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Neo-Liberalism
Andrew Gamble
Capital & Class 2001 25: 127
DOI: 10.1177/030981680107500111

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Neo-Liberalism 127

Neo-Liberalism
Andrew Gamble

  the significant trends of the last thirty years

O has been the revival of economic liberalism both

as a form of political economy and as a political
ideology. By the end of the century many had come to regard
it as the new hegemonic ideology, following the collapse of
Communism in the , the fading of alternative paths of
development in the Third World and the new trajectory of
social democracy. Capital appeared once more triumphant,
and the nostrums of economic liberalism about the organisation
of the economy were once more being expressed as simple
common sense and encountering relatively little challenge,
either politically or intellectually. Compared to the early
s when  was formed, this represented a remarkable
transformation. At that time the long post-war boom was
finally beginning to crack, and the remarkable stabilisation
of capitalism which had taken place in the s and s
was being challenged by an upsurge of industrial militancy
and by the unmistakeable signs of a coming major global
recession. What was under challenge in the s was the
basis of the political settlement between labour and capital,
which came in retrospect to be called the Keynesian welfare
state. The death throes of this regime were protracted and
led to a political polarisation in the leading capitalist countries
and the conviction on the left that the return of capitalist
crisis would provide new strategic openings.
The s and s did see a great convulsion in world
capitalism, at once economic, political and ideological, a
period of major restructuring, the contours of which were
often hard to discern at the time, and frequently misunderstood.
This was particularly true of the role played by ideology in
the crisis, and in particular of neo-liberalism. The revival of
doctrines of the free market, both as ideology and as political
economy, was a significant feature of the period, but there
was little agreement at first as to its significance.
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128 Capital & Class #75

Neo-liberalism first made its appearance in the form of

political economy as a critique of Keynesianism. The
spearhead of this attack was the doctrine of monetarism
associated with economists such as Milton Friedman and
Alan Walters, but behind it was a wider critique of state
involvement in the economy associated with the Austrian
school and in particular with Friedrich Hayek. By the early
s the writings of Friedman and Hayek were being widely
disseminated by think tanks like the Institute of Economic
Affairs in Britain and the Heritage Foundation in the United
States (Cockett, ).
Before the acceleration of inflation in the leading capitalist
economies the monetarist critique of Keynesianism and the
Austrian critique of social democracy were widely
disregarded. They were often regarded as purely ‘ideological’
in a pejorative sense, meaning that they were throwbacks to
an earlier stage of capitalism and had no real purchase on
the realities of modern capitalism. When The Constitution of
Liberty had appeared in  it was described by George
Lichtheim as advocating a return to nineteenth century
laissez-faire, something which he regarded not only as
undesirable but as impractical. Capitalism was now corporate
capitalism or monopoly capitalism, which required very
different ways of legitimating and organising itself than the
simple precepts of economic liberalism provided. There was
a common view particularly among Keynesians that the
success of capitalism in recovering from the Depression of
the s and reorganising itself so successfully after 
was due to the much greater role played by the state
(Shonfield, ). The idea that the state should cease to be
interventionist and should revert to a nineteenth century
nightwatchman role, unlearning the lessons of Keynesianism,
seemed bizarre and likely to precipitate a much deeper crisis
than the one that was currently being faced.
What surprised many of these critics was the speed with
which the ideas of neo-liberalism jumped the barrier into
practical politics, establishing themselves as the leading ideas
both in the national politics of particular states, and perhaps
more crucially in the international agencies of the global
order. If neo-liberalism had had to rely for its dissemination
on the internal politics of capitalist states, its spread and its
influence might have been slower. But the end in  of the
fixed exchange rate system centred on the dollar and the
floating of all the major currencies gave an enormous boost
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Neo-Liberalism 129

