The crisis in neoliberalism and its ramifications

by Tom Bramble • Published 12 July 2018

That neoliberalism in the West is in crisis is widely accepted across the political spectrum and is a topic that features regularly in the leading international press and in discussions at the highest levels of the ruling class and their advisers at forums and institutions such as Davos, the IMF, OECD, World Bank and the World Economic Forum.[1]

The crisis has multiple elements, political, economic, social and imperial, which arise out of the organic workings of the capitalist system – the various elements are not superimposed on the system from outside but are the contemporary forms that capitalist crisis in the West takes in the early twenty-first century. The purpose of this article is to explain the origins of this crisis and its ramifications, with a particular focus on the nexus between its economic and political facets. The crisis in the West is indicated by two major developments. First, the emergence of popular discontent with the austerity and inequality identified with the neoliberal project, manifested most strikingly in political shocks in the UK and US, two bastions of neoliberalism since its foundation. Second, by the growing realisation that the neoliberal economic revolution appears to have run its course and that US hegemony, a central feature of the neoliberal project for most of its life, is now at risk from a new rival, China, which subscribes to a quite different economic and political model. I conclude with some consideration of the crisis in the Australian context.

The neoliberal consensus

The origins of the neoliberal revolution can be traced to the shock treatment administered to the Chilean economy by the Pinochet dictatorship in the mid-1970s and the structural adjustment programs imposed by the World Bank on many indebted nations of the global South in the same period. These were the forerunners of what has since become a global trend.[2]

In terms of the advanced Western economies, the beginnings of the neoliberal project can be dated to the late 1970s when sections of the ruling class came to the realisation that the policy consensus dominant during the post-war boom no longer delivered for them. Features of that consensus included promotion of what was called the mixed economy, with an active market sector buttressed by state ownership of core industries, along with an international trade system dominated by the US-centred fixed exchange rate regime designed at Bretton Woods in 1944. The political corollary of this economic program was the dominance of two blocs or parties, of the centre left and centre right, notable more for the similarity of their policies than any sharp differences, together with the incorporation of the union bureaucracy as a buffer disciplining the working class in a period of full employment. The details varied from country to country within the OECD, sometimes quite dramatically, but this description suffices as an approximate summary of the situation in place from 1945 until the 1970s.

By the mid-1970s, the consensus model was evidently fraying. The most obvious indication of the crisis was persistent stagflation, the simultaneous occurrence of inflation and unemployment. Growth rates slowed sharply. Bankruptcies rose. Alongside the deterioration of the macro economy, various structural changes were eroding the foundations of the post-war set up, the most important of which was the emergence of what would later be called “globalisation”. This involved a rapid expansion of international trade, the growth of cross-border production driven by the need for economies of scale, the increase in large scale foreign direct investment and the creation of offshore banking and flows of money partially disconnected from particular national states.[3] Capitalist globalisation set the conditions for neoliberalism.

Alongside globalisation was the steady concentration and centralisation of capital which transferred competitive pressures from the national market to the international market. Big companies once partially sheltered by state mechanisms and national markets now demanded from their states tax cuts and the stripping away of regulations that would allow them to compete against their rivals based in other states.

Underpinning the increasing awareness that the post-war order had reached its limit was weak and declining profitability at the core of the system. Every major economy – in North America, Western Europe and Japan – experienced declining profitability in the 1960s and 1970s, a major threat to capitalist interests.

Thatcherism and Reaganism emerged as one response to this crisis of the post-war order in the West.[4] These -isms did not arrive on the political scene fully formed – Thatcher and Reagan and their advisers made the road by walking it in incremental steps – and nor were they identical.[5] But the basic components of what in the 1990s became known as neoliberalism were twofold: an attack on the working class and a restructuring of capital in order to weed out its weaker elements. Its main ideology was that “the market” and “competition” should edge out “state control” and “planning”.

The main features of the neoliberal project are well known. In terms of the attack on the working class, they included: mass redundancies, reductions in the minimum wage, repression of the trade unions and imposition of aggressive private sector managerialism in the public sector to weaken the power of organised labour; remaking the welfare system to focus more on surveillance and control over the working class to make it more susceptible to heightened exploitation by capital; greater emphasis on “user pays” in the provision of public services, education and healthcare; and, finally, a switch from progressive and direct taxation to regressive and indirect taxation.

In terms of restructuring capital, the neoliberal project involved: privatising state-owned industries and reducing subsidies to selected industries (while significantly expanding them for others); reducing tariffs and quotas to allow more efficient businesses to benefit more from international trade and investment; a high interest rate regime to squeeze inflation and force out marginal businesses; widespread use of outsourcing; and deregulation of the financial sector. The aim was to switch capital out of sectors where its return to the capitalist class was marginal or negative towards those where the capitalist class as a whole could make a higher return. By the late 1990s, the rhetoric of globalisation – a free market trading order with minimal regulation of capital – emerged and added to the neoliberal mix.

