Neoliberalism

Neoliberalism is the ideology that won so completely it forgot it was an ideology. By the late 1990s its policy preferences were simply called "sound economics," and people who argued against them were the ones who needed to defend their views.

The tradition took shape in the 1930s and 1940s among economists and political theorists who concluded that classical liberalism had become intellectually inadequate to mass democracy and industrial society. The Mont Pelerin Society, founded by Friedrich Hayek in 1947, gathered the founding figures: Hayek, Milton Friedman, Ludwig von Mises, Karl Popper, and a cohort more or less defined by the conversation it produced. This is where neoliberalism distinguished itself from Classical Liberalism, in Hayek and Mises's argument that the older tradition needed updating for mass democracy and industrial society. It is also where the tradition acquired the institutional ancestor it still shares with Liberal Capitalism: Hayek's Constitution of Liberty (1960) and Friedman's Capitalism and Freedom (1962) are canonical for both. The position defined itself against both classical liberalism, which it saw as politically naive, and Keynesian social democracy, which it saw as economically incoherent and politically dangerous.

The 1970s stagflation crisis discredited the post-war Keynesian consensus and opened the door. Thatcher in Britain (1979) and Reagan in the US (1981) implemented the package: tight monetary policy, financial deregulation, tax reduction, privatisation of state-owned enterprises, weakening of labor-bargaining power, trade liberalisation. The Pinochet government in Chile, advised by Chicago-trained economists, had been an earlier and far more brutal experiment, and one the tradition has not entirely lived down; Naomi Klein's The Shock Doctrine (2007) is the influential critical history that has kept the link alive in public memory. The post-1989 period saw neoliberalism become the working ideology of post-Soviet transition economies under IMF and World Bank guidance, of the Maastricht-era European Union, and of the center-left third-way governments under Clinton, Blair, and Schroder; here the tradition's history fuses with that of Third-Way Labour, which delivered neoliberal economic policy under center-left auspices. Anthony Giddens's The Third Way (1998) is the bridging programmatic statement, and the Davos-OECD-IMF technocratic consensus that shaped global economic policy from the 1990s through 2008 was simultaneously neoliberal and centrist, which is why the two converged operationally even where they remained analytically distinct.

The 2008 financial crisis ended neoliberalism's political dominance. It did not end its institutional grip. Most OECD economic institutions still operate on neoliberal premises. Most central banks still follow Friedmanite monetary frameworks. Most trade agreements still reflect the post-1995 WTO consensus. The post-2008 populist challenges from the left (Sanders, Corbyn, the Latin American Pink Tide) and from the right (Brexit, Trump, European nationalist parties) have weakened the political coalitions that supported neoliberal policy without yet replacing the institutional infrastructure. The result is a tradition that is institutionally dominant and politically embarrassed, which is an unusual place for any ideology to live.

Neoliberalism survives most clearly in the policy frameworks of OECD economic institutions: the IMF, the World Bank, the OECD itself, the ECB, the Fed, most national central banks. In partisan politics, it lives uneasily inside coalitions that have moved away from it: the center-left of the Democratic Party in the US, the post-Blair Labour Party in the UK, the European Christian-democratic center. The neoliberal policy program (free trade, monetary discipline, financial liberalisation, light-touch regulation, targeted social insurance) is no longer the political default but remains the working assumption of most professional-class technocracy.