to monetarist ideas as the means for containing inflation

from the mid s onwards. The translation of these ideas
into domestic programmes in the United States, Australia,
New Zealand and Britain followed.
Coming to terms with the significance of neo-liberalism
has been a key part of the analysis of contemporary capitalism.
The initial reaction treated it as an aberration, a throwback
to an earlier period of capitalism, a revival of the discredited
doctrines of laissez-faire, lacking foundations in the
contemporary capitalist world. It was therefore strictly
irrational as a response to the problems facing capitalism in
the s. There was a widespread assumption on the left
that capitalism in its monopoly phase could not afford the
remedies offered by neo-liberalism. If they were to be adopted
the result would be economic disaster, precipitating collapse
on the scale of the s. Keynesianism was still widely
regarded as the most effective economic and political strategy
for capitalism. It legitimated an active state to stabilise
demand and maintain the economy close to full employment
through the use of automatic stabilisers and high levels of
public spending on welfare and defence programmes. The
Keynesian policy regime was in difficulties in the s
because of the acceleration of inflation which exacerbated
the fiscal crisis of the state and precipitated recession and
sharply rising unemployment. But most socialist economists
thought that the choice was between a Keynesianism plus
programme, or a socialist alternative.
By the end of the s neo-liberalism had successfully
redrawn the terms of the debate, sidelining both Keynes-
ianism and socialist alternatives. In Britain and the United
States the political interventions represented by Thatcherism
and Reaganism established neo-liberalism as the new
dominant common sense, the paradigm shaping all policies.
The political ascendancy of neo-liberal ideas could not be
denied, but the rationality of these ideas was still contested.
One way of doing this became to contrast the role of neo-
liberalism in different models of capitalism. Neo-liberal ideas
were largely confined to the English speaking countries of
Anglo-America, and had much less salience in countries in
the European Union outside Britain, or in East Asia. This
led to the suggestion that neo-liberal ideas were a defensive
strategy to shore up a model of capitalism which was
increasingly under pressure from more successful models,
particularly those of Germany, Japan and Sweden. There
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130 Capital & Class #75

was widespread incredulity at many of the policies which

were prescribed by the Reagan Administration and the Thatcher
Government and frequent predictions that while they might
protect existing capitalist property in the short run, they would
only do so by weakening the long-term performance of their
national capitalisms. The destruction of manufacturing
capacity and the undermining of investment in both welfare
and infrastructure were widely regarded as per verse,
particularly when measured against the performance of other
capitalist economies, which appeared to manage with much
lower unemployment, higher growth and more generous
welfare services. The idea that the United States and Britain
in particular were being outcompeted and left behind was
very strong in the s at the time of the debates on British
and  decline. Neoliberalism was regarded as the ideology of
an out-of-date capitalist model, which lacked the analytical
tools to direct policy to appropriate remedies.
This view of neo-liberalism has remained influential and
continued to inspire analyses in political economy of the
policies that would be needed to reverse economic decline
by making British and American capitalism more like German
or East Asian capitalism (Hutton ). This perspective
has been weakened however by the resurgence of American
and to a lesser extent British capitalism in the s, and
the difficulties encountered by other national capitalisms,
particularly Germany, Japan and Sweden. By the end of the
s the triumphalism of  capitalism was back at full
volume and neo-liberalism had become the dominant
ideology of the new world order proclaimed by the Americans
and also of the discourse of globalisation. Many now argued
against the idea of national capitalisms, in favour of analysing
capitalism as a global system of accumulation.
Some of these issues go back to the very earliest debates
in the , particularly those concerned with the nature of
the capitalist state, and ways of understanding the role of
ideology and politics in capitalist societies. One important
issue concerns the relative weight to be given to capital in
general as against particular capitals or fractions of capital.
Many of the analyses of neo-liberalism as irrational have
looked at national capitalisms and particular sectors, such
as industrial capital. But looking at capitalism as a global system
of accumulation and at capital in general, the rationality of
neo-liberalism as a political and economic strategy in a
period of restructuring is more apparent. Neo-liberalism
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Neo-Liberalism 131

