Defining, Contemplating, and Evaluating Neoliberalism

I'm not really a fan of the term neoliberalism, as it tends to produce more heat than light. But I think I can come up with a useful definition that is charitable, but speaks to the concerns of neoliberalism's critics. I should note that the most relevant timeframe for this definition begins around 1971, and has been less relevant since the financial crisis.

Neoliberalism is not defined by a single thinker, manifesto or political party, and it is not readily defined by any necessary or sufficient conditions. It is a constellation of related ideologies, policy prescriptions, and historical developments that revolve around the following interrelated ideas:

1. Markets should be the default mode of economic organization. In less sophisticated accounts, markets are the natural mode of economic organization. Regulations bear the burden of proof; markets do not.

2. Social problems can and should be ameliorated by the expansion of market mechanisms. We should remove impediments to markets. For instance, we should reduce the number of occupations that require state licensing. We should also create new markets where none currently exist. For instance, we should ration road space through scarcity pricing (aka congestion pricing).

3. Collective action, specifically through government, is generally inferior to the actions of individuals because individuals know their situation and their interests more intimately than any bureaucrat. Thus individuals are better at purchasing goods than government and taxes should be lowered accordingly. Cooperation is most efficiently organized through markets and prices. The best way to help the poor is through economic growth. Redistribution, if any, should consist of direct transfers of money rather than in-kind benefits such as housing or healthcare.

4. Central banks should be independent, similarly to the way that the judiciary is independent, because governments are easily tempted to to secure their reelection by overclocking the economy or printing money to cover deficits, which can both lead to runaway inflation. Monetary policy is always preferable to fiscal policy for economic stabilization because it is not subject to the corruption of pork-barrel legislative politics. Monetary policy has only one objective: a low and stable rate of inflation that will create an environment conducive to investment and growth.

5. Corporations should aim to create "shareholder value"; they should maximize share prices rather than promote the interests of their managers, their workers, their customers, or their surrounding community. Corporate managers have no way of knowing what is best for anyone. Their main source of information is the price mechanism and their only criterion for success is profit. Corporations are owned by shareholders and are responsible only to shareholders.

6. Desiring money is nothing to be ashamed of. Conspicuous consumption is nothing to be ashamed of either. Finance is as respectable as any other professional career and plays an important role in the so-called real economy.

7. Neoclassical economics is the queen of the social sciences and social science should either be modeled after economics or explicitly done under the banner of economics.

8. We should promote international trade not only by lowering tariffs and eliminating subsidies, but by bilateral or multilateral trade agreements harmonizing regulations and patent protections. Currencies should be traded freely and the movement of capital should not be impeded.

9. There is no alternative to capitalism.

Developments that were not necessarily forseen by anyone in particular are also included under the umbrella of neoliberalism.  Finance, insurance and real estate played a larger role in the economy. There was a "great moderation" and developed economies avoided major economic crises (lolwut). Structural unemployment increased in Europe. The postwar boom ended and growth rates decreased. Almost all communist countries have embraced some aspects of capitalism.

Quite a motley.

I wanted to spell out what neoliberalism is because I think evaluating neoliberalism demands some nuance. Don't get me wrong. Many aspects of neoliberalism look awful in retrospect. Economists today have a more advanced and expansive understanding of market failures. The transition to capitalism in the former Soviet Union has been a disaster. Wealth didn't trickle down. The zero lower bound on monetary policy has proven to be more than just a theoretical quibble. It's led to a severe injury to human flourishing.

Much of neoliberalism was a bad idea even from the start. Markets are in no way natural. And it is a tragedy when creative, intelligent, driven people waste their potential working at Goldman Sachs instead of discovering new vaccines, designing particle accelerators, hashing out human rights codes, or for that matter, working as executive VP for logistics at a mid sized chemical company. And conspicuous consumption is a sin. And frankly, the cult of shareholder value never made any fucking sense. The list goes on and on.

But I still think that neoliberalism should be critiqued, and not just criticized, because a reflexive rejection of neoliberalism can kneecap our thinking about markets. And everyone, even socialists, should think very deeply about the functioning of markets, the moral consequences of markets, and the role of markets in our society.

The rhetorical role of "neoliberalism" reminds me of the pejorative use of "postmodernism". Sometimes postmodernism is a skepticism about truth, reason, and grand narratives, especially when propogated by post 1968 French thinkers. But sometimes postmodernism is just a cudgel for beating up the humanities, liberals, or experimental art.

If you have to be for or against postmodernism, I would be against it. But isn't that a juvenile way of thinking? A lot of postmodernism is great! Foucault was a profound and original thinker! We should be skeptical about the human sciences! Operation Shylock is an excellent book! Pop culture is sometimes worthy of academic attention! Maybe!

Neoliberalism is, as I said, a motley. And neoliberal policies run the gamut from essential (carbon taxes), to suboptimal (the healthcare exchanges in Obamacare), to beneath contempt (allowing doctors to practice without a license).

Mature thinking partially consists in making distinctions, and invoking finer-grained concepts in our evaluations. Of course, there is always the danger of casuistry. But there are also dangers in thinking with slogans.