Oliver Contreras/Sipa USA via AP Images
President Joe Biden delivers remarks on the economy, January 26, 2023, in Springfield, Virginia.
I had the good fortune to attend a three-day conference last week on what comes after neoliberalism and how to get there politically. The event, convened by the Hewlett Foundation, was titled “New Common Sense.” It included leading economists, strategists, and Biden administration officials. (The Prospect, I should add, is a grateful grantee of Hewlett, which is spending upwards of $100 million to foster a new economic paradigm and a politics to match.)
Let me start with the good news. I’ve been working to defeat market fundamentalism and its political consequences nearly all of my intellectual and political life. I never thought I’d live to see a time when my allies were in charge of the government and the premise of market efficiency had ceased to be conventional wisdom.
The good news is that we’ve just about won the battle of ideas. Reality has been a helpful ally. The core neoliberal claim that the economy would thrive if government just got out of the way has been demolished by the events of the past three decades. Neoliberalism has been a splendid success for the top 1 percent, and an abject failure for everyone else.
It has also been ruinous for the planet. Markets disastrously priced carbon too cheaply, and the globe is overheating as a result. Markets also mispriced securities, leading to the financial collapse of 2008 and its political and economic consequences.
And note that “mispriced” is itself a misleading, anodyne term. This was not just a technical error. Viewing neoliberal fundamentalism in terms of markets as impersonal forces leaves out the political feedback loops.
It wasn’t just impersonal markets that priced carbon wrong. It was politically powerful executives who further enriched themselves by blocking a green transition decades ago when climate risks and self-reinforcing negative externalities were already well known. And it was financial executives who further enriched themselves by creating toxic securities and using political allies in both parties to block salutary regulation.
Despite its handy alliance with free-market economists, neoliberalism is not about impersonal market forces. It’s about power.
And the flip side of elite power is the destruction of jobs, communities, and families. When both parties pretend that nothing is amiss, this creates an opening for ethno-nationalism and neofascism.
All during the era that spanned Carter, Clinton, and Obama, a Democratic Party worthy of the name would have been putting forth a robust form of social democracy as the better alternative to both neoliberalism and neofascism. That it failed to do so is why we have Trumpism. One can tell parallel stories throughout the West.
The hopeful news is that neoliberal ideas about how economies should work are largely in disgrace. And we now have the first post-neoliberal administration in power in Washington.
The Biden administration has explicitly disavowed all aspects of neoliberalism, including the assumptions about free trade and the alleged efficiency of outsourcing, the lack of support for trade unions, and the bipartisan contempt for industrial policy. And despite a working majority of about zero, Biden managed to get through Congress the most expansive technology and industrial policies since World War II. Biden has also used executive power to complement what he could not get legislatively.
Despite its handy alliance with free-market economists, neoliberalism is not about impersonal market forces. It’s about power.
What could possibly go wrong?
One problem is the persistent undertow of bad ideas and residual power. Corporate power to block these innovations is still immense. A few key Democrats in the Senate do the corporate bidding. The Federal Reserve has immense power to pursue neoliberal economics and to destroy the recovery, as it is attempting currently. Neoliberal economists still have substantial influence.
Much of the recent conference was spent exploring the practical problems in making these policies work both as policies and as politics. Carrying out industrial policies is a tangle of details. Many of the fruits of industrial policy will take time to generate jobs. Much of the subsidy comes through tax credits.
When a new factory paying good wages begins hiring workers in a local economy that has long been devastated, will Democrats and the revival of activist government get the political credit? Will those good jobs even materialize, or will industry work to keep the new manufacturing sectors from being unionized and move facilities to right-to-work states? As production becomes ever more automated, will a relatively small number of new good jobs be sufficient to anchor an entire regional recovery, in the way that the industrial Midwest once served entire regions and elected progressive Democrats?
Racial and cultural divisions still threaten a fragile progressive coalition. Can Biden thread the needle, in a politically credibly way, of giving special attention to long-marginalized racial and cultural groups, and still give primary emphasis to unifying class issues?
And given that reshoring and targeted industrial policies will produce only so many new good jobs, where does the leverage come from to drastically raise earnings in the service sector? The support for the caregiving economy was the one part of Biden’s Build Back Better plan that was jettisoned by Congress.
One other challenge is language. Post-neoliberalism is not exactly galvanizing as a call to arms. “Neoliberalism” is the scholarly term for the reversion to the conceits of free-market economics and the broader ideology of rampant capitalism as the organizing principle for all of society. We are looking for principles, policies, and a majority politics for a post-neoliberal order.
But the word “neoliberalism” doesn’t resonate with regular people, much less “post-neoliberalism.” Our adversaries don’t refer to themselves as neoliberals. Also, neoliberalism has more than one meaning, which has to be explained. It confuses the media. Market fundamentalism is better, but it doesn’t carry the full ideological and political meaning of neoliberalism. In order to make the ideas and politics gain traction, we also need better language.
Many at the conference spoke in terms of political “orders.” The New Deal order of de facto American social democracy was anchored in 20 years of Democrats as the governing party (1933 to 1953), delivering tangible benefits and getting the political credit. And Democrats kept control of Congress nearly all of the time right up until 1980—nearly half a century.
So powerful was the appeal of the New Deal order that Dwight Eisenhower, the first Republican president since Herbert Hoover, did not attempt to overthrow it. Not until Reagan in 1981 did we get a president pursuing and entrenching a neoliberal order, which lasted for 40 years until Biden.
But one term is not nearly enough to entrench a new ideological and political order. Many of Biden’s promising policies are still incomplete. If Biden is defeated in 2024, failing to complete the Democrats’ industrial policy agenda will be the least of our problems.
As affirming as it is to be winning the battle of ideas, it will be small comfort unless we can make a big practical difference and win politically.
