The Neoliberal Order Is Crumbling. It’s Up to Us What Comes Next.

Neoliberalism may not be dead, but it is no longer the unquestioned ideology of our time. That leaves a huge opening for those on the Left who want to see a political and economic order based on democracy and solidarity rather than unbridled profit-seeking.


A pedestrian walks by the remains of the Packard Motor Car Company in Detroit, Michigan, 2008. (Spencer Platt / Getty Images)

A political movement becomes a political order when its premises start to seem inescapable. In the 1950s, Republicans bowed to political reality and supported New Deal social welfare programs; in the 1990s, Democrats embraced Ronald Reagan’s deregulatory zeal.

But as historian Gary Gerstle argues in his new book, The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era, no political order is immune to the destabilizing power of economic crises.

For Gerstle, 1970s stagflation undermined the New Deal order just as the Great Depression had helped bring it into being. And today, in the shadows of the 2008–9 Great Recession, with inflation galloping ahead and the pandemic still stretching across the globe, the neoliberal order seems to be faltering. What, then, might come next?

J. C. Pan asked Gerstle this question and more on a recent episode of the Jacobin Show, a YouTube series and podcast from Jacobin. In their conversation, which has been edited for clarity and length, Pan and Gerstle discuss how Donald Trump and Bernie Sanders are right- and left-wing symptoms of the neoliberal crack-up, how the New Left unwittingly aided neoliberalism’s rise, and why he thinks “capitalism [isn’t] in the driver’s seat” at this tumultuous moment.


J. C. Pan

You mean something very specific when you talk about a political order. What distinguishes a political order from, say, a political movement or a political ideology? And what have been some major political orders in the US?

Gary Gerstle

A political order is a constellation of institutions backed by a political party, involving networks of policymakers and people who seek to define the good life in America. It is a structure in politics that allows a movement to gain authority and power over a long period of time.

When Steve Fraser and I wrote about the New Deal order, which arose in the 1930s and ’40s and fell in the 1960s and ’70s, we argued that a key test for a political order is whether it can compel the antagonistic party, in this case the Republican Party, to play by Democratic Party rules. In other words, certain core beliefs become so deeply established, so hegemonic, that they define the playing field. And thus, when a Republican president was elected for the first time in twenty years in 1952, the big question was, would he take apart the New Deal? He did not; he preserved the core pillars of the New Deal, including labor rights, Social Security, and a progressive income tax that exceeded 90 percent.

What is it that compels an opposition party to play by the rules of the dominant party? The answer is a political order. Not everyone in America has to speak that language — but if you want to get elected, if you want to have political influence within the dominant structure of politics in the United States, you have to speak that language.

The neoliberal order arose with the Republican Party in the 1970s and ’80s. It became an order, I argue, when Bill Clinton, in the 1990s, brought the Democratic Party on board. Clinton arguably did more than [Ronald] Reagan himself to facilitate the tenets of the neoliberal order: the commitment to deregulation, the celebration of globalization, and the idea that there should be free markets everywhere. That indicates the political movement of neoliberalism had established itself as an order, with the ability to define the terrain of American politics.

We are living through what I argue is the end of the neoliberal order. That does not mean that ideas of neoliberalism will disappear. After all, Social Security is still around, but the New Deal order is not. There will be elements of neoliberal thinking that continue to characterize American life for a long period of time.

But the neoliberal order no longer has the ability to compel acquiescence, to compel support, to define the parameters of American politics. Jacobin would not have the influence it has if it had emerged in 1995 or 1996. Bernie Sanders was a completely irrelevant player in American politics in the 1990s and first decade of the twenty-first century, and suddenly his ideas matter a great deal. Trump is also a record of the decline of the neoliberal order. He, too, was unimaginable as president in the 1990s.

The fact that the voices once consigned strictly to the periphery are now considered mainstream is one sign that the authority a political order once commanded is breaking up.

J. C. Pan

I want to stay on this question of moving from the fringe to the center, because that’s part of the story of neoliberalism as well. What were the political and economic conditions that allowed the ideas of people like Milton Friedman to move from fringe to center?

Gary Gerstle

I am fascinated by those moments when ideas thought to be consigned to the periphery forever break free and suddenly become very important in mainstream political discourse. In twentieth- and twenty-first-century American politics, those ideas usually escape the periphery and enter the mainstream because of a major economic crisis.

If we go back to the 1930s, it was the Great Depression that allowed New Deal thinkers and New Deal politicians to become mainstream. The recession of the 1970s was not as extreme as the Great Depression, but the economic suffering was real, and it was intense; a world that had been functioning rather well showed signs, in economic terms, of coming apart.

The Keynesian tool kit that had done so much to manage capitalism — to keep it going and take the public good into consideration — was no longer working. Something that wasn’t supposed to happen happened: “stagflation.” (Inflation was not supposed to be going up at the same time unemployment was going up; they were supposed to work in inverse ratio to each other.) A crisis that had no easy solution enveloped the industrialized world. It is this moment of economic crisis that allowed ideas that had been well-articulated but marginal to gain a voice.

