What will it take to kill a Zombie?
A remarkable speech from Joe Biden’s National Security Adviser
‘The vision of public investment that had energized the American project in the postwar years—and indeed for much of our history—had faded. It had given way to a set of ideas that championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.
‘There was one assumption at the heart of all of this policy: that markets always allocate capital productively and efficiently—no matter what our competitors did, no matter how big our shared challenges grew, and no matter how many guardrails we took down.’
‘We faced the challenge of inequality and its damage to democracy. The drivers of economic inequality—as many of you know even better than I—are complex, and they include structural challenges like the digital revolution. But key among these drivers are decades of trickle-down economic policies—policies like regressive tax cuts, deep cuts to public investment, unchecked corporate concentration, and active measures to undermine the labor movement that initially built the American middle class.’
‘This moment demands that we forge a new consensus’
These remarks are taken from a speech last week by US National Security Adviser, Jake Sullivan. From my perspective sat here in London these seem remarkable and would not sound out of place in the opening paragraphs of an Oxfam Davos report. Twitter has been twittering with speculation that that the Washington Consensus, which was a name we all used for neoliberalism in the past, was being finally laid to rest.
Zombie neoliberalism staggers ever onwards
The quote that springs to my mind at moments like this, of which there have been a few since the financial crisis, is from Mark Twain, ‘the reports of my death have been greatly exaggerated.’ The truth is there have been quite a few moments when neoliberalism has been declared dead, only to see it rise again. Neoliberalism definitely lost its sheen and sense of triumphalism with the financial crisis, but it has continued nevertheless, in a kind of zombie form, and as we all know from films, Zombies are notoriously hard to kill.
So, could things be different this time around? I think there is scope to hope, for a few reasons. The Washington Consensus and neoliberalism coincided with the moment in history where the serious economic competition of the Soviet Union first began to fade, and then was ended. The idea of the US then having a moment of unipolar, imperial hubris is usually associated with foreign policy and disastrous wars. But I think in many ways neoliberalism was the economic face of this hubris. Assuming they would always be economically on top, the US agreed to and pushed a level of free trade and global economic integration that they would not have done so otherwise. Equally elites felt free to take the gloves off in terms of driving new extremes of inequality.
There is an historical parallel here; the UK also became a very active advocate of free trade when their empire reached its peak in the late 19th century. Whilst they had used protectionist policies, tariffs and active government policy to build up their industries and economies and crush those of their colonies, notably India, once this was achieved, they were happy to ‘kick away the ladder’ and advocate that no one should be allowed to interfere with the free market.
Things didn’t end well for the UK, both Germany and the US, using protectionism and tariffs as well as investing strongly in educating their people soon sought to overtake the UK. Germany challenged them militarily and lost, but to win the UK ceded economic dominance to the US.
Today the US is now facing up to the fact that the Chinese economy is now almost as big as theirs, and that China represents an enormous challenge to their dominance of the global economic order. This certainly seems to be leading to a cooling of their support for the main tenets of neoliberalism, such as free trade and no government interventions to protect and nurture industries or prevent industry moving to other nations.
Certainly, the issue of National Security and competition from China has enabled Biden to get much wider support in congress for actions that seek to bring industry back to the US in a major way and that are anathema to neoliberals, such as the huge measures contained in the Inflation Reduction Act.
I think there is also of course a genuine recognition by Biden and his team that the neoliberal years drove huge inequality in the US, and with this the horrible, polarised politics that Trump so effectively articulated. That the hubris of progressive elites, still very much in evidence under Obama, that markets are the answer, was a highway to defeat. Neoliberalism, in its zombie form since 2009, has had one big winner: the world’s richest people, and growing numbers of Americans believe this.
Rounding on the boomers
I wonder if the age of Joe Biden is an advantage here, in that he cut his teeth in the pre-neoliberal era, whilst advisers like Sullivan (age 46) are young enough to tap into the millennial rejection of neoliberalism. It is like a progressive pre-boomer/post-boomer alliance.
What could this mean for the rest of the world? The reason neoliberalism was also known as the Washington Consensus was because of its link to the role of the IMF and World Bank, US dominated institutions, in promoting neoliberalism across the world through a combination of economic strong arming an evangelical zeal. They were hugely successful.
