Schmidt, V. and Thatcher, M., (2003), “Why are Neo-liberal ideas so resilient?”, Policy Network , 24 October.
Given the abject failure of the Neo-liberal policy offer, why has it persisted as the dominant approach to European policymaking and is there any way out?
Despite the economic crisis that hit the US and Europe full force in 2008, political leaders have made little attempt to rethink the neo-liberal ideas that are in large part responsible for the boom and bust, let alone to come to terms with how immoderate the ‘Great Moderation’ really was. Much the contrary, neo-liberal ideas continue to be the only ideas available. In the financial markets, where the crisis began, reregulation remains woefully inadequate, while the only ideas in play are neo-liberal, either for more ‘market-enhancing’ regulation or in favor of greater laissez-faire. The biggest puzzle, however, is the response to the crisis by Eurozone countries that have embraced ‘market discipline’ through austerity and, in so doing, have condemned themselves to slow or no growth. This is in contrast to the US, which has posted better economic results, despite being torn between Republican fundamentalists advocating austerity and a more pragmatic leadership focused on growth.
Our question, then, is: How do we explain the resilience of neo-liberal economic ideas? Since the 1980s, why have such ideas not just survived but continued to be dominant? Neo-liberalism entails belief in competitive markets enhanced by global free trade and capital mobility, backed up by a pro-market, limited state that promotes labor market flexibility and seeks to reduce welfare dependence while marketizing the provision of public goods. The watchwords for such neo-liberalism are liberalization, privatization, deregulation, and delegation to non-majoritarian institutions such as ‘independent’ regulatory agencies and central banks. The touchstones highlight the importance of individual responsibility, the value of competition, and the centrality of market allocation. The neo-liberal mantra presents the state as the perennial problem, the market as the solution – even today, despite the fact that the crisis was caused by the markets, not the state.
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Relevant Posts
- Interview of Vivien A. Schmidt, Professor at Boston University, to the Crisis Observatory
- Cohen-Setton, J., (2013), “Ordoliberalism and Germany’s approach to the euro crisis”, Bruegel , 16 September.
- Cramme, O., Diamond, P. and McTernan, M. eds., (2013), Progressive Politics After the Crash: Governing from the Left, London: I.B. Tauris & Co Ltd.