What "neoliberalism" isn't

The first in a series

Matt Yglesias’s recent series on “neoliberalism and its enemies” is well worth reading. It deconstructs the popular narrative that our economic and social problems are downstream from the “neoliberal era” of the 1980s-2010s, when an ideology of deregulation, market fundamentalism and government austerity is said to have gripped the US and global policy elite.

Yglesias doesn’t deny that the “neoliberal era” occurred but challenges the notion that it was both all-bad and all-pervasive. After all, regulations and social spending have increased more or less monotonically in the nearly three decades since Bill Clinton declared that the “era of big government is over.” Reagan himself ran large budget deficits, fought a trade war with Japan, and promoted industrial policies for defense tech and semiconductors. The most consequential “deregulations” of the past half century pertained to utility-style price regulations on airlines and trucking, which were lifted by Jimmy Carter in the late 1970s. Today, meanwhile, cities nationwide are grappling with housing crises whose proximate cause is too little “neoliberalism,” at least when it comes to zoning and land-use deregulation.

With international trade, Yglesias argues that the critics of neoliberalism try to prove too much from the sui generis case of China. Trade really does make America and the world richer, but rapidly liberalizing trade with China came with steep adjustment costs, and clearly failed to make them liberalize politically. So we should learn from the China Shock, but not over-learn: Europe and America’s dependence on China for critical goods and technologies is primarily a national security issue, not an indictment of the classical case for trade per se. On the contrary, diversifying away from Chinese supply chains will require deepening trade with most everyone else.

The “neoliberal era” nevertheless had lasting effects on the political clout of economists, but this wasn’t necessarily bad thing. Economists reason with models and think seriously about trade-offs. There may be many “free market” economists, but economics provides a rich toolkit for diagnosing and responding to market failures and distributional issues as well. As Yglesias writes,

Nobody is 100 percent sure what anybody means by “neoliberalism,” or whether we’re all using it the same way. But the backlash against neoliberalism has, I think, mostly served in practice as a way to tell people that it’s okay to do sloppy economic analysis or say things that aren’t true.

I couldn’t agree more. The large foundations funding the current crop of neoliberal critics have thrown the baby out with the bathwater. The result has been the elevation of dangerously stupid ideas like “Neo-Brandeisianism,” “greedflation” and MMT, when the cases for reinvigorated antitrust and fiscal policies were already readily articulable through mainstream economic frameworks. The difference is that actually writing down a model makes the trade-offs involved explicit.

But maybe avoiding being explicit is the point. As Joseph Heath notes, academic critical studies has a long history of using the term “neoliberal” in a crypto-normative fashion, i.e. as a seemingly descriptive term that smuggles-in unstated normative commitments:

A long time ago, Habermas wrote a critical essay on Foucault, in which he accused him of “cryptonormativism.” The accusation was that, although Foucault’s work was clearly animated by a set of moral concerns, he refused to state clearly what his moral commitments were, and instead just used normatively loaded vocabulary, like “power,” or “regime,” as rhetorical devices, to induce the reader to share his normative assessments, while officially denying that he was doing any such thing. The problem, in other words, is that Foucault was smuggling in his values, while pretending he didn’t have any. A genuinely critical theory, Habermas argued, has no need for this subterfuge, it should introduce its normative principles explicitly, and provide a rational defence of them.

Crypto-normative terms like “neoliberal,” “neocolonial,” and “stigmatization” thus set genuine critical theory back by allowing the theorist to substitute rational analysis with rhetorical bludgeons. Without an explicit articulation of one’s normative commitments, such terms can end up being deployed to critique diametrically opposed policies. For example,

[I]s a move toward means-testing in a government social program “neoliberal” or not? Some authors think it is, some think it isn’t. No one ever explains their reasoning. It seems to be determined just by gut response – whether the person sees means-testing as way of denying benefits to some, or as a way of making the program more progressive and thus reducing inequality. In any case, the mere fact that applying for the benefit involves filling out a form is likely to lead the critical studies practitioner to denounce it for being committed to the (re)production of docile bodies, in order to advance the normalizing agenda of the neocolonial state, or something like that.

Neoliberalism true and false

Alas, with all the being said, I still don’t consider myself a “neoliberal,” and think there is a genuine critique of neoliberalism to be had. The appropriation of the term as a left-wing pejorative has simply obfuscated the nature of neoliberalism and what makes it so problematic. As a result, the average leftist has a vague, Hasan Piker-level understanding of “neoliberalism” as something invented by Reagan, Thatcher, and the Chicago Boys, when this at best captures only half the story.

As I see it, the true history of “neoliberalism” is about the fundamental restructuring of the political economy of Western democracies in the mid-to-late 20th century, when the “embedded liberalism” of the 19th and early 20th century gave way to a “disembedded” form of liberalism decoupled from democratic institutions. It’s a story that implicates conservative and progressives reformers alike, but to see what I mean, I need to first unpack the difference between neoliberalism and liberalism in the standard philosophical sense — the focus of Part II.