During the 1994-95 academic year, I had a fellowship at the Center for Advanced Study in the Behavioral Sciences, located on the edge of the Stanford University campus, to make progress on a book I was writing. A few of the center’s other fellows came, like me, from the humanities, but most were social or life scientists and legal scholars. Of special interest that year—generating not only intense discussion and intellectual fascination but also study groups aimed at aiding research projects—were the ideas of rational choice theory and game theory. These are interconnected approaches to analyzing individual and collective decision-making based on models, devised chiefly between the 1940s and the 1960s and drawn from the world of market-based economics. I found the openness to and, in some cases, excitement about these theories a bit puzzling, given their transhistorical and transcultural assumptions about “rationality” and “rational actors,” not to mention the left-of-center political leanings of most of the fellows. As odd as it all seemed to me at the time, however, the episode serves as an example of one of the important, though generally unappreciated, themes in Gary Gerstle’s terrific new book, The Rise and Fall of the Neoliberal Order: how neoliberal ideas and perspectives gained traction and energized the imaginations of people across the political spectrum, including those who were once part of the New Left.
Gerstle, the Paul Mellon Professor of American History at the University of Cambridge, has never been reluctant to take on sweeping chronological and thematic subjects. He’s written on race and the nation in the 20th century in American Crucible (2001), and more recently on the “paradox of American government” from our founding to the present in Liberty and Coercion (2015). But with The Rise and Fall of the Neoliberal Order, Gerstle not only takes on a big and consequential topic but wades into what can be the murky waters (at least for historians) of theorizing and representation. Which is why the book—brilliantly conceived, capaciously argued, and written with great clarity—is so impressive and timely. For those interested in a meaningful historical perspective on where we are now, I can think of no better book.
Gerstle begins not with the neoliberal order but with the New Deal order that preceded it, whose arc of dominance stretched from the 1930s into the 1970s. He uses the concept of “order” in a wide-ranging way to encompass culture, ideology, and politics as well as political economy—in effect, a hegemonic structure of power relations, moving from the local to the national and international. Federal policies, economic thought, and popular consciousness, to say nothing of the struggles between labor and capital, were all shaped by an emerging article of faith: that unfettered capitalism was a destructive force, one that needed to be tamed by the mechanisms and resources of the state, as well as by a moral perspective subordinating private interest to the “public good.” All of this, together with an embrace of “expertise” as a guiding light—a notion inherited from Progressivism—went into the making of what Gerstle views as a “modern liberalism” that defined the era and became the property of the Democratic Party.
Central to the hegemony of the New Deal order, Gerstle insists, especially during the late 1940s and the ’50s, was the developing Cold War. The fear of communism, combined with worries about a backslide into another economic depression, made possible a “class compromise” between capital and labor, also known as the 1950 “Treaty of Detroit.” Capital accepted collective bargaining, and organized labor, especially in the mass-production industries, accepted wage increases as well as a raft of social benefits (health care, pensions) in return for abandoning its demands for co-management and purging the socialist and communist left from its ranks. So extensive was the reach of this New Deal order that, with some exceptions, it pushed Republican opponents like Robert Taft to the margins and brought Eisenhower Republicans into the fold as effective partners. The buy-in of Eisenhower Republicans—many of whom were internationalists like Franklin Roosevelt—was the moment, Gerstle argues, when the New Deal transitioned from a “political movement” into a “political order,” a transition secured by the anxieties of the Cold War.
The reckoning for the New Deal order came in the 1960s and ’70s, in part owing to how race and the Vietnam War fractured the Democratic coalition in ways that became increasingly difficult to mend. The New Deal order, Gerstle reminds us, was constrained from the outset by Southern Democrats (he rightly calls them, following Ira Katznelson, “Southern barons”), who were willing to accept the centralization of federal power so long as Jim Crow’s racial hierarchies remained undisturbed. Left-wing New Dealers’ efforts to attack racial discrimination and extend social democratic policies across the color line were blocked. But when a growing civil rights movement forced the Democrats to finally embrace a politics of racial equality—alienating, first, a great many white Southerners and, soon, white ethnics in the North—the New Deal coalition, in Gerstle’s telling, started to come undone. The Vietnam War and the massive protest movement against it further divided Democrats, paving the way for electoral defeats in 1968 and 1972.
