Home > Uncategorized > “The continuing tension between Neoliberal economics and democracy” – William R. Neil

“The continuing tension between Neoliberal economics and democracy” – William R. Neil

Today’s Neoliberalism had nearly silenced serious left dissent by the late 1990s, or successfully isolated it in remote academic corners.  Bill Clinton’s two terms in the 1990s are proof of that. And there is the continuing tension between Neoliberal economics and democracy: notice the desperate, barely concealed attempt by the Republican Right to shrink the franchise, using as one of its main levers the racial stigmas from “The Great Incarceration” and the yet to be proven accusations of voter fraud.

This political “shunning” of the left happens even in the supposedly liberal Ivy League. The late political theorist Sheldon Wolin (1922-2015), shortly before his death, in an interview with Chris Hedges, spoke of the silent treatment he was given by the faculty at Princeton University when he placed a copy of his new magazine “Democracy” on the faculty lounge coffee table. He was shunned. Perhaps they did not like where he was going with his last book, or could see it coming much earlier: Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism (2008). Here is that interview, Segment Seven from a nine part series at the RealNewsNetwork.

Modern economic thought, and practice, since the 1970s, has witnessed a growing crescendo of Market Utopianism – the “purer the better” – is still the rallying cry of the Republican Right, even in the wake of the sobering events of 2008-2009 and despite some professional economists making substantial dents in the pretentions.   And if you had any doubts about that, then you haven’t been watching the Republican Presidential Primary debates of 2015-2016, or the sheer destructive obstructionism of its behavior towards President Obama as shamefully displayed in Congress. In its deliberate jamming of the democratic process itself, the Republican Right echoes the behavior if not the ideas of the Fascist parties in the Parliaments of Italy and Germany in the 1920s and early 1930s, before they became outright dictatorships. 

Republican words do not mock the democratic process itself, but that is their effect, and it is clear that the intent is to de-legitimize the fairly elected President of the United States. Therefore it is very important for American readers to be clear about where Karl Polanyi thought the original Market Utopianism of the early 19th century would lead, and the connections he drew between the origins of classical economics and the collapse of the “long” 19th century in the 1930s: “In order to comprehend German fascism, we must revert to Ricardian England.”

Polanyi was far more broadly educated than most economists, perhaps an equal to Keynes. He was employed in Vienna in the 1920s as the “senior editor for the premier economic and financial weekly of Central Europe”– the Financial Times of its day and region. On the very first page of the opening chapter of The Great Transformation, Polanyi delivers his judgement on where the logic of mandating free markets as the dominant force in society would lead if not tempered with countervailing power:

Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.

That dilemma, the struggle over the nature of allowable interventions into the private market system to cope with its seemingly inevitable imbalances, gyrations, recessions and depressions, is still with us. There were prominent claims, however, in the late 1990s, that recessions were gone forever, the perpetual growth machine having been overseen by Alan Greenspan, and he was confident that the new financial derivatives would spread the risk to those who could best bear it. Greenspan was one of the members of Bill Clinton’s “Committee to Save the World” along with Robert Rubin and Larry Summers. During that time they were Utopians and would be Prometheans.

William R. Neil


  1. July 18, 2016 at 11:11 am

    The ‘free market utopia’ is not just an ideology but a product of the market itself: an act of the market leaders taking care of their own business, for their own calculated advantage. The market, the free market, is now almost always ‘wrong’, morally wrong and ruthless toward the weak and unfortunate, sometimes ruthless toward entire nations and economies, but whether we approve of its ideology or not is immaterial: the market rules, the capital rules, and it implicitly dictates economic policies for the entire world. Voters, politicians, workers, can complain, can strike, can even make radical policy changes, work for real social justice, equality and compassion, open borders to refugees, put into law a generous minimum hourly wage, even introduce universal basic income, but the market will mercilessly but still ‘implicitly’ punish such moral frivolity; not because it does not approve of any of these policies on moral or political grounds (it doesn’t care one way or another), but because such changes are regarded as ‘bad for business’, or, at least, because no business-case was presented to the market to convince it that any such changes would be good for business. The final arbiter is always the market, and behind it the capital; not kings and queens, not politicians, least of all the voters.

    We have perhaps reached the time in history that in order to make morally motivated change in any area that would affect the market it is not sufficient to protest, strike or even fight, but to have a bulletproof business case that the desired change is in fact good for the markets.

