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Rough beasts slouching towards utopia, by Stable Diffusion via NightCafe
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John Quiggin: The slow demise of neoliberalism: a€~Like most political terms, a€oeneoliberalisma€n 
is used so loosely that many people have suggested ita€™ s no more than a general pejorative. But 
the ideas and institutions that emerged from the economic chaos of the early 1970s undoubtedly 
differed in fundamental ways
from those of the decades after 1945 and clearly deserve their own name. That these ideas and 
institutions have lost much of their power is just as obvious, even if nothing coherent has emerged 
to replace them.

That, at any rate, is the conclusion reached both by Brad DeLong in his new book, Slouching Towards 
Utopia: An Economic History of the Twentieth Century, and by Sebastian Edwards in his forthcoming 
book, The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism. 
Importantly, neither DeLong nor
Edwards can be numbered among the neoliberalsa€™ irreconcilable opponents. Both embraced 
neoliberalism for many years, though in different forms.

The Chile Project, of which Edwards was a generally sympathetic observer, ranks with Thatchera€™ s 
Britain as the paradigmatic case of what Ia€™ ve called a€oehard neoliberalism,a€D which combines 
authoritarianism and radical free-market policies. The success of the a€oeChicago Boysa€D a€” the 
economists who have
long dominated the Chicago School of Economics a€” in persuading the Pinochet dictatorship to 
implement market-driven policies that were largely sustained under subsequent democratic 
governments. They included a privatised pension system, writes Edwards, along with a€oeopenness and 
globalisation, the fiscal rule, the
taming of inflation, and austere health, education, and environmental policies.a€D


Rough beasts slouching towards utopia, by Stable Diffusion via NightCafe
Subscribe now

John Quiggin: The slow demise of neoliberalism: a€~Like most political terms, a€oeneoliberalisma€n 
is used so loosely that many people have suggested ita€™ s no more than a general pejorative. But 
the ideas and institutions that emerged from the economic chaos of the early 1970s undoubtedly 
differed in fundamental ways
from those of the decades after 1945 and clearly deserve their own name. That these ideas and 
institutions have lost much of their power is just as obvious, even if nothing coherent has emerged 
to replace them.

That, at any rate, is the conclusion reached both by Brad DeLong in his new book, Slouching Towards 
Utopia: An Economic History of the Twentieth Century, and by Sebastian Edwards in his forthcoming 
book, The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism. 
Importantly, neither DeLong nor
Edwards can be numbered among the neoliberalsa€™ irreconcilable opponents. Both embraced 
neoliberalism for many years, though in different forms.

The Chile Project, of which Edwards was a generally sympathetic observer, ranks with Thatchera€™ s 
Britain as the paradigmatic case of what Ia€™ ve called a€oehard neoliberalism,a€D which combines 
authoritarianism and radical free-market policies. The success of the a€oeChicago Boysa€D a€” the 
economists who have
long dominated the Chicago School of Economics a€” in persuading the Pinochet dictatorship to 
implement market-driven policies that were largely sustained under subsequent democratic 
governments. They included a privatised pension system, writes Edwards, along with a€oeopenness and 
globalisation, the fiscal rule, the
taming of inflation, and austere health, education, and environmental policies.a€D

As the examples of Pinochet and Thatcher suggest, hard neoliberalism has nothing in common with the 
concern for freedom of speech that motivated John Stuart Mill and other liberal thinkers. But it 
was consistent with the strain of classical liberalism represented by the Austrian-born economist 
Friedrich Hayek, for example,
who was more worried about preserving individualsa€™ freedom of action, particularly by minimising 
government interference in property rights.

The a€ceneoa€D in hard neoliberalism reflects how the successes of social democracy in the 
twentieth century permanently discredited the kind of classical liberalism that would tolerate mass 
poverty alongside massive wealth. Neoliberals accepted the need for social services to raise most 
people above the poverty line. Provided
that goal was achieved, they argued, there was no need to be concerned about political and economic 
inequality.

