Neoliberalism’s victory over Keynesianism wasn’t an intellectual revolution — it was a class offensive. To roll it back, the Left doesn’t need to win an argument so much as it needs to rebuild working-class institutions from the ground up. [...]
The last time we talked about this topic, you dispelled a lot of common misconceptions about what it is and what it’s not. One of the questions that we’ve gotten a lot from listeners since then is, where does neoliberalism come from?
Vivek Chibber: Yeah, it’s very topical, but it’s also important for the Left, because getting to the crux of this helps us understand where and how important changes in economic regimes and models of accumulation come from. So it’s good for us to get into it in some more depth. [...]
* [ed. Historical discussion of Keynesism vs. Neoliberalism.]
That little story tells you something. What it says is ideas that are going into the halls of power go through certain filters. And the filters are essentially the policy priorities that the politicians have already committed to. Now, what creates those priorities? It’s the balance of class power. Social forces are setting the agenda.
If the social forces, that is, say, trade unions and community organizations, have set the agenda for politicians such that they think the only rational thing to do is to institute a welfare state, then they will bring in economists who help them design a welfare state. That gives intellectual influence to those economists. Economists who are saying “Get rid of this whole thing” are cast out into the wilderness. That’s how it works. [...]
Melissa Naschek: How do theories that focus on this notion that ideas and thinkers caused neoliberalism suggest a certain set of solutions to neoliberalism?
Vivek Chibber: It’s a really good point and a very good question. It gets us back to the issue of, why should we care about this? What does it matter if you misunderstand the factors that go into a change in economic policies? What does it matter if you wrongly attribute influence to ideas, let’s say, over material interests? Well, it can lead you to propose wrong solutions.
This is a very good example of that. If you think that what’s behind dramatic shifts in policy is the influence of ideas per se, the brilliance of those ideas, then, if you think that neoliberalism is a catastrophe and we need to go back to social democracy, then your solution is going to be, “Let’s get some economists or political scientists who are really good theorists of social democracy and give them publicity — put them in newspapers, give them lots of op-eds, maybe try to get them a meeting in the White House or something like that.”
But if you think that what’s really driving these changes is the social balance of power — the power balance between capital and labor, between rich and poor — then you won’t pour your energies into getting the right people entrée into the halls of power. You’ll pour your energies into changing the class balance. That’s the difference between how people on what used to be called the Left approach these issues and the way in which mainstream theorists and thinkers approach these issues.
This kind of ideas-based analysis leads to a great man version of policy change, whereby you get the right person in the right place with the right ideas. And then, counterfactually, the reason we don’t have a desired change is that we haven’t managed to get the right people with the right ideas into the right places. That’s a great man theory of historical change.
But if you are a socialist on the Left, you know ideas get their salience because of the background conditions, the social context, and the power relations. They don’t get their influence because of simple brilliance, at least when it comes to politics. Science is a different matter. But in politics, they get their influence because some agency with social power gives them the platform.
Without that, I mean, if the power of ideas mattered and if the correctness mattered, we’d already have a social democratic government, and we would have had one for decades. Because not only are these ideas, we think in our arrogance, they appeal to everybody.
Zohran Mamdani’s ideas, Bernie Sanders’s ideas, are not radical the way the New York Times is constantly hammering that these are radical fringe ideas. They’re mainstream as can be. They are ideas that appeal to the majority.
Why do they not have entrée? Why do they not have political influence right now? It’s because the balance of class power is such that even though they appeal to the largest number of people, those people have no political organization. They have no way of effectuating their demands. And so, their demands as encapsulated in Sanders and Mamdani don’t have a lot of political influence.
So ideas can matter, but they have to be made to matter.
Vivek Chibber: The mere fact that such ideas exist does not in any way give them influence. The question for us, for socialists and for the Left is, when do ideas gain influence?
It’s a profound methodological error, I think, when you ask the question, “Where did neoliberalism come from?” to look at the contemporary theorists or the contemporary advocates of neoliberalism and then, because they are influential today, trace the origins of their ideas back to where they first started and say, that is where the origins come from.
Melissa Naschek: How important was this debate in establishing or causing neoliberalism?
Vivek Chibber: Not even the least bit. It was largely irrelevant to it. In other words, even if this debate had never happened, even if Milton Friedman had not existed, even if Hayek had not existed, you would have still had a turn to neoliberalism, and that’s the key. This is what the Left needs to understand.
This does not in any way invalidate the intellectual project of tracing those ideas. It’s intellectually interesting. It’s an interesting fact that those ideas had been around for forty years, and they had no impact on policy. Some historians have done great work tracing these ideas back to their origin, but it’s quite another to say that it was the ideas themselves that in the 1970s and ’80s caused the turn to neoliberalism.
