Conjuring Up the Neoliberal Bogeyman

By Samuel Gregg

Sunday, March 13, 2022

 

Who’s a neoliberal? Apparently that is an important question these days, given that two major American philanthropic foundations — the Hewlett Foundation and Omidyar Network — regard “neoliberalism” as a menace to civilization: So much so that Hewlett and its partners recently gave a $40 million gift to Harvard and MIT so that they can “help rethink and replace neoliberalism and its assumptions about the relationship between the economy and society.”

 

“For more than forty years,” according to the press release announcing the grant, “neoliberalism has dominated economic and political debates, both in the U.S. and globally, with its free-market fundamentalism and growth-at-all-costs approach to economic and social policy.”

 

That language reflects the extent to which the Left has upped the rhetorical ante in recent years. Left-leaning thinkers have blamed neoliberalism for things ranging from the aftermath of the second Iraq War to some of the worst forms of social dysfunction in America today as well as its high incarceration rate. Neoliberals, they insist, are all about making the world safe for multinational corporations to do whatever they want whenever they want wherever they want.

 

Significantly, some people on the right now agree with much of that diagnosis. We are informed, for instance, by American Compass that neoliberalism has atomized society and regulated some people into welfare dependency. The symptoms of neoliberalism’s influence include “the concentration of wealth in fewer hands,” “declines in family and community well-being,” and “rising ‘deaths of despair.’”

 

That’s quite a rap sheet. But like accusations of “market fundamentalism,” labeling a position as “neoliberal” generally indicates that its user is more interested in playing rhetorical games and making power plays than in accuracy and facts. This starts to become evident when we examine the history of the term.

 

The phrase neoliberalism has been traced as far back as the late 19th century. But it first emerged in academic usage in the 1930s, when several European classical-liberal scholars decided that proponents of markets had to think more deeply about the preconditions required by market economies and free societies more generally. German economists such as Wilhelm Röpke, Walter Eucken, and Alexander Rüstow (the intellectual architects of the 1948 German economic miracle), the Austrian economist F. A. Hayek, and the French economic thinker Jacques Rueff (himself the author of France’s economic liberalization in 1958) were concerned that 19th-century liberalism had taken several wrong turns and needed refitting for new challenges.

 

By that, they didn’t mean abandoning basic free-market propositions such as the importance of free prices, free exchange, comparative advantage, trade-offs, private property, etc. Instead, they believed that 19th-century liberal economists had paid insufficient attention to the cultural, legal, and political foundations of market economies. This, they argued, had helped create space for collectivism and statism to flourish on the left and right.

 

Neoliberalism was the phrase occasionally employed by these mid-20th century thinkers to describe their agenda for addressing the lacunae in market-liberal thought. They wrote at length about these issues in books such as Eucken’s Foundations of Economics (1940/1950), Rueff’s L’ordre social (1945), and the text probably most familiar to American readers, Röpke’s A Humane Economy: The Social Framework of the Free Market (1958/1960).

 

In other words, these mid-20th-century market liberals did not posit that markets solved all problems, let alone insist that economic liberty and economic growth were absolutes. Yes, they did maintain that market economies were the most optimal economic arrangements. They also remained skeptical of the merits of interventionist policies and were fiercely critical of the economic and cultural effects of welfare states. They were, however, about as far from a mindset that viewed the world entirely through an economic lens as can be imagined. Some of their writings contain far more reflection on cultural, ethical, and historical topics than on economics.

 

Moreover, far from being apologists for large business, people like Röpke, Eucken, and Rueff had no time for companies that cultivated close relationships with politicians and regulators in order to shut their competitors out of the marketplace. To favor a market economy, they understood, is not the same as being pro-business.

 

For the most part, those who deploy the phrase “neoliberal” pejoratively today skip over these details. Over time, their descriptions of neoliberalism and its agenda have steadily taken on more sinister hues.

 

Between 1980 and 2000, for example, neoliberal was the generic label applied to those who worked during the Reagan and Thatcher years to try to wind back the highly interventionist policies that had dominated post-war Western economies. Over the past 20 years, that portrait has given way to the type of imagery conjured up by Hewlett and their allies: one in which neoliberalism is seen as a highly malevolent force, directed by a “neoliberal thought collective” that operates in the shadows because it knows that neoliberalism’s agenda of limitless economic freedom and growth-at-all-costs would never be accepted if presented in the open.

 

At this point, you start to realize that neoliberalism operates as a catch-all phrase for the Left — and now parts of the Right — to describe everything that they think is wrong with the world in general and America in particular. Too much economic freedom and neoliberalism’s growth fetish, they insist, have led America to the edge of political, social, and economic catastrophe.

 

Unfortunately, that claim is at odds with some important facts. The Heritage Foundation’s 2022 Index of Economic Freedom, for example, illustrates that, globally speaking, the world presently hovers on the very edge between being “moderately free” and “mostly unfree.” That has been the case since the index’s beginning in 1995.

 

This suggests that the “neoliberal thought collective” hasn’t been ruling the planet quite as comprehensively as neoliberalism’s denouncers insist. Indeed, it is difficult to identify a single government in the world today committed to comprehensive economic liberalization.

 

As for the United States, the same index shows a less-than-sunny picture for economic freedom. Though designated as “mostly free,” America is less economically free overall than it was in 1995 and has been on an overall downward trajectory since 2009. America has also dropped down the country rankings for economic freedom to No. 22 in the world, and “fallen from the upper half to the lower half of the ‘Mostly Free’ category.” Though America remains relatively strong in levels of business freedom, there have been declines in important areas such as trade freedom and labor-market flexibility.

 

Then there is the size of government. In America, the index states, “Government spending has amounted to 38.9 percent of total output (GDP) over the past three years.” That doesn’t exactly sound like the exemplar of a neoliberal night-watchman state to me.

 

Labels like “market fundamentalist” and “neoliberalism” no doubt function well as clickbait and for virtue-signaling purposes. But their use today is also usually a sign of lack of interest in facts and a desire to stigmatize those who persist in highlighting the deep flaws with extensive government intervention. By all means, we should all be willing to rethink our economic presumptions. That is one way in which knowledge grows. But demagoguery is antithetical to the pursuit of truth. Those who insist on invoking the neoliberal bogeyman ought to remember that.