Eulogies for neoliberalism abound*. It started looking queasy during the 2008 financial crisis, when socialism turned out to be OK for the banks but not for the people. Covid shunted neoliberalism nearer to Hades as governments hiked spending and intervened heavily in the economy.
Now Trump seems finally to be sending it to meet its creator. The US is using high tariffs to bully others. Trade blocs rule. Industrial policy is back. Governments stoke populist opposition to immigrant workers. Heavy-handed economies like China are on the rise.
Maybe Milton Friedman lies below, preparing to be reunited with his progeny?
Stagnation for the many
For the stats are clear: neoliberalism failed in its main claim – that it didn’t matter if a select few grew eye-bulgingly rich, because everyone would benefit as market liberalisation unleashed economic growth.
Instead, the economy slowed. A rising tide for the mega-rich didn’t float all boats.
For most people, living standards stagnated or got worse alongside gluttonous wealth creation. Most people got hardly any richer, and many face stark insecurity. US wages barely budged. Most Americans have no savings. Health and infrastructure deteriorated.
America became more unequal (as did most western countries that followed the model): the top 5% and in particular the top 1% took more of total wealth; owners of capital grabbed a larger share of economic output; inequality worsened across all measures.
Richer than Croesus
This wasn’t a case of the majority prospering slightly while tolerating extreme self-enrichment at the top. The super-loaded gobbled up most of the US economy’s 67%, or $10 tn, real growth since 2000.
That increase didn’t flow to the majority, as some of it did before neoliberalism. It created 600 new billionaires,including Elon Musk, and enriched the 300 who already existed, like Bill Gates and Jeff Bezos.
The wealth boom grew the number of deca-millionaires (with $10 mn) by 125% to 900,000 in the US. There are now double the number of centi-millionaires as in 2000 – over 33,000 of them. Eight billionaires own as much wealth as half the world.
This transfer of riches is among the most gargantuan ever. Croesus had nothing on this lot.
What could have been done
Such largesse over a quarter century could have eliminated all US poverty, or brought near-universal access to healthcare, housing, and food security. It could have modernised the country’s crumbling roads, bridges and ports, and built railways – with change to spare.
All are normal, humane things that any sane society should surely want to do. Imagine amassing such booty, yet doing nothing about these failures.
Even the limp British economy has grown over half again in real terms since the millennium, and about a fifth since the 2008 financial crisis. Yet most workers didn’t benefit. Seventeen years after the crisis, wages are no higher, the worst pay stagnation since the Napoleonic wars. Almost all gains went to the rich and those living on income from capital rather than work.
Before and after
Despite the economic growth that did occur, economies slowed in most countries that adopted neoliberalism. For the three decades after the Second World War, the OECD economies grew on average at about 4-5% a year, much quicker than the 2-2.8% a year of the neoliberal era after 1975 (without Japan, the gap is starker).
That’s about 50% faster. The blue line is pre-neoliberalism; the red one shows what came after.
There are many reasons. The post-war boom was driven by reconstruction, technological innovation and trade. Public and private investment in infrastructure, education and technology underpinned productivity growth.
After the oil price shocks of the 1970s, manufacturing gave way to less productive services. Competition from an emerging Asia created headwinds. Inflation control and social spending cuts deadened progress.
But the stats conclusively debunk the claim that neoliberalism would turbocharge growth. Whatever the reasons, the neoliberal economies slowed or stalled.
And even this shrinking pie was sliced more unequally.
A failure on its own terms
So the central lie stands exposed. Neoliberalism didn’t even work on its own terms. We weren’t all in it together. Greed was bad. There was such a thing as society. Former British ambassador and government minister Peter Mandelson should have been intensely unrelaxed about people getting filthy rich (and about being best pals with a child trafficker). Many knew this from the beginning. The question is: what are we going to do about it?
This is part one of a four-part series.Parts two and three will show how the entrails of neoliberalism still litter the world, despite everyone saying the ideology has disappeared. Part four is about the role of power, and what’s next.
*A few of the obituaries:
The rise and fall of neoliberalism, The New Yorker.;
The end of neoliberalism and the rebirth of history, Social Europe;.
The end of neoliberalism, Centre for Strategic and International Studies;
The neoliberal era is ending. What comes next?, The Correspondent.
When did neoliberalism end?, The American Review of Political Economy.
What comes after neoliberalism?, London School of Economics;
How neoliberalism failed, and what a better society could look like, Roosevelt Institute.
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