Neoliberalism

From 1938 to the 21st Century

Variance Within the Liberal Tradition

Liberalism is a broad tradition that encompasses many different ideas. There are two reasons that liberalism encompasses such a wide variety of ideas. The first is that classical liberalism was always somewhat vague on the definition of liberty. The second is that different liberals have had different philosophical and epistemological frameworks.

There has essentially always been two traditions within liberalism. Hayek notes that “the ancestors of modern liberalism” fall into two camps, distinguishing between British liberalism (Anglican) and French liberalism (Gallican). Hayek sees this divide as being rooted in the divide between empiricism and rationalism. The British empiricist takes a more evolutionary approach to liberalism, recognizing that social institutions are the result of human action rather than human design. The French rationalist tradition seeks to base social institutions on social contract and deliberative rationality. The French tradition imagines it can design a better society, whereas the British tradition recognizes that society is the product of evolution. Thus, the British liberal tradition is more conservative, while the French liberal tradition is more radical. (Cf. Friedrich A. Hayek, The Constitution of Liberty, Chapter 4)

Isaiah Berlin observes two different concepts of liberty within liberalism, distinguishing between negative liberty and positive liberty. This can be seen as the difference between “the freedom from” and “the freedom to.” An individual may be free from external coercion insofar as no one is physically forcing them to act against their own will, but they may not be free to act upon their own will to the extent that their choices are limited by factors out of their control. (Cf. Isaiah Berlin, Two Concepts of Liberty) Suppose that we are on a desert island and I am hoarding all the food and water. I tell you to do such-and-such or else I will not share the food and water with you. You are free in the negative sense, but not in the positive sense — you are free from active interference in your actions, but are not actually free to disobey me. If you do disobey me, I have leverage over you that allows me to effectively annihilate you without actively engaging in violence against you. The British tradition has tended to emphasize the importance of non-interference (negative liberty), whereas the French tradition has tended to emphasize a more robust conception of liberty (positive liberty). Empiricist liberals within the English tradition tend to see minimal government as the most important thing, since government interference tends to become the primary affront to liberty within civilized society. They recognize that government is necessary to secure liberty. Law and order protects people from arbitrary interference by other individuals, yet government interference remains a permanent danger. Rationalist liberals within the French tradition, however, tend to see robust and participatory democracy as essential to preserving liberty, as positive liberty entails being in control to some extent. Liberty is ensured by the democratic process more so than by limiting the size and scope of government.

To put these distinctions in the context of modern American politics, negative liberty is the ideal of libertarianism whereas positive liberty is the ideal of liberalism. The conservative wing of the Libertarian Party represents the English tradition, while the more progressive members of the Democratic Party align more closely with the French tradition.

Liberalism vs. Republicanism

The republican tradition overlaps with the classical liberal tradition, but differs significantly insofar as it defines “liberty” differently and holds a different view as to the role of government. The republican tradition, like liberalism, holds that government ought to serve the purpose of securing liberty. However, republicanism defines liberty differently than liberalism does. Liberalism defines liberty as the absence of interference. Active interference obstructs negative liberty, whereas passive interference obstructs positive liberty. In both cases, the infringement upon liberty entails either the active or the passive interference of another party into the decision-making of the agent. Republicanism, on the other hand, defines liberty as the absence of domination. Liberty, in the republican conception, is the antithesis of slavery. To be free in the republican sense is to not be subject to the arbitrary will of another. This republican conception does, in fact, align with the original meaning of the word liberty. For more on this topic, check out Quentin Skinner and Philip Pettit’s works on the genealogy of liberty.

This seems to be a somewhat subtle and insignificant distinction, but it is actually quite significant. The classical liberal tradition is basically schizophrenic, being unable to balance positive and negative liberty because these two concepts are fundamentally at odds with one another. Republican liberty, however, is a single coherent concept that guides the entire republican tradition. Classical liberalism has two guiding principles, positive liberty and negative liberty, and must choose between its own conflicting ideas at every point, whereas republicanism has a single guiding principle that can be applied at every point. Republican principles tend to lead in the direction of some sort of synthesis of distributism and social democracy, while liberal principles — because of their inconsistent nature — may lead to any number of contradictory conclusions. This is no exaggeration: neoconservatism, anarchism, and Marxism are all literally rooted in classical liberalism. I won’t drone on about republicanism and give an in-depth analysis of republican theory here, but I will merely remark that the most significant distinction between classical liberalism and republicanism is that liberalism advocated markets first and foremost whereas republicanism advocated democracy.

