The Pivot of History

According to Branko Milanovic, "January 20, 2025 marks a symbolic end to global neoliberalism. Both of its components are gone. Globalism had now been converted into nationalism, neoliberalism has been made to apply to the economic sphere only. Its social parts—racial and gender equality, free movement of labor, multiculturalism—are dead. Only low tax rates, deregulation and worship of profit remain." There is no shortage of symbolism in Donald Trump's second inauguration, but I think the idea that his return to power marks the definitive end of global neoliberalism is too neat. The stark opposition that Milanovic proposes between globalism and nationalism makes little sense, neoliberalism continues to dictate social policy in such areas as welfare, and the claim that multiculturalism is dead is no different to rightwing commentators claiming that it has "failed". Pivotal moments are often little more than narrative conveniences. Just as neoliberalism started to influence government policy long before Margaret Thatcher entered 10 Downing Street in 1979, so its end will be a long, drawn-out affair. 

The roots of neoliberalism lie in the counter-movement against democracy that began after the First World War. The idea that politics should conform to market principles was a later ideological addition to the premise that democratic control over the economy would spell the end of private property. It was the exigencies of war that first opened the appalling vista of state control and led both to working class radicalism in the postwar years and the emergence of what Clara E Mattei in her book The Capital Order described as a "reconstructionist" agenda among progressives who saw state intervention as the means to advance social justice. The centre-piece of the counter-movement was the invention of austerity: an explicit programme to constrain the state by imposing costs on the democratic majority through reductions in welfare, wage repression and the fiscal discipline of government by debt-holders. These features have been as consistent throughout the history of neoliberalism as low tax rates, deregulation and the worship of profit. 

The simultaneous emergence of Fascism in Italy in the 1920s was not simply another expression of the anti-democratic movement. It showed that neoliberalism's political agenda was wholly compatible with an activist state. Fascist governments employed the same techniques of austerity but justified them through appeals to nationalism, racism and anti-Bolshevism. Private property was sacrosanct and state industries were privatised (the ideological equation of Nazi and Soviet totalitarianism during the Cold War obscured this). Even in the depths of total war, the Nazi state declined to expropriate capitalists, with the exception of Jews. But notwithstanding this cleaving to economic orthodoxy, the Second World War vastly expanded the scope of the state and led to the election of "reconstructionist" governments, typically of a social-democrat stripe, in many countries after the war. But from the beginning, these governments were reluctant to confront capitalists and soon acquiesced in a return to austerity. Far from marking a retreat of neoliberalism, les trente glorieuses marked its steady march towards hegemony.

If there is a symbolic moment that marks the triumph of neoliberalism it wasn't the fall of the Berlin Wall in 1989 but the Nixon shock in 1971. That brought to an end the Bretton Woods system and in particular led to the gradual removal of exchange controls and thus the free movement of capital. From that point onwards we see the steady spread of neoliberal practice throughout the developed world and the emergence of what would later be termed the Washington Consensus in respect of its relations with developing nations. The point to note here is that it took 50 years for neoliberalism to achieve that victory. Had the Second World War not happened, perhaps it might have been quicker, but the war happened because neoliberalism promoted Fascism. I suspect that the end of neoliberalism may take as long. Trump's first Presidential win marked the culmination of a phase of neoliberal decay that started around the millennium and became obvious in 2003, with the Iraq War marking the end of the delusions of liberal intervention. It became inarguable in 2008 when the banking crisis marked the end of financialisation as a substitute for material production. 

Subsequent attempts have been made to deal with the fallout, notably the imposition (again) of austerity as a way to protect asset values, the adoption of Green New Deal rhetoric as cover for the subsidisation of domestic producers, and the promotion of security interests as a justification for trade restraints on competitors, notably China. Trump's second inauguration indicates the extent to which these developments have now been normalised. Much of the claimed successes of the Biden Presidency were simply an extension of the mercantilist logic that Trump brought into the open during his first term, which is why his return to the White House shouldn't have been a surprise, even allowing for the Democrats' disastrous handling of the nomination process and the subsequent election. If Trump's initial electoral victory emphasised how neoliberalism had failed the democratic majority, his second indicates the failure of institutional politics to respond. But it doesn't mark the definitive end of neoliberalism. For all the distracting nonsense of his initial executive orders, the meat of his programme remains cuts to welfare, deregulation and lower taxes.

In a follow-up blog post, Milanovic notes how the principles of neoliberal globalisation have been in abeyance for over a decade and paints a consequently bleak picture of the immediate future: "It implies the return to mercantilistic policies where the interests of individual countries are paramount. It also means the abandonment of any cosmopolitan and internationalist perspective where the rules are at least in principle universal. We no longer have universal rules and the main culprit for not having universal rules is not Trump, but the view of the world where domestic political interest and the so-called security concerns are above everything else. This is not a world of globalization, but of parceled regionalisms and even nationalism." As a former employee of the World Bank, Milanovic is an evangelist for global development so he sees this as a betrayal. But I think emotion may be clouding his judgement. The interests of individual countries have always been paramount (this is the essence of realism) and the universal rules have always been selectively applied, as Israel frequently reminds us.

