If post-neoliberalism is in trouble, we're all in trouble

Markets can't do the job and our politics aren't fit for purpose

Dan Drezner has a piece in Reason, arguing that the victory of post-neoliberalism is premature.

The claims of a "post-neoliberal" paradigm rest on the belief that there is a tradeoff between resilience and efficiency, between strategic autonomy and globalization. But it seems increasingly clear these values are not mutually inconsistent. The best hope for economic resilience might come not from post-neoliberal policies but from neoliberal ones.

He kindly cites my and Abe Newman’s arguments about weaponized interdependence, and I don’t disagree with the specifics of what he says about our work. But I do have a quite different understanding of the broader topic.

In part, that’s because I’m sort-of part of the coalition that he’s taking on. I’m affiliated to a center that is funded as part of the Hewlett post-neoliberalism initiative that Dan describes (albeit one that is semi-detached from the broader agenda) and I’m friends or friendly with many of the people who he is disagreeing with. But the bigger disagreement stems from a different understanding of what neo-liberalism was, and hence of what the problems of a post-neoliberal world are likely to be.

Neo-liberalism is a complicated and contested word, covering a multiplicity of different ideas and policies. The definition that I think is most useful in this context is that neo-liberalism is the ideological claim that “markets know best.” In other words, neo-liberalism suggests that we should prefer market mechanisms as the best means of solving problems, both because markets are more efficient, and because they are better at discovery and entrepreneurialism (these arguments stem from different traditions in economics, one associated with Milton Friedman, and the other with Friedrich Hayek, but in practice they tend to blur into each other).

In practice, as Quinn Slobodian has repeatedly pointed out, this free market evangelism usually goes hand-in-hand with a politics of popular restraint, and regularly lurches into out-and-out authoritarianism. Many neo-liberals believed that dictators like Pinochet could be good, so long as they maintained economic liberties. But the rhetoric of markets remains crucial to neo-liberalism - especially when it comes to global politics. Hence, the association between neo-liberalism and the kind of globalization that we’ve had for the last couple of decades, which combines movement of goods, capital and intellectual property with institutions that constrain certain kinds of state action.

I see post-neoliberalism less as a coherent alternative body of thought, than as the claim, variously articulated by a very loosely associated cluster of intellectuals and policy makers, that markets should not be the default solution. This belief is spurred in part by the visible domestic consequences of the market knows best paradigm - which plausibly helped pave the way for Trump’s election, through hollowing out large chunks of the economy and greatly increasing inequality. Dan may be right that the economic consequences of the “China shock” have petered out. The domestic political consequences - including a new political cleavage between those who have done reasonably well out of the last few decades, and those who have not, are still there for all to see.

But there is another reason why the market-knows-best approach is in trouble . Markets provide a kind of general guidance mechanism for increased productivity (with gains often distributed very unequally), consumer-focused innovation and certain kinds of resilience. This justified globalization, and some neo-liberals, like Tom Friedman, even argued that it could make national security problems irrelevant. As the countries of the world became increasingly economically interdependent, they would have no reason to go to war against each other.

Such claims turned out not to be true, as Russia’s invasion of Ukraine demonstrated. And as Abe and I have argued in the piece that Dan talks about, big powers such as the US have ‘weaponized’ interdependence, turning other countries’ dependence on global networks into a system of coercion.

Where Abe and I completely agree with Dan, is that we do not want to return to a Cold War world, where national security worries remake the global economy in their own image. Abe and I have a very long piece that came out in Foreign Affairs a few months ago, making this case.

But - and the but is very important - neo-liberalism doesn’t have answers either, now that the Thomas Friedman vision of globalization has blown itself up. As Adam Smith recognized back in the dawn of economics, markets are not what you want to turn to for national security decision making (even if the goods they provide can have national security benefits). “Comrades - we must market harder if we are to return to a more prosperous and secure global order” is not a winning strategy. And none of this is even to begin to get into the problems of climate change - a whole other complicated mess that neo-liberalism is not so great at dealing with.

In this sense, we are all post-neo-liberals now, almost certainly including Dan. Nobody who ought be taken seriously argues that we can delegate national security, or a variety of other problems, to the unimpeachable wisdom of global market mechanisms, and not worry further about them. Nor can national security problems be neatly separated from market governance as people once believed. Once people have woken up to the risks of a weaponized economy, there isn’t any going back. Matters which were thought be squarely in the domain of markets, turn out to be in the domain of politics.

But - and this too is a very important but - post-neo-liberalism is hard. Figuring out how to reconcile national security needs with economics is an inherently complex problem, and it mostly isn’t the kind of complexity that can be delegated to markets and forgotten. The decisions that have to be made are fundamentally political decisions, with complex and uncertain trade-offs. So how do we even begin to think about making them?

The longwinded version of my answer to that is a talk I gave at the Long Now Foundation back in September. The much shorter take is that we have two problems.

One is the horrendous complexity of the intersecting challenges that we confront - what Adam Tooze has called the ‘polycrisis.’ Security concerns choke up supply chains, which make it harder to tackle climate change, which leads to people flee parts of the world that are increasingly uninhabitable, making politics more toxic in the places that see increased immigration and so on, each problem potentially making other problems worse.

The other is the inadequacy of the mechanisms that we have to address these mutually reinforcing problems - not just markets, but government decision making and politics too. Perhaps there may be solutions that are mutually reinforcing too, but identifying them and implementing them is hard in principle, let alone in practice.

Figuring out how to match solutions with problems would be difficult, even in a world where our politics weren’t as completely fucked up as they are. But it’s the challenge that we have to confront. I have a lot of sympathy with the Biden administration’s efforts to solve these problems of economic policy. I’m skeptical that many of their measures will work, but I don’t have obviously better suggestions to make. And some at least of their apparent disorganization - doing lots of things at once in the hope that some will stick - is what you ought to do in a complex environment where you haven’t much sense of what causes what.

More generally, post-neoliberalism isn’t and shouldn’t be a simple reverse image of the system that it has to remake. It can’t be, not least because it has to build in part on what is already there. But returning to neo-liberalism seems to me to be an utterly untenable political project, and I am guessing it is not one that Dan would want to sign onto either. We are in a post-neo-liberal world, like it or not, and our ideas and policies ought be directed toward making sense of it.