The Emergence of Liberal Democracy

With the 20th century, a new liberalism was becoming prominent. Classical liberals had held that the proper role of government is to protect individual liberty, but they did not necessarily support any particular form of government. The new liberals of the 20th century agreed with the classical liberals on the raison d’être or purpose of government, but they also added to this the notion that representative democracy was the form of governance most suited to achieving this goal. Classical liberalism had only stated that maximizing liberty ought to be the purpose of civil society, whereas this new liberalism went further and asserted that democracy is the form of government most suited to pursuing that purpose. The new liberalism promoted liberal democracy as the proper form and function of government. Its proponents believed that democracy and the market economy belong together. They advocated liberalism AND democracy — that’s what distinguishes modern forms of liberalism from classical liberalism. In essence, modern forms of liberalism can be seen as a synthesis of classical liberalism and republicanism. This synthesis had really started developing in the early days of classical liberalism and classical republicanism, with the American Founding Fathers contributing much to the synthesis. By the late 19th or early 20th century, the synthesis had become conventional.

Keynesianism & New Deal Liberalism

When the Great Depression hit, most intellectuals and economists abandoned the classical liberal doctrine of laissez-faire. Among the earliest of the non-classical liberals were the Keynesians and the New Deal supporters. John Maynard Keynes was, perhaps, the first significant person to propose a new revisionist liberalism. Keynes was not a neoliberal proper and neither were the New Dealers, but it is necessary to touch on Keynesianism and New Deal liberalism in order to give a clear picture of neoliberalism, which arose as a reaction against these movements.

Capitalism and liberal democracy seemed to be doing well for quite some time. The “booming 20s” looked good. The late 19th century seemed to be a golden age of laissez-faire. The “internal contradictions” and “inherent instability” of capitalism that socialists had warned about seemed like a thing of the distant past to most Americans. The Great Depression caught everyone off guard and liberals (i.e. advocates of the free-enterprise market system) were left wondering what had caused the crisis.

Even prior to the Great Depression, Keynes had written A Tract on Monetary Reform and had observed that a laissez-faire approach to money was flawed. Money, like any other commodity, must be produced. When the manufacturer of widgets sees an increase of demand for his product there will be an increase in the price, but the manufacturer will also respond to the demand signal by increasing production. When the demand for widgets increases, the producer ought to produce more widgets. The same rules apply to the monetary sphere. When the demand for money increases (which is always reflected in an increase in the value of money), the central bank ought to increase the supply of money. The goal of the money issuer ought to be to stabilize the price level or keep the value of money stable. Money ought to be a store of value and a medium of exchange. It ought not to fluctuate in value.

After the Great Depression, Keynes’ doubts about laissez-faire became even stronger. While he remained a liberal in principle, he became convinced that the Great Depression and the boom-and-bust cycle, in general, was a result of the failure of classical liberalism and the laissez-faire approach to political economy. During the recession, the money supply contracted and jobs disappeared. This set off what Keynes called a deflationary spiral. The economic downturn resulted in falling prices and lower wages. The lower wages, in turn, resulted in a decrease in “aggregate demand” — workers ended up spending less money because they made less money. The decrease in spending and consumption resulted in fewer profits and pushed prices even lower. Employers ended up having to lower wages even more. Unemployment also became a significant problem. Consumer demand in general (aggregate demand) simply wasn’t high enough to maintain full employment. Unemployment is the lowest wage of all — zero. Recessions are a recurring problem under capitalism and each new recession seemed to be worse than the last. Each new recession hits harder and drags out longer than the one before it. Keynes thought the solution to this problem was to turn to government in order to boost aggregate demand. When private sector consumption falls, public sector consumption ought to increase. (Cf. John Maynard Keynes, The General Theory of Employment, Interest and Money)

In response to the Great Depression, Franklin Delano Roosevelt launched the New Deal, increasing public spending in order to make up for the decrease in private spending. To counteract unemployment (the ultimate low wage), they created the Public Works Administration. The government awarded contracts to a myriad of private companies for the construction of roads, hospitals, airports, schools, bridges, etc. The American economy finally made a full recovery from the Great Depression when the United States entered into WWII. Aggregate demand was boosted by military spending, which pulled America out of the Depression. The theories of Keynes seemed to be correct and the vast majority of intellectuals converted to Keynesianism.

The Emergence of Neoliberalism

After the debacle of the Great Depression, most intellectuals had concluded that classical liberalism had failed. However, many liberals were not comfortable with Keynesianism and New Deal liberalism, which they saw as a departure from the true liberal tradition. They were concerned about the growth of government and wary of interventionism, which they saw as a road creeping towards socialism. These intellectuals got together to forge a different “new liberalism,” one that moved beyond classical liberalism but also avoided the errors of Keynesianism and central planning. Thus was born neoliberalism.

At the Walter Lippmann Colloquium (a sort of precursor to the Mont Pelerin Society), leading intellectual proponents of liberal democracy got together in order to discuss what had gone wrong and to forge a new liberal alternative to classical liberalism and Keynesianism. It was from this conference that the term “neoliberalism” came. The term was coined by Alexander Rüstow, one of the fathers of the German social market economy philosophy. The new liberals that attended the conference were united in their understanding that liberalism and democracy were inseparable. They also agreed that big government was not the right solution to the problems posed by economic crises.

