Last week Guardian reported on new research conducted by economists at Cambridge University concluding that economic policies pursued since 1979 have failed to “boost growth.” The policies are described as “lower tariffs and income taxes, free movement of labour, limited legal immunity for trade unions, privatisation and light-touch business regulation.” The last item in the list follows the neoliberal mythology of the small state which gives the impression that regulation is curbed under neoliberalism when, in fact, state regulation of markets has steadily increased since the late 70s. In any case, this analysis seems to rest on a profound misunderstanding of what neoliberalism was meant to achieve.
David Harvey defines neoliberalism as “a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites.” Neoliberalism was quite successful in restoring the conditions for corporate profitability against the interests of the working class. This was done through the suppression of real wages, expansion of finance, and the global reorganization of production. It can only be described as a failure if one misunderstands its purpose or compares it to the post-war period of embedded liberalism. As Damien Cahill writes in his book The End of Laissez Faire: On the Durability of Embedded Neoliberalism:
The post-World War Two era was a unique period in the history of capitalism that delivered unprecedented high and sustained rates of economic growth in the advanced capitalist economies, and in the capitalist world economy more generally. Indeed, such unprecedented growth is the reason it has often been labelled the ‘golden age’ of capitalism … This is highlighted by Angus Maddison’s historical data on GDP growth which show that average annual world GDP growth during the golden age (1950–1973) was higher than at any other time in world history. Moreover, the same is true of the Western European economies. Crucially, however, in both of these cases average annual growth in the neoliberal era was higher than at any period prior to the golden age. While GDP growth in the USA during the neoliberal era was a little less than one percentage point lower than its average during the golden age, this was still a higher rate of growth than in the period 1913–1950 which preceded the golden age.
Only if we designate the post-war period of embedded liberalism as the benchmark and focus solely on economic growth can we pronounce neoliberalism a failure. This would involve ignoring its class component entirely, which surely has to be central in any understanding of the term. Christian Parenti, for example, wrote of the last 60s and early 70s as a time of “disobedience, chaos, ‘counter-planning,’ malingering, and huge, militant wildcat strikes” by labor. It was, he writes, “the first time since the Depression the American business class felt its back pressed against the wall.” Consider where the labor movement is after almost four decades of neoliberalism and then reflect on whether the latter can be called a failure.