Shared Terrain

Shared Terrain

The neoliberal order has been exposed as fraudulent, inefficient, and inequitable. Yet it hardly lies in the dustbin of history.

After a long journey through the academy and into public discourse, neoliberalism has finally been widely accepted as a description of post-1970s economic reality. But recent political developments, especially since the pandemic, have generated discussion about the possibility that something new is emerging.

We asked three historians whether we are witnessing the end of neoliberalism. Amy C. Offner and Gary Gerstle also responded.

—Editors

In a January 2018 Dissent forum, I argued that neoliberalism is a useful term for identifying and conceptualizing a “multifaceted configuration of power against which a diverse, democratic left could and should unite.”

A lot has happened since then. The COVID-19 pandemic revealed that our social safety net lay in tatters. Episodes of escalating climate crisis are unmistakable. Movements for black lives have identified racial capitalism—including neoliberal variety—as a root cause of racial injustice. The neoliberal order has been exposed as fraudulent, inefficient, and inequitable.

Yet despite some significant advances by the left, neoliberalism hardly lies in the dustbin of history. Here’s an update on the four core features of neoliberalism that I identified in 2018.

1) Neoliberalism refers to a set of coherent but flexible ideas centered on the belief that markets organize society best. Financial markets hold primary place in the neoliberal model of the market, where investment and investors play pivotal roles.

Despite the egregious failures and enduring crises of private-sector financial markets and institutions in recent years, neoliberal claims about their efficacy endure. The same goes for the neoliberal commitment to maximizing returns to shareholders.

The notion that we need what Mariana Mazzucato calls an “entrepreneurial state”—rather than laissez-faire financial markets—to fund large-scale, long-term investments for public purposes has gained traction during the Biden administration, influencing the 2021 Infrastructure Investment and Jobs Act and the 2022 CHIPS and Science Act. Even so, the president has repeatedly genuflected to Silicon Valley entrepreneurs and their financial backers. As long as they continue to wield power and influence within the White House, and as long as they keep up their campaign contributions to politicians of both parties, neoliberal dogma about private-sector financial markets will continue to inform economic policy. And it would seem that those financiers continue to dodge reputational damage.

Venture capitalists—those storied funders of innovation in neoliberal thought—neglected to fund COVID-19-related research or solutions for climate change in any significant way (apart from some crumbs for carbon capture). Private equity firms, for their part, worsened the pandemic in the nursing homes and hospitals they had acquired (consistent with a broader trend of PE plundering in the healthcare sector). They also took advantage of low interest rates to gobble Americans’ homes up at foreclosure auctions, which helped tip the United States into its current housing crisis by driving up home prices and converting entire neighborhoods into costly rentals.

None of this damaged the ability of VC, PE, and other managers of private market assets—that is, assets that are not listed on public exchanges—to raise money from investors. Fundraising soared to all-time highs in 2021 and 2022. These firms now sit on a stunning $3 trillion in “dry powder”—funds they haven’t bothered to invest (even as they collect management fees).

Meanwhile, corporations continue to prioritize stock buy-backs to boost the price of their shares, rather than making investments in research, development, production, or jobs. In 2022, S&P 500 corporations set a new record by repurchasing $1.26 trillion of their own stock. Pharmaceutical and biotech corporations’ buy-backs enriched executives at the expense of research and development for new vaccines and treatments for COVID-19 and everything else. American chip-makers now need federal support because they squandered $168 billion on share repurchases between 2010 and 2021. The major airlines, meanwhile, spent a whopping 96 percent of their cash flows in the last decade to repurchase their own shares, resulting in billions in bailouts during the pandemic. Pressure from unions may have prevented the airlines from resuming buy-backs once federally mandated prohibitions expired; railroad unions have launched a similar campaign after the Norfolk Southern disaster in East Palestine, Ohio, in February.

Finally, it’s possible that new approaches to monetary policy helped repel another Volcker Shock in response to the recent rise in inflation. Even so, as soon as wages—especially for low-paid workers—began to reverse their forty-year decline relative to asset prices, the Federal Reserve raised interest rates.

2) Neoliberalism is a range of policies and institutions that release markets from restraints that democracy might impose and that reconfigure the state and civil society in the image of the market. Neoliberal policy and institutions give priority to investment and investors.

