Winner of the New Statesman SPERI Prize in Political Economy 2016

Monday 2 May 2016


The term ‘neoliberalism’ has become so ubiquitous that some might think that it has lost all meaning, beyond a useful catch-all for everything some people on the left dislike about current social and economic trends, or more specifically for those on the left to be rude about those on the centre-left. That is in my view far too dismissive, but the reasons for both the use of the term and confusion over its meaning have real historic and cultural roots.

I know what I mean when I (occasionally) use the term neoliberal. Neoliberalism is a political movement or ideology that hates ‘big’ government, dislikes any form of market interference by the state, favours business interests and opposes organised labour. The obvious response to this is why ‘neo’. In the European tradition we could perhaps define that collection as being the beliefs of a (market) liberal (although that would be misleading for reasons I give below). The main problem here is that in US discourse in particular the word ‘liberal’ has a very different meaning. As Corey Robin writes, neoliberals

would recoil in horror at the policies and programs of mid-century liberals like Walter Reuther or John Kenneth Galbraith or even Arthur Schlesinger, who claimed that “class conflict is essential if freedom is to be preserved, because it is the only barrier against class domination.”

So in this US line of thought, neoliberalism is an adaptation of a position on the left towards the ideas of the right.

Contrary to some perceptions, the term neoliberal was not a US invention, but was first used by Rüstow, as this excellent account by Hartwich and Sally sets out. It was designed to be a ‘third way’ between socialism and a German version of capitalism. It was adopted by a group that later became the Mont Pèlerin Society, which included Mises and Hayek and Milton Friedman, but it would be a great error to view that group as some kind of united intellectual conspiracy. As Hartwich and Sally remark, it is “named after the location as the participants could not agree on anything else”. The group was sufficiently diverse that the idea of what we now call a social market economy can also trace some of its roots to this group.

One of the disagreements in the group was over the problem of what we might call ‘corporatism’: the domination of markets by a small number of large firms or cartels that is a long way from the ideal of a perfectly competitive market. Rüstow saw that as a problem that was inherent to capitalism and required a strong state to prevent it (an idea that is central of what we now call ordoliberalism), whereas Mises thought corporatism is the result of state intervention. (Economists would just say that both are potentially true and it all depends, which is one reason why many economists find it hard to talk about ideologies that involve their own discipline.)

From this group we have the term neoliberal being adopted as a modification of European liberalism and (for some at least) it involved a move from the right to the left. I think the clearest way of thinking about the Mont Pèlerin group is that it was a group that had in common a dislike of communism, but out of which different ideologies emerged, including ordoliberalism and neoliberalism as we understand these terms today. I am tempted to argue that what we now call the neoliberal element of the Mont Pèlerin discussions placed such an emphasis on their dislike of the state that they were prepared to ignore the market imperfections that a state could correct.

I think this alone would be a good reason for the use of the term neoliberal rather than, say, market liberal. Neoliberalism as most people use the term seems quite relaxed about departures from the ideal of a market as seen by economists. A clear example, as Chris Dillow points out, is CEO pay. When people argue that CEO pay ‘should be left to the market’ they mean something very different from ‘be determined by the market’. The role of any market in determining CEO pay is marginal compared to most ordinary workers: pay is set by remuneration committees who reference to the pay of other CEOs.[1] What ‘left to the market’ actually means here is ‘no state or union interference’.

Yet this example also tells us that dismissing neoliberalism as a non-existent ideology is wrong. How often have you heard people arguing that CEO pay should be left to the market, and this assertion has gone unchallenged? This common acceptance of ‘left to the market’ really meaning ‘no state or union interference’ suggests something like an ideology at work. Other commonly used language, like taxpayers money (by which is normally meant income taxpayers) rather than public money, or wealth creators for the 1%, does the same.

Attitudes to the state, both on the right and centre of politics, are very different to those I (distantly!) remember from the 1960s. The ability of the state to achieve economic goals is today routinely denigrated. Part of the reason for the success of Mazzucato’s The Entrepreneurial State (apart from it being a very good book) is that it points out how creative and wealth creating the state can be. What would have seemed obvious in the days when we put a man on the moon today needs to be argued case by case.

