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On Theorizing Neoliberalism

The Problems and Politics of a Critique

In a recent piece for Public Seminar, Jeffery Goldfarb explores the problems of the term and concept of neoliberalism, specifically its inconsistent application by those on the left. He claims that neoliberalism is used to describe a wide range of policy positions from public-private ventures up to the complete deregulation of private industry or “market fundamentalism.” Goldfarb also argues that “neoliberalism” is a kind of “elite-speak,” incomprehensible to anyone outside of a narrow coterie of left-leaning academics. Despite these cogent observations, I contend that neoliberalism as a concept is both more coherent and more problematic than Goldfarb’s analysis suggests.

In this brief essay, I want to build on Goldfarb’s argument in two ways. First, I will explore how it is that we could understand politicians as diverse as Paul Ryan and Barack Obama as neoliberals, without the concept losing complete coherence and instrumental-critical value. Second, I will show how the critique of neoliberalism too easily maintains the false possibility of the reformation of capitalism. If neoliberalism is perceived as the central problem, our critique of capitalism is weakened. The critique of neoliberalism, often regarded as a unique political perversion of a nicer, more humane capitalism, too easily moves the goal posts of radical and progressive change.

In order to retain the coherence of neoliberalism as a concept, we need to distinguish between the ideal-typical political ideology of “neoliberalism,” represented in the work of thinkers like Friedrich Hayek and Milton Friedman, and the process of “neoliberalization.” Neoliberalism, as an ideal-type, is best understood as a government-driven market-based political economy, which places the private property rights and profits of corporations above the democratic control and interests of the people. Neoliberalization then would be any policy, process, or movement that in some form advances neoliberal interests or ends. Neoliberalization, as the process of moving towards the “normative horizon” (or cliff) of neoliberalism, thus typically involves the erosion of public-democratic services, spaces, and even “the public” itself. When most academics refer to something as neoliberal, what they really mean is that it contributes to neoliberalization — not that it represents some pure ideal-type — which is likely the source of Goldfarb’s and many others’ confusion.

That neoliberalism is a matter of degree can be understood by looking at the on-going debate over health care in the US. There are three policies, which are each, to varying degrees, part of a neoliberalization process.

First, we have the Affordable Care Act, or “Obamacare,” wherein the government mandates that individual citizens buy health care from private companies. This individual mandate leaves the roots of the American healthcare system in the market, and even forces citizens into that market to the benefit of private insurance companies. On the other hand, the ACA also expanded the government’s role in providing health insurance by offering citizens subsidies and offering states increased funding to expand Medicaid coverage. Thus, the ACA contains elements that contribute to neoliberalization and others that hedge against full-scale neoliberalism.

Compare the ACA to the Ryan-Trump plan that was recently withdrawn from a planned floor vote in the House of Representatives. This bill was was a more aggressive form of neoliberalization than the ACA in that it removed the individual mandate (the penalty for violation being paid to the federal government) and replaced it with a rule allowing private insurers to charge up to 30% more for people who lacked health insurance for more than 63 days in the previous calendar year. There is still a government-allowed penalty for failing to buy insurance, but in this case the money is paid directly to private companies. Additionally, while the plan retained subsidies, they were substantially more regressive than with the ACA.

The alternative bill proposed by the so-called “Freedom Caucus” of the House GOP, called for the complete repeal (without replacement) of the ACA. No subsidies to help people buy insurance. No individual mandate in any form. Insurance companies would be able to charge more or less whatever they wanted to anyone. They could discriminate based on age, gender, and pre-existing conditions. This bill is much closer to — if not fully representing — neoliberalism in its ideal form.

Privatization can take many forms, but when we think about the drift towards neoliberalism, it is fundamentally a matter of degree, with few policies ever likely to fully meet the ideal-typical definition of neoliberalism sketched out above. This is where the concept of neoliberalism has value; it allows us to understand how policies as diverse as the ACA and the Freedom Caucus proposal each embody neoliberal values in distinct ways and why all degrees of neoliberalization need to be resisted.

