Neoliberalism: a Liberal Pejorative
because capitalism doesn't, cannot work
If you have a feeling that, more and more, our liberal friends hate “neoliberalism,” you are right. If you look at La Wik, you read
Neoliberalism, also neo-liberalism, is a term used to signify the late-20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War…
The term has multiple, competing definitions, and a pejorative valence.
Here’s the report from google’s Ngram:
I would say that, valence-free, neoliberalism is a movement anchored in the so-called Austrian economics of Ludwig von Mises and Friedrich von Hayek that opposes the 1930-1960s elite consensus following the Great Depression of 1929-33 that capitalism doesn’t work very well unless closely supervised and regulated by government experts, and that capitalism needs counter-cyclical resort to deficit spending and money printing in response to economic depression.
The neoliberal consensus, on the other hand, argues that government intervention in the economy usually Makes Things Worse. And indeed that the policies of 1929 to 1940 made the Crash of 1929 worse, and failed to grow the western economy in the 1930s.
Crudely, neoliberalism echoes my Four Laws:
Socialism cannot work because it cannot compute prices (Mises).
The administrative state cannot work because the Man in Washington does not have the bandwidth to run the economy (Hayek).
Regulation does not work because “regulatory capture” (Stigler).
Government programs cannot work because you can never reform them
And apart from the Four Laws there is the basic dynamic of government that feeds its friends and starves its enemies. Which has nothing to do with growing the economy.
But let us read what La Wik has to say:
As an economic philosophy, neoliberalism emerged among European liberal scholars during the 1930s as they attempted to revive and renew central ideas from classical liberalism as they saw these ideas diminish in popularity, overtaken by a desire to control markets, following the Great Depression and manifested in policies designed with the intention to counter the volatility of free markets.
I would say that neoliberalism emerged among people that thought that the government response to the Crash of 1929 by the Keynesians and others Made Things Worse. And that “volatility”is usually caused by government trying to goose the market with interest rate policies.
Volatility is especially a problem after World Wars.
And, in addition, neoliberalism arose to combat the following conventional wisdom in western political classes.
One impetus for the formulation of policies to mitigate capitalist free-market volatility was a desire to avoid repeating the economic failures of the early 1930s, failures sometimes attributed principally to the economic policy of classical liberalism.
“Experts agree” that the previous paragraph is bunk.
Neoliberals believe, on the contrary, that:
The 1929 Crash was caused by the Federal Reserve tightening credit after goosing the economy earlier in the 1920s.
The 1929 Crash grew into a Great Depression because the Federal Reserve System did not act as “lender of last resort” in 1929-33, with thousands of banks failing each year.
Attempts like the 1933 National Recovery Act that tried to keep wages and prices from declining actually Made Things Worse.
The whole New Deal that spawned a ton of new programs that warped the market economy and Made Things Worse.
So, the point of neoliberalism as a pejorative is to reiterate the ruling-class narrative that the progressive liberals are the evolved and educated ones and that the neoliberals are really reactionaries trying to take us back to the 19th century.
Also, the notion of neoliberalism is a reaction to the Pinochet regime in Peru that implemented a bunch of economic reforms recommended by Milton Friedman and others.
When the term entered into common use during the 1980s in association with Augusto Pinochet's economic reforms in Chile, it quickly acquired negative connotations and was employed principally by critics of market reform and laissez-faire capitalism.
I know. The Horror. Because Pinochet’s reforms actually worked.
Really, whatever the Right proposes is immediately marginalized and stigmatized by the Left. Right now, progressives like Rep. Pramila Jayapal (D-WA) are calling the debt ceiling bill thusly.
This was a deal negotiated while the extreme MAGA Republicans held the American people hostage.
I tell you what, Rep. Jayapal: I can’t breathe. That statement is hate speech and I demand that you and your aides and staffers take a 5-day course on hate speech before June 15, 2023, or resign your office.
Whaddya think of that, sports fans?