Which neoliberalism? A reply to Steve Keen

Published in Business Spectator (Melbourne), 31 March 2016

Steve Keen’s article Could Turnbull be the last of the neoliberal leaders? published on Business Spectator this week deserves a reply. Ideally a reply written by a confessed neoliberal.

But since I am yet to meet anyone who readily self-identifies as a neoliberal, I thought I would give it a go.

To get all disclaimers out of the way first: My own leanings are liberal, in the classical sense. I highly value individual liberty, the rule of law and equality before the law, secure property rights, freedom of contract, competition and entrepreneurship (roughly in that order).

To some people, this makes me a neoliberal. Others might call me a right-winger. Still others would say I am a libertarian.

I do not like any of these labels because none of them quite captures what I believe in. Since my beliefs stand firmly in the tradition of what the likes of John Locke, David Hume and Adam Smith had established as ‘liberalism’ centuries ago, I do not quite see the need to reinvent a name for it in any case.

Which brings me to Steve’s article. Of course he has a point: We are witnessing a global move away from the political centre. In its stead, there is a rise of parties and politicians that provide simple answers to complex problems. Or that simply promise to be different from the establishment.

What I do not see, however, is the end of neoliberal hegemony, as Steve describes it. Because let’s face it: There has never been one. To make my case, let me give you two reasons: one hairsplitting and one substantial.

Let’s begin with the hairsplitting exercise. Neoliberalism is not what everybody thinks it is. In actual fact, it is quite the opposite.

If you are interested in some obscure history, you can find out more about the origins of the term ‘neoliberalism’ in my 2009 essay Neoliberalism: The Genesis of a Political Swearword. To my great surprise, it has become my most cited paper to date. And seriously, why would anyone care for German interwar history?

The gist of my paper is simple. After World War I, there were a few intellectuals in Germany who (for the wrong reasons) believed that (classical) liberalism had failed, that socialism was equally unworkable and that therefore some kind of third way was needed. It was meant to combine the best of all worlds: a free economy and a strong state.

One of the main proponents of this muddled thinking was a certain Alexander Rüstow, who coined the term neoliberalism at a meeting in Paris in 1938. The great irony is that Rüstow had little in common with anything that nowadays passes as neoliberalism. In his writings, he often comes across as more of a romanticist or even a social democrat but certainly not like a free market radical.

I wrote the 2009 paper mainly in response to Kevin Rudd’s attack on ‘neoliberalism’ which he denounced in his essay in The Monthly. To me, Rudd’s ‘neoliberalism’ was just a straw man of everything he wanted to disagree with but it had nothing to do with the original meaning of the term.

To make things more ironic, hardly anyone would have self-identified as neoliberal anyway and Rudd himself sounded very neoliberal in the original sense of the word. The icing on the cake was the fact that the Protestant theologian Dietrich Bonhoeffer, of whom Rudd said he was “without doubt, the man I admire most in the history of the twentieth century”, was himself connected to the German neoliberal movement. So either Rudd did not really know what he was talking about or he just scored a fantastic own goal.

Admittedly, such exegesis of the term neoliberalism may appear a bit pedantic so let me get to my more substantial disagreement with Steve’s thesis of the end of neoliberal rule: I really cannot see much evidence for it.

I agree that the new breed of populist leaders (Trump, Sanders, Corbyn, Trudeau, Tsipras) are quite the antithesis of anything that commonly passes as liberal, libertarian or, in three devils’ name, ‘neoliberal’. But that does not mean that the politicians they are replacing (or want to replace) have been free-market radicals either.

A case in point: To most people, former UK prime minister Margaret Thatcher would appear to be the very embodiment of a ‘neoliberal’ politician. And it is true, Thatcher reformed the British economy, deregulated the City of London, and broke the power of the unions.

However, even someone as radical as Thatcher did not shrink the size of the state. At the end of Thatcher’s premiership, the size of government relative to GDP was the same as it was at the beginning. She did not touch the grand bastion of state socialism, the National Health Service. Nor did she change Britain’s soviet-style town and country planning regime.

Among Western leaders of the past generation, Thatcher (together with US president Ronald Reagan) was the most free-market minded. But even the Iron Lady was no ‘neoliberal’, free-for-all politician. Let alone other right-of-centre leaders such as George H.W. Bush, George W. Bush, Helmut Kohl, John Howard, or David Cameron. And certainly not pseudo-Conservatives such as Nicolas Sarkozy, Angela Merkel or Silvio Berlusconi.

The great age of neoliberalism: it is an illusion. Yes, there were deregulations particularly in financial markets (and certainly not all of them were well executed). But the big picture across most of the developed world remained the reality of mixed economies in which the state typically occupied between a third and half of GDP.

Now this is not to argue for a specific size of government. My own personal predisposition would be to shrink government from such levels. All I am saying is that with governments as large as they are, it is hard to speak of a ‘neoliberal order’.

So what Steve actually describes is something different. It is not so much a movement away from neoliberalism, which never properly existed to begin with. I think we are rather witnessing a rebellion of the people against the political class, the establishment, the parties that presided over a lot of the mess we see reported in our daily news.

To me, this seems to be the common denominator that binds Corbyn, Trump, Sanders & Co. together. It is a protest against the insiders of the political system, not so much a revolt against either ‘neoliberalism’ or ‘sound economic management’.

Which finally brings me to Steve’s opening question: Will Turnbull be the last neoliberal leader? It first depends on whether the word neoliberal and its various meanings actually characterise Turnbull’s ideological stance. But more importantly, Turnbull’s political survival depends on his ability to confront the rising populist tides of our time. If that makes him a “neo”-liberal, so be it.

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