The last gasp of (US) neoliberalism

The defeat of the “trade promotion authority” bill in the US Senate marks a big setback for Obama’s attempts to push the (still secret) Trans-Pacific Partnership agreement through Congress. As always, there’s plenty of manoeuvring to come, and the deal may still get up, but even so, it looks like the last gasp for the neoliberalism, in the US sense of the term.

In global terms, neoliberalism, epitomized by Thatcher in the UK, is an appropriation by conservative/reactionary parties of the economic component of classical liberalism, but without any of the associated concerns with personal freedom, except as this coincides with the desires of conservatives and reactionaries to maintain a social order where they can do as they have always done.

By contrast, US neoliberalism is a development from within US liberalism, closer to Blair’s Third Way than to Thatcher. In general, neoliberalism maintained and even extended “social liberalism”, in the US sense of support for equal marriage, reproductive choice and so on. In economic terms, its central claim was that the goals of the New Deal, central to Democratic Party politics, could best be pursued through market-friendly policies that would earn the support of the financial sector (the only major business sector that was prepared to back Democrats, or at least to bankroll suitable candidates from either party). Apart from subservience to Wall Street, the signature issues for US neoliberals were free trade, cuts in “entitlement” spending, and school reform[^1]. In terms of political strategy, the big idea was a ‘grand bargain’, in which Republicans would accept minimal increases in taxation in return for the abandonment of most of the Democratic program.

The Clinton administration was explicitly neoliberal in all respects. Bush ran on a platform of “compassionate conservatism” designed to appropriate the appeal of neoliberalism, and was never really able to break with it. And, while Obama’s 2008 election campaign was masterfully ambiguous, his first Administration neoliberal through and through, dominated by Wall Streeters like Paulson, Geithner[^2] and Summers, and by neoliberal operators like Emanuel[^3] and Duncan. And the same would clearly have been true if Hillary Clinton had been elected.

But developments since then, including the global financial crisis, the failure of school reform[^4] and increasing awareness of entrenched inequality have destroyed the appeal of neoliberalism. It’s obvious by now that the neoliberal policy agenda belongs to the political right, and the backers of that agenda (for example, Wall Street and education reformers like Michelle Rhee) have recognised that fact as clearly as anyone.

The result has been a significant shift to the left in the second Obama Administration, reflected in more populist rhetoric, the abandonment of the search for bipartisanship and in some substantive policy shifts, for example on minimum wages. The big exceptions are issues like the TPP and the security state, where Obama was captured by the permanent government almost from day 1, and has never shifted.

Hillary Clinton is making similar adjustments, realizing that a purely cultural claim to affinity with working class whites, combined with an actual alliance with Wall Street, is no longer going to cut it electorally or within the Democratic Party. She’s maintained silence on the TPP so far, but I predict that, when she can no longer avoid the issue, she will be forced to come out against it.

What does this mean for the future of the Democratic Party? I’ll leave that up to readers for the moment.

[^1]: I’ve decided not to bother with scare quotes around “reform”. The word has been successfully appropriated by neoliberals, both in the US and global senses.
[^2]: Geithner didn’t work on Wall Street until after his Treasury stint. But the NY Fed is pretty much a subsidiary.
[^3]: I’ve read that Emanuel was the model for Josh Lyman in The West Wing, the fictional apotheosis of neoliberalism.
[^4]: Reliably metronomic centrist Nick Kristof said a while back that, while he still supported school reform, the topic was now so politically toxic that he would focus instead on early childhood interventions where there is enough actual evidence of benefit to garner some broadbased support.

28 thoughts on “The last gasp of (US) neoliberalism

  1. Pr Q said:

    In global terms, neoliberalism, epitomized by Thatcher in the UK, is an appropriation by conservative/reactionary parties of the economic component of classical liberalism, but without any of the associated concerns with personal freedom, except as this coincides with the desires of conservatives and reactionaries to maintain a social order where they can do as they have always done.

    Mrs Thatcher was the target of an assasination attempt by a terrorist group that specialised in blowing up pubs, horses and Tories during the 1980s. Post-scripted with a charming note, oozing menace:

    Today we were unlucky, but remember we only have to be lucky once. You will have to be lucky always.