  2. graccibros
    July 18, 2016 at 5:29 pm


    You’ve raised some tough issues here; let me try to address the ones that jump out at me. Your interpretation of where “capitalism” is today, in a harsh, uncompromising mode under Neoliberalism may well be right; your writing here reminds me of Richard Smith’s “Green Capitalism: The God that Failed,” in that the reformist green capitalists, like Paul Hawken, couldn’t carry the day against the forces personified by the Koch Bros.

    Going deeper, and trying to include the German bankers “soul,” here (some might call that an oxymoron) I strongly suspect that after the “rational” discussion of economic theories and models, what it rests upon is something deeper, darker, the sources of power even in the “democratic West,” which run to technocracy and its relationship to oligopoly. The variations on the true nature and drivers of capitalism are without end; I am a student of the theories and they surely surfaced in these pages in the wake of Piketty.

    Polanyi was bound to disappoint more doctrinaire leftists, that is to say various schools close to the Marxist original in several important ways: political outcomes, while taking class into account, don’t have a heroic role pre-ordained for the proletariat, although he doesn’t close the door on that happening; he sees the drivers of events as much broader: natural catastrophes, rise and fall of empires, failed overseas sallies…and he notices how often in Western Europe in the 19th century there have been messy cross- class alliances: industrialists and workers joining together under the double movement to support tariffs; rural agrarians and peasants siding with Junkers and other landed elites to oppose urban workers; more relevant for American troubles today, which way the German middle class, small businesses and civil servants went in the 1920’s and 1930’s…and let’s bring it up to date today in the US Presidential election: Trump’s cross class alliances…significant contribution from the old Reagan Dems, alienated blue collar workers, esp. men, unhappy with the liberal cultural programs of the Democratic Party…tired of being pushed around by professional economists singing the praises of “free trade…” and immigration…and of course, tired with the corporate establishment which also rules the Republican party…messy world according to Polanyi.

    Coming from some contemporary discussions with those to my left on Polanyi, because interest in him is rising (see Dissent and Jacobin magazine recent issues), there is not clear cut resolution or a heroic agent for revolutionary change in the double movement…it’s a constant reworking of alliances with no guaranteed outcomes for the left, as the 1930’s proved in Germany, Italy and Central and Eastern Europe.

    I see Yanis Varoufakis’s movement DiEM25 as embodying this: surprisingly, perhaps, he doesn’t think “social democratic” Europe as it stands today is going socialist…has to win a more participatory democracy vs the technocratic capitalists first…and this seems dicey enough: Hollande’s labor policies are proving him correct…as did his betrayal (my term, not his) by Syriza in Greece also demonstrate…

    A fair question: can the moderation of Polanyi type social democracy generate enough political intensity to overcome the European Right? After all Polanyi wrote about the religious intensity, fanaticism, of the liberal economists who launched the Great Transformation, 1790-1840. Interestingly enough, Varouvakis, along the same lines, has read, noted a favorite book of mine for understanding the US: James Marone’s “Hellfire Nation: The Politics of Sin in American History,” suggesting that he understands some of the roots of the German (Protestant) banking mind if not the foundations of current day Neoliberalism. The neoliberals are detached, secular, reformist even on the social plane – until you come to left labor market reforms, when it becomes austerity itself: work longer for less, that’s the cure.

    If you’ve been listening closely to the sermons in the wake of the Black Lives Matter-Police shootings over the past two weeks, you’ll be reminded of Marone’s thesis: that the dominant outlook in America has been that when things go wrong, especially economically wrong, who gets the blame: the individual or the system…and most of the time, it’s bad people, hence the calls today to assess and change what is in men’s hearts…not the call by Michelle Alexander to look at the system she has named “The New Jim Crow.”

    For our economic audience, that self-help vs. change the capitalist system is really illuminated by Polanyi, Marone, and Varouvakis’ work…

    Again, a fair question: can the left today, Europe and America, come up with the ideas and the intensity – but not the fanaticism – to overcome the Right? I’ll leave it at that…

  3. graccibros
    July 18, 2016 at 5:36 pm

    Forgive me if I dodged “the bullet” proof case you suggested: we only succeed on the left if we dress our reforms up in what’s good for markets, acceptable under their ideology? The answer to that jumps out at me: global warming remedies tried and rejected 2009-2010 when Obama and the Dems had a majority in both houses: both a complex, market and Goldman Sachs friendly carbon trading scheme rejected (nothing more than a disguised tax) and also a direct carbon tax; both violated secular economic religious commandments on the Right: no new taxes…no large role for gov’t (hypocrisies of course abound: what built and maintains the prison and military industrial complexes?)…