This leads me to my second point. Neoliberalism is still a flawed concept, but less for analytical reasons than for political-strategic reasons. While there is an analytical coherence to the concept, especially when thought of as a pursuit of an ideal-type, Goldfarb is right to point to the conceptual drift that occurs too often with the concept of neoliberalism. This looseness that Goldfarb identifies is closely tied to, though not solely caused by, the academic Left’s general desire to avoid directly criticizing the capitalist system. If you criticize capitalism, you “become” a socialist or Marxist, tough identities to maintain within the academy. Being a critic of neoliberalism hardly holds that same stigma.

When the Left aims its criticism against neoliberalization (eg., austerity) however helpful it may be to avoid ostracization and motivate movements in the short-term, I contend it too easily allows activists and critical scholars to lose sight of the broader oppressive horizon of global capitalism. Yes, welfare state capitalism is better than pure neoliberal capitalism, but both have, historically, been actively criticized by the Left. Now it seems like the Left’s goal is “less neoliberalism,” not “less capitalism.” As I argue in my recent piece for New Politics (Winter 2017) when those on the Left focus on resisting specific manifestations, periods, or trends of capitalism, the system is no longer thought of as the enemy.

To the left of the center-left, the focus on neoliberalism is not as analytically problematic as Goldfarb suggests, but on the other hand, it is far more politically-problematic than merely being elitist. Even if the general public knew what neoliberalism was, focusing on resisting that would be a far cry from resisting capitalism in its entirety. Goldfarb is right that “democratic intellectuals” need to be cognizant that people may misunderstand the term neoliberalism. We’re talking about privatization. We are talking about a kind of extreme capitalism, of “market fundamentalism.” We should be clear about this, and this means exploring how policies like the ACA still, in various, ways reinforce neoliberalism and resist genuine democratic socialization of the fundamental spheres of life necessary for a just, egalitarian, and humane society. Neoliberalism is a perverse escalation of an already-perverse political-economic capitalist system, and that is what we should focus our energies convincing people of.

Bryant William Sculos

  • michael

    “Neoliberalism, as an ideal-type, is best understood as a government-driven market-based political economy…”

    What does “market-based” mean here? The question is of absolutely central importance. As an economic doctrine, liberalism counsels maximizing social coordination and “win-win” transformations facilitated by competitive markets. This is possible—to the extent that it is—only on certain conditions, at once social, political and economic, being widely and freely accepted within a given society. And it only works (in limited fashion) if both labor and capital are subject to competitive pressure. That is the only way to form price signals capable of generating accurate information and allocating resources efficiently—where efficiency is understood in Pareto-optimal terms. This is the necessary (if perhaps impossible) condition for both the efficacy and legitimacy of a liberal order.

    Nothing like this is ascribed to “neoliberalism,” where capital is exempt from market mechanisms. Once this exemption is taken as normative, we are no longer dealing with a market-based economy at all. Far from being “liberal,” such a logic is best described as neo-feudal.

    So the problem is not that the Left is fearful of calling out capitalism; nor is it that “neoliberalism” is more coherent than is usually understood. If there is a coherent political project, it *cannot be explained* in terms inherited from liberal or any ideology organized around market mechanisms.

    • Bryant Sculos

      Thanks for the comment. I didn’t mean to imply that neoliberalism (as an ideal-type or its various partial manifestations) actually “works” or that it was actually rooted in (classical) liberalism. Neoliberalism is more than just markets, and only to the extent that they are deregulated (especially with regard to labor and environmental protection, financialization, and taxation) are the markets that do exist “free.” This is the complexity of neoliberalism (a place for “big” government and marketization/privatization), and where I would say it differs from American (right-wing) libertarianism. Neoliberalism maintains a role for a fairly strong government, but it is not a democratically accountable nor a public-serving role. To answer your question more directly, I was using a less technical notions of markets to mean simply that prices, values, and distributions etc. are not controlled through a centrally-planned or a democratically-planned system.