Neoliberals never formed a single monolithic consensus. Like the terms “liberal,” “conservative,” and “socialist,” the term neoliberalism never had a precise meaning. The core insight and unifying aspect of neoliberalism is its recognition that governments create the framework for markets. As Dorian Electra put it, “rules and social order are the essentials” — she was speaking specifically about the views of Hayek, but the statement applies to the views of neoliberalism as a whole. Governments create and regulate monetary systems, they create the rules that establish property rights, and they provide the regulations and institutions needed for the enforcement of contracts and the resolution of disputes. Capitalism doesn’t work without police and courts. For the most part, neoliberals thought that the government’s role ought to be strictly limited. The government ought to focus on establishing appropriate rules and regulations to create a framework within which the market can self-organize efficiently. The right framework would make Keynesian interventionism unnecessary.

It is important here to note the role of Ludwig von Mises as an anti-neoliberal. Many critics of neoliberalism wrongly identify Mises’ market-fundamentalism with neoliberalism. This is a mistake. Although Mises had a role in both the Walter Lippmann Colloquium and the Mont Pelerin Society, he actually rejected neoliberalism and accused the neoliberals within the Mont Pelerin Society of being “a bunch of socialists” for suggesting that a progressive income tax might actually be justifiable.

Varieties of Neoliberalism

I believe neoliberalism can best be divided into two categories:

• Classical neoliberalism, referring to the neoliberalism that emerged circa 1938, which would be associated with F.A. Hayek, Wilhelm Röpke, Alexander Rüstow, Walter Eucken, and Milton Friedman (prior to the 1970s).
• Non-classical neoliberalism (supply-side neoliberalism), referring to the new neoliberalism that emerged in the 1970s, which can further be divided into three subcategories:
   — Center-right supply-side neoliberalism, which refers to the variety of neoliberalism promoted by Milton Friedman after 1970 and which is associated with Ronald Reagan and Margaret Thatcher.
   — Center-left supply-side neoliberalism, which refers to the form of neoliberalism that was developed in the 1980s by Charles Peters. This variety of neoliberalism became popular in the 1990s and is often associated with Robert Reich, Bill and Hillary Clinton, and Tony Blair.
  — Neoconservatism, referring to the conservative branch of neoliberalism that developed a hawkish foreign policy and rose to prominence after 9/11. This movement is primarily associated with Irving Kristol and Bill Kristol.

Classical Neoliberalism

The classical neoliberal tradition consists of figures such as F.A. Hayek, Wilhelm Röpke, Alexander Rüstow, Walter Eucken, Milton Friedman (prior to the 1970s), and Karl Popper, though not all of these individuals referred to themselves as “neoliberal.”

Classical neoliberalism was a fairly conservative centrist ideology. It advocated strict limits on government and wanted minimal government interference in the market, but also recognized the need for government to play a significant role in the economy. Generally speaking, the classical neoliberals believed that government was needed to furnish the rules that generate social order, without which markets cannot function. At the same time, they recognized a significant role for government in providing welfare provisions. The Nordic and German welfare states were not seen as socialist dystopias but as flourishing capitalist economies. As a result, both Hayek and Friedman advocated some sort of single-payer healthcare reform and universal basic income, believing that the government ought to provide all individuals with a basic safety net.

A classical exposition of neoliberalism can be found in Milton Friedman’s 1951 Neo-Liberalism and Its Prospects:

“The collectivist belief in the ability of direct action by the state to remedy all evils is itself, however, an understandable reaction to a basic error in 19th century [classical liberal] individualist philosophy. This philosophy assigned almost no role to the state other than the maintenance of order and the enforcement of contracts. It was a negative philosophy. The state could do only harm. Laissez-faire must be the rule. In taking this position, it underestimated the danger that private individuals could through agreement and combination usurp power and effectively limit the freedom of other individuals; it failed to see that there were some functions the price system could not perform and that unless these other functions were somehow provided for, the price system could not discharge effectively the tasks for which it is admirably fitted.
“A new faith must avoid both errors. It must give high place to a severe limitation on the power of the state to interfere in the detailed activities of individuals; at the same time, it must explicitly recognize that there are important positive functions that must be performed by the state. [This] doctrine [is] sometimes called neo-liberalism…” (brackets and italics mine)

A primary role of government, according to classical neoliberalism, is the establishment of rules and regulations that foster something analogous to pure competition. It was recognized that unregulated competition leads to the emergence of monopolies and the inevitable elimination of competition.

“But it may be well to expand a bit on the functions that would be exercised by the state, since this is the respect in which [neo-liberalism] differs most from both 19th century [classical liberal] individualism and collectivism. The state would of course have the function of maintaining law and order and of engaging in ‘public works’ of the classical variety. But beyond this it would have the function of providing a framework within which free competition could flourish and the price system operate effectively. This involves two major tasks: first, the preservation of freedom to establish enterprises in any field, to enter any profession or occupation; second, the provision of monetary stability.
“The first would require the avoidance of state regulation of entry, the establishment of rules for the operation of business enterprises that would make it difficult or impossible for an enterprise to keep out competitors by any means other than selling a better product at a lower price, and the prohibition of combinations of enterprises or actions by enterprises in restraint of trade…. There can be little doubt that the Sherman anti-trust laws, despite the lack of vigorous enforcement during most of their existence, are one of the major reasons for the far higher degree of competition in the United States than in Europe.”(ibid.)