The major effect of the neoliberal revolution was to reverse the decades-long decline in the rate of profit by raising the rate of exploitation and rationalising constant capital.[6]

The neoliberal project coincided with the advent of two other factors which further boosted corporate profitability. In the 1980s and 1990s, the large scale implementation of computers and information technology cheapened constant capital and allowed a widespread restructuring of industry by making possible much tighter control over business operations extended over larger areas (and thus for example, the introduction of just in time methods and the construction of international supply lines). In addition, the arrival of China as a factor in world trade in the 1990s and 2000s was a boon for Western capitalism, cheapening the cost of imported goods, depressing the value of labour power, and, for some capitalists, providing a big new market for manufactured goods, financial services and resources.

Britain and the United States under Thatcher and Reagan are known as the pioneers of neoliberalism, but many of the basic principles were soon adopted in other countries, and not just by conservative governments. In Australia, the Hawke and Keating governments cut wages, cracked down on social security recipients, reintroduced university fees, slashed taxes on big companies and the rich, privatised Telecom and the Commonwealth Bank and introduced enterprise bargaining. The Lange Labour government in New Zealand went even further in ripping up the post-war welfare state, while the Spanish Socialist government of Felipe Gonzalez was a pioneer of neoliberalism in Europe. Other countries in Europe held out longer – France and Germany for example were more cautious, in the former at least in part due to working class resistance – but by the 2000s the laggards too had embraced many of the major tenets of neoliberalism. The European Commission adopted the Single European Market mechanisms and then rammed them through the enlarged European Union of 27 member states.

The fall of the Berlin Wall saw neoliberalism transplanted wholesale into Eastern Europe and the former Soviet Union, quite commonly by former Communist apparatchiks, using many of the same shock doctrine methods more familiar in Latin America. In the early 1990s, India too opened up its economy. In South Africa, commitments to nationalisation were swept aside and in 1997, the neoliberal Growth, Employment and Redistribution program was adopted, ditching residual progressive elements of the ANC’s economic policies. The ruling class in each of these countries could see in neoliberalism a means to promote capital accumulation by driving down working class living standards.

The neoliberal revolution shook up domestic politics. Its early advocates, for example Thatcher, did not start out with a ready-made base in her party.[7] Throughout her first term in office, she had to do battle with “wets” in the Tory government. But by the mid-1980s, thanks mainly to their victory over the National Union of Mineworkers, Thatcher and her hard right allies had marginalised their opponents in the senior ranks of the Conservative Party. Thatcher then rode high until coming undone with the poll tax riots of 1990. In the United States, the Federal Reserve Bank’s high interest rate policy in 1980, which contributed to a deep recession and the bankruptcies of many US businesses, was unpopular in business circles, but massive tax cuts and sharp increases in military outlays soon assuaged Reagan’s opponents within the capitalist class, even as public debt blew out.

The victory of neoliberalism was assured when it was pursued not just by those parties and individuals representing the vanguard of neoliberalism, such as Reagan and Thatcher – what Perry Anderson calls “regimes of reorientation” – but by their successors too, Bill Clinton and Tony Blair, Anderson’s “regimes of consolidation”.[8] As Thatcher herself responded when asked about her greatest achievement: “Tony Blair and New Labour”. In most cases, left wing social democracy simply capitulated to the neoliberal current; even rhetorical adherence to anti-capitalist policies was abandoned. In the case of France, it was the left’s Lionel Jospin who carried out more privatisations between 1997 and 2002 than any of his contemporaries elsewhere in Western Europe.

The neoliberal consensus dominated the global political scene for at least two decades, not just in the parliamentary sphere but across the main arenas of public debate in the universities, the media, the think tanks and the senior ranks of the public service. Thatcher’s “TINA” – There is No Alternative – captured the situation well. Opponents were simply written off as dreamers or fools. The collapse of the Soviet bloc only seemed to confirm the superiority of the neoliberal model, comprising free market economics embedded in a liberal world order characterised, at least rhetorically, by the “rule of law” and a global trading and financial architecture dominated by the United States. This was, if Francis Fukuyama were to be believed, “the end of history”.

