Wrt welfare: I think alot of people perceive Clinton's changes in how it functions to be neoliberal in nature. Even though there might be more aid now, all of it is predicated on you having a job. That is a neoliberal ethos.
Wrt income inequality & taxes: I'm not sure taxes as a percentage of GDP is the best way to determine whether tax strategy is neiliberal or not. The better way to determine whether a tax strategy is neoliberal is to measure what it allows the wealthy to do. If it allows the wealthy control vast components of societal life, then that tax strategy is neoliberal. This approach is reflected in part by Sam Seder's opinion (paraphrased): "I don't think there should be any billionaires at all. I think we should tax billionaires such that they cannot earn a billion dollars."
To go further on this, I think your taxes as a percentage of GDP approach would be more useful if it went back a few years prior to the income tax (say, start at 1900). That's because the income tax came about in the middle of the financialization of mass production. During this time, federal taxes as a percentage of GDP should have jumped due to the implementation of the income tax. Post 1900 there was suddenly much more disposable income for the government to tax than prior to 1900 (and as a result of this we got many more social programs and a larger federal government).
It is arguable in a similar time now, with the advent of personal computers and the Internet. The financialization of these innovations have generated a rapid jump in wealth/productivity in a similar way the financialization of mass production did in the 20th century. So therefore, the tax to GDP percentage should jump similarly to how it probably did with the advent of the income tax. Maybe the federal government ought to tax 12 percent of GDP instead of 8, based upon higher income taxes on the wealthy, large corporations, and a time-based investment property tax?
Neoliberals, of course, would and do oppose such things. This, in my opinion, prevents government from improving society in ways that it is newly able to- and ways it otherwise would, absent neoliberal ideology.
Perhaps neoliberals haven't had as much as a material effect of we on the left imagine, but the ideology's cultural success blocks much of what a proactive government could be doing in society.
Maybe neoliberalism is just a fancy way to acknowledge the end of 60s' idealism as a justifying principle?
"Same goals, but from now on, we promise to sound humble about it."
The weird thing is that your charts make it look like nothing changed in the net results. I'm reminded of Scott Alexander's "...Do Straight Lines on Graphs Drive Reality?"
In your international chart, the huge swings in UK and Sweden's progressivity are fascinating. How did their societies react to such massive changes in redistribution?
Isn't is kind of understandable that corporate tax receipts would fall in the postwar era? Even if CT were at a 100% the tax receipts would never exceed the profit margin, so all this indicates is that the companies of the day were in highly competitive markets - there were no Standard Oil equivalents around at the time - where they weren't making much profit.
Excellent column discussing yet another politically useless label. There are a lot of us who are quite liberal, yet supportive of economic and political policies that on their own would throw one into one camp or the other. As you note, much of what passes as "neoliberalism" came to pass during Democratic Presidencies though Republican Congressional majorities during the Clinton era had a significant impact.
Thanks to Professor De Long who sent me a pre-print of his book back in April and also alerted me to Gerstle's book on the neoliberal order, I have read both of the. I think Gerstle, who focuses on a small part of what De Long covers does provide a good compliment. As Noah so well points out, sometimes we get caught up in the larger political discussions and lose sight of the broader picture(s).
From my perspective it is the large scale financialization that began in the late 1970s that underpins a lot of what is wrong. Private equity led to massive buyouts and destruction of many companies though in some cases it was the companies who lost sight of their bottom line that made take overs all the easier abetted by junk bond financing (thanks Mike Milken).
We cannot lose sight of how several high ranking Democratic economic policy makers ignored the warnings about the need to regulate new financial derivatives that directly resulted in the 2008 melt down (here's looking at you Bob Rubin and Larry Summers).
Yes, there is a huge amount of inequality that largely is a result of what has transpired via financial innovation (likely an oxymoron). However, with financial security for many of us tied up in the stock and bond markets, Americans have a vested interest in assuring that there is stability and transparency in markets. The same goes for tax policy which is badly in need of reforming (I'm a major contrarian on this point, believing the corporate tax should be replaced by a VAT as direct taxation of corporations will always be gamed through loopholes or off-shoring of assets. It's far better to have lower corporate rates and a VAT).
