Imagining the Twenty-First Century: A Glance Back at the Expectations of the Neoliberal Heyday

In recent years I have devoted more attention to the subject of neoliberalism--defining the concept, examining its practical enactment (particularly in the U.S. and Britain), and considering the resulting economic record from such standpoints as world and national economic growth, and industrialization.

By and large what we see in the world today is profound disappointment in the idea and its application--sufficiently so that any candidate standing for election publicly owns to neoliberal sympathies and intentions at their peril, with the right turning more nationalist, and the center-left taking the other approach of denying it has ever had anything to do with such (even as both right and center-left overwhelmingly remain adherents of neoliberal practice).

In the course of considering the policy record, and the track record with respect to economic growth, I find myself reminded time and again that the late 1990s were the moment when, at least in the Western world and especially in the English-speaking world, neoliberals were most confident in their promises actually coming true, and the societal mainstream most ready to believe them, amid a period of economic boom that at least appeared to be based on a surge of technological innovation consumers experienced in their own lives supposed to be some wonderful new normal.

There were, of course, different ways of thinking about these matters, not all of them totally unfounded. Consider, for instance, the theory of Kondratiev waves, or K- waves for short, which posit a 40 to 60 year cycle of upswing and downswing in the world economy. K-wave theorists commonly see a K-wave beginning some time in the 1940s, with the economy booming for a generation, and clearly slowing down no later than the early 1970s. Afterward, in line with the theory, was a long period of slow growth, quite in evidence amid worldwide recession in the early 1990s, as much of the Third World struggled with post-debt crisis austerity, Japan slipped into a "lost decade," the "reform" of the Soviet bloc actually produced the collapse of the Soviet bloc, and deindustrialization and stagnation characterized the Western performance. With growth proceeding at a faster clip in the later part of the decade, it seemed quite plausible that the downswing was over, that the upswing due by then had arrived. If one took 1995, say, as the start of the next wave, and the next half decade as representative of it, then an adherent of the theory had grounds for expecting twenty to thirty years of rapid growth, boom times continuing, maybe even getting better still, until 2015, 2020, 2025 even.

All this may have seemed more plausible because this was (more or less) what happened in the prior, post-war World War II boom--the 4 percent a year growth clocked in the latter half of the '90s the norm through the '50s and '60s and early '70s. To give one example of what this would have been like, had the U.S. sustained its late '90s-era GDP growth, the country's GDP would be in the vicinity of $33 trillion, or $100,000 per capita (in today's dollars) circa 2020.

Moreover, there was some expectation of fairly wide sharing of such gains with little need for public intervention, not least via the personal asset portfolios that many middle-class people were quitting perfectly good day jobs to manage full-time. Representative of the sensibility was the cover of the July 5, 1999 issue of Newsweek, which featured an old-fashioned comic strip-style drawing of a man with a distressed facial expression alarmed that "Everyone's getting rich but me!"--a thought the cover patronizingly blew off as "the Whine of '99." Inside the magazine Adam Bryant's tauntingly titled article "They're Rich (And You're Not)" proceeded to, at greater length, continue taunting the unfortunates among its readership suffering from what it assured them was the "reality" of "everyone else getting rich."

Of course, contrary to what the idiots who published this mean-spirited garbage would have had their credulous readers believe, the reality was that not everyone was getting rich. Very, very far from it. Still, while the '70s and '80s and early '90s were not great for working people, and even the late '90s were rather less good to them than they were to billionaires, that period saw workers, going by official U.S. Census data on median income, at least, recover the ground they lost in the recessions of those earlier eras. Assuming the growth continued it was quite plausible they would have seen the first real increases in personal income since the end of the post-war boom a generation earlier. And if the gains of the '90s were far from equally distributed round the world, it seemed plausible that other parts of the planet would enjoy similarly accelerated gains, with other industrialized nations following America's lead, and developing nations similarly striving to catch up.

Meanwhile there were those who saw the prospects as even brighter than that, on the basis of the technological possibilities at hand being more fundamentally epochal. Here it seems worth revisiting the prognostications of Ray Kurzweil. In 1999, at the boom's height, he published his book The Age of Spiritual Machines, one chapter in which presents a long list of rather precise technological forecasts, a major theme of which was bullishness about the progress being made with neural networks and the pattern-recognition software based on them, and the pace of improvement in computer hardware, particularly 3-D computer chips. The result was to be a much more rapid advance in areas like artificial intelligence, and new processes and products like virtual reality and (substantially) self-driving cars, with commensurately dazzling macroeconomic consequences--starting with "the ten years leading up to 2009" being a period of "continuous economic expansion and prosperity," the more amazing for its going hand in hand with price deflation as the cost of making things fell. (In contrast with the stagflation of the '70s, this bizarre, unprecedented combination of boom times and falling prices would be, for most, a rather happy perfect opposite.) And things would only go onward and upward from there as technological progress accelerated on the way to a "technological Singularity" that before century's end rendered our old frame of reference meaningless.

