Public ideas
Neoliberalism is collapsing: what comes next?
The New Republic has a podcast (and a transcript) where Michael Tomasky of the NR, and Felicia Wong of the Roosevelt Institute, interview historian Gary Gerstle: The neoliberal order is over: what comes next?.
Gerstle’s account is a story of the economic ideas that have shaped America, and by extension similar countries, over the last ninety years, starting with the New Deal, moving through to the neoliberal era, and speculating on what is to come as neoliberalism collapses.
The progressive spirit of the New Deal lasted much longer than the Roosevelt administration. The Republican Eisenhower administration did nothing to dismantle it, and Gerstle explains that the Cold War actually helped sustain that spirit.
He puts the collapse of that spirit down to a number of factors in the 1970s, including the outbreak of high inflation, to which the response was the ideology of “small government” and a belief in unfettered markets.
Just as Republican administrations had previously held on to the progressive values of the New Deal, so did successive Democrat administrations embrace neoliberalism. Political movements develop and change much more slowly than the cycles of “left” and “right” administrations.
Our economies and political systems are in transition. In response to the question “what comes now” Gerstle describes three scenarios: an extended period of disorder, the consolidation of authoritarianism, and the re-emergence of a progressive era. On that third possibility he optimistically says:
We have seen in the last decade an extraordinary revival of left politics, progressive politics in America. Seeing how much our politics has changed over the last 10 years should give us hope that the politics for the future can be even better.
Gerstle is author of The rise and fall of the neoliberal order: America and the world in the free market era.
A social democratic agenda: echoes of Bretton Woods
Could we imagine any cabinet minister in our notionally social-democratic government making the following public statement?
The vision of public investment that energized the Australian project in the postwar years—and indeed for much of our history— faded. It gave way to a set of ideas that championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.
Those words are a cut-and-paste from a speech by the US National Security Advisor Jake Sullivan, on Renewing American Economic Leadership, with an Australian context substituted for his US context.
Sullivan lists four fundamental challenges for America:
- the hollowing out of the country’s industrial base, victim to the assumption that markets always allocate capital productively and efficiently;
- a misunderstanding of the geopolitical environment, based on a false assumption that economic integration would make countries more responsible and open;
- an accelerating climate crisis, with progress stalled because policymakers believed there had to be a choice between fostering economic growth and meeting climate goals;
- the challenge of inequality and its damage to democracy.
He concludes with what is essentially a call for a rejection of neoliberalism, and a return to the economic orthodoxy that guided America’s most successful era of economic development – in many ways a return to the spirit of Bretton Woods:
The world needs an international economic system that works for our wage-earners, works for our industries, works for our climate, works for our national security, and works for the world’s poorest and most vulnerable countries.
That means replacing a singular approach focused on the oversimplified assumptions that I set out at the top of my speech with one that encourages targeted and necessary investments in places that private markets are ill-suited to address on their own—even as we continue to harness the power of markets and integration.
The speech, linked from the White House website, has the imprimatur of the Biden administration. Of course there is a gap between rhetoric and political action, but it does present a framework of values which social-democratic governments should be able to endorse.