The crisis for the neoliberal order came in the wake of the Great Recession of 2008–9, and this also allowed ideas that had been on the periphery to enter the mainstream in a very profound way. I locate the origins of new economic orders in these moments of economic crisis.

J. C. Pan

You point out that neoliberalism is not just a new type of conservatism. In fact, you argue that ideas from the New Left and even antiestablishment figures like Ralph Nader helped legitimize the neoliberal order. How did values that we now associate with so-called progressive attitudes — cosmopolitanism, multiculturalism, and personal liberation — become so central to the neoliberal order?

Gary Gerstle

This is a controversial argument; I’ve had some pushback on it, and I expect to get more. I say this as someone who was himself a member of the New Left in the early 1970s.

I don’t see neoliberalism entirely as an effort by elites to chain the masses and to undermine their democratic rights. That is certainly an element of neoliberalism — to privilege property, especially capital, above all other considerations. But in my view, if we’re to understand the popularity of these ideas in the United States, we have to also see how neoliberal ideas were able to attach themselves to classical liberal ideas of the eighteenth and early nineteenth century, ideas of freedom and emancipation.

Those classical liberals believed seriously in a kind of freedom they didn’t think was available. They saw a world crushed by monarchies, aristocracies, and elites, with ordinary people having no shot. They carried forward a message of emancipation: overthrow aristocracies and monarchies, free the individual’s talent from constraints, and allow people to work hard and be rewarded for it.

That is not an errant conception of freedom; that is a profoundly attractive notion of freedom. And it’s deep in the thinking and mythology of American life, associated with the American Revolution in the eighteenth century, which was part of this movement to overthrow aristocracy and monarchy.

This dream of classical liberalism proved very effective at releasing the forces of capitalism in the United States and in Europe. By the late nineteenth and early twentieth centuries, new voices began to appear, calling themselves socialists and communists, saying, “Hey, wait a minute, the liberty that classical liberalism is offering is a counterfeit liberty; it’s simply allowing capitalism to unleash itself and privileging capitalist elites.” Socialists and communists took it upon themselves to redefine freedom in ways that benefited working people rather than elites and thus became some of the most powerful and popular movements of the twentieth century.

Stewart Brand speaking at the Frontiers Conference, 2010. (Wikimedia Commons)

But by the 1960s, the oppression of ordinary people was seen not just as the work of capitalist elites, but as the work of government. States had gotten too strong and powerful, as in the Soviet Union. Central to the ideology of the New Left was the notion that “the system” — an alliance of private corporations and state regulators — was stripping people of their freedom.

In the eyes of many New Leftists, even the New Deal agencies set up to regulate capital had been captured by private interests. They were no longer regulating oil or steel or other companies in the public interest; the regulators were serving the interests of corporations and the interests of capital. So what emerged as part of the New Left was an anti-statism and a privileging of the individual and his or her consciousness over all large structures, public and private, that might unduly constrain their freedom.

Once you enter that line of thinking, you begin to see how there could be an intersection between some ideas of the New Left and neoliberals. That’s not to say they merged, and I’m not making an argument that the New Left sold out. It’s not an argument about people pretending to be one thing and in their souls being another. It’s more a story of how critiques of established structures from the Left emerged in ways that brought them into conversation with people on the other side of the political spectrum.

One of the concrete ways this manifested was in the computer revolution. It was the dream of Apple, Steve Jobs, and Stewart Brand — who was a hippie and wrote one of the bibles of hippie-dom, the Whole Earth Catalog — to free the individual from all structures of oppression. That is how the New Left begins to contribute to the development and ultimate triumph of neoliberal thinking.

J. C. Pan

The Clinton years get at this tension in how people left of center can champion notions of personal freedom while being very culturally distinct from conservatives. What was going on during the Clinton years that consolidated the neoliberal order?

Gary Gerstle

Part of it was the computer revolution and the techno-utopianism that surrounded it. So much data would be generated — so much knowledge about markets would be available instantaneously everywhere in the world with the push of a key — that what had once required government intervention in the public interest no longer needed it.

This informs what I consider of the most extraordinary pieces of legislation passed by Democrats in the twentieth century: the Telecommunications Act of 1996, which basically empowers the Internet revolution to be free of any serious public regulation.

The United States has a rich tradition of public regulation of media, including telephone, radio, and television. Because information was seen as so vital to a democracy, the institutions that were providing this infrastructural system had to be regulated in some way.

It’s part of the heritage of Franklin Roosevelt’s New Deal.

Bill Clinton plays the saxophone presented to him by Russian president Boris Yeltsin at a private dinner in Russia, January 13, 1994.

There was also something called the Fairness Doctrine, which was put in place in the late 1940s; it said that if television or radio put out one controversial political view, they had to give equal time to the other side. Reagan got rid of it in the 1980s, and Clinton and his administration made no effort to restore it. And when it comes time to write a bill that meets the challenge of this technological revolution, they abandoned the heritage of media regulation which had been so central to the Democratic Party for most of the previous century. Part of that is because of their techno-utopianism.