Neoliberalism differs from Keynesianism insofar as it holds that government intervention ought to be non-arbitrary: “the essential point is that [the broad powers and important responsibilities that the neo-liberal would give to the state] are all powers that are limited in scope and capable of being exercised by general rules applying to all. They are designed to permit government by law rather than by administrative order.”(ibid.) The idea was that government action needed to be determined by uniform and predictable rules so that individuals and corporations can rationally plan for the future without having to guess what the government is going to do. Additionally, neoliberalism holds that the government should be responsible for the “provision of monetary stability…and to subject changes in the quantity of money to definite rules designed to promote stability.”(ibid.)

Finally, neoliberalism holds that the government ought to provide a robust safety net in order to alleviate or eliminate poverty.

“Finally, the government would have the function of relieving misery and distress. Our humanitarian sentiments demand that some provision should be made for those who ‘draw blanks in the lottery of life’. Our world has become too complicated and intertwined, and we have become too sensitive, to leave this function entirely to private charity or local responsibility. It is essential, however, that the performance of this function involve the minimum of interference with the market. There is justification for subsidizing people because they are poor, whether they are farmers or city-dwellers, young or old. There is no justification for subsidizing farmers as farmers rather than because they are poor. There is justification in trying to achieve a minimum income for all; there is no justification for setting a minimum wage and thereby increasing the number of people without income…”(ibid.)

Classical neoliberalism is also associated with the extended ordoliberal tradition (aka sociological neoliberalism). In Germany, its proponents championed the idea of the “social market economy,” which rose to prominence in post-WWII Germany and is responsible for the wirtschaftswunder (“economic miracle”) of German prosperity and productivity under liberal democracy after the fall of the Nazi regime. Sociological neoliberalism is more conservative than social democracy, but recognizes a greater role for government than classical liberalism or libertarianism do. This strain of neoliberalism considers itself a “third way,” beyond (or between) conventional capitalism and socialism. It sees a greater role for the welfare state, but also recognized the dangers of socialism.

Also associated with classical neoliberalism is the idea of dialogic liberalism, entailing deliberative democracy and a vision of “the open society.” This is a more progressive strain of neoliberalism, relative to modern neoliberalism, but one that remains relatively conservative. It emphasizes the importance of education and free speech. Karl Popper proposed “piecemeal social engineering” as a means of gradually reforming society in a progressive manner. Note that this is not to be confused with either social democracy or New Deal liberalism. While this strain of neoliberalism bears striking similarities to both social democracy and New Deal liberalism, it also differs significantly from those ideologies. Firstly, it does not want big government and therefore does not advocate a robust interventionist state. Secondly, it emphasizes the importance of dialectic and deliberative democracy above all else, emphasizing the importance of liberal dialogue and liberal education in shaping a free society. Social democracy places its emphasis on the promotion of welfare, making that its primary goal. New Deal liberalism sees the job of government as promoting full employment and ensuring that the economy remains productive. While proponents of dialogical liberal democracy may sometimes support the same policy proposals as social democrats and New Deal liberals, their motivating principles and core values are quite different, though not necessarily always incompatible.

It is worth noting that this dialogic neoliberalism of Karl Popper and George Soros closely resembles the “political liberalism” of John Rawls and John Dewey and overlaps with the “third way” or “radical centrist” variety of social democracy espoused by Anthony Giddens.

Non-Classical Neoliberalism

Before addressing the topic of non-classical or supply-side neoliberalism, it is necessary to take a detour and talk about the libertarian movement, which had a significant influence upon the thought of certain non-classical neoliberal thinkers.

Libertarianism

The term “liberal” had been appropriated by New Deal democrats and “neo-liberalism” had already been taken, so classical liberals were looking for a new label. Starting in the mid-50s, some classical liberals had begun calling themselves “libertarians.” This new libertarian movement saw itself as the genuine heir to classical liberalism, but it actually diverged from both classical liberalism and neoliberalism in several significant respects. By the late 1960s and early 70s, the modern libertarian movement had emerged. This new libertarian movement was not part of the neoliberal tradition, but it had been influenced by early neoliberal thinkers like Hayek and did end up influencing later developments within neoliberalism, which is why I am taking the time to address it here.