Now, it’s an easy mistake to make because when the change came, the change was justified with a highly technical economic apparatus, and people like Friedman were given the stage to say not just that these policies are desirable for political reasons, but that they make a lot of economic sense and that it’s rational to do it this way. That gives you the sense, then, that it’s these particular individuals and their intellectual influence on the politicians that makes the politicians make the changes.
But in fact, the order of causation is exactly the other way around. It’s the politicians who make the changes based on criteria that have nothing to do with the technical sophistication of the ideas or their scientific validity. They make the changes because of the political desirability of those changes, and then they seek out advice on a) justifying the changes so that the naked subservience to power is not visible or obvious — it makes it look like it was done for highfalutin’ reasons — And then b) of course, they do legitimately say, “OK, now that we’re committed to this, help us work it out.”
Melissa Naschek: Right, especially because as long as you’re still in capitalism, you’re going to be facing constant economic crises. Even if you’re instituting a new regime, you’re going to be constantly looking for new solutions.
Vivek Chibber: Yeah. And even short of crises, you’re going to look for ways of making the policies work smoothly. And you’re going to look for ways of coming up with the correct balance of instruments and policies within them. So you bring in Milton Friedman or you bring in somebody else.
Surface level, it looks like what’s driving the whole thing is these ideas. But I said to you that the ideas actually have no role to play in the turn itself. So that brings up the question, what does? Why did they do it then?
I just said a second ago that what drove it was political priorities, not intellectual feasibility. Well, what were the political priorities? Who were the politicians actually listening to? Ideas can matter, but they have to be made to matter.
There are only two key players when it comes to policy changes of this kind. The key players are the politicians, because they’re the ones who are pulling the levers. But then, it’s the key constituency that actually has influence over the politicians.
The least important part is intellectuals. You might say voters have some degree of influence, but really, in a money-driven system like the United States, it’s investors, it’s capitalists — it’s big capital. They’re the ones who are pushing for these changes.
That means that if you want to understand where neoliberalism comes from, or rather if you want to understand why it came about, the answer is, it came about because capitalists ceased to tolerate the welfare state.
Now, why did they tolerate the welfare state at all? Most people on the Left understand the welfare state was brought about through massive trade union mobilization and labor mobilizations and was kept in place as long as the trade union movement had some kind of presence within the Democratic Party, within the economy more generally, because those unions were powerful enough, employers had to figure out a way of living with them. Part of what they did to live with the trade unions was to agree to a certain measure of redistribution and a certain kind of welfare state. As long as that was the case, politicians kept the welfare state going.
This is why, in that era from the mid-1930s to the mid-1970s, Keynesianism or the economics of state intervention of some kind was the hegemonic economic theory. The theory became hegemonic because it was given respectability by virtue of the fact that everybody in power was using it. Because it’s being used by people in power, it has great respectability.
This is why, in the 1950s and ’60s, Milton Friedman was in the wilderness — same guy, same ideas, equally intellectually attractive, equally technically sophisticated, but he was in the wilderness.[...]
It’s a profound methodological error, I think, when you ask the question, “Where did neoliberalism come from?” to look at the contemporary theorists or the contemporary advocates of neoliberalism and then, because they are influential today, trace the origins of their ideas back to where they first started and say, that is where the origins come from.
Melissa Naschek: How important was this debate in establishing or causing neoliberalism?
Vivek Chibber: Not even the least bit. It was largely irrelevant to it. In other words, even if this debate had never happened, even if Milton Friedman had not existed, even if Hayek had not existed, you would have still had a turn to neoliberalism, and that’s the key. This is what the Left needs to understand.
This does not in any way invalidate the intellectual project of tracing those ideas. It’s intellectually interesting. It’s an interesting fact that those ideas had been around for forty years, and they had no impact on policy. Some historians have done great work tracing these ideas back to their origin, but it’s quite another to say that it was the ideas themselves that in the 1970s and ’80s caused the turn to neoliberalism.
Now, it’s an easy mistake to make because when the change came, the change was justified with a highly technical economic apparatus, and people like Friedman were given the stage to say not just that these policies are desirable for political reasons, but that they make a lot of economic sense and that it’s rational to do it this way. That gives you the sense, then, that it’s these particular individuals and their intellectual influence on the politicians that makes the politicians make the changes.
But in fact, the order of causation is exactly the other way around. It’s the politicians who make the changes based on criteria that have nothing to do with the technical sophistication of the ideas or their scientific validity. They make the changes because of the political desirability of those changes, and then they seek out advice on a) justifying the changes so that the naked subservience to power is not visible or obvious — it makes it look like it was done for highfalutin’ reasons — And then b) of course, they do legitimately say, “OK, now that we’re committed to this, help us work it out.”
Melissa Naschek: Right, especially because as long as you’re still in capitalism, you’re going to be facing constant economic crises. Even if you’re instituting a new regime, you’re going to be constantly looking for new solutions.