DeLong is, or at least was, a proponent of what Ia€™ ve called a€cesofta€D neoliberalism, which 
derives from the distinctive US use of the term a€oeliberal.a€D Soft neoliberalism was epitomised 
by the Clinton administration, in which DeLong served as deputy assistant treasury secretary under 
Lawrence Summers. Outside
the United States, soft neoliberalism was often described as the Third Way. Its central theme was 
the idea that the goals of social democracy (or liberalism in the US sense) could best be achieved 
by embracing market-oriented reforms, and particularly financial deregulation, while maintaining a 
generally redistributive welfare
state.

In both hard and soft versions, neoliberalism reached its high point in the 1990s. Chile 
experienced severe economic crises under Pinochet, but the end of the dictatorship in 1990 was 
followed by a decade of strong economic performance. The governments™ s most distinctive reform, a 
pension system based on individual
accounts, was seen as a model by George W. Busha€™ s administration in the United States.

The triumph of soft neoliberalism in the United States was announced in hyperbolic fashion by 
Francis Fukuyamaa€™ s The End of History and the Last Man and popularised in airport bestsellers 
like Thomas Friedmana€™ s The Lexus and the Olive Tree. The stockmarket boom of the 1990s, roughly 
coinciding with
Clintona€™ s term as president, seemed to promise endless prosperity.

Particularly notable were a series of corporate-friendly free-trade agreements that contained 
investor-state dispute settlement mechanisms allowing corporations to sue governments for policy 
decisions harmful to their profits. Even more striking was the embrace of the financial sector, 
symbolised by the appointment of former
Goldman Sachs chairman Robert Rubin as treasury secretary.

Neoliberalisma€™ s weaknesses became more evident from the late 1990s on. A series of financial 
crises (the Asian crisis of 1997, the Long-Term Credit Management bailout in 1998 and the dotcom 
bust of 2000) prefigured the massive financial disaster triggered in 2008 by the global financial 
crisis, which continued for most of
the next decade.

Having recovered somewhat in the 1990s, productivity growth slowed to a crawl. DeLong marks 2010 as 
the year when the a€oelong twentieth centurya€D of technologically driven growth came to an end. As 
he observes, a€oeThe years following 2010 were to bring large system-destabilising waves of 
political and cultural
anger from masses of citizens, all upset in different ways and for different reasons at the failure 
of the system of the twentieth century to work for them as they thought that it should.a€D

In Chile, meanwhile, the much-touted pension scheme had proved to be a flop, with workers losing 
much of their savings to management fees. A series of reforms have gradually moved the system back 
towards a more traditional public pension scheme. Moreover, while absolute poverty fell, 
broad-based prosperity didna€™ t
result. Those at the top of the income distribution captured most of the gains.

Edwards sees the protest movement that launched in 2019 as the beginning of the end for Chilean 
neoliberalism. Taking account of global trends, DeLong marks 2010 as the year when the a€oeslouch 
towards utopiaa€D slowed to a crawl or stopped altogether. Either way, neoliberalism had gone from 
unchallenged hegemony at
the turn of the twenty-first century to full retreat twenty years later.

So far Ia€™ ve focused on the period of neoliberal dominance that began with the breakdown of 
Keynesianism in the early 1970s. This framing exactly fits Edwardsa€™ s book, which begins with the 
Chilean military coup of 1973. For DeLong, though, neoliberalism was the second act in a drama that 
began in the late nineteenth
century. During that hundred-year first act a€” about which he writes as an economic historian 
rather than a participant a€” economic life was utterly transformed for the majority of people on 
the planet.

The story begins in Western Europe and its offshoots, most importantly the United States, and it is 
on the latter that DeLong focuses most of his attention. He chooses 1870 as his starting point 
because that was the year when Soeinvention was inventeda€D with the creation of industrial 
research laboratories. These enabled
inventors to focus on innovation rather than an endless, and often futile, effort to commercialise 
and license their inventions. Surprisingly, despite being affiliated with the University of 
California Berkeley, home to twenty-six Nobel prize winners and alma mater of dozens more, DeLong 
doesna€™ t mention research universities,
which provided the basic science underlying most of these inventions.