This is why I do not think it is a problem that few today would describe themselves as neoliberal. Indeed that may be part of the greater problem as perceived on the left: neoliberal ideas have become so commonplace, not just on the right but also the centre of politics, that no self-identification by label is required. But there may be another reason why few call themselves neoliberal, and that is because if we try and regard it as a coherent and consistent set of beliefs it can very quickly be shown to be inadequate and confused. Commonly held beliefs do not have to be coherent and consistent.

This is where many accounts on the left go wrong. Rather than seeing ‘left to the market’ as a deliberately misleading shorthand for no state or union interference, they think neoliberalism involves a devotion to free markets, or worse still (see this piece by George Monbiot for example) they equate neoliberalism with unbridled competition. While that might have been true for some of those at Mont Pèlerin, it is no longer true of neoliberalism today.

The reason is obvious enough. Neoliberalism has been adopted and promoted by monied interests on the right, and that money often resulted from what we might call today crony capitalism. So, for example, there is a big difference between promoting competition within the NHS (which some research suggests works if done in the right context, such as fixed prices), and the privatisation of health contracts. Privatisation is neither necessary nor sufficient for competition. To describe the promotion of competition within the NHS as neoliberalism is confusing and alienating.

More generally, it is a huge error to think that because neoliberalism invokes a highly selective and distorted view of basic economics, the left must therefore oppose mainstream economics. It is a huge error because using mainstream economics is an excellent way of challenging neoliberal ideas. Take the example of banking. At first sight the financial crisis was simply a failure to regulate a free market. But it was a market which included what is to all intents and purposes a huge state subsidy, which is that if the market goes wrong the state (either directly or through its central bank) will come to the rescue. Here state interference in the market encourages lack of competition: only those too big to fail could be sure of support.

For this and other reasons (natural monopolies and other forms of rent seeking), the financial sector embodies many of the things that those who first used the term neoliberalism were opposed to. It is important that those who use the term neoliberalism today recognise this contradiction. It does not mean that using the term neoliberalism to describe the dominant ideology is wrong, but it is a mistake to assume the ideology has not be moulded/adapted/distorted by those in whose interest it works. These changes have made it intellectually weak at the same time as making it politically strong.

[1] This is very similar to how pay was determined under UK ‘incomes policies’ in the 1960s and 1970s. Here the state would set up a committee that would fix the pay of some group of workers with reference to the pay of comparable occupations. At least in that case, however, some of the reference occupations may have had pay that was actually market determined!


  1. Kevin Phillips in 'American Theocracy' connects it to Southern US fundamentalism in the Republican Party.

  2. Thank you for a thoughtful and useful post, and for the pointer to the Hartwich pamphlet. Another useful history is Daniel Stedman-Jones's 'Masters of the Universe', which is likewise historically informed and discriminating in its treatment.

  3. Why not call it libertarianism instead? It (seems to) include the full definition of what you call neoliberalism. As this blogpost rightly points out, the term neoliberalism has been thrown about a lot and is used with different meanings depending on who says it. Libertarianism comes without such baggage and the meaning of the word is crystal clear to most people.

    1. I would say libertarian already has a tremendous amount of baggage. In any case, there is, evidently, a big difference between the two concerning the role of central banks. (Libertarians would get rid of them.)

  4. Me like it.
    Except where you want to limit the range of weapons to fight ideology which acctually have no scrupules about using any weapon.
    Why do you want to limit the fight with only mainstream economics? Why do you want to fight with one weaker hand? Hasn't mainstream totaly failed at preventing such fake arguments apearing and it completely lost the fight?
    Why do you want to keep using the same weapon that shown itself useless?

    There is a problem tough in using multiple weapons. Like mainstreamers and other new ones are infighting instead of grouping toghether. But that is mostly i believe turf fight. Mainstreamers lost one war, against neoliberals and now are determined not to loose anymore ground. But you are helpless against neoliberal.

  5. “The term ‘neoliberalism’ has become so ubiquitous that some might think that it has lost all meaning…”. That reminds me of another common “leftie chant” word, fascism.

    I particularly like this passage from George Orwell on fascism.