This is not to say that the neoliberal revolution was particularly coherent, as Harman has argued.[9] Despite the rhetoric of “small government”, neither government spending as a share of GDP, nor specific outlays on health, education and welfare services, declined. The ruling classes of every advanced economy needed a certain amount of social expenditure on their working classes simply to keep them productive at the standards now required by international competition. And, despite some rhetoric in the early days about controlling money supply and fiscal prudence, governments regularly loosened the monetary and spending taps to stimulate the economy when it encountered turbulence. National variations persisted: there were clearly important distinctions between the political economies of, say, Finland and Britain in relation to the size of the public sector, union coverage, the nature of the welfare state and so on.

The main thing that was consistent across the board was the steady expansion in the fortunes of the rich, a shift of national income from labour to capital, a rise in corporate profitability and the growth of inequality, reversing the trend towards reduced disparities in income that had marked the period from the end of the Great Depression until the 1970s. Trade unions were pulverised, with coverage rates falling to historic lows, and strikes collapsed.

While some neoliberal ideologues used loose rhetoric about “getting government out of people’s lives”, the more serious advocates were always clear that neoliberalism required a strong repressive apparatus in the form of police, prisons and armed forces – both Thatcher and Reagan embarked on massive programs of military expansion during the 1980s while mobilising police and security forces to smash working class resistance. The tighter strings attached to the provision of welfare also worked in this direction.

Not only that, there was a systematic and mostly successful attempt to remove what few channels the working class had to influence economic decision making through the increasing use of undemocratic mechanisms. These included supposedly neutral bodies such as Australia’s Productivity Commission, the imposition of rules such as the European Union’s Growth and Stability Pact, which set restrictions on the size of public deficits, the enhanced power of the European Commission, and commitments in multilateral trade agreements and World Trade Organization protocols to enhance the power of big corporations.

Although the neoliberal revolution transformed the global economy and revived the rate of profit, it did not make the system any less unstable. Indeed, the growing weight of international finance made financial crises increasingly common: from Mexico in 1994 and the crisis in the Asian Tigers in 1997, when the Thai baht, Korean won and Malaysian ringgit collapsed overnight, to the meltdown in Argentina in 2001. Western stock markets experienced two major busts – in 1987 and 2001-02. And nor did neoliberalism boost economic growth in the advanced economies, which was lower in the 1990s and 2000s than it had been in the 1970s. Investment in productive industry stagnated.

The neoliberal revolution, with its agenda of massive wealth redistribution to the rich, did not go unchallenged. Resistance broke through on many occasions. From repeated general strikes in France to township protests in South Africa, from the anti-capitalist protests at Seattle and Genoa to the “pink tide” in Latin America, many people fought back on the streets and at the ballot box in the 1990s and 2000s. But the ruling classes of the world were confident enough in their system to push back ideologically. During the anti-capitalist protests of the late 1990s and early 2000s, for example, there was some official recognition of the yawning inequality that had opened up, but the IMF and WTO stood ready to defend their system. The Washington Consensus withstood the blows. And so it was on the very eve of the global financial crisis in 2007, that the Economist magazine still felt secure enough to write of the situation in Britain: “New Labour’s particular blend of free-marketry and social justice is now widely seen as the natural path of British politics, and few politicians of any stripe would dare veer far from it”.[10]

The neoliberal revolution, however, did leave a legacy that has come to haunt it in recent years. If removing democratic input into politics facilitated the forcing through of regressive economic policies in the 1980s and 1990s, it also hollowed out political structures that during the post-war boom and the immediate onset of economic crisis in the 1970s had helped to hold the working class in check. As politics was reduced to discussion over trivia, with the big decisions already made by unelected bodies, participation in parliamentary elections dropped steadily. Membership, partisanship and activist bases of the mainstream parties were eaten away. With few exceptions, social democratic parties, now committed fully to neoliberal policies, bled electoral support and membership.[11] Razzamatazz and the prospect of holding office could temporarily staunch the flow, as in the British Labour Party in the years between Blair winning the leadership in 1994 and coming to office in 1997. Once in office, however, the party haemorrhaged members, with party rolls sinking from 400,000 in 1997 to just 170,000 13 years later.

Faced with the loss of support and widespread disenchantment, the mainstream parties increasingly stoked racism in these years – against immigrants, refugees and, after 9/11, Muslims – to hold on to their political base. Together with promoting harsh “law and order” campaigns, these parties helped to foster a toxic political environment which only served to legitimise the far right which emerged as a growing force in the US and Europe in the 1990s and 2000s.

The global financial crisis and its aftermath

The global financial crisis of 2008 was a major blow to the neoliberal project. For a period it appeared as if the entire international financial order was on the brink of failure, with a string of banks going bust and commercial lending seizing up. International trade plummeted and stock markets plunged.