The other factor is the fall of Communism and the Soviet Union, a spectacular collapse that no one saw coming. It had two major effects. First, it opened the entire world to capitalist penetration to an extent that had not existed since before World War I. Suddenly all these markets in countries that had been off-limits to capitalist development were fair game for capitalist expansion. This fed a sense of hubris that the West had won — that liberal capitalism had no serious rival in the world, that its greatest antagonist had been defeated.

For the Left, it instituted a crisis in Marxist analysis, because the most ambitious effort to establish socialism had failed in a spectacular fashion. Not knowing how to reorganize the economy on a socialist foundation, people began to define their leftism in alternative terms. The ’90s became a time of rich development of cosmopolitan thinking.

One of the points I make in the book is that this cosmopolitan thinking is something that a globalized, neoliberal world is very comfortable with. This is not to say that people who were pursuing liberation on the Left were themselves neoliberals, but this consonance nevertheless furthered the legitimacy of neoliberal ideas, which themselves had a cosmopolitan component.

J. C. Pan

When did the end of neoliberalism begin, and what are the factors bringing about this decline?

Gary Gerstle

There are always cracks in a political order. Political orders are complex formations. They bring together institutions and constituencies that on some key issues see eye to eye and on other issues don’t. So there are always tension points, and there are always points where things can diverge.

George Bush, I think, set the stage for the crisis of neoliberalism in two ways. He pursued a cheap money housing policy, which in his mind was meant to increase minority homeownership in the United States. Because he was not willing to appropriate actual money for this — that can only be done by extending debt and mortgages to people who had previously been denied mortgages by banks — it set them up for failure. Again, this could happen because of the utopianism surrounding the technological revolution.

Bush also tried to reconstruct Iraq on a neoliberal foundation. He threw away the plans that the United States had used to reconstruct Germany and Japan after World War II and basically handed the job of reconstruction to private corporations, most of them US-based. Through his agents in Iraq, he also dismantled the entire infrastructure of the Iraqi economy, enacting a shock therapy which neoliberals believed was the only way to deal with bloated states that had not succeeded at economic development. This neoliberal experiment was brutal for the Iraqis; it led to civil war within Iraq and exploded Bush’s popularity.

The combination of Bush’s Iraq policy and the housing crisis leading to the Great Recession persuaded a lot of Americans to think more seriously about the kind of political economy that they had committed to through their political leadership.

Protest developed slowly. But over the 2010s, the protests were quite extraordinary, beginning with the Tea Party on the Right and Occupy Wall Street and then Black Lives Matter on the Left. There was the reemergence of socialism on the Left and a powerful ethno-nationalist protectionism in the form of Donald Trump on the Right. The 2016 election delivered the shock. The two most powerful and important people in that election, Donald Trump and Bernie Sanders, were unimaginable as significant political figures in the heyday of neoliberalism. That election was when I decided to write the book.

The neoliberal order compelled all players in politics to abide by a certain set of beliefs and rules, and that clearly is not the case today. That doesn’t mean socialism is coming, but it does mean that the orthodoxy and the power of neoliberal thinking has suffered.

J. C. Pan

The New Deal order was defined by a kind of compromise between capital and labor, while the neoliberal order represented a triumph of capital over labor that resulted in a massive upward transfer of wealth. It stands to reason that capitalists would be very invested in preserving the neoliberal order, much more than they were the New Deal order. Do you see signs of other political orders forming? Or do you think that capital can revive the neoliberal order?

Gary Gerstle

Are capitalists going to do everything they can to retain their wealth and privilege? Absolutely. But it’s not clear that they are going to be able to do that. Part of the lesson of the New Deal order is that there are circumstances that will incline capital to compromise in ways they may not wish to, but nevertheless feel compelled to, as the best of the alternatives facing them. An important question now is, what will strike fear into the hearts of capital? What will incline them to compromise?

One important factor is the reemergence of the labor movement. We’re seeing signs of that, but not at the point where it can command the heights. However, the labor revolt of the 1930s had very modest beginnings.

I’ve just reviewed Thomas Piketty’s new book, which is an optimistic argument for equality and the possibility of achieving it in the twenty-first century. I think it’s too optimistic because he overlooks what he outlined so brilliantly in his first book, Capital in the Twenty-First Century: that World War I and II caused a catastrophe which capital could not control. Out of that disaster came, in his telling, a remarkable advance for social democratic politics and left-liberal politics, which commanded the heights from the 1940s to the 1970s.

Obviously, we don’t want a catastrophe on the scale of World War I or World War II to envelop our lives again — although the climate crisis and the pandemic have compelled us to think that such catastrophes are not impossible — but economic crises can develop to the point where capitalists can’t control the outcome.

I don’t see this moment as one in which capitalism is in the driver’s seat, managing things in its interest. Could the outcome of our current crisis be the reemergence of a neoliberal order, deeply privileging capital, by the end of the 2020s? Yes, that is a possibility. But it’s only one of several possibilities. I think that we are in a moment of inflection, we are in a moment of transition, and we don’t really know what the shape of the world is going to be in five or ten years.

Not only should we not presume that capital is going to triumph, but we should also realize that this is a moment when those with other ideas for reorganizing the economy, for reorganizing politics, must step up and fight for what they believe.