March 6, 2021 Reading Time: 14 minutes

At a time when many movements that are thought to be the intellectual mainstream, left and right, advocate further encroachments on free and open economic exchange, those who cherish voluntary human interaction are likely to expend their energies navigating a political wilderness. 

It is therefore natural for us to seek out common ground with professed advocates of a free and open market system, wherever they may manifest. Though we might call this underlying philosophical precept “market liberalism,” certain strains of its current iteration diverge from that which is designated liberalism in the classical sense. There is danger in the confused condition that sees market liberalism as but an instrument by which to bring about scientific supervision of socioeconomic life wherein human behavior might be molded and subsequently fine-tuned to “correct” for unwanted products of voluntary exchange that attract the scrutinizing subjectivity of the technocrat.

With this concern in mind, I turn my attention to the nebulous concept of “neoliberalism” – a label that has, more than once, been involuntarily assigned to my own work, despite an explicit repudiation of it in the same. The peculiar term functions as both a fashionable bête noire of academic progressivism, and, to a much smaller extent, an articulated philosophy onto itself among a mostly center-right faction of market-oriented think tankers and policy professionals. 

Although it has become an ubiquitous feature of political theorizing in recent decades, neoliberalism’s precise definition remains elusive. To assess neoliberalism, then, requires establishing greater clarity around the meaning of the concept. We must begin by delineating the characteristics of its two strains: its common and typically pejorative academic usage and a more recent attempt to reappropriate the concept into a positive good.

Pejorative Neoliberalism

In its more common use by far, “neoliberalism” functionally operates as an amorphous moniker for a disliked economic other. It is defined primarily by its oppositional relation to an author’s own vantage point on the economic far-left, with the latter axiomatically presumed to be, and also normatively put forth as, the superior ethical system. To be designated a “neoliberal” then is to stand against normative leftism, and to become blameworthy for that stance.

Most attempts to inject greater precision into the term than that proceed in vain. Instead, neoliberalism’s common uses take on an overwhelmingly pejorative flavor with a primary aim of discrediting the alleged neoliberal.

As I’ve previously remarked, the neoliberal moniker functionally operates as an intentionally imprecise stand-in term for free market economics, for economic sciences in general, for conservatism, for libertarians and anarchists, for authoritarianism and militarism, for advocates of the practice of commodification, for center-left or market-oriented progressivism, for globalism and welfare state social democracies, for being in favor of or against increased immigration, for favoring trade and globalization or opposing the same, or for really any set of political beliefs that happen to be disliked by the person(s) using the term.

In such a climate, purely descriptive attributes of what constitutes a neoliberal remain rare and ill-defined. Insofar as a cohesive set of characteristics might be found, we must turn to the history of its deployment. Looking past a popular origin myth that incorrectly ascribes “neoliberalism” to a self-designated label from a 1938 free-market academic gathering in Paris, the term’s deeper history may be unambiguously traced to interwar German language debates about competing camps of economic thought. “Neoliberalismus” became a favored moniker to describe a market-liberal economic philosophy, presented at the time as a methodologically individualistic foil to competitor economic systems on the left and right. To writers in the 1920s, the addition of the prefix “neo” sought to capture the incorporation of marginal analysis and particularly a marginal theory of value into liberal economic doctrine, thereby distinguishing it from the liberal strain of classical economic thought of the mid-19th century.

The curious twist to this neologism comes from the sources of its coining. Though never truly adopted by the liberal-minded economic marginalists themselves, the label entered into near-simultaneous use within the German-language economic literature of both the far-left and far-right. Its earliest deployment with a discernible connection to the term’s modern uses traces to a series of interwar Marxist tracts by Max Adler (1922) and Alfred Meusel (1924). Writing from an overtly socialist perspective, these theorists saw what they called “neoliberalism” as an attempt to rehabilitate individualist economic liberalism in the wake of Marx’s sweeping indictment of capitalism. A marginalist theory of value in particular collided with the Marxist tool of surplus value, itself derived from labor performed in improving a product and presented as the basis upon which the owners of capital exploited the laboring classes. Take away the labor theory of value, and the Marxist system effectively collapses. To its expositors then, a marginalism-infused “neoliberalism” sought to resuscitate old liberalism from what the Marxists – still clinging to the labor theory of value – perceived to be their own knockout blow against an earlier mode of economic thought.