    • July 19, 2016 at 1:25 am

      Let me clarify this point. Yes, the market has the power to enforce its ideology, or rather, the net affect of all underlying ideologies, conceptions of value etc., no matter how irrational these are and irrespective, in the short term at least, of how much an individual or a group disagrees with this net effect. But in the long term the ideological and value commitments of the market do change: they are changed precisely by the dissenting voices, by new technologies and natural conditions, by new (or old) criteria of rationality as these inexplicably, at times, become commonly accepted. The market is a slow learner but it does learn.

      Now putting this in perspective, intellectualising social and economic problems is not futile; resistance and dissent are not futile, our subjective value commitments are not futile: they make their mark by becoming part of the subjective conditions that determine the objective market. We are often disheartened because what we regard as great ideas, superior rationalities, do not have immediate effect. Sometimes ideas do perish without a trace but sometimes they take hundreds of years or ridicule before they are accepted, before they are corrupted again, a so the life goes on…

      • graccibros
        July 19, 2016 at 2:43 am

        Some real wisdom in your last paragraph Michael.

  4. July 19, 2016 at 5:00 am

    If we look at neoliberal economics as a mass movement perhaps we can gain some insights. All such movements create fanatical devotion in adherents and a sense of solidarity in thought and action that is seldom seen elsewhere. Adherents are fanatics and will protect the movement in every situation. Adherents “believe” in the movement’s message and will ensure its spread even at the risk of their lives, families, and well-being. Adherents are completely intolerant of all ways of life and thought that differ from or conflict with the movement. All movements demand both blind obedience and blind faith. Put all this together and the adherents of mass movements show remarkable levels of activity, perseverance, and savaging of opponents, actual and potential. Busy worker bees defending and expanding the realm on the queen bee. One more thing about mass movements. They always begin with fanaticism. Fanatics put forward certain thoughts or ways of life against almost universal opposition but never back away, even in the face of threats, pain, or loss of face. If the movement succeeds these first fanatics become “founding agents” and heroes.

    All this sounds familiar to me. It’s all found in the history of neoliberal economics. How does one change or if it’s your inclination subvert a mass movement? The most effective method is to fraction the movement. In simple terms create distrust and dissension among the movement’s adherents. Destroy their faith in and commitment to one another and thus to the meaning and mission of the movement. But this might have an unfortunate and dangerous side effect if applied to neoliberal economics. Since such economics is at the base of most modern economies destroying it this way could produce economic chaos across the world. Are we willing to pay this price to rid ourselves of this movement’s catastrophic impacts on the world and people?

    • July 19, 2016 at 6:27 pm

      The first paragraph of this is rubbish. Commitment doesn’t have to be fanatical, though to turn it into a mass movement it is probably necessary to enthuse the roughly half the population who, like children, make choices on the basis of how they feel about what is said or written rather thinking about the reality they can see.

      G K Chesterton put this rather better. “The devotee is entirely free to criticise; the fanatic can safely be a sceptic. Love is not blind: that is the last thing it is. Love is bound; and the more it is bound, the less it is blind”. To be bound is to have made a commitment, not to be swayed by emotions.

      The second paragraph is entirely negative. If fractioning is they way to wreck things (and in Britain we have been seeing this at work in the political field), shouldn’t the moral drawn be the need to insist we are all from the same human family: to focus on what we can do to support each other rather than the chaos which could ensue if we don’t allow ourselves to be governed by fictitious markets?

      If I say no more for a week or so it is probably not because I have died, but because I’ve gone abroad (to Scotland?) for a family wedding. Cheers!

      • July 19, 2016 at 7:13 pm

        Agreed that not all commitment is fanatical. But some is. I experienced this personally for many years. One part of my work was to consider the input of citizen organizations. Most were not fanatics. But about 15% were. They lived all the things I list, and few I did not. And they don’t give a flip about your opinions or Chesterton’s of them.

        Fractioning mass movements through internal dissension and mistrust is one potential way to “wreck them.” Your alternative might work as well. But after working with and studying such movements in energy for over 30 years, the empirical evidence I have speaks against your alternative being broadly effective.

        Enjoy the wedding!

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