    "It will be seen that, as used, the word 'Fascism' is almost entirely meaningless. In conversation, of course, it is used even more wildly than in print. I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox-hunting, bull-fighting, the 1922 Committee, the 1941 Committee, Kipling, Gandhi, Chiang Kai-Shek, homosexuality, Priestley's broadcasts, Youth Hostels, astrology, women, dogs and I do not know what else.", George Orwell, What is Fascism?, 1944.

  6. So how is it different from laisser faire?

  7. As a piece of linguistic history this is interesting but it's a little reminiscent of 'grammar' sticklers railing against the 'incorrect' usage of words like 'disinterested' or 'nonplussed'. In the end the meaning of words is defined by the way they are used.

    The word 'neoliberal' is used by people on the left to attack anything that carries the faintest whiff of the market. Neoliberalism is an ideology (in a context where 'ideology' means 'a set of delusions governing the opinions of people who disagree with me') rooted in corruption and selfishness. It is more or less synonymous with 'evil'.

    We need a different word.

  8. Corey Robin blog 'Neoliberalism: A Quick Follow-up' 04.29:

    "Update (6:30 pm). I was just re-reading the introduction to The Road from Mont Pelerin, which I link to above (and which I highly recommend), and the authors claim that the first usage of “neoliberal” along the lines of what I mention above was actually by a Swiss economist in 1925 (there was actually a 1898 usage as well, but they claim it was rather different). In the 1930s, neoliberal took off as a term, particularly in France, culminating in that 1938 meeting that I mention above. As the Cornell historian Larry Glickman pointed out to me in a Facebook thread, the term neoliberal was also used by anti-New Dealers in the United States in the 1930s, only their point was to stress that FDR had transformed liberalism from its 19th century understanding (an understanding that was much more sympathetic to markets) into a “neoliberalism” that was too critical of the market and indulgent of the state’s intervention. According to the authors of the introduction to The Road to Mont Pelerin, Frank Knight, a close associate of Milton Friedman and George Stigler at the University of Chicago, wrote an essay criticizing the New Deal in the 1930s along these lines."

  9. SimonW-L - as a non economist, I cannot understand why 'no state or union interference' does not also imply 'devotion to the markets' and also 'unbridled competition' on the part of neoliberals. Is it possible to explain simply why it does not? I had already read the Monbiot piece, and it made sense to me. Now I am confused.

    1. The high pay of CEOs is due not to market processes but a small number of rich people deciding to generously remunerate each other. They don't want "the market" to determine their pay free from outside interference, they want to continue determining it themselves free from interference. No free market ideology is needed to want a massive annual salary

  10. The term neoliberal was used in Spanish long before it was in English.

    I can find a reference in the El Trimestre Económico, Vol. 8, No. 32(4) (ENERO-MARZO 1942), pp. 735-738.

    In English, it seems to be used by historians first. Faith of a Historian, Samuel Eliot Morison, The American Historical Review, Vol. 56, No. 2 (Jan., 1951), pp. 261-275

    Then, the economists such as this review
    Le Neo-Libéralisme: Étude Positive et Critique by Jacques Cros
    Review by: Frank Munk, The American Economic Review, Vol. 42, No. 5 (Dec., 1952), pp. 923-925

    Then, it was by an economist but NOT in an economics journal.
    Two Concepts of Economic Freedom, Martin Bronfenbrenner, Ethics, Vol. 65, No. 3 (Apr., 1955), pp. 157-170

    Proper economist in an economics journal appears to be in a savage book review by Frank Knight in 1955, JPE: " The practical fallacy in Perry's main conception of freedom permeates current "neoliberal" or equalitarian propaganda and is obvious in the third of the famous "four freedoms." Freedom from want, as a right, means anything up to the right to have anything one "wants," regardless of cost to others. Or, if want means only what one has a recognized right to have, it is mere verbiage, praeteriter nilii. A right to relief of destitution or distress (at the expense of others) has never been in question, and liberal society-"the economy"-has made vast provision for meeting it. But relief as a problem is not mentioned in this book!"