    She can perhaps be excused for not being a knee-jerk, bleeding heart liberal on the subject of civil liberties.

  2. Pr Q said:

    Obama’s…first Administration neoliberal through and through, dominated by Wall Streeters like Paulson, Geithner and Summers, and by neoliberal operators like Emanuel] and Duncan.


    I don’t want to sound too pickyt, but… Although the first Obama admin was crawling with Wall Street insiders, the financial sector did not get all it wanted. Any sdministration that pushed the Dodd-Frank Wall Street Reform and Consumer Protection Act (with a codicil from the Volcker Rule) and appointed Elizabeth Warren to head the agency is not really “neo-liberal through and through”.

    Wall Street was turning on Obama well before he went for re-election. The WaPo (FEB 2010) reported:

    Commercial banks and high-flying investment firms have shifted their political contributions toward Republicans in recent months amid harsh rhetoric from Democrats about fat bank profits, generous bonuses and stingy lending policies on Wall Street. The nascent shift came even before the White House announced proposals for a new tax on banks and a curb on some of their riskiest trading activities.

    The wealthy securities and investment industry, for example, went from giving 2 to 1 to Democrats at the start of 2009 to providing almost half of its donations to Republicans by the end of the year, according to new data compiled for The Washington Post by the Center for Responsive Politics.

    Commercial banks and their employees also returned to their traditional tilt in favor of the GOP after a brief dalliance with Democrats, giving nearly twice as much to Republicans during the last three months of 2009, the data show.

    Wall Street continued to hedge its bets. In the 2010 Congressional elections Wall Street gave a majority of donations to DEM congressional officials. But the push came from the “stop me before I embezzle again” school of Wall Street insiders:

    Wall Street helped give a fundraising edge to Democratic committees and candidates. Employees in the securities and investment industry made $34.3 million in donations last year, about the same as in 2007, with 62 percent going to Democrats, the party’s largest share in a non-election year in the 20 years of data compiled by the Center for Responsive Politics, a Washington-based research group.
    One reason for the increased Democratic share is that investors aren’t unanimously opposed to proposed financial regulations making their way through Congress, said Joe Keefe, president and chief executive officer of Portsmouth, New Hampshire-based Pax World Management LLC, which manages $2.4 billion.
    There are a lot of veteran Wall Street professionals calling for greater regulation,” Keefe said.


    They would know.

  3. I wish I could be so sanguine as to believe this is the last gasp of neoliberalism. It sounds like a minor hiccup to me. The neoliberal project still has full control of our entire political economy. We are light years from the intellectual, perceptual and discourse changes we need to start changing our society for the better in any practical way which would deal with our fundamental social, economic and environmental problems.

    My observation, analysis and instincts tell me that the neoliberals (corporations and oligarchs) are still in control of all the substantial parts of our political economy which are actually controllable by humans. If any of that control is contested, it is simply capitalists fighting among themselves for control of different sectors of the economy. If there is a hitch in getting the TPP it is simply because different groups of capitalists (with substantially different interests) have a disagreement over it. It’s not because popular opposition has any impact.

  4. Pr Q said:

    What does this mean for the future of the Democratic Party? I’ll leave that up to readers for the moment.

    My Five P (pecuniary, periodicity, policy, personality, party) model of duopolistic political systems implies that the news for DEMs in 2016 is not good. This model, which is an adaption of Ray Field econometric model, has a pretty good predictive record over the past decade and a half – x 3 straight confirmed predictions. Field’s models suggests that Obama admin fatigue (x 2 terms) is a big hurdle for the DEMs to overcome.

    in 2016, the non economic variables are not favorable for the Democrats and so the equation predicts that a very strong economy is needed for the Democrats to get more than 50 percent of the two-party vote.

    Policy positions are, regrettably for nerds such as Pr Q, not all that big a factor in the supply side of the market for governance. The strongest predictor of political fortunes is “the economy, stupid”. And the economic auspices are not exactly awe-inspiring for the DEMs.

    The comfortable victory of the neo-liberal Cameron in his first attempt at re-election is not a good omen for neo-liberal DEMs. And the abject failure of the somewhat Bolshie Ed Miliband is even less encouraging. Inequality is a higher priority policy issue these days, but there is not much sign that it has set the electorate alight.

