Imagine a business self-help book is released by well-respected expert: say, a senior human resources advisor to Apple, or – within industry – a floor manager for some restructured German car manufacturer (the factories themselves now in Slovakia, of course). With extensive experience of industrial relations, she is something of an expert on how things work both on the shop-floor and in the manager’s office. At once far-sighted and with a charismatic common touch, she titles her book “Smashing Social Power: How to Get Away With It.” Combining real concern for the psychological welfare of managers with a can-do, deal-making attitude, she insists on keeping a steady hand: “You’ll only drive the change you want to see if you learn to look them in the eye. No one likes to sack someone. But it’s better for them – and you – in the long run.”

Such a book remains deeply unlikely. Even if it existed somewhere it wouldn’t sell. Why? Because neoliberalism has never been an ideology formulated exclusively for and by managers in aid of their material and psychological well-being. Rather, and more complicatedly, it is a hegemony based on class compromise and consensus. A great many people have bought into it, their material interest now wedded to its success. Yet nowhere is the doctrine of muscular free markets sold on its own merits to a skeptical world public. Indeed, if neoliberalism remains hegemonic it does so in a purely negative sense. It is hegemonic precisely because nothing exists to replace it. What is so striking about this situation is the inability of challengers to breach the assumptions of neoliberalism with any feasible alternative. No matter its obvious unpopularity; there remains no way out.

So how did neoliberalism achieve this hegemony, and why does it seem so difficult to unseat?

In attempting to reach these goals it is hoped the essay may contribute to a reassessment of what neoliberalism actually is, going beyond typical assumptions about Reaganomics, Thatcherism and the “betrayal” of the welfare state – all of which imply a very strong voluntarist understanding of social change and little consideration of how political forces are shaped by wider upheavals and shifts in class forces. David Harvey, for example, reinforces the view that wide-scale changes in the policy orientations of national governments the world over (such as those of the 1979-1983 period) do not happen “by accident”. Neoliberalism’s victory was a result of leaders like Margaret Thatcher and Deng Xaioping “plucking” some economic theories about inflation from relative obscurity and elevating them to “majority” status (though “not without a struggle”).[1] This account, though not untrue, underplays the role of conflicts between social forces, real material conditions, and the multitude of ideologies (attempts to understand such conflicts) expressed in government policy.

Neoliberalism could not have been victorious if it had not, at some level, been demanded by a wide enough strata of the working, middle and upper classes. Not only was neoliberalism destructive, it was also the product of a new consensus between capitalism and (at least parts of) the working classes of different countries. Though its symptoms (deindustrialisation, stagnating wages, intensifying financialisation of capital, increased insecurity) could not be swallowed whole, it could be sold, accompanied by appeals to the national interest, as a route to prosperity. And in a certain sense, for some in the western working class, it was.

Since Chile – a militarist authoritarian travesty, famously enforced by the US; less famously favoured by Hayek – neoliberalism has been a term of abuse directed at the Right by both the Left and, less consistently, the liberal-centre. If it is to retain any conceptual sense it needs to be rescued from overuse. Yet it also needs to be made clear that the social and political forces that made neoliberalism – as opposed to rival conceptions of markets, states and societies – so attractive and pervasive have not disappeared. What Yannis Varoufakis calls – rather clunkily, but it makes its point – “bankruptocracy”[2]  is not a long-term replacement for neoliberalism but a kind of intermediary. The crisis, as Gramsci famously observed, “consists in the fact that the old is dying and the new cannot yet be born.” Neoliberalism, the progeny of powerful alliances between social classes, may yet re-emerge under another name.

Neoliberalism first got taken up as government policy during the crisis years of the 1970s. Again, David Harvey has suggested that, after the failed experiment of Chile (the copper industry, remaining in state hands, stopped the whole country going under), neoliberalism retreated into pragmatism.[3] It became more willing to accept the modern state, and therefore more readily adapted to mainstream policy. Yet, as a critical response to the failures of classical liberalism, neoliberalism (even in its early “fringe” years) was modernist rather than reactionary – which is to say, it accepted the modern bureaucratic state insofar as the power of that state could be made to secure greater market freedom. The state was not advocated as a producer or protector of public goods, only as an authority over the money supply and as a guarantor of the market in the last resort. Hayek’s assertion that the state should concern itself with the “supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them”[4] was not a moral blip, but timely and practical acceptance that states and markets would have to interact closely in modern market systems. Neoliberalism’s concern with the state (always really limited to its provision of no-strings-attached welfare) was always practically less important than its support for ever deepening global financial markets.

The early ideologists of neoliberalism believed in reproducing capitalist accumulation through financial means. This was not to be undertaken simply to benefit the already wealthy, but to secure long-term stability for the world’s working classes through the free market. Idealistic this may have been, but when the time came its program would prove surprisingly useful for both elites and the western working class, which was already integrated into postwar patterns of high consumption. By the 1970s, that lifestyle was threatened by a new age of turbulence, and neoliberalism came to express the desire – on both the part of the working class and the political elite – to preserve that rate of consumption.

A Lasting Consensus: Neoliberal Reality

A brief look at the conditions which produced neoliberalism’s success may prove instructive here. Arguing for a conception of postwar globalisation based on the role of the American state as regulator of financial markets, Leo Panitch and Sam Gindin (in “The Making of Global Capitalism“) stress a crucial point of continuity between the so-called demand management of the Keynesian era and the supply-side economics of the neoliberal one: both were rooted in an expansion of the state for capitalist ends. This expansion of US state capacities, beginning with the establishment of the Federal Reserve (1913), but intensifying throughout the Great Depression, later supported the private accumulation of capital under conditions of postwar reconstruction in Europe and Japan. The US required strong competitors in a renewed world market precisely in order to secure its own hegemony.  In short, then, the US state was canny enough to grant European states the fiscal autonomy required to bolster exports at the relative cost of American production. This is partly why European and later Japanese and South Asian economies were permitted to develop distinctive, often corporatist, export-driven models of capitalist markets.