Neoliberal tenets about financial markets, investment, and investors persist because these beliefs suffuse a century’s worth of economic policy.

Consider, for example, U.S. income tax policy. In the mid-twentieth century, white supremacists in Congress legislated pro-investment tax expenditures that cut away at the mildly redistributive social safety net built during the New Deal. Using tax breaks for investment and investors, Franklin D. Roosevelt’s foes and their successors quietly preserved the racial wealth gap in a manner that appeared race-neutral. Over time, these policies locked into place the asset economy that characterizes the neoliberal order. Today, the hidden welfare state created by tax expenditures, which predominantly benefits wealthy white households, totals $1.7 trillion per year—exceeding spending for any single government program.

Over the last forty years, U.S. households borrowed vast amounts of money to take advantage of these tax breaks to acquire homes, retirement portfolios, insurance policies, and savings accounts for healthcare and higher education. These leveraged, self-managed, individualized safety nets proved flimsy. When the inevitable financial crises hit in 2008 and 2020, the federal government chose to rescue corporations, not citizens. Pandemic-era assistance and income-support programs amounted to a mere fraction of the cost of bailouts and interventions by the Fed.  When they expire this fall, Americans will face the full force of the deep, structural problems in our economy.

3) Neoliberalism identifies a specific moment in the history of capitalism. During the period of “financialization” that began in the 1970s, claims over wealth yet to be produced exploded, infiltrated the lives of people across the world, dominated corporate decision-making, and transformed international relations and global governance.

The term neoliberalism references a period since the 1970s in which the financial sector and financial activity have predominated. Mapping the precise contours of financialization helps us to identify points of pressure in our current moment, which is dominated by a specific set of players: asset managers.

U.S. households invest their savings in mutual and pension funds. Asset management companies, in turn, invest funds pooled from households in stocks, bonds, and riskier private-market assets managed by PE, VC, and hedge funds. At present, the industry holds $98 trillion in global assets under management. Private-market assets represent $20 trillion of that total and generate half the industry’s revenue. BlackRock, Vanguard, and State Street together own an estimated 22 percent of the average S&P 500 company, up from 13.5 percent in 2008, according to Boston Consulting Group.

This matters tremendously for how power operates in and through financial markets. Asset managers’ voracious appetite for returns goads the share repurchases mentioned earlier. And collusion and monopolistic practices may occur when asset management firms hold seats on the boards of competing companies. As Americans’ entanglements with finance—as investors and as borrowers—intensified over the last four decades, it was asset managers who gained the upper hand within the corporations in which Americans invested, and the financial institutions that lent to them.

The Supreme Court’s decision to strike down Biden’s plan for student loan forgiveness threatens to trap students’ dreams for the future in a cage of lifetime indebtedness. For now, we’ll face continued pressure to cultivate ourselves as bearers of human capital while surveillance capitalists enrich themselves by commodifying our personal information.

In 2018, I argued that the term neoliberalism “acknowledges the deep connections between a great many . . . of our most pressing challenges.” It “can help us explore those connections empirically, and to challenge outcomes that are often taken for granted or perceived as inevitable.”

I still believe this. But I wonder, now, how much is at stake in the use or abuse of the term neoliberalism? More pressing, I think, is the need to integrate into our work the concepts—including racial capitalism and the political philosophy of care—that connect best with the social movements of our day. Only on shared discursive terrain can we build a winning political coalition that will put neoliberalism in its grave.

So what would the death of neoliberalism look like?

Congress would abolish tax breaks for income from investment, inheritance, and fund managers’ compensation. The Securities and Exchange Commission would outlaw stock buy-backs (as it did before 1982), or Congress would snuff out the practice with taxation. Federal, state, and local governments would fund public projects for climate repair and resilience, care infrastructure, and reparative justice for African Americans. The Federal Reserve would target interest rates to suppress asset-price inflation and to sustain full employment.

When all Americans enjoy better, more secure public options to achieve well-being and security, when children’s life chances are not determined by the wealth of their parents or grandparents—only then might neoliberalism pass into history.

Julia Ott is an associate professor in the history of capitalism at the New School in New York City. She is the author of When Wall Street Met Main Street (Harvard, 2011) and the upcoming Why Wealth Is White.