    And, plugging in values for politician personality, a candidate like H. Clinton is not exactly a breath of fresh air.

    And the DEM party has to be wary of being too strongly identified with minority groups – women, coloreds, non-Christians, trans-gendered etc – for fear of alienating the “silent majority”.

    The REPs really only have to put up a sane and reasonable looking candidate, who can perhaps distance himself from the REPs Tea Party base, in order to be a pretty good bet.

    Im not prepared to make an out-right prediction, yet. I will probably come out around mid 2015 when the economic future is clearer. But at the moment I am not confident for the DEMs.

  5. The REPs really only have to put up a sane and reasonable looking candidate,

    They have to find one first.

  6. zoot said:

    They have to find one first.


    Mitt Romney is a pretty grounded individual. You can’t get any straighter than a venture capitalist who moonlights as a Mormon bishop.

    But he is currently running at well down in the odds. Scott Walker and Jeb Bush are front-runners.

    So the DEMs best hope is that the REP base over-reaches and drinks its own Kool Aid by selecting a nut-job nominee. A not improbable scenario.

  7. All it tells me, yet again, is just how “captured” government in general has become, by Big Business.

    Yet another US President is reduced to helplessness and ridicule, persisting with a patently illogical and obnoxious policy dictated by Wall St.

  8. A good piece by JQ.
    “.. the financial sector (the only major business sector that was prepared to back Democrats, or at least to bankroll suitable candidates from either party) ..”
    How about Silicon Valley and Hollywood? Look at Obama’s policies on net neutrality (progressive) and copyright (reactionary), exactly as Disney and Google want. Apple is by far the largest company in the world by stock market capitalisation.

    “The big exceptions are issues like the TPP and the security state, where Obama was captured by the permanent government almost from day 1, and has never shifted.”
    A fascinating detail on the TPP from Médecins sans Frontières on “data exclusivity”, the right of pharma companies, recognized in the US, to keep their data from clinical trials from competitors. (It should be zero.)
    “The Obama Administration has actually called for data exclusivity to be reduced to seven years at home, so it is puzzling that the U.S. Trade Representative would be aggressively pushing for [a 12-year term] in the TPP.”
    So the famous Obama micromanagement failed here. It’s hard to believe he was simply conned.

  9. Jack Strocchi:

    And the DEM party has to be wary of being too strongly identified with minority groups – women, coloreds, non-Christians, trans-gendered etc – for fear of alienating the “silent majority”.

    As of 2009, there were over 158.6 million women in the United States in 2009. The number of men was 151.4 million. Depending on whether one counts Hispanics as “coloreds” in Jack’s quaint choice of language, “coloreds” will become the majority some time between 2030 and 2040. In any case, if one includes white Hispanics in the count of whites, and one counts the number of US citizens who share the attributes of maleness, whiteness, Christianity, “natural” gender, one is left comfortably short of 50%+1, even before factoring in “etc.”.

    Jack’s mathematical abilities are clearly not as great as those that he habitually ascribes to Ashkenazi Jews and north-east Asians.

  10. @Jack Strocchi
    Jack S: “Mitt Romney is a pretty grounded individual. You can’t get any straighter than a venture capitalist who moonlights as a Mormon bishop.”

    He’s never been a true venture capitalist: you know, back Sergey Brin and make a fortune, back his ten plausible rivals and lose your shirt. Bain Capital is a private equity fund specialising in turning round failing established businesses. At best its restructurings are pretty brutal surgery; at worst, and they have been accused of it, legal looting.

    Your conflation of “straight” with “grounded” is peculiar and revealing. Most readers here would I think see Romney as the classical high-functioning sociopath, without empathy, true moral compass or capacity for self-criticism (the dogs, the 47%). His religion is completely disconnected from his working life: the bshoping is more a sign of cognitive disconnect than a healthy personality. Contrast Newt Gingrich, on any measure a much nastier human being, but a human like us, not a Vulcan.

  11. @Paul Norton
    I think you got him this time.. the stuff in his first post was coarse also, epitomised by the nonsense involving Margaret Thatcher.

    He is ok to point out the undue influence of Wall st re the Democrats, but isn’t vested interests influence the problem with US politics, any way?