Rapid intervention by central banks and governments halted the collapse. However, the crisis had a big and enduring ideological impact.[12] Everything that the politicians and economists and bankers had told their populations for two decades about the superiority of free markets turned out to be false. Free markets, it appeared, were responsible instead for the devastation of the world economy. The blatant white collar crime revealed in the most respectable banks only added to the ideological turmoil. No longer could the ruling class just dismiss critics of the “free market” as throwbacks to an old and superseded order. For the first time, criticisms of the neoliberal order were published on a regular basis in the leading organs of the world’s press. In Australia, Kevin Rudd, then prime minister, wrote a lengthy piece in The Monthly condemning “extreme capitalism” and “unrestrained greed”.[13]

If the neoliberal order was rocked by the global financial crisis, the ruling classes were, however, able to pull it back from the brink. There were two reasons. First, despite some heroic struggles – the Arab revolutions of 2011 stand out, but also general strikes, street occupations and student protests in many European countries– the working class was not able to seriously challenge the power of capital. The Arab revolutions and Occupy in the US were brutally crushed. The ruling class’s ability to roll back the resistance was helped by the ideological immaturity of the popular movements. With socialism discredited, autonomist or semi-anarchist politics dominated in some countries; in others, the social democratic parties or, in the US, the Democrats, steered the movements away from radical conclusions; in Greece, Syriza betrayed the hopes of millions when it took office in 2012; while in Egypt, the problem was popular illusions in the army.

But neoliberalism also held on as the dominant discourse in elite politics because the ruling class itself produced no alternative. If the Great Depression of the 1930s created the conditions for Keynesian ideology (even if not the practice) and the crisis of the 1970s the conditions for neoliberalism, the global financial crisis produced no similar ideological revolution in the ranks of the ruling classes. After some initial large scale infusions of government money and nationalisations of failed banks, the main policy responses thereafter were a huge money-printing program and the imposition of savage austerity. Whatever their differences, the ruling classes could agree on one basic point in the aftermath of the immediate crisis: that the working class, as during every capitalist crisis, had to pay for the cost of rescuing the system; and neoliberalism fitted the bill as its ideological cover. And so it came to pass: on average, two-thirds of households in 25 high-income countries experienced stagnant or falling real incomes between 2005 and 2014.[14] For the first time in many decades, people in the West could expect their children to have a lower standard of living than themselves.

The crisis deepens – 2016 to today

Neoliberalism emerged after the financial crisis bruised but intact. In the past two years, however, the situation has changed, as the ruling classes have been hard hit by the political backlash against years of harsh austerity and the concentration of income and wealth into ever fewer hands. The Western liberal capitalist order has been severely shaken.

The current crisis consists of two main phenomena.

First, the acceleration in the erosion of the credibility of the neoliberal project in the minds of millions of people across the Western world. Popular support for the centre parties which have promoted neoliberalism has fallen, while parties and figures on both the far right and left have seen their stocks rise. These tendencies were already under way in the aftermath of the global financial crisis, and continued with the electoral success of Podemos in Spain and the Left Bloc in Portugal. But the last two years have seen dissatisfaction break through as a mass phenomenon in two of the centres of world politics, the US and UK. The strong showing by both Bernie Sanders and Donald Trump in the US presidential primaries in 2016 was one sign that the political climate was shifting. Then in June 2016, the Brexit referendum in Britain returned a shock result. Less than five months later, Trump won the US presidency and in June 2017, the success of Jeremy Corbyn’s Labour Party repudiated those who had poured scorn on the idea that a progressive social democratic agenda could cut through after decades of neoliberalism. The political establishment was shocked by the succession of what were, for it, major setbacks. On Trump’s election, for example, France’s ambassador to the US tweeted that the world as we know it “is crumbling before our eyes… It is an end of an era, that of neoliberalism. It remains to be seen what will succeed it”.[15]

These are very different phenomena in many respects: support for Trump was clearly on a right wing basis; support for Sanders and Corbyn on a left; and support for Brexit on a very mixed basis. But each in its own way was driven by widespread hostility to the neoliberal project which has become irretrievably linked to austerity in the minds of millions. “In every case”, Nancy Fraser has written, “voters are saying ‘No!’ to the lethal combination of austerity, free trade, predatory debt and precarious, ill-paid work that characterize financialized capitalism today”.[16] According to the former editor of Marxism Today, Martin Jacques, writing in The Guardian, inequality is “bar none, the issue that is driving the political discontent that is now engulfing the west”.[17]

In Western Europe, the traditional parties of the centre associated with neoliberalism saw their vote decline substantially in 2017-18. At elections in France, Germany and Italy, the vote share of the traditional centre left and centre right parties fell to historic lows. The erosion of the centre parties presents something of a problem for the establishment. The mainstream parties that provided the capitalists with a stable buffer throughout the post-war decades, alternating in office but without threatening the economic order, have now lost much of their grip on the population, courtesy of their adherence to neoliberalism, suggesting political instability will continue for many years.