The German-speaking far-right almost simultaneously adopted the term on parallel grounds, albeit in their own case with a tendency to view “neoliberalism” as an individualist challenge to the collective economic good of a unified people, ethnicity, and state. Liberal individualism thus injected discord into the collective well-being of the German people, threatening to derail what the far-right saw as an inexorable march toward national ascendance that they pursued with the same political fervor as the Marxist far-left’s pursuit of allegedly-inevitable socialism. The proto-fascist academic Othmar Spann thus became the leading critic of what he called neoliberalism from the political right, following the incorporation of the term into the 1926 edition of his economics textbook’s taxonomy of various schools of economic thought.

For reasons that are not difficult to discern, the German far-right literature on “neoliberalismus” all but disappeared from academic discussion in the wake of the Second World War. The closely similar far-left variant is still traceable, albeit subconsciously, to its current use, having undergone a dramatic revival of use in the academic literature between the 1990s and the present. Although perhaps less wedded to doctrinaire Marxian theorizing than its precursor uses, it still retains a hostility to subjective valuation and methodological individualism at its core.

It thus becomes possible to see how, at least among the deployers of pejorative neoliberalism, the term can be freely applied to what appears to be a disparate and disjointed set of economic beliefs, ranging from radical laissez-faire non-interventionism to a market-friendly left-of-center social democratic welfare state. These positions need not exhibit any commonality on their prescriptive doctrines, as the very act of operating in a market-based intellectual paradigm – and thus outside of far-left collectivism – qualifies someone as a “neoliberal” and, more often than not, a target of disparagement among the users of the term.

The pejorative characteristic is itself a feature of the moniker, and primarily arises from the user’s conviction that he or she is pursuing the collective cause of economic and political justice, thwarted only by the neoliberal adversary’s self-interests. From this vantage point, even the most mundane of market institutions appear as conscious efforts to entrench injustice and preserve an economic status quo of unequal distribution. Restraints on state interference in economic affairs become manipulative schemes to “enchain democracy,” wherein the only countenanced democratic outcome looks not like the will of a popular majority but rather something suspiciously similar to a preordained set of policy preferences advanced in the name of “social justice.”

In its extreme manifestations, the critical theorists of pejorative neoliberalism even adopt an overtly conspiratorial epistemic system. Here liberal market institutions are assumed to serve the nefarious designs of profiteering and wealth accumulation. And rather than operating at face value, its theorists are held forth to be esoteric adherents of authoritarian designs – to be anti-democratic elites, or secret Pinochet enthusiasts, or even clandestine fascist throwbacks who have merely dressed up their true intentions in the language of liberal market democracy. 

Furthermore, such charges become unanswerable precisely because they are not stated by the alleged “neoliberals” and instead may only be divined through textual analysis of their works, as conducted using the tools and acroamatic training of Critical Theory. Evidentiary norms need not be abided when malicious intentions may be inferred through unfalsifiable speculation.

In practice, this approach yields the sort of decoder ring pop-psychologizing that purports to detect neoliberalism even among those of us who explicitly reject the label. Its use follows this pattern because the neoliberal moniker’s primary purpose has become a means by which to sweep aside a broad array of ideas, arguments, and evidence that would otherwise challenge the ideological precepts of those who deploy the term pejoratively.

In short, pejorative neoliberalism is a way for the user to discredit an interlocutor without engaging the particulars of an argument. It may be rejected as any pejorative slur would.

Non-ironic Neoliberalism

A sense of non-rigorous ideological banality, and at times even intellectual vacuousness, permeates most of the modern scholarly literature on “neoliberalism,” voluminous and growing though it may be. We might nonetheless ask ourselves if neoliberalism has a more sophisticated offering as a cohesive system of thought that its pejorative users miss in their quest to demonize and blame.

Spurred by the growing academic adoption of the pejorative moniker, a small group of writers in the American and British policy think tank worlds launched an initiative in the mid-2010s to essentially reclaim the neoliberal label as a forward-looking alternative to not only the far-left’s economic beliefs but also a more doctrinaire laissez-faire liberalism. Unlike the caricatures of the more prevalent pejorative use, this non-ironic reappropriation of the neoliberal moniker seeks to present a positive philosophical system blending a free-market economic disposition, and accompanying policy tools, with greater tolerance for state intervention in economic affairs, particularly as it concerns issues of equity and fairness.

