Review by Henry Farrell: The Strange Non-Death of Neo-Liberalism looks at the prospects of neo-liberalism (which [Colin] Crouch sees as claiming that “optimal outcomes will be achieved if the demand and supply for goods and services are allowed to adjust to each other through the price mechanism, without interference by government or other forces”) post-2008, and argues that they are pretty good. Even if neoliberalism should have been discredited, it is emerging more powerfully than ever, as states cut back welfare and public spending in the wake of the crisis. Crouch argues that neoliberalism, despite its claims, is effectively “devoted to the dominance of public life by the giant corporation.” What neo-liberals, and some leftists, see as a conflict between the market and the state is in fact an argument over how the two should relate to each other. Neoliberals are not pushing for free markets so much as a certain style of politics, which masquerades as a commitment to free markets, independent of politics, but in fact is an unhealthy hybridization of the two. To the extent that politics pervades markets, and markets pervades politics, both suffer.
Crouch depicts classical liberalism and social democracy as mirror images of each other. Both are intensely suspicious of the intermediate zone where politics and markets influence each other, classical liberals because they fear that politics will distort markets, social democrats because they fear that markets will distort politics. But neoliberals have settled for solutions which greatly widen the zone of interaction. As neoliberals have been unable to convince the public that government should simply stop providing key collective goods, and instead leave them to the market, they have instead opted for intermediate arrangements, such as privatization (but with regulators) and the contracting out of government work.
This argument leads directly into a damning (and to me entirely convincing) indictment of the UK government’s privatization and ‘marketization’ of public services from Margaret Thatcher on. These have not created true markets. Instead, they have resulted in a kind of horrid chimera of government and private actor, with no obvious lines of accountability. The UK government turns to the private sector for project financing – but the private sector firm which leases the relevant facility back to the government has control for 20 or 30 years, under a fixed contract. “Long PFI contracts bring in private firms while limiting the role of the market, again demonstrating how the neoliberal policy shift is more about firms than about markets.” Lengthy chains of contracting and subcontracting relations mean that no-one is really accountable. The businesses who win these contracts win because they have a comparative advantage – in winning government contracts. [Continue reading…]