The far right has been the main beneficiary of the destabilisation of the liberal capitalist order. Support for radical-right parties was already growing, doubling in 22 European countries from 5 percent in 1997 to 11 percent ten years later. At the most recent parliamentary elections support for hard right parties jumped to 16 percent.[18] Having helped to till the soil in which the far right has grown, the centre right, along with elements of social democracy, are now tailing the far right in an attempt to win votes back from them. In the October 2017 Austrian elections, for example, the new leader of the conservatives was only able to prevent his party from being overtaken by the far right Freedom Party by appropriating virtually its entire program. The social democrats for their part announced before the election that they had dropped a 30-year ban on forming a coalition with the Freedom Party. The two right wing parties have subsequently formed a governing coalition.

In only a few cases has the left built support, and only by tacking well to the left of neoliberal social democracy. The most obvious case has been Britain where, with a leader well to the left of his parliamentary colleagues, the Labour Party scored well at the 2017 general election. Across the Channel, Jean-Luc Mélenchon, leader of France Insoumise, came third in the French presidential election, falling short of the run-off by less than two percentage points. More generally, the left in Europe is in the worst state it has been for many decades. In the United States, there is widespread interest among the young in socialism, but the Democrats are likely to be the main beneficiaries for the foreseeable future.

Outside the Western core, there has been a notable lurch towards authoritarianism and nationalism in what are nominally parliamentary democracies, as in Hungary, Poland, Russia, Egypt, Turkey, India and the Philippines, where presidents and prime minister have centralised power and wielded the police, security forces and the courts, along with street mobilisations of loyalists and online harassment by trolls, against opponents.

The second major element of the crisis of neoliberalism in the West is the loss of confidence within the ranks of the ruling classes and their ideologues in the efficacy of the neoliberal project as a means to revive the capitalist system, alongside the loss of US global hegemony.

As compared to the global financial crisis, the world economy is in a healthier state today. Global growth of 3.8 percent in 2017 was the highest since 2011 and the IMF predicts the expansion to continue at a similar rate in 2018 and 2019. The United States is enjoying one of the longest economic expansions in its history and corporate profits are buoyant. The European Union and Japan are finally picking up after years of stagnation.

The more astute capitalists and those who oversee the system’s affairs – the central bankers, the OECD, the IMF – are nonetheless very conscious that the methods used to stabilise the economy during the global financial crisis and its aftermath – government infusions of money and bailouts, followed by a gigantic money printing program – cannot be sustained indefinitely. But they are also aware that weaning the Western economies off such stimulatory measures carries a big risk. The world economy may seem buoyant in the first half of 2018 but it is weighed down by a long term crisis of profitability and, in the US in particular, by a huge overhang of government, corporate and household debt. Trump’s tax cuts will only further increase US government debt. The combination of quantitative tightening and rising US government borrowing will push up interest rates, stifling US business investment which is already barely keeping ahead of depreciation.[19]

Awareness of the fragility of the economic situation in the West is combined with alarm about the US’s relative decline as the world’s only superpower. The most obvious threat to the US is the transformation of China from a state operating on the fringes of the world system to one that is now a peer rival of similar economic clout, with a growing military capacity and an ideological framework running very much at odds with that promoted by the US. Although the “opening up” of the Chinese economy and privatisation of state-owned enterprises since the 1990s appear to be consistent with neoliberal doctrines, and the rapid growth of companies such as Alibaba and Tencent illustrate the success of China’s private sector, there is much about Chinese economic management that flouts neoliberal ideology. The Chinese government intervenes heavily in the operations of big domestic and international businesses. International trade is not “free”, the currency is managed tightly, the banking system operates on the orders of the central government, and debt-funded government infrastructure spending dwarfs outlays by the US and EU. All land remains in the hands of the state.

Nor, of course, does China operate on the basis of the liberal political ideal – separation of powers, the right to privacy, free speech and assembly, the right to due process in the courts, democratic parliamentary elections, etc. While neoliberal advocates once argued that sustainable economic growth requires political liberalism, citing the collapse of the Soviet Union to make their point, China now appears to make the case for political authoritarianism. In stark contrast to the US, the factional battles within the Chinese ruling class appear to have been suppressed for the time being under a leader who is now effectively a president for life. While chaos reigns in Washington, relative calm and coherence prevail in Beijing, only enhancing China’s international prestige in the eyes of ruling classes elsewhere.[20]

But it’s not just China that is shaking up US imperialism and the neoliberal order over which it has presided over the past four decades. America also faces increased Russian assertiveness, the threat of Iran to its interests in the Middle East, the ambitious nuclear program of a hostile North Korean regime, and the preparedness of US allies in the Middle East and Asia to forge their own paths in pursuit of regional ambitions.