Murray Rothbard had traced the term “libertarian” to 19th century market-anarchists like Lysander Spooner and Benjamin Tucker. Rothbard and his ilk latched on to the Spooner-Tucker political vision and combined it with Austrian School economics as espoused by Mises and Hayek, creating a unique synthesis that is quite distinct from classical liberalism. In its pure form, libertarianism was a form of market-anarchism, which sought to abolish government altogether and replace it with totally voluntary arrangements on the free market: private police, private courts, private militaries, etc. In 1969, Karl Hess coined the term “anarcho-capitalism” as a synonym for laissez-faire capitalism as envisioned by libertarian theorists like himself and Rothbard: “Economically, this system is anarchy, and proudly so.”(Karl Hess, The Death of Politics) Libertarians departed from liberalism in their advocacy of market fundamentalism and in their extremist version of laissez-faire. They saw virtually no legitimate role for government.

Many libertarians were more moderate and would not embrace the libertarian doctrine in its extreme anarchist form. Moderate libertarians more closely resemble classical liberals. However, a key feature of libertarianism is its tendency to define liberty in terms of property. Libertarianism tends to reduce all rights to property rights, a problematic departure from liberalism. Critics of libertarianism have, therefore, called it “propertarianism.”

Following from its extreme anti-government and propertarian viewpoint, libertarianism tends to equate taxation with theft. Classical liberals, however, universally advocated land value tax, following the physiocrats in advocating the collection of ground-rent (land tax) by government. When taxes are levied against land value, taxation is not only not theft but is a necessity of justice. Libertarianism also finds itself at odds with neoliberalism insofar as it tends to be hostile to democracy. Neoliberalism holds democracy and markets to be complementary liberal institutions, whereas libertarianism is always suspect of democracy and often outright hostile to it. Furthermore, libertarians do not believe, as neoliberals do, that government regulation is needed for markets to function optimally.

In 1971, the Libertarian Party was formed. After the founding of the Libertarian Party, the anarcho-capitalists and former classical liberals coalesced into one “liberty movement” under the banner of libertarianism. Milton Friedman, though also a neoliberal, even adopted the label “libertarian,” helping to blur the lines between classical liberalism, neoliberalism, libertarianism, and market-anarchism. Milton’s son, David, even went on to become a major proponent of anarcho-capitalist libertarianism.

Center-Right Supply-Side Neoliberalism

From about 1940 until the mid-1970s, “neoliberalism” primarily referred to the moderate centrist version of liberalism that emerged following the Great Depression. This would change in the 1970s and 80s, when a new variant of neoliberalism emerged. The core components of neoliberalism remained unchanged, but many libertarian ideas were integrated into neoliberal theory.

Milton Friedman had a genuine neoliberal pedigree. He had been a founding member of the Mont Pelerin Society. He honestly believed that government intervention through monetary policy was necessary to guarantee economic stability and prosperity. He had also advocated various universal basic income proposals. Yet two things had changed in Friedman’s thinking over the years: he had come to be substantially influenced by the market fundamentalism of the new libertarian movement and he had converted to supply-side economics after witnessing the stagflation of the 1973–1975 recession. Friedman’s newfound supply-side libertarian ideology gained popularity amongst advocates of laissez-faire. Margaret Thatcher and Ronald Reagan rose to power by running on supply-side economic platforms. The new brand of supply-side neoliberalism gained notoriety and became so popular that the term “neoliberalism” became more or less synonymous with supply-side economics in common usage.

The key feature of modern neoliberalism is its emphasis on growth and adherence to supply-side economics (also referred to as “trickle-down economics”). Supply-side theory suggests that tax cuts, deregulation, and privatization result in a greater supply of goods and services at a lower price, thereby allowing the economy to grow. When the economy in general does better, the benefits will trickle down to average folks — those at the bottom will benefit from economic growth. These new supply-side neoliberals hold that economic growth tends to raise everyone up rather than increase inequality. With the increase in wealth, wages will rise and everyone will be better off. If you want everyone to be better off, you just need to make the economy grow more. This is how “neoliberalism” became shorthand for the ideology of infinite growth. Whereas classical neoliberalism often emphasized sustainability and responsible use of natural resources, non-classical (supply-side) neoliberalism emphasized growth as the ultimate good.

Under the influence of libertarian market fundamentalism, the new supply-side neoliberalism ended up supporting a wave of privatization. The non-classical (supply-side) neoliberals sought to shrink the public sector and expand the private sector. These neoliberals pushed for the privatization of government-run industries. The new supply-side neoliberalism sought to privatize utilities, the postal service, air traffic control, and even welfare. A wave of privatizations swept the U.S. and the U.K., affecting municipal services (e.g. water, sewage, electric, trash), railways, air traffic control, and even prisons. The privatization of prisons and welfare is perhaps the most controversial (nefarious?) plot of supply-side neoliberalism.

It is worth noting that Milton Friedman, even after his turn towards the libertarian-leaning supply-side ideology, still advocated universal catastrophic insurance and a negative income tax, the former of which is a single-payer healthcare proposal and the latter is a universal basic income scheme. Even supply-side neoliberalism advocates a far more robust welfare state than we currently have in America. While neoliberalism is remembered as a failure because of the negative effects of tax cuts for the wealthy and privatization, we must also remember that neoliberalism was never actually tried, since neoliberalism entails universal healthcare and a minimum income (or basic income) guarantee. Most of the core policy proposals of the neoliberals were never implemented.

