The Millennial Guide to Neoliberalism is our way of telling the story of where politics is right now.

We’re quite possibly at the end of the Neoliberal era and a lot of interesting people are talking about what might come next. But to come up with meaningful answers to that question, it’s vital to know where we’ve come from.

Today, we’ll be covering the key development of the 90s and 00s: how Neoliberalism captured the political left with ‘Third Way’ politics, leading up to the 2008 Financial Crisis.

Part 1 of the Millennial Guide to Neoliberalism was all about what it actually is, conceptually, and what gave rise to it. You can check it out here.

Part 2 takes in the big thinkers behind it all and how they became mainstream. See that here.

Part 3 is all about our first Western Neoliberal leaders, Thatcher and Reagan. Read about them here.

Part 5 brings us right up to the financial crisis — the end of the End of History. Listen now.

Why would voters move away from the successes of Thatcher and Reagan?

Two reasons. First, voters like a change after a while — even if everything has been going well. Second, Thatcher and Reagan’s economic successes are somewhat dubious. It’s difficult to tie their policy decisions to the upturn in economic fortunes.

They claimed credit for economic upturns their policies actually had little do with. The world economy was far more stable in the 1980s than in the 1970s, for instance, and recent analysis points out that US and UK growth in the 1980s was similar to or less than both historical averages and less neoliberal peers at the time. Thatcher and Reagan also earned political capital by storing up costs for later generations. Thatcher’s late 1980s boom led to a bust not long after she left office, while Reagan managed to triple the national debt despite cutting back social programmes.

Probably the greatest advantage they had was the way that the shocks and downturns of the 70s could be framed as evidence that progressive and big-state economics was inherently ineffective and unsustainable. In reality, many of the problems of the decade were out of left-wing politician’s hands (such as the Nixon shock and Oil crises), and where they did make bad decisions (like Vietnam) these weren’t fundamentally linked to progressive economics.

Throughout all this, there was a decade of consecutive losses for left-wing parties, all the while extreme neoliberal governments were transforming society in ways that would be really difficult to reverse. Backed with enough support from the white, well-off and politically-enfranchised layers of society over a long-period, it became the ‘neoliberal consensus’, the accepted norm for politics and society.

And that’s when the opposition realized they needed to radically rebrand: enter the Third Way.

What is the Third Way?

The Third Way was the doctrine adopted by the Bill Clinton and Tony Blair administrations in the 90s and 00s. It represented a conscious break from earlier, more classically leftist positions, represented in the fact they used names like New Labour.

It was the shotgun wedding between left wing social values and neoliberal economics.

As the name ‘Third Way’ implies, it sought a middle ground between the new market-driven neoliberal order and older ideals of democratic socialism. It did this by maintaining a socialist belief that the state should intervene in society to achieve some idea of social justice, in contrast to Thatcher and Reagan’s support for inequality and unswerving belief that only free markets can decide what a good society looks like. But, unlike democratic socialism, the methods in which Clinton and Blair would hope to achieve social justice were straight out of the neoliberal handbook.

How did those policies match up to the three core tenets of Neoliberalism from Part 1?

1. Lowering taxes.

Taxation was the area Clinton and Blair were probably least neoliberal. The most important point here is that they did not reverse the radical changes made by their predecessors — they more or less kept taxes at the historically low levels of Reagan and Thatcher.

2. Privatization.

Blair truly believed that the best and most efficient way to provide for society was through markets, with the state taking a shepherding and regulatory role at most.

Once in power, Blair and his successor Brown certainly didn’t reverse the huge swathe of privatizations under Thatcher and her successor John Major. Their main privatization policies were a stealthy compromise between retaining state ownership and handing the keys to the market still in vogue today.

This is the era of outsourcing — shifting contracts to the private sector for particular services. Technically this isn’t full blown privatisation, as government owns the contract and can bring back in services if required. In reality, it move competence away from the public sector. After a while, governments don’t have the capacity to fulfil large project themselves, they have to rely on huge private sector companies which take on more and more, growing and growing and growing until, well — until you get something like Carrillion collapsing.



3. Deregulation.

Clinton was a much more active mover on this front. He signed the North American Free Trade Agreement, which was a major deregulation of borders with Canada and Mexico, allowing transnational companies to move money, goods, services and people far more easily. This boosted trade and headline growth, but NAFTA and free trade agreements like it cause serious issues for low-skilled labour. American companies can very easily move these jobs to wherever wages are lowest, not only causing unemployment for some but also weakening the bargaining power of labour and driving their wages down.

Even more consequential was the repeal of the Glass-Steagall act in 1999. This act had been introduced in 1933 to prevent the Great Depression ever happening again. By repealing it, investment and commercial banks were no longer forced to remain separate, opening the floodgates for giant mergers — such as the $33 billion deal between J.P. Morgan and Chase Manhattan in 2000.

Investment banks could now take major risks backed by the funds of ordinary depositors who never put money in our bank accounts expecting that level of risk. It also this increased the number of systemically crucial mega banks which became ‘too big to fail’. Both of these factors played a major role in the 2008 Financial Crisis.

Why did left-leaning voters move so far to the right for these Third Way politicians?

The classic leftist arguments hadn’t won any elections since the bad old days of the 1970s — people were ready for a win, any win. Many were relieved to see their progressive party in power after a decade of Thatcher or Reagan absolutely battering the state and society. They may not have supported Third Way policies themselves, but they were certainly better than the Tories and Republicans.

Clinton and Blair applied enough progressive policy to make their voters feel good about themselves. Some of this was around social issues, such as pro-LGBT and pro-Choice legislation, which were not incompatible with neoliberal economics. Others, such as tax credits, were actually just sticking plasters that addressed symptoms short-term, but did little to address the systemic economic arrangement driving inequality.

Blair and Clinton were better than the other side, and should be congratulated for the progressive policies they pushed through. But look under the hood and you realise they weren’t reversing Neoliberalism, they weren’t even halting it. Overall, they deepened it.

…

Figuring out how the hell Neoliberalism has managed to survive since the Financial Crisis is the topic of the fifth and final part of this epic series. 2008 is in many ways the crucial year for Millennials: it’s the year the economy collapsed, the year new online social movements really took off and has become the rallying call for a generation that knows it’s being screwed and finally, finally wants to be able to vote differently.

And that means not voting for the neoliberal, left or right wing.

You know the drill:

Follow us on FB – www.facebook.com/connectedanddisaffected/

– www.facebook.com/connectedanddisaffected/ Follow us on Twitter – twitter.com/CandDPodcast

– twitter.com/CandDPodcast Subscribe and leave us a review on iTunes – itunes.apple.com/us/podcast/connected-disaffected/