  11. "So, for example, there is a big difference between promoting competition within the NHS (which some research suggests works if done in the right context, such as fixed prices), and the privatisation of health contracts"

    next time would be good to read about health care system in countries like switzerland or singapur, where almost all the system is private, always in the top5 in the world in all index and quality clasifications, and where the public health expenditure per capita in $PPP is $1628 and $762, far from countries like united states ($3967) or Norway ($4607).

    According to professor Wren-Lewis, switzerland or singapur are neoliberals :-).


    1. Talking about public health expenditure in a country where most health care is private (Switzerland) is nonsensical. Total health expenditure in Switzerland per capita is currently highest overall.

  12. Wittgenstein’s idea of “family resemblances” is useful here, as it suggests that rather than looking for one essential common feature in ideas we describe as “neoliberal” we should instead look for the overlapping similarities that connect them.

  13. I’m not convinced that ‘neoliberalism’ is opposed to “big government”. Both Thatcher and Reagan oversaw big increases in spending on the armed forces and most ‘neoliberals’ seemed quite content with vast bank bailouts. Similarly, rather than disliking market interference by the state, ‘neoliberalism’ seems to require continuous manipulation of market regulations to maximise opportunities for profit. Participants in the labour market who find themselves on its margins are subject to a far higher degree of harassment than was the case before ‘neoliberalism’ became dominant. It doesn’t seem to be either size or interference that ‘neoliberals’ object to but rather the use of state power to favour labour or other popular interests, rather than those of big business or the wealthy.

    1. It is an interesting oddity that the 'vast bank bailouts' of recent years were done by the 'right' (i.e. Republicans) in the USA, and by the 'left' (i.e. Labour) in the UK.

    2. Yes, it would be better to say that neoliberalism is opposed to strong and smart government, then big per say. Opposition to "big government" is mostly an excuse to subdue it and control it for their benefit.

      But those increases of spending is a byproduct of their policies, so they have to increase spending by government in order to keep the system going.
      By reducing the automatic stabilisers neoliberals are reducing profits of many smaller ones and crush them in order to have less competition and with it the bigger slice of a smaller pie. Increase in size and power of corporations is the goal. But continuation of such policies reduces their profits in given time. So they have to use government to improve their positions.

  14. This is a thoughtful post. It is good you brought up the 'third way'. People have confused neo-liberalism with laissez faire or anything that pushes for small-government, which while there is a large overlap, they are not completely synonymous. Neo-liberals are socially liberal, for example, they believe in welfare safety nets, (but not, for example, in infant industry arguments or centralised wage fixation systems). They believe in the efficiency of the price mechanism. They also believe in government intervention at the macro-level, for example in Keynesian anti-cyclical policy. The Neo-liberal age was the Washington Consensus of the Blair/Clinton era. Basically post --fall of the Berlin Wall.

    But I think it is important you consider the following:

    I believe at the fundamental micro-foundational level neo-classical economics and neo-liberalism are linked. They are both what political scientists regard as coming under the umbrella of Rationalism and Positivism. And at their core is individualism.


  15. I see a huge confused about the term. Maybe i can help a little bit. First, I'm afraid my English is a bit rusty. So sorry for that.

    Neoliberalism (NL) is directly linked with Colloque Walter Lippmann (30's) and Mont Pelèrin Society (after War). In the beginning we can say "Ordoliberalisme" (Freiburger School) is equal to Neoliberalism. The Question was "Why Second Wolrd war was happening. Well, they had a focus on some social questions. In 1970's we had a change. Ideas of Chicago and late Hayek had a stronger impact and NL became a strong laissez faire, elitist and anti-social conception of the world.

    So we need to understand NL is directly connected with Mont Pelèrin Society. So we can also say NL and economic Theory have strong connections. Of course also some other sciences and scholar (Popper).

    Greets from Germany

  16. Is it accurate to say there existed a huge state subsidy because only those too big fail could be assured of a bailout?

    The US govt allowed Lehmans to go bust not fully understanding the impact and the consequences ie. That they would be forced to bailout AIG in order to prevent a global banking collapse. So surely nobody was "assured" of a bailout. Is it therefore not more accurate to say that the "system" was designed in a way in which banks were supposed to be allowed to fail - so no implicit subsidy - but due to the opacity and complexity of the banking system bailouts were necessary in hindsight to restore confidence and prevent a wider collapse?