    James Wimberley’s point there fore seems very valid, also.

  12. Jack, take another month off and, if you decide to come back, look at your comments here and don’t post anything like that.

  13. From the OP:

    In global terms, neoliberalism, epitomized by Thatcher in the UK, is an appropriation by conservative/reactionary parties of the economic component of classical liberalism, but without any of the associated concerns with personal freedom, except as this coincides with the desires of conservatives and reactionaries to maintain a social order where they can do as they have always done.

    Exhibit A.

  14. @michaelfstanley

    The shorter Ikonoclast, recapping what I said above.

    (1) It is not the last gasp of neoliberalism. It is a minor hiccup in their ongoing program.

    (2) The neoliberal project still has full control of our entire political economy.
    (Meaning all those parts which are actually controllable by human agency.)

    (3) If any of that control is contested, it is simply capitalists fighting among themselves.

    (4) Expanding on point 3, if there is a hitch in getting the TPP through it is simply because different groups of capitalists (with different interests) have disagreements. It’s not because popular opposition has any impact.

  15. @Ikonoclast
    I tend to agree, but we are heading a different direction, it’s just, I have no idea what direction that is. Economic chaos (for want of a better term)? I’m just imagining an information or digital economy being far less controllable and taxable than a bricks and mortar economy. Look at illegal downloads, shadow banking, bitcoins, profit shifting, cyber crime and cyber attacks, data tapping etc. There appears to be all these new innovations to assist in bypassing the institution of the “financial system” as we know it. The question is – is this just the tip to iceberg or will “democracies” need to adapt a Chinese style control of information flow to keep “gaming the system” under control?

  16. Ikonoclast :
    I wish I could be so sanguine as to believe this is the last gasp of neoliberalism. It sounds like a minor hiccup to me. The neoliberal project still has full control of our entire political economy. We are light years from the intellectual, perceptual and discourse changes we need to start changing our society for the better in any practical way which would deal with our fundamental social, economic and environmental problems.

    I agree with you totally. I wonder why John thinks otherwise. It would be good if he could further detail why he thinks neoliberal economics/law/managerialism/politics and its think tanks and financial backers is a dead force.

    Your observation about the discourse being still with us I think is central here. When Thatcher got going following earlier murmurings (I recall Macolm Fraser contributing to this with his pursuit of excellence line). At the time, the late 70s/early 80s, neoliberalism wasnt a given though and old fashion social democracy and Keynesianism were still around albeit on their death beds thanks to two oil crises, high inflation, the decline in traditional religion especially catholicism and body blow to the right embedded in the defeat in Vietnam.

    But then this complex of crises gave the neoliberals their chance and they began to change the rules of the game, the media discourse, the principles, the ideals of the young etc. Sometimes it was via conspiracy + force as with the miners strike in the UK, sometimes it was via seduction as the ‘sensible’ wing of Labor (Hawke, Rogernomics) came to dominate culminating in as John points out Clinton. Cold war fears were reignited. The young now wanted MBAs rather than peace and love.

    The source though wasnt just the neoliberals it was I suggest that the soft left had run out of ideals it believed in and novel ideas arising, the hard left had been discreditted by the failure of its collective experiments just about everywhere and hippy anarchosyndicalism a forerunner of today’s occupy movement, couldnt provide a coherent alternative system of social organization either.

    The result is we now all seem to use the neoliberal framework if not in the extreme Randian version then in a soft system. And worryingly this seems likely to continue either an alternative idea of what the human condition is about comes to dominate or environmental constraints force a real change in direction.

  17. Highly principled, those Democrats:

    Senate Democrats reached a deal with Republicans Wednesday to move forward on U.S. President Barack Obama’s fast-track trade agenda, one day after pro-trade Senators stalled the bill by blocking debate, according to Politico and Roll Call. In exchange for their support on a vote for the fast-track trade authority, Democrats will get separate votes on two related bills on currency manipulation and duty-free status to U.S. imports of goods from certain sub-Saharan African countries.

    No, neo-liberalism is powering along unimpeded in the slightest by the looks of it. And just like the ALP here, it couldn’t happen if not for the “left” enablers.

