The Rise and Fall of the Neoliberal Order: A compelling analysis

The Rise and Fall of the Neoliberal Order

Author: Gary Gerstle

ISBN-13: 978-0197519646

Publisher: OUP USA

Guideline Price: £15.99

There has been a sea change in American politics. Things have happened that a decade ago would have been unimaginable. The Republican Party has been captured by a former reality television show star who cultivates support from white supremacist paramilitaries. Though less noticed, the Democratic Party too has been transformed due to the insurgent primary campaigns of a professed socialist.

In his excellent new book, The Rise and Fall of the Neoliberal Order, Gary Gerstle explains the tectonic shifts that produced these earthquakes. He masterfully blends compelling analysis with a propulsive narrative.

What we are witnessing, Gerstle concludes, is the neoliberal political order coming apart at its seams. A political order structures party competition, enables state policies and sets the boundaries of acceptable discourse. The neoliberal order, Gerstle argues, emerged out of a challenge to the once hegemonic New Deal order that began with the presidency of Franklin Roosevelt.

For decades Republicans were forced to concede government responsibility for social welfare. As president Dwight Eisenhower privately concluded: “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws…you would not hear of that party again in our political history.” Under Eisenhower the top rate of federal income tax reached an astonishing peacetime high of 91 per cent.

By the 1970s, however, issues such as the Vietnam War, racial equality and feminism fractured the New Deal coalition. The federal government was discredited by its inability to cope with stagflation. Neoliberalism – an ideology favouring free movements of capital, goods and people – gained adherents.

The neoliberal order was born during the presidency of Ronald Reagan. Reagan pushed an aggressive programme of deregulation and union busting. The top rate of federal income tax fell to just 28 per cent by the end of his presidency.

Yet, as Gerstle shows, it was during Bill Clinton’s administration that neoliberalism triumphed. It was Clinton who deregulated telecommunications and finance. Though he faced pitched battles with congressional Republicans on cultural issues, Clinton worked with them to unleash corporate power. The fall of the Soviet Union convinced many that there was no alternative to capitalist democracy.

Trump represents not a departure from neoliberalism but a new authoritarian version of it. Neoliberalism and authoritarianism are compatible

The Bush presidency was one of neoliberal hubris resulting in two catastrophes. A blind faith in the power of markets led to the botched postwar reconstruction of Iraq. Years of civil war in the region resulted. And further deregulation of finance combined with backing for subprime mortgages precipitated the financial crash of 2008.

During the Obama years, the centre seemed to be holding. Yet challenges to neoliberalism were emerging. From the left, the Occupy Wall Street movement questioned the power of the 1 per cent. From the right, the Tea Party fed on ethnonationalist hatred of the cosmopolitan Obama, the nation’s first black president. Opposition to neoliberalism exploded during the 2016 presidential campaign with the rising power of Bernie Sanders and the victory of Donald Trump.

Though generally convincing, there are some limitations to Gerstle’s analysis.

He defines neoliberalism in terms of political ideology. But it can also be viewed in material terms as a form of class warfare by the rich. In that case, Trump is an intensification of neoliberalism rather than a challenge to it. True, he opposes free trade and immigration. But he also lays bare the asocial violence of neoliberalism in his narcissistic and hateful character. His mismanagement of Covid, which cost hundreds of thousands of lives, was a product of decades of anti-government ideology that started with Reagan.

Trump represents not a departure from neoliberalism but a new authoritarian version of it. Neoliberalism and authoritarianism are compatible; in fact, neoliberal policies were first implemented in the early 1970s by a Chilean dictator, the US-backed general Augusto Pinochet.

Gerstle downplays the extent to which neoliberalism is an elite project and overstates its popularity. To be sure, it never could have triumphed without mobilizing large constituencies. But neoliberalism never enjoyed the same level of popularity as the New Deal order did. It benefited from mass disengagement; voting rates during the neoliberal era were historically low. Many corporations, meanwhile, profited from rent-seeking and monopoly power, perfectly willing to jettison free market principles whenever it suited their interests.

Gerstle’s assertion that the neoliberal order has fallen assumes that a new order will rise to take its place. But there is good reason to believe that we may be in for a protracted period of gridlock and paralysis. Unlike any previous period in US history, one of the major political parties is not seeking to build electoral majorities. Instead, Republicans are pursuing a minoritarian strategy reliant on anti-democratic measures and exploiting the advantages granted to it by the country’s antiquated constitution.

Democrats, on the other hand, are stymied by that very system. If the US Senate were elected by popular vote, Biden’s domestic reforms – a moderated version of the Bernie Sanders agenda – would have sailed through Congress. It might have served as the basis of a new political order defined by the green New Deal. Instead, Biden’s most ambitious proposals were sunk by the vote of a single senator. Now the Democrats seem likely to lose the midterm elections. Years of bitter partisan warfare and government dysfunction would result. Instead of a new political order, we might get chaos.