    Surely this is a crucial distinction as it would be wrong therefore to argue that state interference in this case encouraged or encourages a lack of competition.... The bailouts were a last resort and not intended to be "built into the system". They arose as a direct result of failed regulation and the fatal opaqueness of the global banking system.

  17. The reason neoliberalism isn't admitted to is they know it a floored doctrine,& they're deliberately distance themselves from it!whilst using it to achieve their neoliberal goals,we have gone through the stage,were it was a silent assassin to it being outed and transfering to a new silent form whilst distancing themselves from the old,that is why Hayek (who called himself a "neoliberal") supporters distance themselves to the point of not acknowledging the very existence of the word!

  18. Two thoughts.

    First, I'll repost the following link:

    Second, it seems to me that all strands of (market) liberalism, from classic (Smith etc.) to ordo- and neoliberalism as well as libertarianism share the view that economies, given some stable framework such as say the rule of law and national security (depending on the flavour of liberalism at hand) have a teleological tendency to self correct towards the best of all possible worlds.

    And while classic liberals were lucky enough to not have experienced the downsides of their own ideologies, their intellectual heirs naturally have more evidence to work with. And yet they all somehow cling to the view that a market order a: can be achieved and b: once it is, will necessarily deliver the better result. Or, to put it differently, there is always a dichotomy between public and private and there is always an equilibrium of perfect competition to be found somewhere.

    And it is by methodological association that standard economics in all its flavours (including yours, I'd say), is a natural ally to these strands of thought.

    Take your example of CEO pay. You state that ‘left to the market’ is often confused with ‘no state or union interference'.

    I personally would argue that the distinction is just a question of degree. Or, more cynically, a question to what extent one is prepared to gloss over outcomes as a matter of belief. Markets are not consequetualist creatures. Markets are that part of human activity which one is prepared to abstract from. And the political battle ground between moderate left and the far right is the degree to which one is prepared to abstract.

    It is the far left who have embraced complete state led heavy-handedness and who are accusing anyone to the right of them of neoliberalism (or worse). Neoliberal seems to be anyone who refuses to accept a government solution to a problem by reference to an abstract market mechanism.

    Considering the heavy-handedness and nation state implications of such a view, I can't say I'd fully endorse it. But I certainly understand where they're coming from and, at the very least, it seems like they're no worse than the rest. They're just that piece of the picture that's been unduly banned for the last 30 years whereas in fact they're a crucial part for understanding it.

    But if I could make a wish, it would be that you economists come up with a new framework, a new picture. One that works without the public - private dichotomy, one that manages to define qualitatively meaningful objectives without pointing at either theoretical teleological constructs such as markets and equilibria or big government. Neither side in the current debate, no matter where you draw the political divide, have managed to do that, imo. The far left, and the derogatory terms such as neoliberlaism which it uses to frame enemies, can only be understood in relation to the rest of the political sprectrum.

  19. I wonder if part of this is explained (at least amongst super educated commentators) by the rise at of a style of intellectual history which focusses on the terms which people use. At university I remember hearing on a number of occasions that mercantlism didn't really exist because nobody identified themselves as a mercantlist (which is not to say that mercantlism is a useful term, just that this isn't a good reason to dismiss it). So because neoliberals 1) don't self identify as such and 2) talk a lot about the free market two slightly odd interpretations have emerged. Those who focus on 1) may conclude the whole concept is useless and those who focus on 2) that a belief in the market really is important to neoliberals

  20. Mark Carney talked about the need for a 'more inclusive capitalism'. This gave me an insight into what is generally called neoliberalism, and I now tend to think of it as 'exclusive capitalism'.

  21. Two comments.

    For TheGoodTheBadTheUgly,

    You are missing the fact that the meeting at which Rustow used the term (apparently used earlier for different meanings) was the Walter Lippmann Colloque, which met in Frence. But Walter Lippmann was an influential American journalist and intellectual and he used it after this time.

