Globalists: The End of Empire and the Birth of Neoliberalism; Quinn Slobodian; Hardcover; 400 Pages; Harvard University Press; March, 2018.
The book present the history of neoliberalism from the days of World War I and disintegration of the Austrian Hapsburg Empire. The author argues about neoliberalism being a coherent project to establish a system of global economic rules at a time when anarchy was thriving. The book is well researched and enlightening, though I don’t agree with the negative picture of neoliberalism which is presented.
Neoliberal has become a hated word in contemporary times. Inevitably almost any ill in the current economic and social system – consumerism, environmental degradation, financial crisis, and the list can keep going – is attributed to neoliberalism. But what is Neoliberalism? A contemporary definition would go like this:
“Neoliberalism is the dominant economic thought of the last forty years in which the free markets form the core of the global economic system. The role of the state is shifted from a provider of public welfare to a guarantor of free markets and competition. Some common traits of the neoliberal system are – removing tariff barriers, an easy international movement of capital, and limited the power of trade unions and state-owned enterprises.”
What the book Globalists does is that it pushes back the origin of Neoliberalism back by almost sixty years at the time of World War 1 and crumbling Austrian Hapsburg empire. In doing this, it brings to light thoughts of several luminaries like Mises, Hayek, and Röpke, which will often be considered blasphemous in our era.
For example, inspite of the word liberal embedded within the neoliberal, neoliberalswere antagonist to order of the social system – they were not that worried about Marxism and often opposed democratic (i.e. liberal) principles. On the contrary, they would often support authoritarian regimes if they are willing to embrace global markets. In fact, there was a well-ingrained antipathy towards democratic systems because neoliberals were concerned that democracies could always succumb to the populist urge of protectionism and welfare state. It is no wonder then that for the original neoliberals like Mises, the Austro-Hungarian empire held a special place where an amalgamate of different ethnicities were politically governed by a central authority which maintained a single integrated economic market.
The book sheds light on how neoliberalism transformed from economic theory to a legal system. In the late 1920s and early 1930s, neoliberals including Hayek were deeply involved in empirical work focusing on business cycles. However, the economic crisis of the 1930s shook their belief in any predictive power of empirics. Not only this, they came to see the very act of “counting the economy” as a threat to private property. For, only when the governments or the rulers know how much they have, can they redistribute and decide to keep for themselves. The neoliberals saw heavy government internvention as a sign of doom as it essentially seeks to redistribute private property based on empirical work which is very flawed. From this stage, they transformed themselves from being economic research into legal and social theorists which tries to safeguard the neoliberal thinking rather than providing prescriptive cures.
Neoliberals had to take a backseat after World War II when the colonial world order was collapsing. Policy makers had very little interest in neoliberal thinking. Even the capitalist societies of the US and Europe were professing economic planning and state welfare. At this time the neoliberals protested against the post-imperial world order, some supported Apartheid as long as the regime guaranteed support to neoliberal agenda, and many rallied against the global South`s vision of fairer and more regulated international economic order.
But through their tenacity and persistence, neoliberals gradually took control of global economic order. From being a sideshow in the 1950s and 1960s, neoliberalism took center stage thanks to ample support from policymakers especially Ronald Reagan and Margaret Thatcher. Global economic events also came to help. Rise of monetarism and the Volcker Shock which led to the debt crisis for the third world countries provided good opportunities to the neoliberals. To get the world out of the economic collapse of the 1970s, the state welfare programs were reduced, income tax rates cut, and trade deals signed. Institutions like the IMF and the World Bank became more aggressive when it came to providing support to developing states. The key mantra was of ‘structural adjustment’, by which the countries had to eliminate redistributive policies and reduce trade barriers. By the 1990s, helped by the collapse of Soviet Union (and hence eliminating any challenge when it comes to social and economical options), neoliberalism was ruling the world with the creation of WTO as its crowning glory.
Overall the portrait of neoliberalism by Slobodian is quite negative. The book seems to suggest that neoliberals are to blame for the rising inequality and other social ills. But to me, it is not so obvious. For, if the inequality is rising within the developed countries, it is decreasing at a global level where emerging countries are fast moving up the income curve.
The problems of the developed world are also because of bad economic planning (which the neoliberals actively warned against). There are a lot of perverse incentives which go against the very core of the western-backed institutions like the WTO and the IMF. One example of this is the huge agricultural subsidies and protection in these countries. There is an argument for protecting nascent industries, but clearly, the technology sector gets very few protections while agriculture the most. The reason is populism and economic planning, not neoliberalism.
To me, it seems neoliberal system may be an ideal system when the countries are at even levels, and the people within are at equal levels on factors like productivity, distribution of income and wealth, etc. Otherwise, neoliberal order would make sure the debtors will forever be debtors, and the poor will forever be the poor. For e.g., very few third world economies have been able to break the middle income track. Another example is how recent studies suggest that a well-off northern EU has benefited at the expense of southern EU. To counter this, a true neoliberal would counter that, the EU is not a real neoliberal setup, as government intervention in economic policy runs large.
Finally this comes to the very heart of the neoliberal dilemma – free markets, property rights and freedom of movement of capital cannot be attained without a state. But the state runs the risk of turning democratic or populist which can lead to backtracking on these goals.