Shackling the state

Neoliberalism and its enemies, an epilogue

When I shared the fourth essay in our series on the movement to construct a “post-neoliberal” economic policy agenda for Democrats, I described it as the final one. But I had one more thing I wanted to say about this, so you’re getting a bonus edition. You can find previous posts here:

• What was neoliberalism?

• Neoliberalism and its enemies

• The specter of "political economy"

• On the success of full employment and the failure to adjust

The first three are free to read; the final two are for paid subscribers.

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I wanted to conclude this series with something I heard Francis Fukuyama say off-handedly during the “Liberalism for the 21st Century” conference back in early July. It was something like, “Neoliberalism is not the celebration of the market, but the denigration of the state.”

That struck me as profound and wise, a dramatically better description of a real trend than the “free-market, anti-government, growth-at-all-costs approach to economic and social policy” language that the Hewlett Foundation used in its anti-neoliberalism grant program and that I see echoed by left-wing academics.

What is the denigration of the state?

I can’t speak for Fukuyama, but what really strikes me about American public policy over the last generation or so is not that we have deregulated the private market, but that we have subjected government action to more stringent regulation than we apply to private actors.

Some parts of the private sector really have become less regulated (airlines), while others have become more strictly regulated (housing), but what’s regulated most strictly of all is the public sector. And this overregulation of the public sector locks us into a vicious cycle. First, we make it very difficult for public center entities to execute their missions. Second, this leads public sector entities to develop a reputation for incompetence. Third, the low social prestige of public sector work leads to the selective exit of more ambitious people. Fourth, elected officials in a hurry to do something often seek ways to bypass existing public sector institutions further reducing prestige.

And what’s actually needed is not more money or more takes about how free markets are out of control or a new anti-growth paradigm.

What we need is a vigorous public sector reform campaign to increase the likelihood that, when elected officials want the government to do X, X occurs in a reasonably timely and cost-effective manner. And the question of whether X is bad is fought out in electoral politics.

I seriously doubt that this kind of cult of proceduralism and desire to regulate the public sector is what most people have in mind when they talk about “neoliberalism.” It certainly doesn’t seem to be what left critics of Barack Obama and Bill Clinton mean by it. But this is a genuine trend that corresponds with the time period in which “neoliberalism” is supposed to have occurred, and its consequences do include some of the things that critics of neoliberalism don’t like. So if it’s at all possible to redirect these impulses toward leveling the playing field between state and market by unshackling the state rather than shackling the market, I think that would be a huge win and a reasonable basis for peace in our time.