Simon Wren-Lewis has also been ruminating about the end of neoliberalism and the dynamics of what comes after: "the main political battles in many countries [will] be between on the one hand socially conservative right wing plutocratic populists and on the other centre or centre/left parties tentatively moving away from neoliberalism." That "tentatively" is doing a lot of work, as is the implication that the movement would be leftwards. Just consider two of Keir Starmer's recent pronouncements. First, the commitment to "ruthtless" public spending cuts in support of Rachel Reeves's fiscal rules. Second, his paean to the idea that the fairy dust of AI can transform public services and that selling off public data is a price worth paying for what amounts to little more than hype. These are the classic tropes of neoliberal utopianism: the liberation afforded by technology and the discipline of markets. With its rejection of nationalisation, its antipathy towards welfare and its belief that deregulation will spur growth, this is a government that remains in thrall to neoliberal practice. Insofar as the Labour right intend to move anywhere, it is, as Phil Edwards notes, to a "position where it embraces policies which would have been more characteristic of a far-Right party forty or fifty years ago".

Wren-Lewis makes an interesting point about international dynamics: "Increasingly the populist plutocratic right is an international project, and Trump’s victory gives its national representatives much more power. The UK is far from alone in having to contend with this kind of political interference. There is a danger that individual national governments that are not right wing populists may be too weak to combat this attack, particularly when resistance can result in economic retaliation from Trump in the form of tariffs." This may raise a rueful smile among anyone in a country that has historically had to put up with interference by the West, or where the only acceptable forms of government are those that satisfy the IMF and World Bank. A sub-text of much liberal commentary on the costs of Brexit has been the idea that the UK has been relegated from a nation that interferes in the affairs of others to one that is intefered with.

The plutocratic right has always been an international project, specifically to ensure the free movement of capital. When democracy looks like it might get out of hand, i.e. threaten private property, capital will up sticks and move elsewhere. Capital mobility is not simply about finding the best return but about minimising the risk of expropriation or (what amounts to the same thing in the minds of many capitalists) taxation. What has been little reported on is the way that initially isolationist and even autarkist rightwing movements have been repurposed in recent years, e.g. the anti-EU Front National became the grudgingly pro-EU Rassemblement National. This isn't due to any electoral calculation but because of pressure from its rich backers. While many saw opportunities in Brexit, notably the deregulation of capital flows through the City of London, few see similar opportunities in Frexit, with the country's continuing presence in the EU market being far more important to domestic and foreign capital. 

According to Wren-Lewis, "The fight against right wing plutocratic populism is not like previous post-war political battles between the right and left, over how society should be organised to best serve its citizens. Instead it is a battle over whether politics addresses the real world problems voters face, or whether it is instead preoccupied with a fantasy world." Politics has always dealt in fantasy, not least in the postwar era, from Churchill warning that Labour's 1945 manifesto heralded the arrival of a British Gestapo to Thatcher insisting that only monetarism could save British industry and reduce unemployment. As ever, what matters is not what people claim to believe but what those ostensible beliefs indicate, e.g. "Gestapo" was the hyperbolic inflation of worries about a nanny state but at root it reflected a fear that the state would seize private property. Likewise, monetarism was a technocratic rebranding of sound money: the idea that the interests of savers should trump those of consumers.

Wren-Lewis isn't simply wrong in his history here, he is obscuring that what we are faced with is not a novel situation but simply the latest round in the struggle between socialism and capitalism. The determination to rule out the possibility of any form of socialism has resulted in the advance and inevitable fall of governments of the ostensible "centre-left". They are incapable of reviving neoliberalism in its progressive, internationalist guise, but are also unwilling to properly embrace the legacy of postwar social democratic nationalism. Some have flirted with the idea of a national economy to outflank the far-right, but their unwillingness to consider nationalisation means they usually settle for a rhetorical nationalism that shades into xenophobia. The UK government promising to crack down on people-smuggling while opening up the NHS to foreign companies being illustrative.

Donald Trump doesn't mark the end of global neoliberalism because there is currently no effective opponent of neoliberalism within electoral politics. Until such time as there is, there can be no alternative and so neoliberalism will stumble on like a Zombie. The characteristics of its latest phase -  the populism, the plutocracy, the austerity - are simply amplifications of the nature of neoliberalism itself: the subversion of democracy to preserve property rights and impose the costs of capital's externalities on the general population. The re-emergence of a historically mild form of social democracy during the last decade, which was ruthlessly curtailed by the political establishment in both the UK and the US, indicates that the democratic appetite for an altenative exists, a point paradoxically reinforced by growing electoral disengagement. At present, it may seem hard to imagine how this could happen again, but it looked even less likely before 2015. Neoliberalism is dying and this gives rise to many morbid symptoms, not the least of which is the tendency to mistake a contingent form of rhetoric for substantial interests. The struggle of the last 100 years has been between democracy and private property, or socialism and capitalism, if you prefer. That isn't about to change.