Defining Neoliberalism

The recent pseudo-debate over whether "neoliberalism" is a meaningful concept in economics and politics, especially in relation to center-left political parties like the Democratic Party of Bill and Hillary Clinton and Barack Obama, or the "New" Labour Party of Tony Blair, has been every bit as cynically manufactured as the debates over whether or not tobacco is a carcinogen, or whether the climate is changing and the change is due to human action, with the mainstream media displaying every bit of the same ignorance, incompetence, venality and cowardice in facilitating it that it has in those other situations.

Still, I must admit that in considering the claims, and answering them, I had to study the issue more closely than before, examining anew the specifics of the policy record, while working out as rigorous a definition of neoliberalism as possible. It seems to me that

Neoliberalism can be defined as a political reaction against the shift of society away from its approximation of the "classic liberal" (libertarian) model in the nineteenth century, and the associated growth of the state since that time. Liberalism’s response to that trend of state growth is most commonly identified with a variety of specific prescriptions including but not limited to fiscal austerity, deregulation, privatization, deunionization and free trade, especially as ways of redressing the compromises of earlier liberalism on behalf of maximizing industrial development, macroeconomic stability, employment, social welfare and equity. Increasingly important as a political project from the 1970s on, it is particularly identified with the policies of Margaret Thatcher in Britain and Ronald Reagan in the U.S., and associated with an economy which is not simply a more liberalized version of what came before, but unprecedentedly financialized and globally integrated.

A longer, more comprehensive and, I hope, clearer, explanation reads as follows:

Neoliberalism refers to a body of political economic theory; its associated thinkers, political movement and policies; and their application and consequences in actual life. It is, above all, a reaction against the shift of society away from what neoliberals see as its natural and optimal centering on individual, private exchange under a minimalist "night watchman" state devoted to the defense of private property, which neoliberals regard as having been best approximated in the nineteenth century West; in favor of a large and highly interventionist state devoted in particular to industrial development, social welfare and macroeconomic stewardship (in particular the combination of full employment-generating economic growth with low inflation), and disposing of as much as half the national Gross Domestic Product in the process.

While clearly underway with the emergence of the Austrian School of economics in the early twentieth century, this movement came to encompass a loose collection of schools of economic thought broadly sympathetic to this agenda (monetarism, public choice, etc.), and increasingly consolidated into a recognizable intellectual and political movement in the post-World War II period (an important moment in which was the 1947 founding of the Mont Pelerin Society). In developing their theoretical arguments, and promoting their ideas among intellectuals and the general public, neoliberals developed a particular package of prescriptions for dismantling the offending apparatus of the industrial-welfare-macroeconomic state, and recreating, at a higher level, the desired economic order, stressing but not necessarily limited to

Government tax and spending cuts, more stringent and often explicitly legislated fiscal discipline, and "austerity."

A related shift away from progressive taxation, social spending and redistribution of income.

The deregulation of business activity, and particularly the elimination of regulation which imposed costs or limitations on business, as with regulation to protect workers, consumers and the environment; and legislation limiting forms of financial activity which could be disruptive to the larger economy, as with financial speculation.

The privatization of state assets and functions in ways ranging from outright sell-off, to outsourcing, to the shutdown of programs leaving activity to the private sector, with individuals buying the desired good as consumers or not at all.

A deemphasis of full employment as a public goal, especially of fiscal and monetary policy.

The withdrawal of state protection, and even tolerance, for organized labor.

The reduction or elimination of controls on the international flow of goods, capital and investment.

A significant force in practical policymaking by the 1970s, these theories were significantly applied in the critical early "laboratory" of Chile under the dictatorship of President Augusto Pinochet (1973-1990), with the industrialized, Western, world seeing Britain and the United States lead the way, a development most closely identified with the Prime Ministership of Margaret Thatcher (1979-1990) and the Presidency of Ronald Reagan, respectively (1981-1989).

In considering the application of these ideas it is essential to acknowledge that their interaction with a dynamic economic reality has produced a distinctly different economic model from what came before, emphasizing the resourcing and incentivizing of investors over the other goods previously pursued, and their operation in a different manner than was previously the case. Usefully termed "Neoliberal Financialization," it sees an "unleashed" financial sector emphasizing the speculative buying and selling of assets across the worldwide field of activity not only created by the ever-more developed free trade regime, but intensified by loose monetary policy, and the substantially digital technologies enabling whole new productive practices (like "labor cost arbitrage"), and turbo-charged speculation (like the electronic trading of stocks and currencies). Putting it another way, "globalization," "creditism," "digitalism" are all key parts of the package (in contrast with the prior national orientations, gold standard-backed dollar, employment-oriented monetary policy, and treatment of Fordist production methods and goods as the cutting edge of the system).

Key elements of this package were not only unanticipated by the neoliberal vision, but in conflict with it (loose monetary policy and government's "picking winners" with its support for the financial sector contradict the classical liberal principles neoliberals profess). However, proponents of neoliberal thinking, which is today the orthodoxy of academic teaching of economics and predominant in mainstream comment and policy, generally embrace and defend this model in its essentials.

I admit that the second, longer version of the definition is less punchy than the first. But I think that facing it the political hacks who pretend neoliberalism is "not a thing" would have a much harder time playing their inane word games.