The long shadow of market fundamentalism [View all]

In the dusk of neoliberalism a new narrative is needed to untangle the moral and political trade-offs of our times.

https://socialeurope.eu/the-long-shadow-of-market-fundamentalism



On May 4th 1979, Margaret Thatcher entered 10 Downing Street in London as British prime minister. The time had finally come to put into practice her political philosophy, prioritising private interests and markets over society and the state. As she had put it 11 years earlier in the wake of the May ’68 explosions, ‘the way to get personal involvement and participation is not for people to take part in more and more government decisions but to make the government reduce the area of decision over which it presides’.

Her words found an echo across the Atlantic on January 20th 1981. In his inauguration speech as United States president, Ronald Reagan said: ‘It is no coincidence that our present troubles parallel and are proportionate to the intervention and intrusion in our lives that result from unnecessary and excessive growth of government.’

The elections of Thatcher and Reagan marked the definitive affirmation in western democracies of neoliberalism, an ideology which gained traction in response to the crises of the 1970s and the long series of economic shocks which progressively unsettled the postwar policy consensus, around Keynesian demand management, and triggered political strife. Part of the reason for the neoliberal takeover was the striking simplicity of its core message: everything has a price and, if markets are freed to determine that price, prosperity and social harmony will follow.

Bretton Woods institutions

This vision, which entailed a shrinkage of government economic activity through privatisation and fiscal austerity but also inflation targeting and tight monetary policy, was extended to the postwar Bretton Woods institution—the World Bank and the International Monetary Fund—headquartered in Washington. The debt crisis of the early 1980s triggered substantial loss of policy autonomy for developing countries obliged to seek help: if they wanted further aid, they had to accept the ‘Washington consensus’. Western capitalist economies, which held the lion’s share of votes on the boards of these institutions, were consequently strengthened.

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