gives priority to capital as money rather than capital as

production. In a period of rapid restructuring this has the
advantage of enabling policies to be adopted which clear
the decks, removing subsidies and protection, and freeing
up capital from fixed positions. It allows capital to regain
mobility, dissolving the spatial and institutional rigidities in
which it had become encased (Clarke, ; Harvey, ).
The contribution of neo-liberalism to the restructuring
of capitalism was therefore to provide a means by which
capital could begin to disengage from many of the positions
and commitments which had been taken up during the
Keynesian era.The priority of monetarism was to make sound
money once more the cornerstone of economic policy, and to
give up the Keynesian objectives of full employment and
economic growth. The issue was never really whether
monetarism as a technique could do what it claimed. In fact
monetarism proved to be unworkable, because whichever
indicator of money supply was used, other forms of money
went out of control. The real significance of monetarism
was political. As Hayek noted, the key issue was to recognise
that inflation was not a matter of technical error, but of the
political balance of power (Hayek, ; Gamble, ).
Kalecki’s famous analysis in  of the political basis of
Keynesianism, argued that it represented an alteration in
the balance of power between labour and capital (Kalecki,
). If governments committed themselves to policies of
full employment it meant a significant weakening of the
normal capitalist disciplines of bankruptcy and unemployment
and a huge increase in the bargaining power of organised
labour, particularly over wages. The neo-liberal analysis was
that this had led to the progressive extension of state
intervention over the market economy in the form of wage
and price controls, and the development of corporatist modes
of governance for the economy. The political message of neo-
liberalism was that the outcome of Keynesian political economy
was accelerating inflation and growing state intervention.
Making sound money once again the cornerstone of policy
meant being prepared to take on politically all the vested
interests which had grown up through the extended state
and helped perpetuate the policies which were restricting
the rights of managers to manage and were tying capital down
in increasingly ossified economic and organisational structures.
Chief among these targets were trade unions and the
welfare state. As many costs as possible should be shifted
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132 Capital & Class #75

from the state and back on to individuals, and markets,

particularly labour markets, should be made as flexible as
possible. Viewed from the standpoint of capital in general neo-
liberalism offers a simple and straightforward criterion for
the direction of policy. The presumption is always in favour of
recreating the widest possible conditions for markets to
flourish, which means removing as many restrictions on com-
petition as possible, and empowering market agents by reducing
the burdens of taxation. For such a policy to be effective the
state has to be prepared to break the resistance of any group
which demands market protection or subsidy through the
state. Since the extended state of the last hundred years was
built up precisely through the granting of such protections
and subsidies to one group after another such a task was
heroic in its ambitions. It meant unwinding not just the coils
of social democracy but the coils of all forms of democracy,
including those of the right. Needless to say the actual record
of even the most neo-liberal regimes in the last twenty years
has been deeply disappointing to many of their supporters,
because they have failed to make the dramatic inroads into
state provision and taxation which were hoped for. The
welfare state has proved a remarkably difficult structure to
dismantle, certainly within the constraints of democracy.
One argument against neo-liberalism is that capitalism
needs democratic legitimacy if is to survive, and that welfare
programmes are part of the ransom capital has to pay in order
to be protected. Dismantling welfare provision and trade
unions might help capitalism in the short run, but in the
long run would lead to a build up of hostility and desperation
amongst the poor and the propertyless. One of the arguments
for welfare programmes which appealed to both right and
left were that these were necessary to incorporate the mass
of the population within the capitalist order and let everyone
feel they had a stake in it. Democracy tended to be social
democracy because mass electorates voted for parties which
would deliver collective social provision. In the era of mass
democracies political parties of the right have always had to
find programmes which could mobilise support, and often
found it not in neo-liberal policies but in collectivist policies
which promised security and protection. Laissez-faire seemed
outmoded in the first half of the twentieth century partly
because it had such weak electoral appeal. A programme to
preserve the general rules which allowed the market order
to function was never likely to be wildly popular.
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Neo-Liberalism 133

