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Extravagances of Neoliberalism

On how the fringe ideas of a set of American neoliberals became a new and pervasive way of life.

“I GOTTA USE WORDS when I talk to you,” T.S. Eliot had a character in one of his plays complain, not unreasonably. The chronic problem becomes acute in the case of economic history, where the available words seem at once too technical and too vague. The problem word for the period stretching roughly from 1948 to 1973 is Keynesianism. There, the technical part concerns the prewar idea of the English economist John Maynard Keynes that governments should borrow and spend to keep people working and firms operating during economic downturns, when confused common sense typically maintained that governments should instead tighten their belts during lean times. After the war, Keynes’ recommendation of emergency borrowing became a description of perennial policy, as the budgets—and budget deficits—of rich countries ballooned in hopes of purchasing social peace through full employment. The vague allusions accompanying the term Keynesianism have to do with developments stemming in large part from such policies: further elaboration of the welfare state; advances in the rights and status of women and racial and sexual minorities; declining inequality; higher income taxes; greater labor militancy; and so on.

For a period stretching from the early 1980s (say, Reagan’s defeat of the air traffic controllers’ strike in 1981) until at least the financial crisis of 2009, the handiest unhelpful word is neoliberalism. Technically, this refers to the economic philosophy that populations tend to prosper to the extent that markets are free and the government sits on its hands. In practice, the philosophy was most often honored in the breach by those administrations friendliest to it; government budgets remained about the same size, and markets were still managed, only now to the clear advantage of owners rather than workers. Socially, neoliberalism is therefore associated with a host of opposite phenomena to the Keynesian cohort: retreat of the welfare state; uneven and sometimes undone progress in the emancipation of women and minorities; mounting inequality; lower income taxes; a cowed labor movement; and so on. How did Keynesian conditions become neoliberal ones? In her new book Counterrevolution: Extravagance and Austerity in Public Finance, the economist Melinda Cooper concentrates on the interregnum between Keynesianism and neoliberalism. Her uncommonly radical and eloquent history shows how what were once the fringe ideas of a set of American neoliberals became, over the last four decades, a new and pervasive way of life.

Melinda and I spoke about Counterrevolution over Zoom last month. Our conversation has been condensed and edited for clarity.