Center-Left Supply-Side Neoliberalism

In the 1980s, another version of neoliberalism emerged as a result of a self-critique of modern liberalism from within the Democratic Party. This center-left neoliberalism embraced the supply-side economics, deregulation, and privatization ideas of Friedman’s new center-right neoliberalism. It is associated with figures like Charles Peters, Robert Reich, the Clintons, and Emmanuel Macron. This new neoliberalism integrated aspects of supply-side neoliberalism with the modern liberalism of the Democratic Party, arising from a self-critique of liberalism within the Democratic Party. The quintessential exposition of this ideology is provided in Charles Peters’ A Neoliberal’s Manifesto.

Following center-right supply-side neoliberalism, this newest form of neoliberalism put economic growth above all else. However, it was critical of Reaganomics. It was still supply-side and agreed that tax cuts could spur economic growth, but recognized that not all tax cuts do so. Reaganomics often just resulted in the rich getting richer without benefitting the average man. Center-left supply-side neoliberalism holds that tax cuts ought to be focused only on areas where tax cuts actually spur economic growth and increase productivity. Non-productive speculative investment ought to be taxed, whereas productive investments ought not to be taxed.

This new variety of neoliberalism was self-consciously centrist. They abandoned dogmatism and ideological purism in favor of pragmatism, seeking solutions that work and attempting to avoid the errors of both liberalism and conservatism. Like advocates of the “open society,” these neoliberals emphasized the importance of liberal dialogue and were critical of ideology and dogmatism. It is important to be self-critical and recognize the valid points made by those with whom you disagree. Democracy works best when there is a free exchange of ideas and information. A decent education is important for facilitating the sort of conversation and dialogue that makes democratic societies prosper, so these neoliberals supported reforms to ensure that rich and poor both have access to the same quality of public education. We need better teachers and better reporters in order to make public education and the free press work efficiently. This is essential for the functioning of democracy since it is necessary in order to ensure that the voting populace is well informed.

Charles Peters criticized “credentialism” for holding back productivity in America. We put far too much emphasis on credentials and too little on the ability to perform. Performance and productivity matter more than anything else. Some tasks just don’t require a degree. Lawyers could be replaced by mediators without degrees or paper credentials in many cases, most notably in cases involving divorce and auto accidents. We have bad teachers who have an education degree alongside individuals without a degree who are qualified to teach — their qualification being their ability to perform the task effectively! Employees are chosen or favored based on credentials and seniority rather than on ability. America has an unnatural fetish for credentials and formal education alongside an indifference to actual performance. This hampers productivity and slows economic growth. American industry and government have become inefficient as a result.

Peters also criticized liberal intellectuals for their snobbery. Liberal intellectuals are wrong to look down on “hicks” who support bad politicians. Rather than maligning “hicks,” Peters felt that neoliberals ought to try to ensure that rural folks are well informed by guaranteeing decent education through both schools and the press. Rather than maligning conservatives and their traditional values, he advocated a compromise with conservatives on religious and family values. For instance, we ought to allow prayer in public schools but forbid teachers and administrators from forcing students to participate. Instead of guided prayer, a period of silent meditation would be a nice compromise.

The new center-left neoliberals rejected the left’s unconditional admiration of unions. Unions forcing wages up without regard to productivity is, according to these neoliberals, socially harmful. When wages are too high, companies can’t afford to hire as many people. The quest to drastically raise the minimum wage is problematic. The labor movement has done real harm by driving up wages, even when this has been done through bargaining rather than legislation. The old liberalism of the Democrats had become “a movement for those who had arrived” and “pulled up the ladder” for those who were seeking employment — older workers were made better off while younger folks would find it more difficult to break into the labor market as a result of liberal policies. Irresponsibly high wages harms productivity and slows (or prevents) economic growth. These neoliberals were not anti-labor per se. They also criticized high wages/salaries for management and CEOs, seeing these as being harmful for the very same reasons. Money spent to enrich executives ends up being wasted when it could be allocated directly to production. The center-left non-classical neoliberals were genuinely concerned with the plight of workers. They even “favor giving the worker a share in the ownership of his company.” Wages ought to increase only when productivity and profits increase. A better approach, according to these neoliberals, is “to give the workers stock instead of money” so that they could “share in the success” of the company. (Cf. Charles Peters, A Neo-Liberal’s Manifesto)

The neoconservatives are not fiscally conservative, especially when it comes to military spending. The center-left neoliberals, on the other hand, advocate a fiscally responsible approach. As of 2012, the United States was spending more on the military and “defense” than the next 10 biggest defense-spending nations combined. This keeps America from being able to effectively compete in the global market.

