Why Neoliberalism?

In understanding neoliberalism it is not merely helpful but essential to remember what came before. Looking at what I call "Keynesian Fordism" makes it easier to see the distinct features of both models of capitalism in a way instantly debunking the quite stupid centrist dismissals of the salience of neoliberalism as a concept. Equally looking at Keynesian Fordism--not the myth of the era, but its actual history--makes it easier to understand why neoliberalism developed as it has. Simply put, rather than Keynesian Fordism representing some sort of new social contract, it was really a matter of elites, under the extreme duress of the Depression, world war and Cold War, making strategic concessions that they did not care to bear any longer than was absolutely unavoidable--as seen in how the avowed right never ceased to openly oppose such concessions, and business and other associated interests continued to lavish the theoreticians, propaganda machinery and politicians opposed to these changes, in the name of what we would later call neoliberalism, with material support. It may seem that the opponents of Keynesian Fordism's compromises were slow in becoming effectual, the more in as they never came close to building really wide popular support for their ideas. (Thus did the Republican Party in 1964 lose by a landslide when it ran the rightist Barry Goldwater for President.) Still, they were always a force on the scene, and their opposition played its part in keeping the social reforms associated with that model to the minimum (not Keynesianism per se but a "bastardized" version is what people got, with government preferring warfare states to welfare states, as tellingly the U.S. never came close to such basics of the concept as tuition-free college or universal health care)--not least, by giving the centrists who were never really all that eager for it an excuse to not do more. (If commonly called "liberal," or even "left," the centrists were fundamentally conservative, but simply the sort of pragmatic conservative who knows that sometimes a sympathetic face and a strategic compromise can be a more effectual way of upholding the status quo than brazen intransigence.) Thus did New Deal reform all but grind to a halt in 1937, and reform of that kind not really, properly, return to the agenda for a generation after that, with Lyndon Johnson's the Great Society--which in various ways had its wings clipped by the material demands of the Vietnam War. (It was not a War on Poverty but the Cold War that the right wanted to fight, and they were successful in keeping the government's resources committed to that.)

All of this was even as business frankly did quite well out of the model in these decades, in spite of the concessions profits running higher than they would later amid a historic post-war boom that, however little they care to admit it, they owed to the very concessions they made. Still, that boom eventually waned, no later than the late 1960s, because of the model's inherent limitations. (That boom represented a happy but far from totally planned convergence of the Fordist productivity revolution, colossal U.S. government wartime investment, and the way that Cold War spending by way of a "military-industrial complex" that stimulated the "automotive-industrial complex" let the U.S. act as a locomotive for a badly mauled but not beyond recovery world economy on terms business was prepared to live with. However, that productivity revolution eventually ran into diminishing returns, the old investments aged without replacement, the Cold War spending was unsustainable, all as the world economy grew in size beyond what the U.S. could drive forward in the old way, and both the complications entailed by a more integrated world economy and the resource profligacy of the model told.) And by the 1970s elites were facing a situation of both economic and political crisis, with business and especially finance in a situation of "stagflation" facing falling profits and government facing deficits, all as unions resisted attempts to push the cost of dealing with the situation onto their workers. At the same time leftist movements at home demanded change, and internationally the developing world's "Group of Seventy-Seven" demanded a "New International Economic Order" that would enable the developing countries to industrialize, as the commodity producers among them demonstrated their potential power in the oil market. In the circumstances business was rather less willing to endure the old concessions, let alone make new ones, while even the compromise-minded centrists, looking at how the state had grown, at the fiscal deficits, at the poorer groups they were increasingly of a mind to denounce as "special interests" now, were increasingly inclined to think they had made too many concessions already (certainly it was so with America's "Neo-Liberals"), and so rather than compromising with a New New Deal they opted for a counter-offensive, central to which were those reforms we speak of as neoliberal. Thus did central bankers and presidents decide that the unions had to be broken, with spiking interest rates and new laws and the battles against American air traffic controllers and British miners, as the "Group of Seven" came together to fight back against the Group of Seventy-Seven, with the International Monetary Fund and the World Bank famously playing their part, among much, much else. These actions were not popular, they did not live up to the false promise that they would rescue the faltering manufacturing bases of deindustrializing North America and Western Europe, but amid financialization and globalization they did restore business profitability, and more broadly beat back the political challenge to the status quo, in the process defining the economic history, and thus the history, of our era.