Vivek Chibber: Yeah. And even short of crises, you’re going to look for ways of making the policies work smoothly. And you’re going to look for ways of coming up with the correct balance of instruments and policies within them. So you bring in Milton Friedman or you bring in somebody else.
Surface level, it looks like what’s driving the whole thing is these ideas. But I said to you that the ideas actually have no role to play in the turn itself. So that brings up the question, what does? Why did they do it then?
I just said a second ago that what drove it was political priorities, not intellectual feasibility. Well, what were the political priorities? Who were the politicians actually listening to? Ideas can matter, but they have to be made to matter.
There are only two key players when it comes to policy changes of this kind. The key players are the politicians, because they’re the ones who are pulling the levers. But then, it’s the key constituency that actually has influence over the politicians.
The least important part is intellectuals. You might say voters have some degree of influence, but really, in a money-driven system like the United States, it’s investors, it’s capitalists — it’s big capital. They’re the ones who are pushing for these changes.
That means that if you want to understand where neoliberalism comes from, or rather if you want to understand why it came about, the answer is, it came about because capitalists ceased to tolerate the welfare state.
Now, why did they tolerate the welfare state at all? Most people on the Left understand the welfare state was brought about through massive trade union mobilization and labor mobilizations and was kept in place as long as the trade union movement had some kind of presence within the Democratic Party, within the economy more generally, because those unions were powerful enough, employers had to figure out a way of living with them. Part of what they did to live with the trade unions was to agree to a certain measure of redistribution and a certain kind of welfare state. As long as that was the case, politicians kept the welfare state going.
This is why, in that era from the mid-1930s to the mid-1970s, Keynesianism or the economics of state intervention of some kind was the hegemonic economic theory. The theory became hegemonic because it was given respectability by virtue of the fact that everybody in power was using it. Because it’s being used by people in power, it has great respectability.
This is why, in the 1950s and ’60s, Milton Friedman was in the wilderness — same guy, same ideas, equally intellectually attractive, equally technically sophisticated, but he was in the wilderness.[...]
That little story tells you something. What it says is ideas that are going into the halls of power go through certain filters. And the filters are essentially the policy priorities that the politicians have already committed to. Now, what creates those priorities? It’s the balance of class power. Social forces are setting the agenda.
If the social forces, that is, say, trade unions and community organizations, have set the agenda for politicians such that they think the only rational thing to do is to institute a welfare state, then they will bring in economists who help them design a welfare state. That gives intellectual influence to those economists. Economists who are saying “Get rid of this whole thing” are cast out into the wilderness. That’s how it works. [...]
Melissa Naschek: How do theories that focus on this notion that ideas and thinkers caused neoliberalism suggest a certain set of solutions to neoliberalism?
Vivek Chibber: It’s a really good point and a very good question. It gets us back to the issue of, why should we care about this? What does it matter if you misunderstand the factors that go into a change in economic policies? What does it matter if you wrongly attribute influence to ideas, let’s say, over material interests? Well, it can lead you to propose wrong solutions.
This is a very good example of that. If you think that what’s behind dramatic shifts in policy is the influence of ideas per se, the brilliance of those ideas, then, if you think that neoliberalism is a catastrophe and we need to go back to social democracy, then your solution is going to be, “Let’s get some economists or political scientists who are really good theorists of social democracy and give them publicity — put them in newspapers, give them lots of op-eds, maybe try to get them a meeting in the White House or something like that.”
But if you think that what’s really driving these changes is the social balance of power — the power balance between capital and labor, between rich and poor — then you won’t pour your energies into getting the right people entrée into the halls of power. You’ll pour your energies into changing the class balance. That’s the difference between how people on what used to be called the Left approach these issues and the way in which mainstream theorists and thinkers approach these issues.
This kind of ideas-based analysis leads to a great man version of policy change, whereby you get the right person in the right place with the right ideas. And then, counterfactually, the reason we don’t have a desired change is that we haven’t managed to get the right people with the right ideas into the right places. That’s a great man theory of historical change.
But if you are a socialist on the Left, you know ideas get their salience because of the background conditions, the social context, and the power relations. They don’t get their influence because of simple brilliance, at least when it comes to politics. Science is a different matter. But in politics, they get their influence because some agency with social power gives them the platform.
Without that, I mean, if the power of ideas mattered and if the correctness mattered, we’d already have a social democratic government, and we would have had one for decades. Because not only are these ideas, we think in our arrogance, they appeal to everybody.
Zohran Mamdani’s ideas, Bernie Sanders’s ideas, are not radical the way the New York Times is constantly hammering that these are radical fringe ideas. They’re mainstream as can be. They are ideas that appeal to the majority.
Why do they not have entrée? Why do they not have political influence right now? It’s because the balance of class power is such that even though they appeal to the largest number of people, those people have no political organization. They have no way of effectuating their demands. And so, their demands as encapsulated in Sanders and Mamdani don’t have a lot of political influence.
So ideas can matter, but they have to be made to matter.