Neo-liberalism is still by itself not very good at winning

electoral support. But a number of politicians have been adroit
either at combining the neo-liberal economic programme
with conservative policies which do appeal to particular
interests and groups, or at recasting the neo-liberal economic
policies in ways that resonate as popular commonsense. The
authoritarian populism of Thatcher and Reagan were two
such successful employments of neo-liberalism by politicians
on the right. BothThatcherism and Reaganism were inconsistent
in that each had its own special interests who were subsidised
up to the hilt, but in their war against vested interests and
the size of government they did express the key neo-liberal
principle that governments exist to hold the ring, and to
sustain the political and legal foundations of a market order.
In the s the revival of the United States economy
appeared to reinforce the neo-liberal message. Neo-
liberalism became assimilated with globalisation and the
policies of international agencies such as the  and World
Bank pushing neo-liberal agendas. In this context neo-
liberalism began to take on the mantle of a new hegemonic
creed. One influential variant of this was the argument,
developed by theorists influenced by Karl Polanyi, that neo-
liberalism was the successor to the economic liberalism of
the nineteenth century, an ideological and political project
which was responsible for the free market experiment (Cox
). Resistance to it from right and left had led to the
extension of collective control and regulation of the market
in the twentieth century. Neo-liberalism represented the
breakdown of those systems of control and regulation and
the unleashing once more of the free market. Some think
that the effect of the application of neo-liberal policies
throughout the world will produce in time a strong political
reaction and the re-regulation of capital at some point in
the future. Pessimists believe that the more likely outcome
is a fracturing of the global economy into antagonistic and
protectionist regional blocs (Gamble & Payne ).
A different assessment of neo-liberalism gives much less
weight to it as a global ideology, and instead emphasises the
competitive pressures of capital accumulation in forcing the
convergence of all capitalist models and all national
economies towards neo-liberal institutions and policies, such
as privatisation, deregulation, shareholder value, flexible
labour markets, and residual welfare (Coates ). There
remains great controversy over how strong these pressures
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134 Capital & Class #75

for convergence are, and how well they are being resisted.
But there is a widespread acceptance that they exist. An
influential variant of this view has analysed the imposition
of disciplinary neo-liberalism through the main institutions
of the global economy (Gill ).
Neo-liberalism has been interpreted in many different
ways since it emerged, hydra-headed, in the s. No sooner
has one head been cut off than another has appeared, hissing
all the louder. What has to be avoided, however, is a tendency
to reify neo-liberalism and to treat it as a phenomenon which
manifests itself everywhere and in everything. This kind of
reductionism is not very useful, and it is also politically
paralysing. Far better to deconstruct neo-liberalism into the
different doctrines and ideas which compose it, and relate
them to particular practices and political projects. This is
what I have tried to do in my own work, acknowledging the
importance of neo-liberalism, but not treating it as though
it is the source of everything else, from new Labour to global
poverty. European social democracy, for example, has plainly
been influenced by neo-liberal ideas, but to suggest that it
has become simply an expression of neo-liberalism, is too
simple a judgement. Many other factors are at work.
Ideologies are extremely important, but ideological deter-
minism is in the end no better than economic determinism,
and no more illuminating.

References

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Aldershot: Edward Elgar
Coates, D (2000) Models of Capitalism Cambridge: Polity
Cockett, R (1995) Thinking the unthinkable London: Fontana
Cox, R (1996) Approaches to World Order Cambridge: CUP
Gamble, A & Payne A (eds) (1996) Regionalism and World Order London:
Macmillan
Gill, S (1998) ‘European Governance and New Constitutionalism:
Economic and Monetary Union and Alternatives to Disciplinary
Neoliberalism in Europe’ New Political Economy 3: pp.15-26
Hayek, F (1972) A Tiger by the Tail London: IEA
Harvey, D (1982) The Limits to Capital Oxford: OUP
Hutton,W (1995) The State We’re In London: Cape
Kalecki, M (1943) ‘Political Aspects of Full Employment’, The Political
Quarterly 14 (1943) pp.322-31
Shonfield, A (1965) Modern Capitalism Oxford: OUP
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