(2024-06-11) Yglesias What Was Neoliberalism

Matthew Yglesias: What was neoliberalism? I think the closest thing to its current usage dates to the late 1940s and is captured by a 1951 Milton Friedman essay titled “Neo-Liberalism and its Prospects.”

a world war, a Great Depression, and another world war, all of which involved massive levels of state intervention in the economy

One school of thought was that while all these measures were adopted as a means of wartime necessity, it was good that they happened and the war was just laying the groundwork for the construction of a better society over the long haul.

“Neo-liberalism” was essentially the opposite of this optimistic view of postwar political economy. Neo-liberalism held that we should bring back classical liberalism in a somewhat new form.

Western economies grew really fast in the 1950s and 1960s, so there wasn’t much political momentum for a “back to liberalism” project at that time.

But inflation, which had been slowly-but-surely rising in the sixties, skyrocketed in the 1970s. Multiple oil shocks brutalized western economies

Ronald Reagan’s election (along with Margaret Thatcher’s in the UK) signaled a new era of economic policy — a neoliberal era — that people are now very excited about overthrowing. But what was that era like?

Did neoliberalism even happen?

Is it true that since 1974, policy debate in the United States has been dominated by a “growth-at-all-costs” brand of “free-market fundamentalism”?

it’s pretty clear that environmental regulation is a lot stricter in 2024 than it was in 1974

Land use regulation — which was explicitly called “growth control” when it was new — has grown dramatically stricter since the seventies. The idea that for the last 50 years we've been on a manic quest for growth is confused.

pretty clearly true that the overall scope of regulation is larger in 2024 than it was in 1974.

I do think it’s true that there’s been a clear vibe shift around neoliberalism over the last 50 years

Even more strikingly, Bill Clinton seemed to accede to the vibe shift. He promised that Democrats were now “New Democrats” and that “the era of big government is over.”

However, the era of big government did not, in fact, end.

Since Bill Clinton’s time, Social Security and Medicare has grown due to an aging population. Medicaid has expanded several times

while Joe Biden has not done nearly as much as Barack Obama to expand the welfare state, he absolutely contested Reagan and Clinton’s assertion on the level of vibes more vigorously than Obama did — his administration contends that the government should be helping with all kinds of stuff

Clearly a lot of things changed after the Reagan Revolution.

Notably price regulation, which used to exist across many sectors of the economy (airfares, interest rates at banks, natural gas, trucking fees), largely went away

Labor unions stopped having bipartisan support. Antitrust regulation adopted a new set of standards. Financial regulation stopped trying to deliberately promote fragmentation of the industry.

I think he understates the effect of financial deregulation/financialization, other anti-trust collapse, and never even mentions marginal tax rates dropping for the rich...

And the Trump and Biden administrations have in a real way mounted a kind of challenge to this neoliberal order

But I do think it’s notable that the people leading the charge against “neoliberalism” are often tilting against things that literally did not happen

The primary rhetorical function of invoking a decades-long neoliberal consensus is to elide the policy differences between George W. Bush and Barack Obama (or Ronald Reagan and Bill Clinton), as if it’s inconsequential that one man tried to privatize Social Security and the other delivered Medicaid to millions of poor families. Of course, there really are things they agreed on, and it’s fair to point that out and critique it. But the move from specific arguments to the generalized “neoliberal” bogeyman is deliberately sloppy, because its purpose is to make two governing agendas that were actually quite different sound the same

For the next post in this series, I’m going to talk about trade policy, where there really was a consensus that has now been disrupted.