The two issues of rising US economic and strategic vulnerability come together in relation to the country’s military capacity. The US’s domination of the world system in the post-war decades was underpinned by the strength of its military-industrial complex. The US still clearly leads the world in a range of important sectors, including banking and finance, aerospace, armaments, information and communications technology and entertainment. But it has fallen behind in others. The biggest US steel producer, Nucor, for example, is ranked only number 12 in the world in terms of output, behind Luxemburg-registered Arcelor Mittal and ten other companies, all Asian.[21]

Trump’s economic nationalist project is one response to this problem: to boost the country’s manufacturing base using protectionism and government subsidies, along with a big lift in military orders. Trump’s advisers responsible for trade and economic policy, Robert Lighthizer and Peter Navarro, openly scorn neoliberalism which, they argue, has led to the destruction of middle America and its capacity to make things. And so, “Make America Great Again” involves both the intensification of the neoliberal project on the one hand, with attacks on the working class and handouts for the rich, including huge tax cuts and the elimination of regulations on the energy industry, the banks and the big polluters, and, on the other, the erosion of the neoliberal order in the form of withdrawal from the Trans-Pacific Partnership (TPP) and the Paris climate accord, sabotage of the World Trade Organisation, and, starting in early 2018, a string of new tariffs, with a particular focus on China.

How far Trump is able to pursue his economic nationalist agenda is at the moment unclear. Putting aside the prospect that he is ousted from the White House before his first term is over, there is extensive opposition within the ruling class to some elements of Trump’s agenda, in particular broad tariffs that not only raise costs of inputs for the rest of the capitalist class but also alienate US strategic allies elsewhere in the Americas, Europe and Asia. Pulling the US out of trade, finance and investment pacts in Asia such as the TPP will only create more space for China to insert itself in the region as the major power – it is already by far the biggest trade partner for most Asian countries by an order of two to one. Trump’s critics can point to the fact that the TPP still appears to be going ahead, only now without the US, as an indication both of the ongoing support for the neoliberal trading order among Asian and Latin American governments and dwindling US clout in the region.

Where Trump does win support, however, is for economic nationalist measures that are narrowly focused on maintaining US leadership in high-tech industries and frustrating China’s growth in these sectors, a key aim of Beijing’s “Made in China 2025” program. Where economic nationalism can be married directly to geostrategic goals, Trump appears to be on safe ground. Here he can pull both the Republicans and Democrats behind him. Nonetheless, the Trump administration is unpredictable, chaotic and at times, plain irrational, and a battle is still raging over the future of economic policy in the US.

To draw some threads together: polarisation and destabilisation have become important themes in political life in the advanced economies of the West. The hard right has become an important force, both within and without established conservative parties. Where left wing forces have emerged, they have in some cases discredited themselves, as with Syriza, or remain largely untested (as with Corbyn and Podemos). The centre parties for the most part have sought to rebuild their bases by stealing the policies of the far right around immigration, Muslims, refugees and national security. Britain’s Labour Party is the only case of a centre party successfully tacking to the left. Just as obvious as the growth of any clearly definable political current, however, is growing disengagement with official politics, evident in declining electoral turnouts and party membership, and disgust and cynicism towards mainstream political leaders.

Much is uncertain. The trajectory depends so much on the class forces at play, not just, as in the US, within the White House and broader administration, not just in the battles between rival ruling classes, but also in the struggle between the capitalists and working class. In 2013 Neil Davidson could write that at that time there was no crisis of neoliberalism, only a crisis in neoliberalism, “which, in the absence of successful resistance by the exploited and oppressed, may lead not to its extinction, but to its further evolution”.[22]

The same remains true today. If neoliberalism has failed in some of the goals set out by Thatcher in the early 1980s, it has succeeded in inflicting serious blows on the collective organisations of the working class. Neoliberalism may have less grip ideologically than in the 1980s and 1990s but politics is about organisation as well, and the working class in most countries is currently poorly equipped organisationally and ideologically to do battle against further attacks by the capitalist class and governments. The level of strikes is woefully low and has been so for several decades. France provides something of a test case for the future of neoliberalism. President Emmanuel Macron, elected on the basis of representing a break from the tired old political establishment, albeit quickly incorporating many elements of that establishment in his own government, is trying to break the power of French trade unions. Whether neoliberalism and the broader capitalist offensive against the working class grinds on in Europe depends on the outcome of battles such as these.