This non-ironic neoliberalism has several antecedents, including a presence at the aforementioned 1938 conference in Paris where participants debated the proposition of relaxing laissez-faire precepts to countenance a more aggressive government response to the global Great Depression. The Walter Lippmann Colloquium, as the gathering was called, ended without reaching a conclusion on this subject, and indeed some of its participants – Ludwig von Mises in particular – rejected the suggestion outright. Yet the lesser-known “neoliberal” faction from the gathering has more or less persisted in some form or another ever since under what might be termed a pro-market philosophical umbrella.

The direct descendants of the “neoliberal” faction at the 1938 conference reconvened after World War II to lay the political groundwork for what we now know as Ordoliberalism – a midcentury school of thought anchored in Germany that sought to blend market-guided policies such as free trade and fiscal restraint with a safety net-style welfare state and robust institutional bulwarks for each. Yet the still-existent Ordoliberals are more of a cousin to the post-2010 efforts to reclaim neoliberalism, than an ancestor. Non-ironic neoliberals present their program as a novel approach, or even a third way that has yet to be taken, its political purposes intended to bridge the gap between more doctrinaire free-market principles on the center-right and a traditionally left-leaning concern for the least well off.

So what do the non-ironic neoliberals believe? Their platform is less amorphous than the pejorative moniker’s use in the academic literature, and rejects the surreptitious malevolence that the leftist deployment of the term often assigns its designs. It is fluid in other ways, and sufficiently broad so as to encompass what might be thought of as the economic center-right and social center-left of the conventional political spectrum. It also resembles older uses in its pairing of certain social democratic programs and a professed belief in market-friendly policies such as free trade and open immigration.

There is no single philosophical statement of this non-ironic brand of neoliberalism. But the aforementioned pairing is the thrust of one recent statement of neoliberal principles published by the “Neoliberal Project” – a website of the center-left Progressive Policy Institute. A statement out of a group of right-leaning think tankers in the UK staked out similar positions in 2016, professing an embrace of free markets, trade, and property rights, while also paired with a proactive political program of adopting more robust measures to care for the poor.

Both statements profess adherence to a style rooted in empiricism and scientific rigor. In terms of specific policy proposals, the non-ironic neoliberals express enthusiasm for the aforementioned precepts of trade and immigration, but also social welfare programs such as a Universal Basic Income (UBI) system (offered as a substitute for the less-efficient welfare state), an aggressive set of interventions to tackle global warming (usually offered as a carbon tax or carbon pricing scheme), and some degree of income redistribution. 

An overarching theme is a belief that markets may be paired with a suite of policies to improve upon them where they are alleged to fail or fall short of a desired normative prescription for greater equity. Negative externalities become a central preoccupation for the non-ironic neoliberal, and the state exists primarily to correct these “market failures” through scientifically-guided collective action that aims to fine-tune market operations and keep the machinery running. Similarly, professed concerns for equity and the poor serve the purpose of bringing them into the market system’s purview by redistributing some of the abundance that robust market institutions excel at generating.

In fleshing out these particulars, it becomes quickly apparent that non-ironic neoliberal is not so much a novel spin but a conglomerated repackaging of familiar tools – Samuelsonian market failure theory from the mid-20th century, a center-right iteration of Keynesian macroeconomic management of business cycles, a predisposition towards introducing efficient and cost-saving management to large scale public expenditures, and enthusiasm for a larger but also better-run social safety net of entitlements and benefits for income support and necessities such as healthcare.

The problems with this approach are as familiar as its older variants, and become most acutely realized when one considers that political allocations of public resources and accompanying social mandates through the public sector are innately susceptible to interest group manipulation and graft. In economic parlance, collective action places rents on the table for the taking, and once made available those rents are sought in ways that inevitably create political constituencies for their preservation and expansion. The rent-seeking process trends toward political sclerosis, thereby impeding the necessary adjustments that a policy system premised on fine-tuning the market would require. Once allocated through the public sector, a benefit or expenditure will become nearly impossible to repeal until its value dissipates somewhere below the level of political lobbying required to maintain it. And in most cases, the lobbying push for perpetuation moves in the opposite direction – even when a program’s intended purpose lacks minimal evidence of its fulfilment.

