Five Neoliberalisms

The recent debate over Matt Yglesias’ ‘left neoliberalism’ reminded me what an ambiguous term neoliberalism is. There are at least five political movements or schools of thought that are called neoliberal. While they are distinguishable, they are not entirely separate.

According to Taylor Boas and Jordan Gans-Morse the term neoliberalism was first coined in the 1930s "by the Freiberg School of German economists to denote a philosophy that was explicitly moderate in comparison to classical liberalism, both in its rejection of laissez-faire policies and its emphasis on humanistic values". This ‘German neoberalism’ or ‘ordoliberalism’ went on to influence economists and politicians in Spain and Latin America.

In the United States, economists at the University of Chicago developed a school of thought that opponents now refer to as neoliberalism. This Chicago School is most closely identified with the work of Milton Friedman. Through a group of Chilean economists known as the Chicago Boys, Chicago School ideas had a major influence on the economic policies of the Pinochet dictatorship in Chile. As Boas and Gans-Morse explain, once the term neoliberalism became associated with the Pinochet regime, supporters of free market reforms no longer identified with it. Neoliberalism became a derogatory term. I’ll call this sense ‘bad neoliberalism’.

While many Europeans and Latin Americans adopted the term in this derogatory sense, North Americans did not. Then in the late 70s and early 1980s some writers started to use neoliberalism as a label for a new kind of American liberalism — a kind of precursor to the Third Way. Since this neoliberalism was promoted in the Washington Monthly, I’ll call this ‘Washington Monthly neoliberalism’.

Eventually, US leftists with an interest in Latin American politics adopted the derogatory sense of the term neoliberalism. As this use became more widespread, it became confused with the non-derogatory American sense of the term (ie Washington Monthly neoliberalism).

Recently, US bloggers have started to talk about something called ‘left neoliberalism’. The neoliberalism in left neoliberalism seems to be a blend of bad neoliberalism and Washington Monthly neoliberalism.

Below the fold, I’ve posted more information on each of these neoliberalisms: 1. bad neoliberalism; 2. German neoliberalism; 3. Chicago School neoliberalism; 4. Washington Monthly neoliberalism; and 5. Left neoliberalism.

1. Bad Neoliberalism: According to Robert McChesney, neoliberalism "refers to the policies and processes whereby a relative handful of private interests are permitted to control as much as possible of social life in order to maximize their personal profit."

Bad neoliberalism is often described as a way of governing rather than as an ideology. It is defined by its function which is to serve the interests of multinational corporations and wealthy individuals. According to critics like Elizabeth Martinez and Arnoldo García it has five main features:

• The rule of the market. Under neoliberalism government control over prices, wages and working conditions are abandoned. Tariffs are abolished and goods, services and capital are allowed to move freely across national boundaries.
• Cuts to welfare and social services. Government spending on health, education, community services and income support is cut back under neoliberalism. Subsidies and tax breaks for business continue.
• Deregulation. Neoliberalism is opposed to regulations that threaten profits. That means less government control over pollution, workplace safety etc.
• Radical individualism. When individuals fail to adequately provide for themselves and their families, they are held responsible for failing to adapt to the requirements of the marketplace.

Built into the idea of bad neoliberalism is an assumption that these policies will have a negative effect on society. They will make the poor poorer, the rich richer and will destroy any semblance of community or social cohesion.

Critics insist that bad neoliberalism is not about promoting liberty. According to French theorist Loïc Wacquant, there’s little resemblance between the ideology of neoliberalism and the reality. He argues that actually existing neoliberalism:

… involves everywhere the building of a erection of a Centaur-state, liberal at the top and paternalistic at the bottom. Then neoliberal Leviathan practices laissez faire et laissez passer toward corporations and the upper class, at the level of the causes of inequality. But it is fiercely interventionist and authoritarian when it comes to dealing with the destructive consequences of economic deregulation for those at the lower end of the class and status spectrum.

In some cases wars and death squads are necessary to protect corporate interests, say critics. Radical opponents of the war in Iraq have described the Pentagon as the armed with of neoliberalism (ensuring that corporations have access to oil). And in some cases governments have relied on torture and murder to hold on to power and implement neoliberal reforms. As Naomi Klein puts it: "it is when people reject free-market ‘reforms’ that states often turn to torturing individuals".

Exemplars of neoliberalism are Chile under Pinochet, Britain under Thatcher and the United States under Reagan.

2. Chicago School Neoliberalism: This neoliberalism is an ideology or school of thought. It is associated with the work of economists such as Milton Friedman and Gary Becker at the University of Chicago. As Michael Fitzgerald explains:

The central idea of the Chicago School of Economics holds that economies work best when markets operate freely, with limited government participation. The Chicago School, a phrase coined in the 1950s, championed an old idea: 1870s neoclassical economics. Yet in the wake of the Great Depression and World War II, it was a radical proposition. It went against the ideas of John Maynard Keynes, who believed government should play an important role across an economy.