How does Australia fit in to the current crisis?

Australia has experienced a quarter of a century without recession, which marks it out from every other OECD member state. Nonetheless, the working class has still been pushed backwards by government cuts and an employer offensive. The wages share of GDP is the lowest since records began. Household incomes were lower in 2017 than in 2012, while costs of living have been bumped up by the adoption of user pays, the privatisation of government services and sharp increases in the price of basic household necessities such as energy. Buying a house is now out of reach for many young workers.[23]

These developments have had political effects. Neoliberalism has never been extremely popular in Australia and no government has won office federally promising a hard neoliberal agenda. Indeed, the tendency over the years has been for greater support for public spending and less for tax cuts.[24] In the past five years, however, hostility to neoliberalism has come to the fore in politics.

Neoliberalism in Australia has been hamstrung chiefly by the failure of the 2014 Budget. The Coalition won office in 2013 on a fairly “softly-softly” agenda. Its first Budget, however, was a major offensive, comprising savage attacks on welfare and public services. It wasn’t just the dollars and cents but the whole ideological package: the “leaners and lifters” and promises to end “the age of entitlement”. The public response to the budget was instant hostility, deepened by the ALP which tacked left and attacked the budget quite aggressively.

The 2014 budget was the first and last attempt by the Coalition to carry through such a wholesale attack on the working class. It nearly lost government at the federal election two years later, a stunning reversal given how recent and hostile was the public memory of the Rudd and Gillard governments. Lacking the parliamentary numbers, the Coalition then had to retreat on a range of fronts.

This is not to say that the government has done nothing to advance the capitalists’ agenda. It has pushed through quite significant cuts to spending and entitlements, sometimes with ALP assistance. It has re-established the Australian Building and Construction Commission which has aggressively prosecuted trade unions. It remains committed to cutting taxes on big business. But the Turnbull government has not won public support for a frontal offensive on the welfare state, nor has it won support for its attacks on the trade unions – the royal commission into trade unions failed to generate a groundswell of anti-union sentiment.

Labor has certainly positioned itself sensibly given the public mood and has helped to further discredit neoliberalism through its regular invectives against “trickle-down economics”. Attacking inequality and big business, once the province of marginalised socialists within the party, is now part of Labor’s mainstream discourse, ranging from former Treasurer and member of the Right faction Wayne Swan to the Left’s Anthony Albanese. The appointment of Sally McManus as ACTU secretary in 2017 and the launch of the Change the Rules union campaign have also helped to place inequality and hostility to neoliberalism at the forefront of Australian politics.

The capitalists have been reticent to take up cudgels on behalf of the Coalition. This much was clear during the 2014 budget when Treasurer Joe Hockey complained that business would not publicly defend the budget cuts. And nor are the erstwhile citadels of neoliberalism – the Reserve Bank and Treasury – aggressively championing the cause. The RBA is more often in the news complaining about low wages growth and its impact on consumer spending.

The irony of the situation in Australia, therefore, is that in the country with the most sustained run of economic growth in the world, the main ideological prop of this story – the superiority of market deregulation – is barely heard in 2018. That the free market fails for the common people is simply understood as common sense. Every issue that comes up today on the economic front – exorbitant house prices, falling wages and wage theft, banking scandals, escalating university fees and the trashing of vocational education – only seems to further discredit the neoliberal agenda.

With wholesale attacks on the working class by the government put on the backburner for now, employers have been happy to continue their own DIY neoliberalism, with outsourcing, open flouting of award conditions, ripping up enterprise agreements, walking away from collective bargaining and work intensification widespread. The Fair Work Commission has simply given employers a blank cheque, while the trade unions have failed to mount a serious fight on the ground to protect wages and conditions. The federal government continues to dole out big subsidies to big business, with entire lines of industry – for example, private health insurance, private schools, infrastructure construction, military contractors and mining companies – awash with government funds. The Australian Tax Office has been stripped of staff, only encouraging big companies to engage in wholesale tax evasion, while the Australian Securities and Investments Commission, charged with tackling corporate malfeasance, is both seriously under-resourced and unwilling to fulfil its obligations. Corporate Australia, therefore, continues to prosper.

The Coalition, however, staggers along, turning itself in ever smaller circles, hostage to the right wing in caucus which sabotages government initiatives while lacking the support to take the leadership itself. The Coalition is now confronted with the reality that neither its right (Abbott) nor its liberal (Turnbull) wings can muster any wider public enthusiasm. This does not mean, however, that the Coalition is destined to lose the coming federal election. The ALP has led the government in opinion polls for years but has never established a crushing margin. Its bland centrism is incapable of enthusing its supporters, while the Coalition can try to rally its base through a mixture of income tax cuts, racism and “national security” measures.