    For last Anonymous,

    What you are describing was a specifically Washington usage of the term that followed the 1983 "A Neoliberal's Manifesto" by Charles Peters. It was more supportive of social safety nets as well as socially liberal policy while defending free markets and free trade and such like. It was closely associated with the centrist faction of the US Democratic Party, with Bill Clinton very closely associated with it. It also coincided with the Washington Consensus, which when applied to Latin America looked a lot like the Spanish-version that had been inspired by the more hardline pro-laissez faire group out of the Mont Pelerin Society. This has allowed harder leftists to conflate the two, with the term following Peters's formulation more or less dying out in Washington in more recent years.

    Barkley Rosser

  22. An excellent post. However, there is one dynamic to the development of neoliberal policies over time I would like to highlight. By cutting back the public sector and expanding the private, privatising state functions while failing to address causes of market failure from rent-seeking and monopolies, socialising risk while the privatising profit, neoliberal governments in the UK since Thatcher have done more than just stretch the meaning of the term neoliberalism. By giving business a very profitable interest in a privatised state with lax regulation of markets, they have created a new political economy.
    I would be curious to hear what you think about this, Simon. I think it explains a great deal that is otherwise difficult to understand in terms of pure neoliberal ideology, which as you say in certain instances has come to mean something those who first used the term neoliberalism opposed.
    Why are the Conservatives so lax on tax evasion among the ultra-rich and have let substantial financial reform to prevent another financial crisis fall by the wayside? Rich corporations and their owners are the Conservatives' political base, the party’s major donors and so the key to the future electoral success of the party. Keep them sweet and onside!
    Why are the conservatives moving against state and union funding for other political parties while leaving donations from wealthy individuals and business untouched? By starving other political parties of alternate sources of funding they ensure that all other parties have to try to outcompete the Tories at their own game. This game is of course about attracting rich donors who for the most part have a vested interest in supporting a ruling party that supports a significant role for the private sector in the running of the state and lax regulation of markets. Blair pulled it off in ’97, but was undoubtedly helped by dissarray within the Tory ranks at the time.
    This leads straight to the question why are so many of the anti-Corbyn Parliamentary Labour Party wedded to the notion that austerity was necessary and even laudable? They want the party to go the Blairite route and win the support of business, and to do this they have to demonstrate the party’s commitment to a pro-business version of Tory policy. To be a “credible” party of government they embrace a policy that has little or no empirical evidence to support it and a great deal of evidence against it, which even the IMF has come to criticise. How can that be justified, if not by a developing plutocratic political economy?
    This also raises questions about the style of Tory politics and the reductive politics of fear the party has embraced.
    I am sure there are many more examples, but these are the ones that spring immediately to mind.
    Osborne’s latest wave of sweeping privatisations, from the Land Registry to the forced academisation of schools and the march of privatisation in the health sector will put billions more into the pockets of private businessmen, giving them all a stake in the status quo and the party that can guarantee it.

  23. I tend to call it "market fundamentalism", though of course as SWL alludes to, many of those preaching from the market fundamentalist pulpit really have no interest in free markets when their own circumstances are involved; they just want less awkward interference and they pay lots of money lobbying for help to maintain their powerful market position.

    I'm so glad to see someone of intellect like SWL call foul on the use of the term "wealth creator", a term which I maintain is sophistry of the highest degree.

    He seems to think he got a hard time for his Washington consensus and touches on the reaction against it and neoliberalism.

  25. i really, really hate tha term 'neoliberalism' lmao

    i'm almost 30 years old & i've met literally only maybe a handful of people in my entire life who truly understand tha etymology & background of tha term 'neoliberalism' & its origins associated with classical European economic theory lol; why dont critics refer to it by a moniker that most people would actually recognize & understand immediately, ie hypercapitalism, crony capitalism, casino capitalism, corporate oligarchy, etc?

    is it merely because they're justifiably afraid of being automatically labeled/stigmatized & disregarded as communists or socialists for simply proposing anti-capitalist arguments lolo?


Unfortunately because of spam with embedded links (which then flag up warnings about the whole site on some browsers), I have to personally moderate all comments. As a result, your comment may not appear for some time. In addition, I cannot publish comments with links to websites because it takes too much time to check whether these sites are legitimate.