Neoliberalism is Dead, Long Live Zombie Neoliberalism!
By Sacha Dierckx*
“Neoliberalism” is a contested term. A lively debate exists on what the term exactly entails. Politically, it is also very controversial: few politicians will call themselves “neoliberals”. Without trying to provide definitive answers to the questions raised in this debate, I am convinced it is an appropriate term to describe the phase within capitalism that started in the 1970s of the twentieth century. The economic crisis in the West at the time made Keynesianism and the welfare state lose legitimacy with elites, policymakers, and among large sections of the population. This gave way to the beginning of a new neoliberal phase.
Free range for business
Neoliberalism as a hegemonic project was loosely based on the ideas of Milton Friedman, Friedrich von Hayek, and their companions at the Mont Pelerin Society. More importantly, the neoliberal premise was that everything will be better if corporations and investors are allowed to function with the least impediment. It is no wonder, then, that expressions like globalization, liberalization, deregulation, and privatization gained prominence.
Two important players within the political-economic field became neoliberal targets. On the one hand the workers’ movement and trade unions, which had ensured that there were significant limitations on the way businesses could treat their employees, were targeted. On the other hand governments that had – under pressure from labor movements – restrained the freedom of businesses through regulations, taxation, social security and barriers to globalization were also targeted. The neoliberal project aimed to curb the power of both these institutions, or change them in ways so that they would operate as per the wishes of the capitalists.
After the crisis: neoliberal myths debunked
As the crisis of the 1970s marked the end of the Keynesian phase, many now expected that the crisis that erupted in 2008 would signify the end of the neoliberal phase. But we have since seen a strange paradox. On the one hand neoliberal ideas and policies are more and more contested, even from unexpected sources such as the IMF and the OECD. However, on the other hand, in the realm of actual policies little has changed, and in some fields there has even been an intensification of neoliberal policies.
Let us first look at the ideas. Since the economic crisis started, it has clearly been easier to refute neoliberal ideology. This can be seen in the several scientific studies conducted by academics and researchers based at international organizations. One by one all neoliberal myths have been debunked by these studies – as well as by reality.
First of all: wage moderation is in general not a smart strategy for a sustainable economy. On the contrary, strong trade unions, decent minimum wages, and strong collective labor agreements are good for the economy. Increasing the flexibility of the labor market does often not result in more jobs, and even less often does it result in better jobs. Inequality is a brake on rather than the motor for a sustainable economy, and strong trade unions are needed to keep inequality from increasing. A robust social safety net does not reduce dynamism, and even leads to more resilience when an economic crisis hits.
Second: a strong government does not conflict with a healthy economy. Higher tax rates do not necessarily have bad consequences, and similar to a robust social safety net, they can hold back even larger downfalls during an economic depression. Moreover, when a crisis breaks out, austerity only exacerbates the economic situation, and it even leads to higher government debt. Public investment is therefore not only too low in general, it is also highly necessary to stimulate the economy again. Additionally, privatization is not always cheaper and often leads to a worse service delivery.
Third: giving markets free range does not result in greater welfare for everyone. When the financial sector grows too big, it is bad for the economy. Financial deregulation does not create a more efficient financial sector, but produces more banking crises and volatility. International capital mobility and deregulating speculative capital flows does not lead to more economic growth, but it does lead to tax havens, higher inequality, and even bigger financial crises. Finally, free trade does not only create winners but also losers, and in the past the gains of free trade have often been overestimated and the costs underestimated.
Why is neoliberalism not dead?
A logical question then arises: if – after the worst economic crisis since the Great Depression – research demonstrates that almost all neoliberal ideas are myths, why do we see such few changes with regard to policies? There are many reasons, but here I will list three of the main causes.
First, it is clear that when the economic crisis erupted, there was no readymade alternative, no coherent ideology that could take over. Many neoliberal ideas have been accepted by center-left political parties during the past decades, and some of the parties have been slow in leaving these neoliberal ideas behind. While the neoliberal project had a clear vision for society in the 1970s, such a well-defined, coherent vision is much less present among the large progressive forces in society today. Moreover, it takes time to change public opinion. The debunking of neoliberal myths does not mean that many people do not “believe” in them anymore.
Second, having good ideas is necessary but insufficient. It also takes power to put these ideas into practice. Both in parliament and on the streets the progressive forces in society are still rather weak. Center-left parties seem to have been structurally weakened in the electoral arena, and many trade unions have been strongly harmed by neoliberal policies. The consequence of having good ideas but no power became painfully clear when Syriza finally accepted Europe’s diktat after a tough battle.
Third, the existing structures make it harder to implement progressive policies. For instance, it is clear that the current globalized world economy with the free movement of goods and capital makes it more difficult to realize a progressive alternative than was the case with the more closed off national welfare states after the Second World War. Another example is the way the European Union and the Eurozone have been designed during the past decades. It is clear that these structures are more conducive to those in Europe who want to implement harsh austerity than to those who want to accomplish the upward convergence of labor regulations within Europe.
A coherent alternative ideological project, more power, and changes to the regional and global structures: these are three building bricks of a progressive alternative of which the realization takes a lot of time and efforts. Consequently, neoliberal ideas still have a strong impact on policies in many countries, both in the Western world and in many developing countries. Neoliberalism therefore lives on like a zombie: intellectually dead, but still damn troublesome for everyone who is chased by it. Zombie neoliberalism is either ready to further colonize the entire world, or is waiting for its final death.
*The author is a Doctor in international politics (Ghent University, Belgium) and member of the Belgian think tank Poliargus (www.poliargus.be)
This post originally appeared in Dutch on knack.be