18 January 2011

Glossary: Neoliberalism

In writing Permanent Crisis, it is our intention to carry on a theoretically sophisticated conversation, but at the same time to keep that conversation accessible to anyone with an interest in the issues under discussion. A specialized vocabulary is often essential to the first aim, but can be a real obstacle to the second. So as we proceed, we will attempt to incorporate posts that seek to explain some of the terms we commonly use, which will be linked to in relevant posts. These attempts to define our terms shouldn't be taken as the final word on the subject, of course, and hopefully we can bring out differences of interpretation in the comments.

Neoliberalism commonly refers to a set of free market ideas that became the dominant economic philosophy following the crisis of the 1970s. (The "liberalism" in neoliberalism refers to the classical liberalism of the 19th century founded on the thought of John Locke, Adam Smith, and others who advocated a strictly limited government, an unregulated market, and negative political liberties like freedom of speech. It should not be confused with American left liberalism of the 20th century, which it actually repudiates.) Drawing on 20th century critiques of government intervention in the economy by figures like Friedrich von Hayek and Milton Friedman, neoliberalism counseled an end to the welfare state and government regulation, blaming them for social ills ranging from the breakdown of the family to unemployment. Neoliberalism sees market forces as nearly infallible in achieving optimal outcomes, distributing resources in the most efficient manner and allotting income to those who actually create the wealth.

Government policies pursued under neoliberalism included privatization, deregulation, balanced budgets, floating exchange rates, free trade, and the free movement of capital. Corporate power dramatically increased at the expense of both workers and consumers as labor unions in the advanced market economies (especially the United States) were decimated by offshoring of production, corporate taxes and regulations were slashed, and countries competed to attract production by offering the most favorable terms to corporations. Overall, this resulted in lower growth rates and higher rates of unemployment in the advanced market economies of Europe and North America, as well as in Latin America and Africa, compared with those achieved in the 1950s and 1960s. However, it also facilitated rapid if inequitable economic growth in East Asia (especially China) and increasingly in India as well.

A broader use of the term neoliberalism includes the above features, but extends its meaning to cover an entire way of life. Superficially, the cultural and intellectual trends of the last 40 years may seem to have nothing to do with free market dogma, but some would argue that the two are intimately connected - both produced by a new experience of the world under the changed circumstances that followed the crisis of the 1970s. Everything from postmodernism to the revival of Christian fundamentalism, from game theory to evolutionary biology, from a new kind of consumerism centered on entertainment rather than consumer durables, to new forms of resistance like the Black Bloc - all of these can be understood as products of the neoliberal era. This blog will attempt to explore some of these connections.

It remains an open question whether the current crisis signals the end of neoliberalism. Certainly the political response to the crisis looks a lot like an intensification of neoliberal economic policies - perhaps surprising since it was the contradictions of the neoliberal system that gave rise to the crisis. Yet the major crises of capitalism over the last century have all been marked by a doomed attempt to use the familiar tools even after their efficacy had ended: think of Hoover's response to the Depression, or Nixon's resort to wage and price controls. One of our goals in this blog will be to understand why that should be so, and another will be an examination of the new ways of thinking that must necessarily come out of the crisis.


  1. I think that it is important to remember that neoliberalism was adequate to certain dimensions of society for a period. It successfully responded to the stagflation crisis of the 1970s and to the increasingly intense international competition for market share. (The crisis of Keynesianism and State Capitalism is something that figures like Krugman would rather ignore.) We must explain, as Harvey endeavored to, what about the functioning of capitalism generated this ideology and what made it seem adequate. This crutial period of the 1970s serves as an origins story for neoliberalism, with Reagan being the god-man. It is for this reason, that all economic crises-- even crises with the opposite tendencies like the present threat of deflation and the actual deflation of the Great Depression-- are viewed through the lens of inflation.

  2. This comment has been removed by the author.

  3. One aspect, you neglect to mention, which is important for understanding the political geography of the United States, is the almost complete de-legitimization of the word "socialism" as a positive political category.

  4. What we have to ask is why the word socialism has been delegitimized. Something about the experience of neoliberalism rules out the kinds of sociality that even vulgar kinds of socialism assume, so people find the idea laughable if not pernicious. Where the inquiry should focus is what it is about our social experience under neoliberalism that is producing those underlying ideas, which also lie at the base of a lot of other ideologies and forms of common sense generated by neoliberalism.