Consider the implications for the non-ironic neoliberals’ favorite centerpiece program, UBI (Universal Basic Income). Its premise carries immense technocratic appeal. Recognizing the bureaucratic inefficiencies of the existing welfare state’s allocation mechanisms and administrative costs, UBI proponents pitch their program as a streamlined and cost-saving replacement for welfare entitlements. The new program, they insist, will deliver a greater share of the program’s benefits to intended recipients, absent the paperwork and wasteful political administration. And it might do just that in an idealized policy world, yet as I’ve pointed out previously the case for UBI rests on an unrealistic assumption of seamless implementation in an idealized system of government, free of the rent-seeking tendencies that pervade the system of government we actually have. The more likely political reality of a UBI “swap” is no swap at all, but rather a vastly more expensive social welfare state that adds the new UBI benefit payment to the already-existing suite of safety net programs, the latter remaining in place and fully funded precisely because it would be impossible to repeal them without angering deeply entrenched political constituencies connected to the same existing programs. The likely result: a bloated and unwieldy entitlement system that is now twice the size of its predecessor and impossible to reform in any meaningful way.

Similar problems impede the carbon tax “solution” that many non-ironic neoliberals espouse as an efficiency-improving way of tackling climate change. And indeed, the same may be true of most collective action attempts to correct for externalities through the political system. Ronald Coase, himself perhaps the preeminent externality theorist of the last century, noted as much in a perceptive commentary on Pigouvian taxation, of which carbon taxes are an example:

“It is easy to show that the mere existence of “externalities” does not, in itself, provide any reason for governmental intervention. Indeed, the fact that there are transaction costs and that they are large implies that many effects of people’s actions will not be covered by market transactions. Consequently, “externalities” will be ubiquitous. The fact that governmental intervention also has its costs makes it very likely that most “externalities” should be allowed to continue if the value of production is to be maximized. This conclusion is strengthened if we assume that the government is not like Pigou’s ideal but is more like his normal public authority–ignorant, subject to pressure, and corrupt.”

And here we find the Achilles heel of non-ironic neoliberalism. Efficiency-improving market failure corrections often look like an obvious and tidy solution on paper. When it comes to implementation however, they become Public Choice quagmires. They become large scale opportunities for political rent extraction at the public trough, with few or no effective safeguards to prevent the desired measure from becoming a free-for-all of political pork and handouts typical of almost any large scale “stimulus” measure or budgetary omnibus bill.

Awareness of this problem induced many of the mid-century Ordoliberals to turn to robust institutional designs as a posited safeguard against the Public Choice problems they knew their policies would invite. Whether they succeeded in other countries exceeds the scope of this essay, although I’ll suggest that the trajectory of deficit spending in the United States over the last half-century is a testament to the difficulty of even mildly slowing Leviathan’s growth through institutional design.

Yet for all the theoretical challenges this question may invite, it’s largely missing from our modern day non-ironic neoliberal movement. Instead the carbon taxers, UBIers, and market-friendly market failure theorists exhibit an air of flippancy that assumes their preferred policies will be securely implemented and seamlessly executed, provided that society simply wills it so. When the pretense of efficient scientific execution meets the political stumbling blocks of naïve social planning, these modern neoliberals have no ready answer save for an appeal to their own claimed technocratic abilities.

As a recent illustration, look no further than last year’s disastrous attempts to centrally plan our way through the global coronavirus outbreak. Decades of scientific knowledge about pandemics and basic common sense about the pitfalls of political allocation through government mandates and restrictions gave way to a hyper-technocratic policy framework premised on scientific epistocracy and untested theoretical epidemiology models. Except the scientists we listened to amassed a year-long string of failed predictions and blunderous errors. The main model guiding the policy response failed in catastrophic ways. The political web of ineffectual lockdowns and nonpharmaceutical interventions (NPIs) sclerotized, as two weeks to flatten the curve became two months, then six months, then almost a year – all despite no discernible effect at mitigating the pandemic apart from statistical randomness.

Meanwhile, several of the very same free-market technocrats behind the non-ironic neoliberal movement remain wedded to these failed policies after a year of their unmitigated failure, lashing out against attempts to relax the lockdowns and latching onto fringe strategies masquerading as “science” such as the ZeroCovid movement’s push to “eliminate” the virus through even harsher lockdowns. Even the non-ironic neoliberals’ once-cherished commitment to free movement and open borders sits on the chopping block of Covid technocracy, insofar as stricter border closures than we already have become the next item in a long list of NPIs to fine-tune. It’s a familiar pattern. To the non-ironic neoliberal, NPIs could not have possibly failed the last several times they were attempted due to flaws in their underlying premises and untested scientific assumptions. The science behind them is sound, we’re told, and any case rise in spite of these measures simply must be a result of failing to lock down hard enough, failing to close the borders tightly enough, or failing to boost the mask-wearing threshold from its current 85 or 90% of the public to full 100% compliance. Any capacity for marginal analysis in this brand of thinking, it would appear, has long since flown out the window.

