According to this view, the various failings of our society, from the inability to act on climate change to mass incarceration to the imposition of market logic on higher education, all converge as consequences of neoliberal hegemony. But what is neoliberalism? It is usually described as a philosophy, born sometime between the fall of the Hapsburgs ( Slobodian ) and the postwar convening of the Mont Pèlerin Society ( Mirowski et al. ), and surely there is truth to these well-documented accounts. But should we understand the past four decades or so as primarily the product of a sea-change in thought, the end result of these precursor currents?

Then we had a cultural turn. Now it seems it’s all about consciousness and ideology, of which economic structures are a pale reflection. Neoliberal ideology is said to have seeped its way into the heads of intellectuals, journalists and politicians—perhaps even the public at large—and this explains things like deregulation, privatization and the ubiquity of outsourcing and global value chains. It’s even possible to have 500-page treatises about the failures of capitalism that make no reference at all to the empirical structure of the economy, only modes of thought, as I point out here .

As someone who has looked at the world through a political economic lense for decades, I am restless with the “cultural turn”. Once upon a time, it is said, the bad old vulgarians of the left believed that economic structure—the ownership of capital, the rules under which economies operate and the incentives these things generate—were everything and agency, meaning culture and consciousness, were nothing. The latter was sometimes claimed to be derivative of the form.

The position I would like to take digs beneath the opposition between structure and agency, the empirical economy and the conceptions people have of it. No doubt the rules and incentives that direct economic life are the product of choice, and therefore consciousness, just as consciousness is strongly influenced by the problems our economic circumstances throw at us and the possible solutions it affords. Shouldn’t there be a coevolutionary process down there somewhere that encompasses both of them?

Identifying such processes is the task of historians, and as we know, understanding the present as history without the benefit of hindsight is an enormous challenge. In my preferred world, this would be the project of political economists, giant armies of them, adequately encouraged and funded. We would see a constant flow of books and articles on the matter, hashing out points of debate. The real world is quite different, alas.

Here is a thought intended to provoke research in this area. How do we understand the timing of the neoliberal turn? In the English-speaking world it took hold a few years before or after 1980, a bit later elsewhere. What transpired to account for this?

A standard narrative is that the Keynesian postwar order cracked up over the crisis of inflation during the mid-1970s. A conservative alternative that trusted markets more and government less was vindicated by events and established its intellectual dominance. After a lag of a few years, policy followed along. One can critique this on matters of detail: economic growth remained stronger during the 70s than it would be thereafter, anti-Keynesians did not have a superior understanding of economic developments, and no intellectual revolution was complete within the space of just a few years. But the deeper problem, it seems to me, is that this attributes vastly exaggerated agency to coteries of intellectuals. Do we really think that the elections of Reagan and Thatcher, for instance, were attributable to a shift in grad school syllabi in economics and related fields?

I propose an alternative hypothesis. From the end of WWII to the collapse of the Bretton Woods monetary system, a large portion of capital was illiquid, its value tied to its existing use. The rich sought to diversify their portfolios, of course, but there were limits. Stock market transactions were beclouded by large information costs, and share ownership tended to be more stable and concentrated. Fortunes were rooted in specific firms and industries. In such a situation there were significant divisions within the capitalist class that attenuated its overall political clout. Industries divided according to policy preferences, and political parties, which were essentially interest group coalitions, attracted different segments of this class. (In the US the Republicans were just as much an interest group coalition as the Democrats, just different interests like small retail business, domestic mining, nonunion manufacturing, etc.) Public policy in this dispensation, whatever its ostensible justification, reflected sectoral influence.

Since the early 1970s capital ownership has become substantially more fungible in every respect. Equity funds of various sorts established themselves as institutional players, allowing individual capitalists to diversify via investment in these funds. Regulatory restrictions on capital movements were dismantled or bypassed. New information technology dramatically reduced (but not eliminated!) the fog of all financial markets. And firms themselves became separable bundles of assets as new technology and business methods allowed for more integrated production across ownership lines. The combined result is a capitalist class with more uniform interests—an interest in a higher profit share of income and greater freedom for capital in every respect. The crisis in real returns to capital during the 1970s, the true economic instigator, galvanized this reorganization of the political economy. (In the US the S&P peaked in 1972 and then lost almost half its inflation-adjusted value by the end of the decade. This is not an artifact of business cycle timing.)

Of course, all understanding of the world is mediated by the way we think about it. The wealthy didn’t say to themselves, “Gee, my assets are taking a hit, so the government needs to change course.” They turned to dissident, conservative thinkers who explained the “failures” of the 70s as the result of too little concern for the engine of growth, which (of course) was understood to be private investment. Market-friendly policy would, it was said, reinvigorate investment and spur economic growth. Keynesianism was seen as having failed because it took investors for granted, taxing and regulating them and competing with them for finance; politicians needed to show respect. It’s understandable why capitalists would interpret their problems in this way.

The other side of the coin was political influence over ideas. Intellectuals who advanced the positions we now call neoliberal were rewarded with research funding, jobs and influence over government policy. When the World Bank and the IMF were remade in the wake of the 1982 debt crisis, this influence was extended internationally. Lending conditionality reproduced in developing countries the same incentives that had shifted the intellectual environment in the core capitalist world.

This hypothesis—and it’s important to be clear that’s what it is—also gives us an explanation for why the 2008 crisis, while it did provoke a lot of reconsideration by intellectuals—did not result in meaningful institutional or policy change: the underlying political economic factors were unaltered. And it implies that further intellectual work, necessary as it is, will not be enough to extricate us from the shackles of neoliberal political constraints. For that we need to contest the power that undergirds them.