Of the two meanings of “Neoliberalism”

Of the two meanings of “Neoliberalism”

The use of the term “neoliberal” has recently been criticized as a meaningless epithet, a tabula rasa used to disparage anyone deemed unsatisfactorily conservative.

To the contrary, I think the term “neoliberal” is fairly precise, but much like the term “liberal” itself, it has two quite different meanings depending on whether the definition descends from its original European or American incarnation.  The first variety is very right-wing. The second is centrist.

A good description of right-wing neoliberalism can be found in this article in Al Jazeera this past weekend on a right-wing awakening in Latin America:

[N]eoliberalism is … a means to an end. The state is purposefully reduced in its scope of action to a minimum – by way of policies associated with fiscal austerity, financial deregulation, free trade and the privatisation of public assets, among others – so nothing can prevent the market and its profit-oriented agents from reaching a fair point of equilibrium between demand and supply. According to those who advocate such perspective, the state is nothing but a “necessary evil”.

Similarly, Brad DeLong has said:

[R]ight-neoliberalism is the claim that social democracy was one huge mistake–that it created a North Atlantic of takers who mooched off the makers. It holds that if we got rid of social democracy, we would have a utopia because the makers wouldn’t have to carry the takers on their backs and the takers would shape up ….

This right-wing meaning, of “neoliberalism” is a reincarnation of European-style 19th Century laissez-faire liberalism, a belief that the ideal state should operate and be limited by the rule of law, and administered by neutral officials selected on merit, with the economic markets left to themselves without interference by government. Nineteenth century liberals had no problem with, for example, government  promotion of infrastructure, including things like sanitation and education. Right-wing neoliberals, by contrast, see all government bureaucracy as inherently evil — even, as we saw in the case of Flint, Michigan, in the case of basic sanitation.

Note that right-wing neoliberalism is similar to, but not quite the same as, “libertarianism.” Libertarians believe the state also has no business in the private sphere of people’s lives. Thus it should stay out of the bedroom as well as the boardroom.  Not necessarily for right-wing neoliberalism. Right wing liberalism is agnostic as to whether foreign policy is passive or imperialistic, and whether or not government intervenes in the social sphere, so long as it stays out of the economic sphere.

The second type of “neoliberalsim,” centrist neoliberalism, originates from the US meaning of liberalism, and is once again defined pretty  well by Brad DeLong:

1. Most of the time the best way to accomplish social-democratic ends will be to get the money to the people who maximally want those ends accomplished, and then let them spend it.

2. Most of the time the best way to correctly manage the market system so that it doesn’t rain destruction upon the land is to impose the appropriate anti-destruction-raining Pigovian taxes (and subsidies).

3. Most of the time command-and-control is strictly dominated by other modes of government intervention that are less vulnerable to naked rent-seeking by the politically influential.

Elsewhere he quotes John Quiggin:

US neoliberalism is a development from within US liberalism …. In general, neoliberalism maintained and even extended “social liberalism”, in the US sense of support for equal marriage, reproductive choice and so on. In economic terms, its central claim was that the goals of the New Deal, central to Democratic Party politics, could best be pursued through market-friendly policies that would earn the support of the financial sector (the only major business sector that was prepared to back Democrats, or at least to bankroll suitable candidates from either party). Apart from subservience to Wall Street, the signature issues for US neoliberals were free trade, cuts in “entitlement” spending, and school reform[^1]. In terms of political strategy, the big idea was a ‘grand bargain’, in which Republicans would accept minimal increases in taxation in return for the abandonment of most of the Democratic program.

Of note, DeLong says “I think that John Quiggin is largely correct–if you correct ‘abandonment’ to ‘reconfiguration’.”  To my mind that is a breath-taking admission.

Both forms of neoliberalism default to free market solutions to problems. But for right-wing neoliberalism, the free market is an end in and of itself. Simply put the free market in place, and goodness results. Unlike  right wing neoliberalism, however, centrist liberalism sees the free market as a means to an end, which end can be a benificent government policy. It endorses government involvement in shaping the economy. It just insists on minimizing the involvement to shape the incentives by which the free market can arrive at socially fair results.  Further, unlike right-wing neoliberalism, centrist neoliberalism embraces the social justice ideals of old-fashioned midcentury US liberals.

The  confusion exists because the dominant faction in *both* US political parties adheres to  one of the two definitions  of “neoliberal.” The GOP is ideologically a right wing neoliberal party (although its actual policies are more truly aligned with crony capitalism than a free market, in my opinion). The Democratic party’s dominant ideology is centrist neoliberalism (although in terms of economic opinions the grass roots are probably dominated by left-wing populists).

The US is being wracked by political paroxysms because neither form of neoliberalism, as practiced by either of the two parties, has been able to “deliver the goods” to a majority of the populace, even if it has been good to the donors who have dominance in each of the parties.  It’s also probably why the most popular politician of any stripe in the US today doe not subscribe to either form of neoliberalism.  That would be Bernie Sanders.