Public health crises, it turns out, also provide a direct opportunity to observe the technocratic governance style of non-ironic neoliberalism in practice. Viral transmission exhibits certain externality characteristics, which produce an accompanying impulse to “correct” them through collective action. Pandemic responses also invite and even require highly specialized scientific expertise in virology and epidemiology – if only we “follow the science,” all of this will be over. The catastrophic failures of this approach to governance should dispel all illusions of its promises by now, and yet the non-ironic neoliberals’ answer thus far is to simply double down on technocracy. “Lockdowns did not work the last three times, because we didn’t listen to the scientists enough and didn’t sufficiently commit to making them work!”

Uniting the Neoliberal Variants

With no small irony, Covid has provided an underrecognized synthesis between the two aforementioned variants of neoliberalism – one pejorative and almost always invoked derisively, and the other put forth as a reclaimed positive program. Theorists of the pejorative version have penned numerous tracts attributing the coronavirus pandemic itself, and the failures of the political response, to the amorphous target of their scorn. And yet these anti-neoliberals of the left largely share a preference for the exact same pandemic response policies that the center-right neoliberal technocrats have also embraced in the name of science-driven policy: they back lockdowns and related NPIs, they prefer handing the reins of government over to experts like Neil Ferguson and Anthony Fauci, they resist and denounce efforts to reopen by calling them irresponsible and predicting doomsday scenarios that never happen, and they express an overarching contempt for scientific dissent by attacking and ostracizing anyone who questions either the scientific basis or efficacy of their preferred policies. At the core of both variants, we find that they share more in common than either care to admit.

One critique offered by the critics of pejorative neoliberalism appears to hold true for its non-ironic reclaimants. Despite lip service to liberal democratic norms and values, this latter group of neoliberals will readily sacrifice the very same principles to scientific technocracy if and when the two collide. 

The world of emergency policy-making under the direct guidance of epidemiology modeling is illustrative not only in its scientific failures, but its habit of placing deliberative democratic institutions and even cherished constitutional rights in a subservient position to what they herald as “the science.” The final twist, however, is that the neoliberalism critics on the illiberal left appear ready to sacrifice the very same norms and constitutional constraints as the self-described neoliberal technocrats, and for the same reasons.

What we see emerging from both is a pattern of convergence – one technocratic, and the other motivated by a desired ideological end, but both arriving at the same place: a paternalistic and interventionist government operating under a delusional confidence in its own ability to deftly execute sweeping policy decisions that affect tens of millions of lives, and doing so based only on the hubristic belief that it is implementing pure science-guided expertise through the capacity of the state. Whether we call that neoliberalism or something else, and whether we accept its self-description at face value or the caricature presented by its critics, the same illiberal outcome – and same disregard for basic rights and basic democratic constitutional processes – results.

If that is neoliberalism in action, then no – I am not a neoliberal. Nor do I have any interest in the prescriptions that either the center-right neoliberals or the like-minded critics of their chosen moniker on the left are offering.

Phillip W. Magness

Phil Magness

Phillip W. Magness works at the Independent Institute. He was formerly the Senior Research Faculty and F.A. Hayek Chair in Economics and Economic History at the American Institute for Economic Research. He holds a PhD and MPP from George Mason University’s School of Public Policy, and a BA from the University of St. Thomas (Houston). Prior to joining AIER, Dr. Magness spent over a decade teaching public policy, economics, and international trade at institutions including American University, George Mason University, and Berry College. Magness’s work encompasses the economic history of the United States and Atlantic world, with specializations in the economic dimensions of slavery and racial discrimination, the history of taxation, and measurements of economic inequality over time. He also maintains an active research interest in higher education policy and the history of economic thought. His work has appeared in scholarly outlets including the Journal of Political Economy, the Economic Journal, Economic Inquiry, and the Journal of Business Ethics. In addition to his scholarship, Magness’s popular writings have appeared in numerous venues including the Wall Street Journal, the New York Times, Newsweek, Politico, Reason, National Review, and the Chronicle of Higher Education.

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