Yet as Gerstle demonstrates, this reckoning for the New Deal order cannot be understood apart from the larger transformation of the international capitalist system that had arisen after World War II and, for more than two decades, had given the United States unrivaled power in the production and distribution of goods and the expansion of middle-class material life domestically. New economic competitors then emerged in Europe and Asia in the 1960s and ’70s, while complacent American manufacturing stumbled, the cost of energy and other raw materials rose dramatically, and inflation spiked. Perhaps most important, as stagflation fastened its grip on American society, the class compromise that underwrote the power of organized labor and the material gains of the white working class began to unravel, while the once widely accepted notion that government power could be wielded to manage the economy in the public interest came into serious question. The formidable New Deal order now appeared to be crumbling—economically, socially, politically, and ideologically—leaving the door open for a neoliberal alternative.
Historians tracing the origins of neoliberalism generally point to Vienna and Geneva in the 1920s and ’30s and then to the advent of the Mont Pelerin Society in 1947, which brought together a number of economists and philosophers—Ludwig von Mises, Friedrich Hayek, Karl Popper, and Milton Friedman, among others—who were interested in reviving market values in the face of what they saw as the failure of numbing, heavy-handed state-regulated and state-directed economies, whether fascist, socialist, or social democratic. Gerstle acknowledges these origins but suggests an even deeper connection to the classical liberalism of the 19th century, arguing that, like liberalism itself, neoliberalism is best understood as “a series of ideational and institutional moments varying in form and meaning” and energized by “clusters” of policy initiatives, so that it has no single definition.
Foremost among these policy clusters was the unleashing of the “free market” from the regulatory burdens that had weighed upon it, though neoliberals were hardly libertarians. Much like the classical liberals of the 19th century, they believed that the state had an important role to play not only in tearing down impediments but also in setting the rules about property, exchange, and the circulation of money and credit. Equally consequential, many of those influenced by neoliberal thinking believed that market principles might be usefully applied to many—maybe even to all—areas of life, recapturing some of the utopian promises of freedom that classical liberalism itself had claimed to offer. Not surprisingly, Milton Friedman was an important part of the University of Chicago school of economics, where neoliberal thought held sway and rational choice theory and game theory were being developed by his colleagues.
The political and intellectual power that neoliberalism would achieve was hardly preordained. If anything, neoliberals seemed to be whistling in the wind as the New Deal order, along with the social democratic regimes across Western Europe, continued to flex its multi-muscled arms. Yet as that order was hit by the political crises of the 1960s and the economic crises of the ’70s—crises it could no longer manage successfully—neoliberal ideas gained traction as well as institutional support. During the early 1970s—the “silent phase” of neoliberalism’s ascent, as Gerstle terms it—the Heritage Foundation, the Koch Foundation, the Manhattan Institute, the Cato Institute, and the Business Roundtable were all established, demonstrating that wealthy donors with neoliberal convictions were ready to go on the offensive. These well-funded think tanks sought not only to promote the concept of deregulation but also to change the very way we spoke about politics and economics. Their intellectuals embarked on a massive propaganda campaign to demonize organized labor, government power, and liberal jurisprudence and to persuade the public that the creeping stagflation of the time was the logical outcome of a government-regulated economy.
This ascendant neoliberalism was not just a project of the Republican Party: It was bipartisan and already evident in Jimmy Carter’s administration in the late 1970s, before Ronald Reagan’s near-landslide election in 1980 secured its reign. Famously proclaiming that government was the problem rather than the solution, Reagan advanced the deregulatory initiatives that Carter had already started to deploy. He also moved against organized labor and crushed its strikes (most notably the Professional Air Traffic Controllers strike of 1981); celebrated supply-side economics; pushed for the repeal of the FCC’s “fairness doctrine” (unleashing shock jocks like Rush Limbaugh); and appointed judges who were constitutional “originalists” and took a dim view of expansive interpretations of the Constitution’s commerce clause. At the same time, Reagan was quick to use state power to strengthen the United States internationally, steadily increasing the defense budget and luring the Soviet Union into an arms race, and to expand the prison system domestically—including the militarization of municipal police forces—thereby ring-fencing the market economy against rising crime rates.