One link between Chicago School neoliberalism and bad neoliberalism is the Chicago School’s influence on economic reform in Chile under Pinochet. After seizing power in a coup, General Pinochet struggled with the economy. Eventually he turned to the ‘Chicago Boys’ a group of economists who trained in the Department of Economics of the University of Chicago. According to Gary Becker, the Chicago Boys "advocated widespread deregulation, privatization, and other free market policies for closely controlled economies."

While the Austrian economist Friedrich Hayek held a chair at the University of Chicago from 1950 to 1962, he was not a member of the department of economics. The Chicago School economists seem to have disagreed with his approach to the discipline so instead of joining the economics department he came to Chicago as professor of social and moral sciences with his chair funded by the William Volker Fund.

Chicago School neoliberalism is associated with the economic policies of the Thatcher and Reagan governments.

3. German Neoliberalism: Also known as ‘ordoliberals‘ the German neoliberals were associated with the Freiburg School of economics founded at Freiburg University in the 1930s by Walter Eucken. Freiburg School economists had a major influence on West German economic policy in the immediate post war period.

According to Henry Oliver, the German neoliberals were opposed to Keynesianism, price controls, food subsidies, rent control or other policies that interfered with the price mechanism:

They insist that, when the government takes steps to redistribute income or provide security, it do so in ways that leave the price system unimpaired, or, in other words, that it rest content with progressive taxation, some social services, some varieties of social insurance, and outright relief of extreme need.

Also associated with German neoliberalism is the economist Wilhelm Röpke. While influenced by the Austrian School of economics, Röpke argued that the market needed to be regulated to prevent the development of politically powerful monopolies. He also insisted that "undiluted capitalism is intolerable, and among other things this is apparent from the deep dissatisfaction which the commercialization of arts, sciences, education, or the press rouses in us."

According to Erik von Kuehnelt-Leddihn, in Spain German neoliberalism played a role in the struggle between "the united front of monarchists, Opus Dei members, and Free Traders and against the state controllers and inlationists. In the National Review (May 7, 1960) he writes that Franco’s economic minister Ullastres was a devout Catholic and an admire of German neoliberals like Röpke.

German neoliberalism influenced economists and business leaders in Latin America where some free market supporters began to refer to themselves as neoliberals.

4. Washington Monthly Neoliberalism: In 1981 a triumphant Ronald Reagan spoke about America’s crumbling economy and declared "government is not the solution to our problem; government is the problem." He accused his liberal opponents of pandering to special interests and promised to make government work for everyone.

In an effort to revive the Democrats and left of centre politics a number of US writers and politicians attempted to reinvent American liberalism — hence the term neoliberalism. A number of journalists associated with the movement wrote for the Washington Monthly and The New Republic. According to New York Times columnist David Brooks:

… the neoliberals were liberal but not too liberal. They rejected interest-group politics and were suspicious of brain-dead unions. They tended to be hawkish on foreign policy, positive about capitalism, reformist when it came to the welfare state, and urbane but not militant on feminism and other social issues.

Over time, many of the key ideas of 80s neoliberalism were absorbed into the Third Way politics of Bill Clinton and the Democratic mainstream. Since these neoliberals favoured free markets, deregulation, entrepreneurship and welfare reform, left-leaning critics sometimes condemn them and their descendants as neoliberal in the bad sense.

When former Mother Jones blogger Kevin Drum pleads guilty to “some general neoliberal instincts”, this he’s referring to Washington Monthly neoliberalism (Drum used to blog for the Washington Monthly).

5. Left Neoliberalism: American blogger Matt Yglesias holds views that are neoliberal in the Washington Monthly sense but increasingly finds himself attacked for being neoliberal in the bad sense. His response has been to say: "while I’ll cop to being a ‘neoliberal’ I don’t acknowledge that I have critics to the ‘left’ of me."

Yglesias, along with a handful of bloggers such as Brad DeLong, have been labeled ‘left neoliberals’. According to Henry Farrell at Crooked Timber:

There is a real phenomenon that you might describe as left neo-liberalism in the US – liberals who came out of the experience of the 1980s convinced that the internal interest group dynamics of the Democratic party were a problem.

Farrell’s discussion of left neoliberalism makes it sound indistinguishable from Washington Monthly neoliberalism. However when Mike Konczal discusses left neoliberalism he writes:

For academic purposes, I like Foucault’s definition, taken from the 1978-1979 “The Birth of Biopolitics” lectures given at the Collège de France. Here neoliberalism “does not ask the state what freedom it will leave to the economy, but asks the economy how its freedom can have a state-creating function and role, in the sense that it will really make possible the foundation of the state’s legitimacy.”

Foucault’s definition comes from a 1979 lecture where he discusses German neoliberalism (neoliberalism 3). In other lectures he discusses something he calls American neoliberalism which he says is different to neoliberalism in Germany and France. Foucault’s American neoliberalism corresponds, more or less, to Chicago School neoliberalism (neoliberalism 2).