Anyway, I've gone on too long for most readers and will thank Noah for a very useful and thought provoking column!!
I hope you wear the “Chief Neoliberal Shill” title as a badge of honour, rigged elections or not. None of the policy changes you describe seemed crazy or ill-advised at the time, nor in retrospect. One part of the fiscal equation you didn’t discuss is the deficit, which grew dramatically, of course. Tomorrow’s problem.
You seem mainly to demonstrate that neoliberal ideology was not the sole determinant of policy even in the era when it was ascendant. This is commonly the fate of ideologies and not a proof that they lack significance or influence.
My takeaway is that govt. generally found its way to doing the right thing in the topics covered. The country became wealthier and the govt., both parties included, was able to significantly cut those living in poverty.
This is an amazingly well researched and written post for someone who publishes several times a week. I think the conclusion is exactly right. Most economists would take a whole book to cover this topic. Glad to pay the big bucks for this Substack.
Neoliberalism means something different in the US (roughly = Third Way( because "liberal" means something different. The Clintons were neoliberal in the same sense that Tony Blair was "New Labour", friendly to financial markets and deregulation, but hoping to use market methods to achieve traditional liberal objectives. Outside the US, the term "neoliberalism" means roughly what is described here.
I find the poverty chart pretty unconvincing. Depending how you read it, poverty went from perhaps 20% to 12%. Great, right? Not really. At the same time, GDP per capita went from $19k to $56k per year in 2015 dollars. So we became 3X richer per person as a country and couldn’t get poverty to go down more than 40%? I think that’s pretty disgraceful. Given how wealthy we are, it should be zero. Even worse, no one even aims to bring it to zero. Our priorities are out of whack.
Quinn Slobodian has written "Globalistss," a book describing the development of neoliberalism from the 30s by the so-called Austrian economists. It is an exhaustive and exhausting account. Neoliberalism had a pov that the world was divided into political and economic spheres. The political sphere must only support economics in that full support of free trade and capital is its correct role. Anything interfering with that is unacceptable.
"There have been scattered pseudo-privatizations in prisons, schools, and health care, where the government basically contracts out to privately owned companies, but this is very different than selling off government assets, and ultimately the government is still footing the bill."
That is a huge part of what people mean when they talk about neoliberalism in the US.
The axiom that since the private sector is always more efficient, it makes sense to contract public service provision to private entities.
This means that the government still has to pay everything, but the services get Whittier and these entities can just take massive profit out of the public purse.
That this is only a sentence and kind of dismissed makes this post super disappointing.
This is especially disappointing because when the US tries to apply solutions to the Congo or somewhere, a common failure state is telling the to make a private sub contractor to provide public services and it usually doesn't work.
I find this an informative contrast of neoliberalism with classical liberalism:
'Whereas classical liberalism represents a negative conception of state power in that the individual was taken as an object to be freed from the interventions of the state, neoliberalism has come to represent a positive conception of the state’s role in creating the appropriate market by providing the conditions, laws and institutions necessary for its operation. In classical liberalism the individual is characterized as having an autonomous human nature and can practise freedom. In neoliberalism the state seeks to create an individual that is an enterprising and competitive entrepreneur.'
Olssen, Mark and Peters, Michael A (2005) Neoliberalism, higher education and the knowledge economy: From the free market to knowledge capitalism. Journal of Education Policy, 20(3), 313-345.
Those of us teaching Consumer Science from the 1970s to 2010 saw the ground effects in our classrooms -- not good; grim in fact. It was felt within the ranks that those effects were not simply due to economic winds, elections or social movements. The only explanation that made sense at the time was corruption. Fast forward to "Inside Job", a 2010 documentary that did a pristine job of laying that out. The boys that pumped investments then bet against them knew exactly what they were doing. One just won a Nobel! They took down the country, got rich, and never lost a cent -- to this day. In 2022, not much has changed.
Wrt welfare: I think alot of people perceive Clinton's changes in how it functions to be neoliberal in nature. Even though there might be more aid now, all of it is predicated on you having a job. That is a neoliberal ethos.