The ascent of neoliberalism in the 1980s was, from the outset, an international phenomenon. In Britain, Margaret Thatcher was every bit the ideologue that Reagan was and, like Reagan, crushed a long and bitter strike (in her case, by the mine workers) before proceeding down a path of deregulation and massive cuts to the social welfare and education systems. France, Italy, and Germany (where neoliberalism was often known as “ordoliberalism”) followed a more complex road beginning in the 1970s, as Michel Foucault discussed at length in his “Birth of Biopolitics” lectures of 1978-79, with distinctive dynamics and oppositions in each country, as a number of scholars have recently shown. So far-reaching was the influence of neoliberal thought that Mikhail Gorbachev in the Soviet Union and Deng Xiaoping in China moved toward their own forms of market liberalization. For Gerstle, however, it was in the 1990s, not the 1980s, that neoliberalism went from being a political movement to a political order.
Gerstle’s treatment of the 1990s is perhaps the most compelling section of his book. He tells the story of how neoliberalism became as much a creed of the Democratic Party as of the GOP, focusing on how the Clinton administration embedded neoliberal perspectives into the logic of policy-making and helped advance legislation that extended the Reagan-era rollback of the federal regulatory apparatus. Clinton oversaw the passage of the North American Free Trade Agreement, the repeal of the Glass-Steagall Act (which had kept commercial and investment banking separate), the deregulation of the telecommunications industry, and the enactment of punitive welfare reform. Even the administration’s failed attempt to create a national health insurance system relied on the private sector to underwrite the program. “Across his two terms,” Gerstle writes, “Clinton may have done more to free markets from regulation than even Reagan himself had done.”
In all of this, Clinton exemplified the continuing shift in the Democratic Party toward neoliberal principles, which had become more pronounced by the mid-1980s. It was championed by senators like Gary Hart, Paul Tsongas, Bill Bradley, and Al Gore and governors like Michael Dukakis as well as Clinton, all of whom believed that the party needed to move to the center and embrace ideas that stepped outside the framework of the New Deal order. Sometimes called “Atari Democrats” for their interest in the emerging high-tech sector, they created the Democratic Leadership Council, which was tasked with refashioning the party’s agenda and supporting candidates who were ready to pull it in this new direction. Indeed, the developing connections between these new centrist Democrats and Silicon Valley entrepreneurs were indicative of how neoliberal sensibilities were seeping into many areas of American social and political life, even tapping into the personal-liberation politics and anticorporate outlooks of the counterculture and the New Left. Ralph Nader, who once seemed the quintessential critic of capitalism, serves as an early example: His work in the 1970s, while riling conservatives and corporate executives, nonetheless focused on making markets more responsive to consumer needs rather than on decoupling government regulatory agencies from corporate control. Subsequently, many who came of age in the 1960s and ’70s and had their own suspicions of the state and its projects found some of neoliberalism’s libertarian and entrepreneurial values very appealing. The hegemonic nature of neoliberalism was best expressed by Lawrence Summers, an economic adviser to both Clinton and Barack Obama. “Not so long ago, we were all Keynesians,” Summers observed candidly in 2006. “Equally, any honest Democrat will admit that we are now all Friedmanites.”
Gerstle is certainly not the first to recognize the Clinton administration’s links to, rather than breaks from, the Reagan administration—or, for that matter, the ways in which the baby boomer generation could gravitate to a neoliberal worldview. But his discussion of how the end of the Cold War and the collapse of the Soviet Union strengthened the neoliberal order and expanded the cultural and political influence of neoliberal ideas is a crucial contribution to the growing body of scholarship on the world that neoliberalism was creating. It is also emblematic of Gerstle’s broad vision of political economy and the dynamics of change. On the one hand, the fall of the Soviet Union opened large parts of the world within the Soviet orbit to the penetration of Western capital and further squeezed those areas that continued to resist. “Capitalism,” Gerstle writes, “became global in the 1990s in a way it had not been since prior to the First World War.”