The real question is: why did this situation of mutual support change? Why couldn’t the US continue paying for Europe’s and Japan’s competitiveness in order to sustain its own global hegemony along with its capitalist class? Why, in the early 70s, did Nixon famously have to ditch the system of fixed exchange rates which had done so much to aid the competitiveness of Europe and Japan at the expense of the US? By the end of the 1960s “what was expected of the US” by the very national economies it had so extensively reconstructed “was that US inflation would be kept lower than in the other advanced capitalist states.” The Bretton Woods system “finally had to be abandoned” because it weighed increasingly heavily on the US’s “capacity to navigate between its domestic and imperial responsibilities.” In short, the system placed increasing strain on America’s domestic economy.

Financial deregulation was necessary if American hegemony was to be maintained. Yet it took more than a decade of intensifying class struggle – with labour and union militancy battling for the status quo – before the crisis in profitability could be quelled. Indeed the seeds of neoliberalism’s fierce anti-unionism can be dated to these struggles. Yet corporate profits did eventually improve. And, they argue, that neoliberalism’s defeat of labour was so thorough that a boom in the real economy (not just the financial markets) was effected. In short, neoliberalism should not be seen simply as a greedy political ploy by the wealthy: capital really succeeded in reanimating itself by monetarist and deregulatory, labour-disciplining means. The years 1983-99, in their eyes, mark a period of major “recovery” in the world economy, though one not without its own contradictions – principal among them the decline in income of that thin seam of the world proletariat inducted into American capitalism’s regime of high consumption and the increasing competition over wages in the world at large. The moment neoliberalism became focused on the systematic promotion of financial markets – rather than strict, unyielding state austerity – it successfully aligned itself with real changes in the global economy.

Neoliberalism thus looks less like a dastardly plot to undo Keynesianism at the expense of middle class well-being, and more like an ideology that emerged/was adopted though a series of careful policy adaptations by global elites in the period of unrest following the global downturn of the late-60s/early-70s. Less a fully formed, pre-existent road-map, than a developing strategy for rebooting western capitalism in the face of a long crisis. That crisis was itself the result of over-capacity and intensifying competition.[5] With America’s competitors increasingly able to underprice it in manufacturing, it fell to neoliberalism to boost US manufacturing profit rates while deepening US financial hegemony over the world economy.

Neoliberalism has always been bound up with ideologies of national renewal and individual well-being. Even disciplinary, Thatcherite neoliberalism was marketed under the guise of a return to former national glories. The Blairite model – compensatory, cuddlier – granted the approach temporary reprieve from fracturing constituencies. The reason for this is that neoliberal ideology always reflected real changes in material conditions and the genuine concerns of those who submitted to its consensus. As such neoliberalism was hardly monolithic: it reflected local class compromises in both its particular implementation and its ideological expressions. This might give rise to the view that it was purely pragmatic, yet it can be defined by two, distinctive but interrelated, effects. Neoliberalism’s disciplining of the western working class was accompanied by increased integration of that same class (especially in the form of mortgaged homeownership). Its particular form of expanding and intensifying financial markets was also crucial for its success. Both this disciplining/integration of the working class and the commitment to ever increasing financialisation of capital were necessary if 1) American global hegemony was to be maintained and 2) capitalism was to retain its role as the engine of that hegemony. It was in the name of the abundance provided by such a systemic regime of accumulation that political elites could maintain consensus over its implementation. Reflecting the real concerns of western working classes, whose livelihoods were threatened by long declines in industrial profitability and intensifying competition, neoliberalism articulated a feasible response in the form of easier access to financial markets and the supposed stability offered by fixed assets (i.e. housing). Outside of the west it could be sold as the only viable option, and a crucial stage in the development of a home-grown modernity.[6]

Neoliberalism thus reflected, locally and internationally, the interests of a broad variety of social classes. If it has fractured recently it has done so under pressure of its expansion, the central contradiction of which is the demand that an inherently inegalitarian system be adapted to include the growing demands of societies whose previous roles had been to supply both cash (in the form of government bond purchases) and products for western markets. Neoliberalism is thus increasingly forced to confront immediate pressures from within. Yet the question remains: can it any longer support the social classes whose real desires it appeared, for a while, to meet? If its hegemony cannot be successfully undermined from below; that is, if it turns out that it is the closest to a global social compact the ruling classes have available to them, it stands every chance of a re-run. This time, however, neoliberalism, or its ‘flesh-eating’ progeny, will assume power in ever more volatile circumstances, and under ever greater pressure. It will require increasingly coercive instruments of domination and exploitation for use against those on its periphery. As global financial markets continue to deepen and intensify, growing ever more important for the “real economy”, the question of their deeply oligarchic nature will inevitably arise. Challenging neoliberalism will in fact require a reassessment of class compromise and class exploitation under conditions of capitalism as such. Capitalism necessarily imposes stark, barbarous choices on those who wish to participate in it. A just alternative to the politics of neoliberalism cannot help but confront this form of capitalist exploitation of class interest. The choice, as Rosa Luxemburg once said, may well turn out to be that between socialism and barbarism after all.