Wrt income inequality & taxes: I'm not sure taxes as a percentage of GDP is the best way to determine whether tax strategy is neiliberal or not. The better way to determine whether a tax strategy is neoliberal is to measure what it allows the wealthy to do. If it allows the wealthy control vast components of societal life, then that tax strategy is neoliberal. This approach is reflected in part by Sam Seder's opinion (paraphrased): "I don't think there should be any billionaires at all. I think we should tax billionaires such that they cannot earn a billion dollars."
To go further on this, I think your taxes as a percentage of GDP approach would be more useful if it went back a few years prior to the income tax (say, start at 1900). That's because the income tax came about in the middle of the financialization of mass production. During this time, federal taxes as a percentage of GDP should have jumped due to the implementation of the income tax. Post 1900 there was suddenly much more disposable income for the government to tax than prior to 1900 (and as a result of this we got many more social programs and a larger federal government).
It is arguable in a similar time now, with the advent of personal computers and the Internet. The financialization of these innovations have generated a rapid jump in wealth/productivity in a similar way the financialization of mass production did in the 20th century. So therefore, the tax to GDP percentage should jump similarly to how it probably did with the advent of the income tax. Maybe the federal government ought to tax 12 percent of GDP instead of 8, based upon higher income taxes on the wealthy, large corporations, and a time-based investment property tax?
Neoliberals, of course, would and do oppose such things. This, in my opinion, prevents government from improving society in ways that it is newly able to- and ways it otherwise would, absent neoliberal ideology.
Perhaps neoliberals haven't had as much as a material effect of we on the left imagine, but the ideology's cultural success blocks much of what a proactive government could be doing in society.
Maybe neoliberalism is just a fancy way to acknowledge the end of 60s' idealism as a justifying principle?
"Same goals, but from now on, we promise to sound humble about it."
The weird thing is that your charts make it look like nothing changed in the net results. I'm reminded of Scott Alexander's "...Do Straight Lines on Graphs Drive Reality?"
(Link: https://slatestarcodex.com/2019/03/13/does-reality-drive-straight-lines-on-graphs-or-do-straight-lines-on-graphs-drive-reality/ )
In your international chart, the huge swings in UK and Sweden's progressivity are fascinating. How did their societies react to such massive changes in redistribution?
Isn't is kind of understandable that corporate tax receipts would fall in the postwar era? Even if CT were at a 100% the tax receipts would never exceed the profit margin, so all this indicates is that the companies of the day were in highly competitive markets - there were no Standard Oil equivalents around at the time - where they weren't making much profit.
Excellent column discussing yet another politically useless label. There are a lot of us who are quite liberal, yet supportive of economic and political policies that on their own would throw one into one camp or the other. As you note, much of what passes as "neoliberalism" came to pass during Democratic Presidencies though Republican Congressional majorities during the Clinton era had a significant impact.
Thanks to Professor De Long who sent me a pre-print of his book back in April and also alerted me to Gerstle's book on the neoliberal order, I have read both of the. I think Gerstle, who focuses on a small part of what De Long covers does provide a good compliment. As Noah so well points out, sometimes we get caught up in the larger political discussions and lose sight of the broader picture(s).
From my perspective it is the large scale financialization that began in the late 1970s that underpins a lot of what is wrong. Private equity led to massive buyouts and destruction of many companies though in some cases it was the companies who lost sight of their bottom line that made take overs all the easier abetted by junk bond financing (thanks Mike Milken).
We cannot lose sight of how several high ranking Democratic economic policy makers ignored the warnings about the need to regulate new financial derivatives that directly resulted in the 2008 melt down (here's looking at you Bob Rubin and Larry Summers).
Yes, there is a huge amount of inequality that largely is a result of what has transpired via financial innovation (likely an oxymoron). However, with financial security for many of us tied up in the stock and bond markets, Americans have a vested interest in assuring that there is stability and transparency in markets. The same goes for tax policy which is badly in need of reforming (I'm a major contrarian on this point, believing the corporate tax should be replaced by a VAT as direct taxation of corporations will always be gamed through loopholes or off-shoring of assets. It's far better to have lower corporate rates and a VAT).
Anyway, I've gone on too long for most readers and will thank Noah for a very useful and thought provoking column!!