On the other hand, the end of the Soviet Union and the apparent defeat of communism—“clear[ing] the world of capitalism’s most ardent opponent”—relieved the pressure on noncommunist countries to pursue more egalitarian and social democratic programs and put the final nail in the coffin of the class compromise between capitalist elites and workers that had been coming apart since the 1970s. To many observers, the collapse of the Soviet Union seemed a rout that cold warriors could hardly have dreamed of: an “end to history,” as one of them put it almost giddily, in which the forces of capitalism triumphed over those of communism, socialism, and social democracy.
The broad effects of the neoliberal order were to be seen in the massive power and latitude of the financial sector, the emergence of a “gig economy” in which onetime salaried employees and workers could imagine themselves as entrepreneurs, the explosion of cell-phone technology and social media platforms, the further deterioration of organized labor, and the robust globalization of capital. They were to be seen as well in the rapid growth of income and wealth inequality, in the decades-long failure of middle- and working-class incomes to rise, in the hollowing-out of many public sector institutions, and in the deepening public disillusionment with the federal government and politicians more generally. The crash and recession of 2007-9 testified to both the shaky foundations of the neoliberal order and the still significant embrace of neoliberal principles by policy-makers: As president, Barack Obama surrounded himself with economic advisers from the Clinton administration (the “Rubin group,” as Gerstle calls them, after Clinton’s treasury secretary, Robert Rubin) and began to deal with the crisis by bailing out the banks and investment houses that were responsible for the crash in the first place.
The possible demise of the neoliberal order found expression in the emergence of political movements on the right and the left—the Tea Party, Occupy Wall Street, and Black Lives Matter in particular—all of which pushed back against the elites that neoliberalism appeared to have sustained. The Tea Party attacked their internationalism and their embrace of a multicultural America; Occupy Wall Streeters and Black Lives Matter protesters attacked them for the massive economic and racial inequalities they enabled and continued to thrive upon. The path was thereby cleared for both Bernie Sanders, whose rhetoric and critique harked back to the New Deal order of the 1930s, and Donald Trump, who seemed the embodiment of the Klan-inspired racism, anti-immigrant lawmaking, anti-radicalism, isolationism, eugenics, and Gatsbyesque hedonism of the late 1910s and ’20s. However much they differed, Sanders and Trump shared an opposition to the neoliberal order’s hallmarks of free trade and globalization. Trump stormed his way to the Republican nomination in 2016, while Sanders could not surmount the wall that neoliberal Democrats had built to secure the nomination of Hillary Clinton. And, as Gerstle suggests, the hostility that kept Clinton from the presidency was rooted in more than just misogyny and personal distaste; it was also rooted in a deep anger at the political and economic system with which she was readily linked.
Gerstle finished his book soon after Joe Biden was sworn in, and he senses that the neoliberal order is tottering and a new progressive order may be taking shape—a transition with real promise as well as serious dangers. The lessons of Covid, he believes, not only demonstrated Trump’s incompetence but also showed how important the government is in addressing great crises and severe hardships, a recognition born in the 1930s. And Biden himself, Gerstle argues, while long a Senate point man for Democratic neoliberalism, seemed to recognize the need to break from his party’s neoliberal turn. Faced with the challenges of climate change, systemic racism, and Covid-driven economic woes, Biden would clearly need to govern boldly, given the Democrats’ tenuous hold on Congress. Gerstle even wonders whether, in view of the enormous assistance the federal government provided Americans during the pandemic, the emergence of a democratized politics of finance might be one of the results of Biden’s presidency.
