor economic consequences), but a stitch-up focused on rules and regulations. It privileged market conditions, prices, competition, not favours or back-scratching; at the very least, it purported to do so. The new wave of summits, meetings and buddy-systems that has emerged, to coordinate corporate, financial and government interests, indicates that we are currently operating without any governing economic policy paradigm at all. In that sense, neoliberalism is over.

Comments

[Michael]

Interesting and timely post, thank you.
On R4 Today prog yesterday, as you say above, the PM was "vowing" to get energy costs reduced. At 6pm news the message from him was "shop around".

So at one level, one could say, so much for the "summit". But it seems clear that energy and its cost is a complex challenge for the government, and (as you seem to be arguing), especially interesting because of how it highlights the Conservative psychological conflict about whether they ultimately want less or more regulation, freer or more constained markets etc.

[IanC]

An excellent post, and thanks also for the Economics of Unhappiness paper, with which I agree completely.

The corporatism of the Long 1980s (1980-ad nauseam) reflects the political limits to pure neoliberalism. This sees public goods and collective needs either as something that are handled by blind individual transactions en masse, or as regrettable necessities to be dealt with by the minimalist state. Actually existing neoliberals in the West have to live with the need to get elected by voters with considerable interests in the legacy of the social democratic state. The way to do this is to try to 'marketise' as much of that state as you can, and then you have no option but to enter into endless stitch-ups and market-bending policies to deal with the unwelcome political consequences of capitalists doing what comes naturally.

The current situation seems to reflect the enormous political and psychological strain for policymakers committed to a neoliberal worldview and yet unable to deny the evidence of its immensely damaging contradictions. They have no will or vocabulary to work out an alternative worldview and strategy, but can't make the old ones work. Gramsci quotations come to mind.

[Dick Pountain]

Will - it seems to me inevitable that your definition of neo-liberalism must be "somewhat idealist" because the phenomenon itself is an idealist illusion - namely the idea of "the market" which deploys forces acting on the real world. In reality a market is nothing but the vector sum of a colossal number of individual material transactions (probably not computable even in theory). The illusion of a market rationality is essential to its working - as Soros describes in his book - and is hence vulnerable to catastrophic bouts of mass psychosis.

[Jason Treit]

Politics in living practice is such that you should always be surrounded by evidence that a worldview is dead, dying, or on the wane. Who dares touch the minimum wage? When last did regulators or public planners fall in number or kind? Wasn't it Reagan who pushed export quotas on Japanese automakers? And taxed and spent through much of the '80s?

That you see much space between nudgers and Hayekians, though, tells me something about what impact neoliberalism continues to have on the range of viable worldviews.

[Will Davies]

Dick - yes, very good point. The pioneers and early practitioners were constructivists and idealists, so some sort of deconstructivist perspective becomes critically essential.

Jason - I don't quite understand your first paragraph. As for your point about nudgers, I do think that there is a key distinction here, which may not immediately generate a new policy paradigm, but represents a significant departure from the dogmatic value relativism of Hayek and the Chicago School. Though I can also see other ways in which behavioural economics is an effort to rescue the authority of consumer choice.

[Jason Treit]

Sorry, my first point was to stress how contingent any worldview's influence is on politics, whose currents pull in many directions at once. Most agree neoliberalism thrived in the '80s – or had a pulse, at least – yet it would've fared as miserably then as now in a battery of contradiction tests.