      • michael

        The problem with this line of argument is twofold: 1) the term neoliberalism is profoundly misleading, insofar as it suggests some sort of relationship with economic and political forms of liberalism that the policy prescriptions and theoretical doctrines not only lack but explicitly contradict; 2) those doctrines and prescriptions simply do not cohere into so much as a “family resemblance,” since several central tenets are mutually exclusive. For example, marketization and privatization are at odds both practically and theoretically, since the latter is commonly a way of abrogating the former. This is clear in the various debates among members of the Mont Pelerin Society, and even more obvious in the profoundly confused policy initiatives of ostensibly “neoliberal” politicians. My point here is that the term obscures rather than illuminates the current predicament. If we simply start with this predicament, we quickly find that it represents a break from earlier forms of capitalist ideology, and is in fact opposed to the market economy. Once this is clear, we can begin the search for an apt name (my suggestion is neo-feudalism, but whatever). Clinging to “neoliberalism” impedes critical progress.

        • Bryant Sculos

          Thanks again for the engagement. A couple points in reply. First, I think we are coming at this issue from different intellectual perspectives (mine being a more [neo-]Marxist one). This is important because from my perspective marketization and privatization are hardly mutually exclusive; in fact, they are often interrelated phenomena. Privatization generally entails increases in the private (individual and/or corporate) ownership of enterprises and services. This often means placing them outside of government and/or democratic control and within a market (that yes, may not be entirely “free” in a strict sense). I suspect you are using these terms (marketization and privatization) in a different technical sense that I wouldn’t agree with–though I could be wrong. Second, on your preferred term “neo-feudalism.” My major problem with this label is that it completely ignores the reality that the fundamentals of capitalism (gendered and racialized exploitative surplus-value extraction and wage labor) are as extreme and as widespread as ever. While capital may be controlled by fewer and fewer hands (not invisible ones…) in a way that might resemble a neo-feudal order, the core elements of capitalism are as prominent features of the existing world order as they have ever been. (See Imperialism in the Twenty-First Century by John Smith [2016], Southern Insurgency by Immanuel Ness [2016], The Theory of Monopoly Capitalism by John Bellamy Foster [2014], and The Theory of Global Capitalism by William Robinson [2004]. While there are certainly differences between them, each in their own way provide empirical and theoretical explanations for why capitalism is as good a term for our current conjuncture as it has ever been).

          • michael

            I do understand how things appear from a Marxian perspective. I just think that perspective has to be properly applied. Privatization is necessary to establish markets, and markets require it. But there is more than one distinction at work here. It’s not only a matter of public (or common) versus private ownership and commodification; it is also a matter of competition. Marx’s thesis about the declining rate of profit was a (mistaken) way of grasping this dimension of capitalism.

            In the “bourgeois” political economy that gave rise to neoclassical (liberal) economics, what Marx takes to be a “contradiction” is explicitly posited as the sine qua non of efficiency: capital (private enterprise) can only generate societal benefits (it is only useful and legitimate) if it is subject to competitive pressure. In this scheme (whatever we may think of it), profit is explicitly designed as a lure: investment is directed where it is most needed, and competitors drive each other’s profit margins down to the marginal cost of production, abolishing profitability in that sector and driving investment elsewhere.

            Something very, very different happens today under the label of “neoliberalism.” Marketization—privatization and commodification—is imposed on labor *but not on capital*. On the contrary, the general tendency is to use claims about the benefits of free markets as the lure, while establishing a system fundamentally at odds with the liberal understanding of market economics.

            But things are even more confusing than this, since many MPS theorists were violently opposed to such measures. Some were lying (Friedman), while others were scrupulously serious (Buchanan); but in both cases the public face of the argument was that capital must be subjected to competition *because this would drive down profits* and thus benefit everyone. Again, we can take issue with the logic of this argument, but it was pitched against corporate power. What is called “neoliberalism” today is a slate of policies that favor monopoly by capital. That is neo-feudalism, insofar as it turns private firms and industries into fiefdoms exempt from competitive pressure and in position to seek exorbitant rents, while workers are left in positions very similar to those of feudal serfs.