  18. Megan :
    No, neo-liberalism is powering along unimpeded in the slightest by the looks of it. And just like the ALP here, it couldn’t happen if not for the “left” enablers.

    “It’s full steam ahead then” as Captain Francesco would convey [with a wink & a smile]

  19. I am about to stick my neck out to have my head chopped off.

    Although I tend to read JQ’s posts and those of many commenters on politics and political economy with interest, I confess I have not progressed in understanding most of it. I can’t think with terms like ‘neoliberalism’ (US, UK, …, versions), ‘left’, ‘right’, ‘soft left’, ‘hard left’, ‘conservatives’, ‘classical liberals’, etc. Each of these terms seems to convey many different ideas, policies, histories; bundled histories so to speak. This by itself wouldn’t be so difficult to deal with. The greatest difficulty is that the ‘stuff’ which comes along with each of the above category names in single quotes overlaps to various degrees over time and geopolitical space. Moreover, some of these category names seem to have been introduced retrospectively while other words I recall in chronological time have disappeared. For example, the epoch, which is now labelled neoliberalism, has its origin in a period in time when words like ‘market oriented policies’, and ‘globalisation’ were introduced as if they were concepts or category names. In terms of what transpired under the terms ‘market oriented policies’ and ‘globalisation’, the TPP is an attempt to use treaties (state power) to cover up that China has spoiled the vision of those who introduced the word ‘globalisation’ and the secrecy aspect of the TPP process is necessary to prevent the ultimate confirmation that those who claimed to promote ‘market oriented policies’ were actually promoting what JQ called financial capitalism underwritten by what Cameron called authoritarian corporatism and what Piketty showed to be of benefit to an increasingly smaller fraction of people in countries often called the centres of capitalism.

    Is neoliberalism a polite way of referring to political spin for the benefit of those who want ‘the dollar’ to rule the world while pretending climate scientists are spin masters for the UN to become the world government? I don’t know. But I have convinced myself that we didn’t get ‘market oriented’ policies and we are not going to have ‘globalisation’.

  20. @Ernestine Gross

    I am not sure how to suggest a resolution of these definitional problems for you. However, this won’t stop me sticking my head out of course.

    I think the Wikipedia entry on Neoliberalism is well worth reading. It describes the current definition of the term and then gives a history of the term as its meaning has evolved and changed.

    To me, certain terms are crudely interchangeable. For example, I am quite happy to say Neoliberalism approximately equals Laissez-faire capitalism. The basic differences are perhaps that;

    (1) Laissez-faire capitalism carries a connotation of being the original, unfettered, primitive capitalism of circa 19th C.

    (2) Neoliberalism carries a connotation of being the program designed to wind back the social-democratic amendments to and accommodation with capitalism circa 1929 to 1969.

    (3) Following on logically from point (2), Neoliberalism has a different programmatic intent, design and process set from the old policies merely meant to support incumbent Laissez-faire capitalism.

    (4) Neoliberalism is also closely associated with mature corporatism and mature managerialism which existed only in nascent forms under earlier stages of capitalism. Together these phenomena form a new complex, a new emergent political economic reality. It would take a long essay or thesis to tease out what this means or might mean.

    For what it’s worth, that’s my take on it.

  21. Neoliberalism owes much to Nozick’s libertarianism, more than it is aware. Thisis a good potted history.

  22. Great news about the impending funeral of the TPP (and economic liberalism) Professor. You just made this sunny afternoon much sunnier!

  23. Neoliberalism may be ending. The real issue is the way that it is creating the conditions for what follows it. There is an emerging tendency in which neoliberalism has shown capital that it doesn’t need democracy. The militarization of policing, now a global trend, appears to offer the oligarchs an attractive alternative to liberal democracy. This means that endless global war will not be fought in other states alone. It will be fought at ‘home’ on grounds of class, ethnicities, sexualities, ideas, religious affiliations and exclusion. Altogether a dystopian picture.

  24. @Jack Strocchi

    Not excused by me, I lived through a significant part of her tenure at Downing Street. She did immense harm to the UK economy and society generally. Of course she did not recognise the existence of “society”. As far as many in the UK are concerned, had the terrorists succeeded it might have actually been a better outcome for them.

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