It may seem that this outcome would not have been a wholly positive vision. For example, a world where countries have a GDP two-thirds or more higher may seem daunting to the ecologically conscious. However, the increased productivity would, arguably, have not only seen the substitution of "information" for labor, but information replacing natural resource consumption as well. Indeed, many of the technologies Kurzweil specifically discussed, like carbon nanotubes and self-driving cars, could have been powerful contributors to a more sustainable world economy, while higher incomes would have meant more scope for action to save the environment, whether one thinks in terms of the research and development of new energy technologies, or even public action on the more urgent problems as the swift growth translated to budget surpluses and falling debt-to-GDP ratios without painful budget cuts or tax rises. It even seems far from inconceivable that all of this could have translated to a more tolerant society, with social stresses assuaged by an experience of plenty. (It is certainly worth remembering that the civil rights movement won its victories in the boom years of the '60s, that what the right derides as "political correctness" had its heyday in the boom years of the '90s.)

Of course, things did not go as the optimists seem to have hoped. Looking at Kurzweil especially it seems worth noting that much of the technological advance he predicted for 2009 remained unachieved not only in 2009 but in 2019--at which point , and the things Kurzweil talked about once again deferred indefinitely into the future (the neural nets and 3-D chips and virtual reality and self-driving cars and the rest). Indeed, analysts increasingly conceded that the burst of productivity growth improvement evident in the late '90s petered out after a few years, without ever matching the swift gains of the Fordism-dominated mid-century period, and gave way to even slower growth than before.

One can hardly picture much economic growth in a period of feeble technological progress, and indeed, the results that way were all too predictable. The tech boom proved tech bubble mere months after the paperback edition of Kurzweil's book hit the stores, amid an exposure of corporate fraud and accounting scandals, Wall Street's great bull run (1982-2000) clearly over. Price deflation? Quite the contrary, rising energy prices translated to a renewal of inflation, severe enough to cause food riots in the Third World well before oil hit a $150 a barrel. And those surging prices were broken only by another, bigger, financial crisis, the worst since the '30s--from which it seems safe to say, neoliberalism, globalization and the prevailing political culture did not recover, stagnation, unemployment, anger only worsening on the way to the next, still worse, "worst since the '30s" in 2020. Indeed, by the latter date U.S. GDP was about forty percent lower than it would have been had tech boom-style growth continued for those two first decades of the century. (Taken as a drop from where the country would have been in the alternative scenario, a distance in output equivalent to the fall between 1929 and the Depression's rock bottom in 1932.)

Meanwhile the slight gains were concentrated at the top, and the costs went the opposite way, swelling the largest fortunes to heights of which the Gilded Age robber barons could only have dreamed as far, far more people saw themselves fall further and further behind, not least because the public sector was so badly squeezed. Instead of budget surpluses and a falling Federal debt-to-GDP ratio such as might have been hoped for, what the era saw instead was trillion-dollar deficits, and a doubling of the debt-to-GDP ratio, taking it back up to World War II-era levels. The ecological stress we have experienced and its resulting anxiety hardly need enlargement here--while the same goes for the decay of such gains in civility and tolerance as the past two generations had seen.

In short, the neoliberal utopia we were promised was an illusion--in which, it must be admitted, many never believed. To the left, the genuine, economics-minded left, at least, what happened instead was not really a surprise--simply confirmation of what they had been arguing all along. Even many old-style liberals, unconvinced by the neoliberal arguments, and quick to point to its failures from the very beginning, could not be surprised. At the same time the nationalist right was never on board, either, and likewise unsurprised. It might be added that the broader public was, at the very least, less persuaded by the talk than the more genuinely privileged groups. But of course what was mainstream did not include very much input from them, the media, for example, seeming to speak here with only one voice, so long and so loud, and so little perturbed by the lie being given to their promises that they just went on and on with the same line. Naturally the illusions lingered for a long, long while, and looking about even today it seems it has not totally gone away (the way things are these days, wherever one sees techno-hype, there they are apt to find the essentials), the consequences enduring.