            My point is that Marxism neither sanctions nor helps explain the use of the term; on the contrary, it is precisely the wrong term to use in a Marxian analysis.

          • Bryant Sculos

            I have my own problems with neoliberalism, as I mention in the last part of the piece here (it occludes how neoliberalism is just a kind of expansion and intensification of the logic of capital). And while you are right that labor is much more subject to competition compared to (monopolized) capital (again see J.B. Foster’s work on this), “neo-feudalism” also occludes what is capitalistic about “neoliberalism” (the extraction of surplus-value through exploitative wage labor and the private ownership of the means of production). Under Marxist theory, while there are still very real conflicts between firms, there is no fundamental reason to think that as competition between firms decreases (if that is what is occurring) that we have in any way moved beyond capitalism.

            Marx’s initial analysis of the declining rate of profit was certainly not predictive in the manner he suggested, but there has been a lot of work on this within the tradition. As a matter of fact though there has been an overall declining rate of profit since 1998 (I will add that I am not convinced this can’t be reversed.), but there are plenty of other contradictions within the system that make is unsalvageable in any form. I would also add that increased financialization and massive expenditures in highly manipulative marketing campaigns to foment consumer demand are the most likely explanations for why the rate of profit did not decline sooner and more permanently–to say nothing for novel developments in imperialism.

            The comparison between wage laborers and serfs is not entirely off-base though. There’s a reason Marx referred to two kinds of slavery, chattel slavery and wage slavery. One difference being that under feudalism the lord needed serfs in a certain sense. Under capitalism, primarily due to technology and automation (among other reasons), individual laborers are far more expendable. The coercive and undemocratic elements are not wholly dissimilar though.

          • michael

            At the risk of starting a debate about what we mean by capitalism, if what you are calling neoliberalism is an extension of capitalist logic, then the term is superfluous. I would dispute that 1) capitalism can be cogently defined; 2) there is a logic of capitalism; 3) what is commonly called neoliberalism is consistent with its economic and political predecessors (as intensification, variation, or whatever, of them).

            We don’t need to agree on neo-feudalism, but I would point out that feudalism was predicated on private property; it’s just that certain forms of it could not be sold on a market. Capitalism did not invent property but only re-purposed it. As for wages, my point is precisely that what makes contemporary reinvention of feudalism “neo” is that it retains some of the familiar features of market economies but transforms them into elements of a system whose operation is no longer consistent with these. I claim that the ruling class created during the 20th Century has set about abolishing the system that gave rise to it. The term neoliberalism obscures *this* crucial fact, stressing continuity where in fact there is a sharp reversal.

  • Ryan Fanselow

    I really appreciate that you recognize what worries critics of the concept of neoliberalism. They worry that the term is either incoherent or if it is made coherent, it fails to include mainstream Democrats like Barack Obama.

    But I’m a little uncertain that you really show that Obama’s policies, including the ACA, are neoliberal. In order to count as neoliberal, on your definition, a policy has to “advance neoliberal ends or interests”, where neoliberal ends or interests are those “which places the private property rights and profits of corporations above the democratic control and interests of the people.”

    Crucially, there is a distinction between a policy *advancing* an end and a policy just preserving some already extent end. To advance a neoliberal end, one would have to increase neoliberalization relative to the status quo. But it’s not clear from what you say above that the ACA really advances neoliberalization rather than just preserving some extant neoliberalization.

    Your main reason for saying that the ACA is neoliberal is that it “leaves the roots of the American healthcare system in the market”. But this is preserving some feature of the system rather than advancing a neoliberal end.

    Here’s a take on Obama’s policies in general (this is a generalization that will be false in specific instances). They tend to frustrate neoliberal ends relative to the status quo. Thus, they don’t advance neoliberal ends and are not neoliberal on your definition. They do often fail to eliminate already extant neoliberalism but that’s not advancing neoliberalism.

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