Unfortunately, what the past year has shown is that the promise evaporated quickly and the dangers have grown overwhelming. If anything, the Russian invasion of Ukraine has generated an American-led effort to revitalize the transatlantic neoliberal order and to dust off the rhetoric and logic of the Cold War so as to isolate and take down Russian President Vladimir Putin. After all, the great expansion of NATO during the 1990s was very much a part of the neoliberal order’s consolidation, and it is likely that when the smoke clears, NATO will have even more members (Sweden and Finland have already been approved) and will be responsible for securing even more of Europe’s territory, which will include a rearmed Germany. What’s more, the progressive wing of the Democratic Party, which seemed to be moving into the driver’s seat between 2018 and 2020, has mostly been stymied by the party’s centrists as well as by the Republicans and, along with Biden, will be blamed for the inflation and related economic problems that their massive Covid rescue plan is seen to have stoked. A democratized politics of finance or of anything else, given the failure to ward off attacks on voting rights, seems far less obtainable now than it did in early 2021.
In view of the rumblings against neoliberalism that have been increasing for at least a decade and a half, we may wonder as well if the notion of an “order,” whether neoliberal or New Deal, is too capacious to account for the dissidence at the grass roots. Gerstle’s two previous books focused on the tensions and contradictions at the heart of American politics that, at times, have called the very legitimacy of federal power into question. One may ask if such ongoing instabilities—often provoked by issues of race and social justice—raise doubts about whether a “movement” can ever become something as hegemonic as an “order.”
Indeed, the backlash against the New Deal was already apparent in the South by the late 1930s, and in the rest of the country by the late 1940s, even in the context of the class compromise, which, as Gerstle makes clear, would have been unlikely without the political challenges of the Cold War. Even the beneficiaries of New Deal–influenced programs like the GI Bill, which enabled expanding levels of homeownership, were busy mobilizing against racial integration and the left, both in industrial cities and the burgeoning suburbs, by the late 1940s and ’50s. A political culture of opposition, interrogating and then rejecting many of the New Deal’s articles of faith, was quickly growing in the American West, especially in Southern California and especially among white evangelicals, whose own articles of faith turned Jesus into a free marketeer—and all this while the New Deal order still seemed robust. For their part, many New Deal intellectuals and policy-makers, like Democrats more generally, headed for the cover of anticommunism in the 1950s, if not before, effectively hampering the redistributionist politics that lent the New Deal its historical distinctiveness. If neoliberalism does hark back to the classical liberalism of the 19th century, as Gerstle suggests, there is a good case for Jefferson Cowie’s recent argument about the New Deal as “the great exception,” and an unstable one at that.
The neoliberal order, as Gerstle demonstrates, was one of smoke and mirrors, offering a little something for everyone for a little while, together with a lot for the very few for much longer. Yet crisis and instability also seemed to reign supreme under the neoliberal order, which, rather than generating shared articles of faith, increasingly weaponized the deepening fractures. “Culture wars” were already being waged in the 1980s, as was the “carceral warfare” that quickly made the United States the world’s leader in terms of the number and share of people imprisoned. Right-wing domestic terrorism reared its head in the 1990s, along with the ethno-nationalist politics of the Republican Party, as David Duke demonstrated early on in Louisiana. An international anti-globalization movement came on the scene in the late 1990s, subsequently fortified by the effects of the 2008 crash, in many ways anticipating the Sanders movement of 2016-20, not to mention the unionization drives in the service sector. And it was George Wallace’s nearly decade-long series of national campaigns, from 1964 to 1972, sidelined by his near assassination, that laid much of the political and rhetorical groundwork for the ascendancy of Trump.
American history has long been periodized by a series of “ages”—the Age of Jackson, of Lincoln, of Roosevelt, of Reagan, and so on—organized principally around political narratives and ideological shifts in governance. Even though Gerstle confines his book to the New Deal and the neoliberal order, the implication may well be that a re-periodization of the country’s history should be constructed around changing political economies, a re-periodization that would integrate the political narrative into a broader constellation of power relations as well as the resistance and popular movements that continuously push at, and reshape, its boundaries. This is the sort of thing that William Appleman Williams attempted to do 61 years ago in his brilliantly imaginative, though generally overlooked, Contours of American History. Whatever questions and doubts can be summoned, Gerstle has shown that the concept of a “political order” may be of great value not only in comprehending developments in the past, but also in deciphering the complexities of the present.