“One problem we’re trying to address…is that American industry’s ability to compete has been seriously impaired by the amount of money we have spent in the common defense compared to our competition and that we must find some dramatic way to redress the balance.” — Charles Peters (A Neo-Liberal’s Manifesto)

These neoliberals thought that the defense budget needed to be drastically cut, yet also insisted “that liberals should not content themselves with merrily opposing increases in defense spending but should find out on what weapons money is being wasted and on what weapons more should be spent.”(ibid.) They also questioned the reasonableness of having a military based upon voluntary military service. Currently, the government must use wages and benefits to incentivize individuals to join the armed forces. Rather than having voluntary military service where people choose military careers for the wages and benefits, it is proposed that a “draft would be a less expensive way to meet our need for military manpower because we would no longer have to use high salaries to attract enlistees.”(ibid.) These neoliberals want a strong military, just like the neocons do, but insist that government needs to be run more efficiently in order to reduce waste and unnecessary spending.

In their fiscal conservatism, the center-left neoliberals opposed universal welfare programs in favor of means-tested welfare. While Hayek and Friedman had advocated “universal basic income,” these new neoliberals would be more likely to support “guaranteed minimum income.” They objected to programs like Social Security on principle. Rich and poor alike are eligible to draw Social Security benefits. This is what makes Social Security so popular, but it also means “that a lot of money is wasted on people who don’t need it.”(ibid.) People who can get by without Social Security benefits or unemployment compensation ought not to be eligible to receive money from such programs. All welfare programs, including Social Security and unemployment compensation, ought to require a “means test.” If one cannot prove that they actually need government assistance, then they ought not to be allowed to receive money from the government.

Like neoconservatives, the center-left neoliberals desire “a rebirth of patriotism, a rebirth of devotion to the interests of the national community, of the conviction that we’re all in this together.”(ibid.) They hold that “the national interest” ought to be put before selfish individualistic interests. While the neoconservatives had a more nationalistic conception of patriotism, these neoliberals had a more solidaristic conception of patriotism.

Neoconservatism

Irving Kristol is regarded as the father of neoconservatism. A former Trotskyist, like many other early neoconservatives, Kristol was a Marxist who felt drawn towards neoliberalism. The neoliberal roots of neoconservatism are made clear by his essay The Neoconservative Persuasion. Following the logic of supply-side neoliberalism, neoconservatives see perpetual economic growth as desirable and feasible. They advocate the pursuit of perpetual growth through supply-side economic policies. Kristol advocates “cutting tax rates in order to stimulate steady economic growth.”

While neoconservatism follows supply-side neoliberalism in advocating tax cuts to encourage economic growth, it rejects traditional notions of “fiscal responsibility” and “balanced budgets.” It still follows neoliberalism in holding that economic growth will raise all classes and lead to an affluent society, but it departs from traditional neoliberalism insofar as it doesn’t care much about the size of the federal debt or deficit. Neocons believe that supply-side (trickle-down) policies will result in better conditions for everyone, raising the people at the bottom as social wealth increases overall.

“Neocons would prefer not to have large budget deficits, but…one sometimes must shoulder budgetary deficits as the cost (temporary, one hopes) of pursuing economic growth. It is a basic assumption of neoconservatism that, as a consequence of the spread of affluence among all classes, a property-owning and tax-paying population will, in time, become less vulnerable to egalitarian illusions….” — Irving Kristol (The Neoconservative Persuasion)

I do not want to go too far down this rabbit hole, but critics of neoliberalism and neoconservatism have held that, in the absence of redistributive policies like progressive taxation, all the new wealth resulting from economic growth will go to the top 1%. Rather than raising everyone, the economic growth under neoliberal/neoconservative regimes will widen the gap between rich and poor and result in greater social inequality. Tax cuts for the rich will simply result in rich people pocketing more money, rather than in rich people paying their employees more. The wealth won’t trickle down as predicted. The critics of supply-side neoliberalism/neoconservatism are correct. As a matter of fact, supply-side policies have been the norm for over forty years now and wages are lower today in real terms than they were in the 1970s, so history has proven supply-side economics to be wrong. The real result of Reaganomics was a widening of the gap between the wealthy and the poor.

Neoconservatism stands in stark contrast to traditional conservatism. Traditional conservatism was rooted in Christianity, desiring to conserve religious institutions and traditional values. Neoconservatism shares these values to some extent, but puts far less emphasis on them, allowing neoconservatism to appeal also to people of a secular mindset. Furthermore, traditional conservatives advocated decentralization and were wary of big government, while neoconservatives advocate big government, especially when it comes to a strong military and military-industrial complex. In some ways, neoconservatism is a road to fascism. While Bill Kristol is critical of Trumpism, the movement he and his father helped build did lay the foundation for the ascendency of Trump. And, I suspect that Kristol’s reason for objecting to Trumpism has to do with the fact that Trumpism weakens the power of America relative to other nation-states, not that Kristol has any principled objection to authoritarianism as such.

