Regarding the Viability of Post-Neoliberalism...

Let's start 2024 with a neoliberal bang.

Photo by Galen Crout on Unsplash

In my post announcing the 2023 Albies, I hinted that more would be forthcoming from me regarding the proposition that a coherent set of post-neoliberal ideas had emerged to supplant neoliberalism as a policy paradigm.

Enough with the hints! My latest for Reason magazine, “The Post-Neoliberal Moment,” takes a long look at the cluster of assumptions and ideas underlying post-neoliberalism:

In the 16 years since the 2008 financial crisis, neoliberalism has taken a rhetorical beating; New Yorker essayist Louis Menand characterized it as "a political swear word." Until recently, no coherent alternative set of ideas had been put forward in mainstream circles—but that has been changing. A welter of think tanks ranging from the Institute for New Economic Thinking to the Roosevelt Institute have sponsored new initiatives in heterodox economics. In 2020, the Hewlett Foundation announced a five-year, $50 million commitment to "help develop a new intellectual paradigm to replace neoliberalism." That funding has started to yield benefits to its proponents. [FT columnist Rana] Foroohar has described Hewlett's conferences as "a kind of Mont Pelerin Society for people who want to move beyond neoliberalism." After attending a Hewlett conference this past spring, The American Prospect's Robert Kuttner wrote, "We've just about won the battle of ideas. Reality has been a helpful ally. The core neoliberal claim that the economy would thrive if government just got out of the way has been demolished by the events of the past three decades."

These ideas are being shaped by powerful officials. The primary difference between Biden and Trump in this area is that Trump's opposition to globalization was based on gut instincts and implemented as such. The Biden administration has been more sophisticated. Policy principals ranging from U.S. Trade Representative Katherine Tai to National Security Adviser Jake Sullivan have been explicit in criticizing "oversimplified market efficiency" and proposing an alternative centered far more on resilience. This shift is evident in the administration's signature economic policy accomplishments to date: The Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act all represent a pivot to industrial policy—a focus on domestic production.

Given the various shocks hitting the global economy over the past decade, it seems intuitively obvious to focus more on resilience. But what if this intuition rests on a false premise? The claims of a "post-neoliberal" paradigm rest on the belief that there is a tradeoff between resilience and efficiency, between strategic autonomy and globalization. But it seems increasingly clear these values are not mutually inconsistent. The best hope for economic resilience might come not from post-neoliberal policies but from neoliberal ones.

You’re going to have to read the whole thing over at Reason to see my argument in full. For here, suffice it to say that while there are valid reasons behind some of the post-neoliberal critique, the suggested solutions are not necessarily an improvement.

One point worth stressing a bit more here at Drezner’s World is a paragraph in my concluding section. Even if one accepts the cluster of post-neoliberal ideas being posited — and to be clear, I think some of them have some validity and others do not — there is the question of whether the implementation will be competent:

A key assumption behind post-neoliberalism is that policy makers can implement the right policies in the right way to nudge markets in the right direction. Talk to Biden administration policy makers, however, and one senses a bit more uncertainty about the whole process. Phrases like, "we're all trying to figure this out in real time" and "we're building the plane as we're flying it" abound. Congress has forced additional changes to some of their trade ideas. The closer one gets to Washington, D.C., the more skeptical one becomes of the government's ability to implement the best version of post-neoliberalism.

In the last six weeks some significant data points have been gathered to bolster this point. There was the stalling out of the Indo-Pacific Economic Framework’s trade pillar, for example, as well as the shelving of a proposed Anglo-American trade deal.

It should be noted that neither of these agreements contained anything resembling greater market access — i.e., freer trade — in them. That was kind of their point — the Biden team was trying to propose these kind of deals to show it could promote “worker-centered” trade deals without needing congressional approval. As trade policy experts have pointed out for weeks, however, that was an impossibly narrow needle to thread.

As Politico’s Gavin Bade noted last week, Biden’s post-neoliberal trade agenda has been sabotaged by poor bargaining and poorer politics:

President Joe Biden’s ambitious plans to rewrite the rules of global trade — and blunt Donald Trump’s economic message against him — are running aground just as the nation enters election season.

The chief reason: Biden has failed to sell his self-styled “worker-centered” trade policy to key members of his own party, stoking fears of a backlash at the ballot box from the very workers the president and fellow Democrats are courting….

“The politics on this are a bit less nuanced and more anti-trade than some folks in the administration had been thinking when they embarked on this endeavor,” said Peter Harrell, who led the international economics team on Biden’s National Security Council until November 2022. “At the end of the day the voter in Dayton, [Ohio], looks at this and says: trade deals have been bad for me, I don’t want more trade deals. This sounds an awful lot like a trade deal, and I’m against it.”….

“Today, it looks like trade is probably going to be a post-election agenda, and it will obviously look quite different depending on whether we get a Biden term two or a Trump term two” said Harrell. “I think it’s a shame because, while big comprehensive trade deals have never been first term president projects, I feel we should have been able to make some headway.”

There is an irony here. As Rana Foroohar observed in the Washington Monthly, “paradigm shifts begin with narrative shifts.” The Biden administration’s narrative on trade has been to pillory neoliberalism. In bashing free trade policies as much as it has, however, the Biden administration also legitimized Donald Trump’s critique of freer trade. The result is that Biden’s policymakers are suffering from rhetorical blowback. Even the most meager gesture towards greater trade openness invites hostility from veto players.

So congratulations to the post-neoliberal ideologues who have supplanted neoliberalism. In salting the earth, however, they have also made it impossible to sustain any constructive post-neoliberal trade agenda. The result is not post-neoliberalism; it’s Trumpish protectionism in post-neoliberal clothing.