As his title suggests, the subsequent century saw remarkable progress that nonetheless failed to 
create the utopia many believed could emerge from the massive improvements in technology. Instead, 
the century was consumed by disputes over how to organise societies and economies a€” ferocious and 
bloody disputes in the first
half of the twentieth century followed by an uneasy peace under the threat of nuclear annihilation.

DeLong personifies the schools of thought within the capitalist world as being those of Hayek 
(aCceThe market giveth, the market taketh away; blessed be the name of the marketa€D) and Karl 
Polanyi (The market was made for man, not man for the market). More prosaically, while Hayek 
opposed all forms of government
intervention in the economy as a a€oeroad to serfdom,a€D Polanyi argued that people a€oehad rights 
to a community that gave them support, to an income that gave them the resources they deserved, to 
economic stability that gave them consistent work.a€D

Within this schema, the decades following 1945 {Les Trente Glorieuses, as the French call them) can 
be seen as the period in which this tension was resolved by the combination of Keynesian 
macroeconomic management and the social-democratic welfare state. Hayek was victorious in the 
campaign against comprehensive
economic planning but not in his opposition to large-scale public provision of health, education 
and infrastructure services of all kinds.

Polanyia€™ s views seemed to gain ground during Les Trente Glorieuses, with the size and scope of 
the state growing steadily. In the cold war setting of the mid twentieth century, many expected 
that the rival economic systems of capitalism and communism would converge to a a€oemixed 
economy,a€D with most large
businesses owned or tightly regulated by governments, and market forces ruling elsewhere.

But the tables were turned in the space of a few years. Hayek triumphed in the 1970s, both in 
DeLonga€™ s symbolic terms and as the intellectual star of the decade. Financial markets were 
deregulated, public enterprises privatised and unions crushed. The era of neoliberalism, which 
forms the second part of DeLonga€™ s story,
had begun.

This account leaves DeLong, and his readers, with two big problems. First, did technological 
progress really cease to work after 2010 and, if so, why? Second, why was a relatively short burst 
of high inflation enough to overthrow social democracy yet decades of poor economic performance 
insufficient to generate an alternative
to neoliberalism?

On the first question, I am a bit more optimistic than DeLong. The twenty-first century has seen 
huge growth in the volume of information distributed through media of all kinds. Unlike traditional 
goods and services, information is a a€oenon-rivala€n product: making information available to one 
person does not reduce the
amount available to everyone else. But the infinite capacity for reproduction also makes it hard to 
force people to pay for information. The most common, though highly unsatisfactory, solution is to 
attach useful information to advertising people would not otherwise choose to look at.

In these circumstances, traditional measures of output, income and consumption become less and less 
relevant. At least in countries where most people have access to a basic twentieth-century set of 
household goods and to a variety of personal services, it may be that future improvements in living 
standards will come almost
entirely from access to information provided outside the market.

On the second question, DeLong argues, correctly I think, that social democracy was a victim of its 
own success. Everyone expected accelerating growth in their incomes combined with a continuation of 
full employment and low inflation. When the system failed to deliver at quite the expected level, 
neoliberalism promised a
return to prosperity. By the time it became clear that this promise would not be realised, 
expectations had been lowered so much that (for example) a 5 per cent rate of unemployment was seen 
as a success rather than the disaster it would have been perceived as in the 1970s.

Again taking the optimistic view, we are seeing a gradual rehabilitation of the institutions of the 
mixed economy, including activist governments, public enterprise and trade unions. At least for the 
moment, we dona€™t have to worry that our limited successes will recreate the hubris of the 1960s. 
Perhaps we can finally put the
era of neoliberalism behind us. a€0

Slouching Towards Utopia: An Economic History of the Twentieth Century
By J. Bradford DeLong I John Murray I $34.99 I 624 pages

The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism
By Sebastian Edwards I Princeton University Press I US$32 I 376 pages

Leave a comment
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By J. Bradford DeLong I John Murray I $34.99 I 624 pages

The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism
By Sebastian Edwards I Princeton University Press I US$32 I 376 pages

Leave a comment
Subscribe now