“Neoconservatism is not merely patriotic — which goes without saying — but also nationalist.”(Irving Kristol, Reflections of A Neoconservative: Looking Back, Looking Forward, introduction)

Neoconservatism emphasizes patriotism (nationalism) as a virtue and opposes any move in the direction of global governance. It sees international associations, like the EU, as suspect and warns that they will lead to a dystopian New World Order style global government if left unchecked. As already mentioned, neoconservatism seeks to maintain a strong military and military-industrial complex. The reason for this is that neocons see the “national interest” as being ideological in nature. Thus, neoconservatives advocate an interventionist foreign policy whereby American style liberal democracy is imposed on the world by force. The American State has become more powerful than any other nation-state as a result of historical processes that were guided by no one. According to neoconservatism, this power comes with great responsibility. America, whether it likes it or not, has a moral responsibility to police the rest of the world. “With power comes responsibilities, whether sought or not, whether welcome or not.”(Irving Kristol, The Neoconservative Persuasion) The neocon opposes any sort of global governance that checks the power of the American government or questions the political and economic hegemony of America, yet supports global governance as long as it manifests in the form of the arbitrary domination of America over all other nations.

Neoconservatives have also brought the Cold War mentality into the modern age. One of the primary concerns of foreign policy, according to neocons, ought to be to prevent the emergence of another super-power that might challenge American hegemony. American foreign policy ought to (1) focus on ensuring that America remains the only super-power in the world and (2) guarantee that alternative political and economic models are not allowed the opportunity to prove themselves to be superior to American neoliberalism.

Neoconservatism is genuinely conservative. It is strongly opposed to socialism (government-ownership of industry) and favors property-owning democracy (widespread distribution of private-ownership). The idea of “property-owning democracy,” sometimes referred to as distributism, was popularized by such conservative thinkers as Noel Skelton, Hilaire Belloc, and G. K. Chesterton. Advocacy of a property-owning democracy was even a key point in Margaret Thatcher’s rhetoric, though not in her actual policies. Kristol’s embrace of property-owning democracy links him to a long conservative tradition of seeing the possibility of a third-way between conventional capitalism and conventional socialism. Neoconservatism is also linked to the broader conservative tradition by its opposition to violent insurrection and revolution. It sees peace, stability, and security as things to be valued, and opposes any leftist scheme that threatens to disrupt law and order. Neoconservatives are, therefore, following in the footsteps of men like Edmund Burke and Russell Kirk, who saw the folly of the left’s calls for revolution so many years ago. Like Burke, the neoconservative admits that change is sometimes necessary and that progress cannot be halted, but he also insists that progress ought to proceed by way of gradual reform through the democratic process and not by disruption, chaos, insurrection, and revolution.

While the neoconservatives are conservative in some sense — drawing on the ideas of Edmund Burke, Russell Kirk, and Noel Skelton — , they remain neoliberal. As traditional conservatives were partisans of classical liberalism, neoconservatives are partisans of neoliberalism. This means, of course, that neoconservatives are not opposed to the government creating rules to regulate businesses, nor are they opposed to the welfare state.

“In economic and social policy, [neoconservatism] feels no lingering hostility to the welfare state, nor does it accept it resignedly, as a necessary evil. Instead it seeks not to dismantle the welfare state in the name of free-market economics but rather to reshape it so as to attach to it the conservative predisposition of the people. This reshaping will presumably take the form of trying to rid the welfare state of its paternalistic orientation, imposed on it by Left-liberalism, and making it over into the kind of ‘social insurance state’ that provides the social and economic security that modern citizenry demands while minimizing governmental intrusion into individual liberties.”(Irving Kristol, Reflections of A Neoconservative: Looking Back, Looking Forward, introduction)

Concluding Thoughts

As you can probably tell by now, neoliberalism is not a single coherent ideology but a broad trend within liberal thought that developed in an attempt to renew and update liberalism for the 20th century. Neoliberalism attempted to solve the economic problems that confronted liberal democracy throughout the 20th century. Different varieties of neoliberalism emerged in response to different economic problems. Classical neoliberalism confronted the Great Depression, center-right non-classical neoliberalism confronted the stagflation of the 1970s, and center-left non-classical neoliberalism confronted the declining efficiency of American industry in the 80s and 90s. Neoconservatism, in spite of its name, is a variety of neoliberalism that sought to address the failures of fiscal conservatism and confront the realities of international relations in the modern world. While leftists like to bash neoliberalism, it is important to recognize that the failure of neoliberalism was mostly just a failure to implement neoliberalism. In reality, neoliberalism and social democracy are very similar. Though they have significant differences, we must remember that neoliberals from Milton Friedman to Hillary Clinton did fight for universal healthcare. Friedman was also one of the most vocal proponents of universal basic income. And Hillary Clinton did seriously consider running on a universal basic income platform in 2016; due to how unpopular the necessary tax increase would be, she decided not to.