The Failures of Neoliberalism

When confronted with failure, there’s a familiar retort that emanates from both extremes of the political spectrum: their prescriptions simply “haven’t been tried.” There were some complicating factors which scuttled the whole thing, or the prescribed measures weren’t enacted in full, or they weren’t given enough time to work. Therefore, it would be unfair to appraise the political project in question.

One iteration of this defense was the attempt to absolve actually-existing Communism of its sins; apprised of the litany of neoliberal failures, the right’s remonstrations are taking on a similar form. Just as the objective preconditions weren’t satisfied in the case of Soviet Communism, government retrenchment hasn’t been severe enough for neoliberal purists. If we just cut more and imposed more austerity, growth would take off, and all would prosper.

The argument of inchoateness could be true, of course. It’s possible that the regulations and social programs and institutions we’ve established merely distort the market and prevent us from living in a better world: Unions don’t really enhance the pay, dignity, autonomy, and bargaining power of workers. In actuality, they help union members and hurt everyone everyone else. They put the breaks on that ineffable vehicle of prosperity, the free market. Once these impediments are swept away and untrammeled neoliberalism is triumphant, all will be right with the world. This is all very possible, if highly implausible.

You see, partisans of any dominant ideology must marshal facts and figures in order to be taken seriously, they must defend their track record. For supporters of the reigning economic regime, neoliberalism has bequeathed cheaper consumer goods and low inflation, enhancing the lives of millions of Americans. In their telling, areas characterized by “government monopolies” and stifling regulation suffer from inefficiency and poor quality. The public education system, for instance, needs to be injected with competition; charter schools and vouchers are the preferred agents. Then things would be dandy.

Given the neoliberal project’s record of success, it’s stunning that millions of people still believe this drivel. If we were headed toward neoliberal utopia when the crisis struck, you’d think the last 30 years wouldn’t have sucked for most American workers, that, at the very least, their wages would have seen a healthy jump. Put another way: Neoliberals could justifiably say we should “stay the course” if, pre-recession, their policies were (arguably) improving the lot of the 99 percent. But they weren’t. Not even close.

The numbers, from the latest installment of The State of Working America: “Had there been no growth in income disparities since 1979, annual income for a middle-income household would have been $88,875 in 2007, $18,897 higher than the $69,978 it actually was. The median household lost wealth between 1983 and 2010 and had just $57,000 in net worth in 2010, rather than the $119,000 it would have had if wealth had grown equally across all households over this period.” Consumer debt proliferated in its stead, and inequality hypertrophied. After considerable progress toward eradicating poverty, rates plateaued. Unionization became scarce.

These are the conditions neoliberals have to explain, or explain away. For all its deficiencies, the postwar economic regime which neoliberalism replaced could at least boast about increased job and consumer protections, declining poverty, and rising median wages.

Yet the postwar paradigm faced its own crisis of sorts in the 1970s. Stagflation raged and labor unrest pervaded and profit margins dropped—solutions needed to be offered, choices made. Essentially, there were three options: tinker around the edges and hope the system would stabilize; move in an anti-capitalist direction, beyond welfare-state capitalism and Keynesianism; or unshackle the restraints placed on capital.

For those partial to the first choice, a drastic shift wasn’t justified by the crisis’s degree of severity. Paul Krugman, the most prominent contemporary Keynesian, has written, “the troubles of the 70s were real, but they are an awfully thin basis for an ideological revolution. For one thing, external factors — two big oil shocks — played a major role. (That’s a contrast with our current crisis, which was entirely self-inflicted.) For another, a lot of the problem was monetary policy: if the Fed had acted more responsibly, there would have been a lot less inflation.”

Krugman is right, to an extent. As measured against the current recession, which has self-evidently necessitated a full-scale economic re-examination, stagflation was, in retrospect, a moderate hurdle. Profits were dropping, however, signaling the capitalist economy was fundamentally imperiled. Leftists recognized this and accepted that the postwar consensus faced an existential crisis. To them, the contradictions of the system itself had finally been exposed. The supposed transcendence of labor-capital conflict was revealed for what it was: a farce. Bell’s The End of Ideology had been debunked, and the smartest minds inhabiting the left produced compelling alternatives to fill the void.

The most powerful economic actors viewed the issue as systemic as well. Their solution? Neoliberalism. As David Harvey documents in his masterful A Brief History of Neoliberalism, the New York City fiscal crisis of the mid-70s presaged a larger shift in the nation’s political economy. Shortly thereafter, Federal Reserve President Paul Volcker unscrupulously stanched the flow of inflation, Ronald Reagan broke the PATCO strike, and policymakers abandoned full employment as a central policy objective. Wages stagnated, fringe benefits eroded, and, with the looming threat of outsourcing or unemployment, workers were dragooned into submission.

This is what neoliberalism has wrought: insecurity, precarity, powerlessness. It must be judged on what it has produced, however piecemeal its implementation. Only in authoritarian and totalitarian countries can a cadre of committed ideologues establish and enact an ideological program in its totality. In liberal democracies, you have to work through the political process in order to alter socioeconomic arrangements on a large scale. Neoliberals haven’t gotten their way on everything—the social welfare state has only been partially dismantled—but they’ve had an immeasurable impact on public discourse and public policy. Market ideology is pervasive, and neoliberals control both political parties. The ideology’s earnest purveyors, self-assured and armed with glossy platitudes, will continue to abound inside and outside academia.

It’s only fair that the citizenry examine the real-world outcomes of neoliberal policies, lofty promises be damned.

UPDATE: This is now posted on the front page, where it’s attracting considerably more comments.