December 11, 2017

On Friday, Jeremy Corbyn was the keynote speaker at a United Nations event entitled ‘Towards a post-neoliberal world order: rebuilding human rights-based multilateralism’. To decipher what any of that means, we have to begin with ‘neoliberalism’.

In practice, ‘neoliberalism’ is a catch-all term of abuse for everything the left doesn’t like about how the world is currently run. However, a much better definition is supplied by Oliver Letwin in a thought-provoking essay for Standpoint.

He doesn’t actually use the word, referring instead to ‘social market liberalism’  – a more exact way of describing the economic and political status quo established almost forty years ago by Margaret Thatcher and Ronald Reagan.

The great free market reformers rolled back the frontiers of the state, but didn’t put laissez-faire capitalism in its place. Rather the market, though set free from direct central planning, was taxed and regulated to provide social goods. Hence, the social market. Furthermore, it was a liberal social market, because the ultimate purpose ascribed to it was the maximisation of individual freedom.

Social market liberalism is now under threat from populists of both left and right. Letwin argues this is due to various factors – the pain of “fiscal consolidation”, “the education and training deficit”, demographic change, globalisation, the “democratic deficit” and above all what he calls the “long-dated effects of the 2008 crash”:

“Together, these six phenomena more than adequately explain — indeed, as Louis Althusser would have said — they ‘over-explain’ the rise of the demagogues of Left and Right across much of the Western world. However, once they are set out calmly, it also becomes evident that they are historically contingent. These problems and challenges and tensions were present long before 2008. And yet, they didn’t generate anything like the massive wave of resentment which we are at present witnessing until the latent feelings were given real force by the long-lasting effects of the 2008 crash…”

In this account, social market liberalism – a.k.a. neoliberalism – is like a man whose once tolerable character flaws become utterly intolerable after he gets drunk and crashes the family car.

Letwin’s hope is that once the shock of the crash wears off – and suitable amends are made – we can go back to how things were:

“This suggests, in turn, that the power of the illiberal politics of Right and Left that we have seen unleashed in various forms across the West is itself historically contingent — a temporary reaction to a set of economic events. The political reaction provoked by the events of 2008 can and very likely will dissipate once the economic effects of 2008 are overcome…”

The advocates of the status quo need to “hold their nerve” and make the case for “social market liberal policies… all over again.”

Letwin’s argument is more sophisticated than those merely urging a re-iteration of the case for capitalism. The winning argument, he thinks, is not the free market for its own sake, but as the means by which we achieve the growth that pays for a civilised society:

“…through sharing the proceeds of such growth, we can — and can alone — sustain the fine public services and the properly structured welfare system through which a social market economy delivers social justice.”

Unfortunately, I don’t think that “sharing the proceeds of growth” is a winning argument anymore:

  • Firstly, growth, and the productivity improvements that produce it, are in long-term decline across the western world. When mainstream economists are at a loss to explain what’s going on, which they are, we have a serious problem.
  • Secondly, a social market can’t just be laundered through the spending power of the state. If we want working people to support capitalism then they have to see the proceeds of growth in their pay packets, savings and home ownership. Again the long-term trends are pointing in the wrong direction.
  • Thirdly, where the state does the sharing, who benefits? Some people get a lot more help than others, and voters will accept that – but only as long as it takes place within a context of shared identity and reciprocal obligations. If that is undermined through uncontrolled immigration, an unchecked dependency culture and other manifest forms of unfairness, then you break the social contract on which social market liberalism depends.
  • Fourthly, the ‘liberalism’ in social market liberalism isn’t enough. It’s not that people have turned against individual freedom, it’s that they need other things too – family, community, nation, creation, transcendence. The social market needs more than one moral dimension. (And if you understand that, you’ll understand that ‘post-liberalism’ is not the same thing as anti-liberalism).

Social market liberalism is not wrong in itself. Its individual components must be saved from those who would destroy them. However, as a whole it is incomplete – no longer able to support itself against the enemy without or its weaknesses within.

The age of neoliberalism is drawing to a close. The fight that matters is over what comes next.

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