It is interesting to imagine a world where that process was reversed. One where the US government was insisting the World Bank stop supporting privatisation of public services, or the erosion of labour rights, and support instead universal public services and trade unions. That would be really something dramatic. Certainly, right now this would seem to be about as far from the truth as it gets. Instead, we are seeing a huge wave of austerity across the Global South as government after government faces a financial crisis and impossible debts. True to form the IMF has been very much a party to this, and as our recent research shows, their attempts to mitigate the impacts of such austerity on ordinary people have been pretty derisory. For every $1 dollar of protected spending, $4 dollars in cuts are being demanded. This is despite simultaneously IMF research showing that austerity fails to reduce government debt.
So far there is very little evidence the US are pushing for a different approach, instead their main focus for the IFIs seems to be on enabling them to lend even more and countries, many already bankrupt, to borrow more, something Sullivan champions in his speech. This money is in turn to be used to magically leverage more private investment, continuing the process of turning the Washington Consensus into what has been called the ‘Wall Street Consensus’. Their pick for World Bank president, the former head of Mastercard, was not one that seems to signal a major progressive shift either. But lets see.
Return to comforting economic certainties, and austerity too.
In the rich world too, rising inflation together with rising interest rates have brought perhaps a certain sense of relief on the part of mainstream economists, happy to be back on familiar terrain after over a decade of strangeness.
Debt crises, inflation and austerity hark back to the beginning of the neoliberal era in the early 1980’s. Debt crises cede enormous power from debtor countries to creditors, meaning governments lose control over their ability to choose their own policy path putting renewed power in the hands of the IFIs. Austerity has a long history of being a very useful tool to suppress progressive policies and support the economic status quo.
In some ways over the last decade, neoliberalism was completely done away with at the macroeconomic level, with quantitative easing and huge increases in government debt seemingly failing to impact on inflation.
But this shift at the macroeconomic level was not accompanied by any shifts at the micro-economic level. There was no move away from privatisation, away from trade liberalisation. There was no move to shore up labour rights and restore the power of unions. There was no significant move to reverse the collapse in taxation of rich people. The concentration of market power has remorselessly continued. All of this remained very much in place, and in fact was made worse.
Now it seems we have a strange switching going on; high interest rates, inflation and austerity are back just at the moment the most powerful nation on earth is, rhetorically at least, ripping up the policy playbook of neoliberalism.
Smash neoliberalism? That was so 2010’s
In Europe, much of the progressive left is taken up with new debates at the moment, driven by the climate crisis, questioning not just neoliberalism, but capitalism itself, and with this the whole concept of economic growth. Suddenly getting rid of neoliberalism seems a bit moderate compared to what is being called for to stop climate breakdown.
I definitely agree we need to imagine and fight for much more radical ways to transform our societies, and ways to value what matters in life, rather than ever more consumption and GDP growth. I also think that many of the problems we associate with neoliberalism are really supercharged versions of fundamental problems with capitalism itself.
The recent protests in France have been incredible, and if you haven’t listened to this speech by Jean Luc Melenchon about the fight for more free time, time to do nothing, then you should as it is brilliant. Imagining and fighting for a new future based on wellbeing for all whilst living within the boundaries of our planet is vital, and this goes beyond simply rejecting the Washington Consensus. Nevertheless, smashing neoliberalism and the terrible ideas and interests on which it is built would seem to me an essential and necessary place to start.
Politics not just policy
My own feeling is not just that this speech by Sullivan is significant in terms of its content, although it is. Its significance is I think particularly important in that it reflects, at least in part, a response to political mobilisation on the left. This sets it apart from other moments, such as the key papers from the IMF after the financial crisis that questioned many of the same neoliberal shibboleths, and linked them to rising inequality.
I think it is reasonable to argue that the thing driving this shift in the Biden administration has been the space created and the policies demanded by progressives, and the hugely successful work of Bernie Sanders and Elizabeth Warren in making these policies mainstream. Recent research from the US and UK shows that millennials are the first generation not to drift to the right politically as they age; this seems to me not a coincidence as they are the ones who have benefited least from the late stages of the neoliberal era.
This speech shows that we are getting somewhere, and we need to double down and keep going. We need to do all we can to continue to build these powerful progressive, unified movements that see the fight against the super-rich, the fight for a huge increase in equality, the fight for economic rights and security, and the fight for our planet’s future as all part of the same unified struggle.
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