Dead Men Left

Monday, September 26, 2005

Neo-liberalism: no longer quite the thing?

It is, I grant, a hopelessly optimistic title but it's usually better to call these things too early than too late. The signs are there: most dramatically, the obvious unwillingness of large numbers to tolerate further "reforms" upon their basic public services. In both the French EU referendum and the German election campaign, it was the weight of popular feeling against neoliberalism that decisively tilted election results to the left; and, dropping the parochialism, the ferocity of anti-privatisation, anti-"Washington Consensus" anger worldwide is scorchingly apparent.

But more than this, it is perhaps just about possible to detect certain divisions appearing amongst those confronted with that anti-neoliberal heat. Splits over Iraq and Washington's new assertiveness have been obvious to all; but there seems to be just the vague glimmering of a realignment on economic policy. It's hard to put your finger on it, but the whisperings against the neoliberal consensus that have been heard in academic circles appear to be gaining a traction elsewhere. Keynes is a name that keeps cropping up.

And why shouldn't it? Far from being the end of history, the period since 1989 and the supposed unwinding of public expenditure in the west have been marked by an incredible turbulence. Blindly continuing on the same course in such circumstances could be considered as enormously foolhardy.

The economic historian Karl Polanyi left a theory of modernity in which a pure free-market is gradually undermined by democratic (and other) pressures for an expansion of public goods and state provision; whilst he did not forsee that this process could be reversed, the desire to "roll back the frontiers of the state" over the last twenty to thirty years can be viewed as an attempt to do precisely that.

It has not been wholly successful: as a share of GDP, public expenditure was almost identical when the Tories left office in 1997 to what it was when they entered in 1979. The state has shifted its functions, but it has not much changed its size. Given that, there is no reason to expect the neoliberal style of governance to be permanent. In conditions of persistent economic weakness, the pressure for alternatives will grow.