Neoliberalism was introduced as a return to the private market, allowing market forces to work untrammelled by politics. Ordoliberalism was a German idea that was worked out in some detail, but that became replaced by neoliberalism through the politics of Thatcherism and Reaganomics.
Now, nearly half a century into the era of neoliberalism it is becoming increasingly clear that this has not happened. Markets are being manipulated to death by politicians for nefarious aims. Neoliberalism is turning into a sick joke. The return to the neoliberal dream of a private market separate from politics and political power has become a nightmare.
Nearly 3 years ago I argued in the page on About that neoliberalism is cyclical. Here are the two key paragraphs:
“My idea boils down to looking at neoliberalism in relationship to ordoliberalism, and to understand that both are cyclical. In the modern era, we have seen how ordoliberalism in Germany worked to create German recovery from the Second World War, the so-called economic miracle, with its minor burst of ordoliberalism in Sweden doing much the same only with much less impact on European power relationships, but that the rise of neoliberalism in the US under Reagan and in Europe in the wake of Thatcherism put a stop to ordoliberalism and boosted neoliberalism.
The trouble with the neoliberal proponents like Hayek and Friedman is that they preached free markets but turned a blind eye to the massive state interference needed to rescue the banks, which placed the burden on the taxpayer to do the rescuing. This is a major reason why neoliberalism with its focus on flat, low-income tax rates creates poverty and enriches the wealthy. Or perhaps the likes of Friedman and Hayek knew this was likely but saw this as an advantage, or at least turned a blind eye to this form of interference by the state in their “pure” market! Ordoliberal measures to minimise oligopoly by encouraging a wide range of small and medium-sized enterprises were early on developed to counter this. Yet as neoliberalism became increasingly globally dominant the international competition needed to survive meant that oligopoly would grow.”
I have long believed that this situation will come to a crisis as boom-slump cycles become more intense and more frequent. We may now be at the point where this crisis can soon happen. As it happens, today Washington’s Blog comes to the same conclusion.