One significant difference between Australia and the US and much of Europe is that the discrediting of neoliberalism has not been accompanied by any sharp political breaks. The hard right outside the Coalition parties has not broken through and One Nation’s Pauline Hanson has positioned herself, if anything, as a champion of neoliberal attacks on the working class rather than as the spokesperson of the downtrodden.

Discontent with the status quo in these circumstances therefore simply takes the form of cynicism, hatred of politicians and withdrawal from politics, evident now for several decades.[25] Only occasionally, as with the marriage equality postal survey in 2017, do people express any enthusiasm for political engagement.

In conclusion, neoliberalism will not expire simply of its own accord or its own internal contradictions. The fact that the Coalition government was able to get away with cutting penalty rates with barely a peep of opposition from the unions indicates that neoliberal attacks can still continue in the absence of a fightback. And so, if the bosses appear to be in no hurry for a coherent alternative and the working class movement has no alternative of its own, neoliberalism can survive for years to come. It is too early to write its epitaph in Australia just yet.

Bramble, Tom 2014, “Australian capitalism in the neoliberal age”, Marxist Left Review, 7, Summer.

Callinicos, Alex 2010, Bonfire of illusions: the twin crises of the liberal world, Polity.

Cameron, Sarah M. and Ian McAllister 2017, Trends in Australian political opinion: results from the Australian Election Study, 1987–2016, School of Politics and International Relations, Australian National University.

Davidson, Neil 2013, “The neoliberal era in Britain: Historical developments and current perspectives”, International Socialism, 139, Summer.

Fraser, Nancy 2017, “The end of progressive neoliberalism”, Dissent, 2 January 2017.

Harman, Chris 2008, “Theorising neoliberalism”, International Socialism, 117, Winter.

Harman, Chris, 2009, Zombie capitalism: global crisis and the relevance of Marx, Bookmarks.

Harvey, David 2006, A brief history of neoliberalism, Oxford, 2006.

Marlière, Philippe 2010, “The decline of Europe’s social democratic parties”, Open Democracy, 16 March 2010.

McKinsey Global Institute 2016, “Poorer than their parents? Flat or falling incomes in advanced economies”, McKinsey & Company, July 2016.

Roberts, Michael 2016, The Long Depression, Haymarket Books.

Roberts, Michael 2018, “Global economy peaked”,, 20 April 2018.

Rudd, Kevin 2009, “The global financial crisis”, The Monthly, February 2009.

Upchurch, Martin 2018, “Is globalisation finished?”, International Socialism, 157, Winter.

[1] See, for example, Martin Wolf, “Davos 2018: the liberal international order is sick”, Financial Times, 23 January 2018.

[2] There is a vast literature on the rise of neoliberalism and its meaning, so my treatment here will be relatively brief. See Harvey 2006; Harman 2008 and 2009; Davidson 2013.

[3] Upchurch 2018; Davidson 2013, pp178-79.

[4] Albeit, the ground was prepared for them by the Callaghan Labour government in Britain and the Carter administration in the US in the late 1970s.

[5] Davidson 2013, pp190-91.

[6] Harman 2009; Roberts 2016.

[7] Davidson 2013, p184.

[8] ibid., p194.

[9] Harman 2008.

[10] Cited in Davidson 2013, p196.

[11] Marlière 2010.

[12] Callinicos 2010.

[13] Rudd 2009.

[14] McKinsey Global Institute 2016.

[15] Colum Lynch, “The world is crumbling before our eyes”, Foreign Policy, 9 November 2016.

[16] Fraser 2017.

[17] Martin Jacques, “The death of neoliberalism and the crisis in Western politics”, The Guardian, 21 August 2016.

[18] Andre Tartar, “How the populist right is redrawing the map of Europe”, Bloomberg, 11 December 2017.

[19] Roberts 2018; Graeme Wearden and Larry Elliott, “IMF chief warns Trump’s tax cuts could destabilise global economy”, The Guardian, 27 January 2018.

[20] James Kynge, “China’s ancient strategies create a new challenge to the west”, Financial Times, 27 December 2017; Martin Wolf, “US-China rivalry will shape the 21st century”, Financial Times, 10 April 2018.

[22] Davidson 2013, p172.

[23] I review the outcomes of the neoliberal revolution for the working class in Bramble 2014.

[24] Cameron and McAllister 2017.

[25] ibid.

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