Neoliberalism was ‘forty years of elite failure’. During that period the financial sector largely became ‘a rent-extraction machine’, which ‘wastes both human and real resources’, and the ‘delicate balance between the economic and the political’ broke down to the point that ‘we are no longer able to combine the operations of the market economy with stable liberal democracy.’
This analysis goes well beyond what Andy Burnham said either in his first major speech ahead of the Makerfield by-election, during which he claimed that ‘forty years of neoliberalism’ had damaged Britain, or in his first speech in the Commons as Prime Minister. It is not his own analysis, in fact: we owe it to Martin Wolf, chief economics commentator of the Financial Times since 1996 (I quote from his latest book).
That the enlightened liberal commentariat – I chose perhaps its most lucid and frank representative, admittedly – would be harsher on neoliberalism than a moderate-left Labour politician suggests that the situation is really very bad. Indeed, the demagogic right is growing almost everywhere in Europe.
Here I would like to suggest a line to reverse this trend, drawing on a recent book which the Financial Times has appreciated.
I begin with a comparison, as stark as it is rarely noted. The neoliberal turn followed the crisis of the 1970s, which undermined trust in post-war ‘embedded liberalism’: two decades later, by the late 1990s, western societies had been profoundly changed by bold, systematic, and sustained reform programmes. Harsher and deeper, the 2008 crisis made several serious defects of neoliberalism manifest; 18 years later, however, western societies have not changed much: for reforms were generally timid, episodic, and few.
Why this contrast? If we do not wish to hand over power to the demagogic right, we must understand why so few reforms could be done during the past two decades.
One reason certainly is the political influence of economic elites, which benefited from neoliberal policies and tend to defend the status quo. But in a democracy elites can hardly impose their interests so thoroughly, and for so long, unless they can plausibly claim that the policies they prefer are in line with the public interest. So there necessarily was also an ideological obstacle to reform.
The idea that most helped defend the status quo is the liberal conception of freedom, which is the pillar upon which neoliberal doctrine ultimately rests.
Known also as ‘negative liberty’, after a celebrated lecture delivered by Isaiah Berlin in 1958, that conception defines freedom as absence of interference (neither being stopped from doing what we want, nor being forced to do what we would not otherwise do). This view – ‘non-interference’ – is shared by the whole liberal tradition, including its egalitarian strands, and is dominant in western societies.
Indeed, that conception will sound obvious. Seldom remarked, however, its implications raise tall normative and rhetorical obstacles to progressive reform. For non-interference disjoins freedom from democracy, implies that any law is a fetter on our freedom, and is blind to the asymmetry of power, which can compromise our freedom even in the absence of interference.
Berlin was very clear on the first two implications: ‘any law is an infraction of freedom’, he said, for the simple reason that it binds us; so a ‘liberal-minded despot’ may well grant citizens greater freedom than an interventionist democracy.
To appreciate the third, think of the relationship between a precarious worker and her employer, who has the discretion to either renew her short-term contract or let it lapse. If she has no immediate prospect of reemployment, she might spontaneously waive her rights – on working hours, for example, or workloads – in order to ingratiate herself with the employer. This would be the direct effect of an asymmetry of power, which seems vast enough to conclude that in this domain of her life that worker is not really free.
Progressive liberals may well be moved by her plight, but for them to claim that her waivers were not free they must see evidence of interference, such as explicit demands or veiled threats, which they will typically not find – for the wider the asymmetry is, the more it operates silently. Indeed, public discourse treats precarious work as a problem of social protection, or economic efficiency: not primarily as a question of freedom, as it manifestly is.
The dearth of reforms of the past two decades is therefore hardly surprising, as liberty is the value that western societies tend to regard as supreme, and the liberal conception of it is widely shared by progressives themselves – because it is properly hegemonic.
Facing challenges that threaten both democracy and freedom, and visibly require remedies coordinated or enforced by the state, those three implications of non-interference are now fettering our efforts to stem the drift towards oligarchy, fight inequality, and preserve the very legacy that liberalism drew from the Enlightenment and bequeathed to our democracies: the equal dignity of persons, the rule of law, the separation of powers, constitutionalism, pluralism, universalism, tolerance.
Non-interference is not the only conception of freedom, however. Two centuries ago, it displaced a sharply different one, which was hegemonic for two millennia, and has recently been revived in political philosophy. In this other view, liberty means absence of domination: being free means not being subject to the uncontrolled power – and therefore the will – of others, be they our peers or a public authority. Liberty means independence, in other words, or self-mastery.
This conception – usually called ‘non-domination’, or ‘republican’ freedom – opposes not just interference, but the subsection to a power of interference. It therefore requires that every citizen be assured a robust sphere of self-determination, in which one may be one’s own master. A sphere defined by the fundamental rights of citizens, and buttressed by sufficient public resources – health, education, social protection, information – to allow each to exercise those rights according to their own volition, unlike the precarious worker of my example.
From this ideal a theory of justice, social and political, has been drawn. It offers us the image of a state whose citizens have equal and effective control over political power, and a society whose members can walk tall among their peers, holding their head high, and can ‘look others in the eye without reason for fear or deference’.
Higher and stronger than the liberal one, the republican conception – I needn’t add that it has nothing to do with the US Republican Party – requires democracy, posits that liberty is a creation of laws and public policies, and allows us to fight both oligarchy and excessive inequalities – i.e., excessive asymmetries of power – in the name of liberty.
My contribution to republican theory is the argument that a strong synergy exists between that view of freedom and the most persuasive theory of long-term growth – Schumpeterian theory, according to which prosperity is driven by technological innovation.
Innovation is ultimately the off-spring of individual talents, which are distributed randomly across the population. Hence the first facet of that synergy: the gradual strengthening of the republican sphere of self-mastery would foster the flourishing of citizens’ talents, and the universalistic reach of this process would widen the pool of talents that society benefits from.
For fresh ideas to turn into material progress, however, markets must be open to them. Schumpeterian theory tells us that established firms – the successful innovators of the past, typically – fear new innovations, which could displace them (this is what ‘creative destruction’ means): if they dominate their markets, therefore, and can influence political authorities, innovation will be stifled. Hence the second facet of that synergy: in a democracy in which citizens have reasonably equal and effective control over political power, economic elites will not be able to protect themselves from creative destruction.
(From this perspective, incidentally, Burnham’s apparent U-turn on limits to political donations is very regrettable.)
By reversing the drift towards oligarchy and reducing excessive asymmetries of power, we would thus accelerate innovation and the rise in living standards. My point, in sum, is that the republican-Schumpeterian synthesis offers progressives a coherent basis for building attractive and realistic reform programmes, which could defeat both the demagogic right and neoliberal conservatives.
Andrea Lorenzo Capussela is the author of The Republic of Innovation: A New Political Economy of Freedom, The Political Economy of Italy’s Decline, and State-Building in Kosovo. He writes for Le Grand Continent, Domani, and the Financial Times.