I hope you wear the “Chief Neoliberal Shill” title as a badge of honour, rigged elections or not. None of the policy changes you describe seemed crazy or ill-advised at the time, nor in retrospect. One part of the fiscal equation you didn’t discuss is the deficit, which grew dramatically, of course. Tomorrow’s problem.
You seem mainly to demonstrate that neoliberal ideology was not the sole determinant of policy even in the era when it was ascendant. This is commonly the fate of ideologies and not a proof that they lack significance or influence.
Great perspective using decades of data.
My takeaway is that govt. generally found its way to doing the right thing in the topics covered. The country became wealthier and the govt., both parties included, was able to significantly cut those living in poverty.
This is an amazingly well researched and written post for someone who publishes several times a week. I think the conclusion is exactly right. Most economists would take a whole book to cover this topic. Glad to pay the big bucks for this Substack.
Neoliberalism means something different in the US (roughly = Third Way( because "liberal" means something different. The Clintons were neoliberal in the same sense that Tony Blair was "New Labour", friendly to financial markets and deregulation, but hoping to use market methods to achieve traditional liberal objectives. Outside the US, the term "neoliberalism" means roughly what is described here.
https://johnquiggin.com/2015/05/13/the-last-gasp-of-us-neoliberalism/
Both have been in retreat since around the turn of the century.
>Inequality increased and unions declined
Ok, so there was a neoliberal turn. Capital got stronger and labor got weaker.
I find the poverty chart pretty unconvincing. Depending how you read it, poverty went from perhaps 20% to 12%. Great, right? Not really. At the same time, GDP per capita went from $19k to $56k per year in 2015 dollars. So we became 3X richer per person as a country and couldn’t get poverty to go down more than 40%? I think that’s pretty disgraceful. Given how wealthy we are, it should be zero. Even worse, no one even aims to bring it to zero. Our priorities are out of whack.
Quinn Slobodian has written "Globalistss," a book describing the development of neoliberalism from the 30s by the so-called Austrian economists. It is an exhaustive and exhausting account. Neoliberalism had a pov that the world was divided into political and economic spheres. The political sphere must only support economics in that full support of free trade and capital is its correct role. Anything interfering with that is unacceptable.
"There have been scattered pseudo-privatizations in prisons, schools, and health care, where the government basically contracts out to privately owned companies, but this is very different than selling off government assets, and ultimately the government is still footing the bill."
That is a huge part of what people mean when they talk about neoliberalism in the US.
The axiom that since the private sector is always more efficient, it makes sense to contract public service provision to private entities.
This means that the government still has to pay everything, but the services get Whittier and these entities can just take massive profit out of the public purse.
That this is only a sentence and kind of dismissed makes this post super disappointing.
This is especially disappointing because when the US tries to apply solutions to the Congo or somewhere, a common failure state is telling the to make a private sub contractor to provide public services and it usually doesn't work.
I find this an informative contrast of neoliberalism with classical liberalism:
'Whereas classical liberalism represents a negative conception of state power in that the individual was taken as an object to be freed from the interventions of the state, neoliberalism has come to represent a positive conception of the state’s role in creating the appropriate market by providing the conditions, laws and institutions necessary for its operation. In classical liberalism the individual is characterized as having an autonomous human nature and can practise freedom. In neoliberalism the state seeks to create an individual that is an enterprising and competitive entrepreneur.'
Olssen, Mark and Peters, Michael A (2005) Neoliberalism, higher education and the knowledge economy: From the free market to knowledge capitalism. Journal of Education Policy, 20(3), 313-345.
https://www.researchgate.net/publication/44836326_Neoliberalism_Higher_Education_and_the_Knowledge_Economy_From_the_Free_Market_to_Knowledge_Capitalism
Those of us teaching Consumer Science from the 1970s to 2010 saw the ground effects in our classrooms -- not good; grim in fact. It was felt within the ranks that those effects were not simply due to economic winds, elections or social movements. The only explanation that made sense at the time was corruption. Fast forward to "Inside Job", a 2010 documentary that did a pristine job of laying that out. The boys that pumped investments then bet against them knew exactly what they were doing. One just won a Nobel! They took down the country, got rich, and never lost a cent -- to this day. In 2022, not much has changed.