The term “neoliberalism” is often used to condemn an array of economic policies associated with such ideas as deregulation, trickle-down economics, austerity, free markets, free trade, and free enterprise. As a political movement, neoliberalism is seen as experiencing its breakthrough 40 years ago with the election into office of Ronald Reagan and Margaret Thatcher. And since the 2007–08 financial crisis, an explosion of academic work and political activism has been devoted to explaining how neoliberalism is fundamentally to blame for the massive growth in inequality.

Yet Gary Gerstle—in his new book, The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era—argues that this understanding of neoliberalism struggles to explain why it has exerted such a profound influence on both the left and the right. Gerstle—a professor of American history at the University of Cambridge—thinks neoliberalism should be understood as a worldview that promises liberation by reconciling economic “deregulation with personal freedoms, open borders with cosmopolitanism, and globalization with the promise of increased prosperity for all.”

Such a vision. as Gerstle relates, was able to attract such strange bedfellows as Steve Jobs and Barry Goldwater, Ralph Nader and Ronald Reagan, and Bill Clinton and Newt Gingrich. When seen as a worldview, Gerstle contends, neoliberalism can trace its origins just as much to the left, and in particular the New Left, as to the right. People across the political spectrum, including those aforementioned bedfellows, had a common goal: the end of a bureaucratized world.

Gerstle’s book explains the rise of the neoliberal order by placing it against the backdrop of the New Deal. He also explores the relationship between neoliberalism’s rise and the collapse of the Soviet Union. And he provocatively argues that, on account of the Iraq War, the Great Recession, a revitalized socialist movement, and the Trump presidency, the neoliberal order is crumbling.

But how does Gerstle’s understanding of neoliberalism stack up against rival interpretations of it? How are we to make sense of how the Democratic Party became captive to neoliberalism? And is the neoliberal age really coming to an end? The Nation spoke with Gerstle about these and other questions. This conversation has been edited for length and clarity.

—Daniel Steinmetz-Jenkins

Daniel Steinmetz-Jenkins: Over the last decade, few topics on the left have received more attention and stirred more debate than the subject of neoliberalism. Unlike some critics, you believe that neoliberalism is still a legitimate term of scholarly analysis in regard to understanding contemporary politics—rather than a pejorative, catch-all term others have deemed it. Why do you believe this is the case, and, in a nutshell, how do you define it?

Gary Gerstle: Neoliberalism is a creed that prizes free trade and the free movement of capital, people, and information. It celebrates deregulation as an economic good that results when governments are removed from interfering with markets. It valorizes cosmopolitanism as a cultural achievement, the product of open borders and the consequent voluntary mixing of large numbers of diverse people. It hails globalization as a win-win proposition that both enriches the West and brings an unprecedented level of prosperity to the rest of the world. It tolerates economic inequality and justifies the weakening of labor movements, welfare policies, and other “impediments” to free market capitalism in the name of economic growth robust enough to lift all boats. These core principles deeply shaped American politics across the last 50 years.

The label “conservative” is often attached to the aforementioned beliefs. But conservatism, in the classical sense of the term, connotes respect for tradition, deference to existing institutions, and the hierarchies that structure them, and suspicion of change. Neoliberalism, on the other hand, calls for unleashing capitalism’s power, along with entrepreneurialism and other forms of risk-taking, and eliminating institutions that stand in the way.

Invoking neoliberalism allows us to shift the focus somewhat away from narratives that have dominated so much history writing—white southerners, for example, seeking to maintain racial privilege in the era of civil rights, or evangelicals pushing back against women’s, gay, and sexual liberation movements—and toward equally important stories that focus on venture capitalists, Wall Street “modernizers,” and information technology pioneers. That shift in emphasis, my book suggests, is overdue.

In my chapter on the 1990s, I discuss only briefly the culture wars that dominated headlines during the Clinton presidency but dissect at length the major legislative packages of those years that fundamentally restructured America’s information/communication systems and Wall Street. The Telecommunications Bill of 1996, for example, has profoundly shaped contemporary political economy. Yet the nature of that bill and the mechanisms facilitating collaboration between the hostile Clinton and Gingrich camps required to pass it are still shrouded in mystery. A focus on neoliberalism can help us to bring the economic transformation of the 1990s more into focus and to give it the kind of careful examination it deserves.

DSJ: Your understanding of neoliberalism goes against many of the dominant interpretations of it. For instance, many argue that what made neoliberalism “new” is that it broke with the “old” classical liberalism of the nineteenth century, which typically is associated with freeing markets from state regulation and interference. On this reading, the early neoliberals, perhaps most notably Friedrich Hayek, realized that—given mass enfranchisement, labor unions, and socialist parties—only strong states could protect and shield free markets from democratic forces. However, you see a strong connection between classical liberalism and neoliberalism. Can you explain this connection, and why, if it is so strong, the term “neoliberalism” is even necessary?

GG: Classical liberalism is thought to be an emancipatory movement seeking to remove the heavy hand of the state, in the form of monarchs and mercantilists, from civil society. Neoliberalism is thought to be a repressive movement that uses the state to enforce capitalist prerogatives on “unruly” democratic populations.

This dichotomy is overdrawn. We now know (from the excellent work of a generation of historians and political scientists) that governments were as necessary to construct and supervise markets in the 19th century (the era of classical liberalism) as they are today. Markets may emerge from what Adam Smith once described as the propensity of people to “truck, barter, and exchange,” but they can only flourish within a context of government-enforced rules. “Laissez-faire” is a political and economic project, not a condition of nature. It has always been thus.

By the same token, it is a mistake to treat neoliberals of the past half century as being exclusively concerned with order and domination, and with constraining (and sometimes undermining) democracy. In many of them a spirit of individualism and freedom reminiscent of classical liberalism still lives. This is especially true in the United States where, as Michel Foucault once observed, liberalism has always been everywhere, sprouting on the left as well as on the right, never confined to one party or school.

My book takes Foucault’s insight as inspiration: It argues that neoliberalism’s career has been marked as much by heterodoxy as orthodoxy, by its capacity to make individuals as different as tech hippies and Ronald Reagan, as dissimilar as Barry Goldwater and long-haired university students who wanted to bring down “the system,” feel as though they held the key to unlocking a future of untrammeled personal freedom.

Why not, then, call this aspiration toward freedom by its original name, “liberalism”? Because Roosevelt and his New Dealers stole the name from its free market advocates in the 1930s and imbued it with social democratic meaning. That theft qualifies as one of history’s great terminological heists. Milton Friedman was forever dismayed by what he regarded as “the corruption of the term ‘liberalism.’” So was Friedrich Hayek. Both men refused the label “conservative” to describe their beliefs. The term “neoliberal” allowed them to affiliate with the classical liberal tradition they admired while separating themselves from the New Deal liberalism they despised.

DSJ: Another intervention you make is to argue that the bulk of the scholarship devoted to the international roots of neoliberalism, most notably that of the historian Quinn Slobodian, fails to reckon with the Soviet Union and of communism more generally. Given your interpretation that the fall of the Soviet Union played the major role in neoliberalism’s rise, especially after the end of the Cold War, does this assume that neoliberalism needs something like a communist threat to be thwarted?

GG: Few international events in the 20th century matched the Russian Revolution of 1917 in importance. It had a huge effect on both world and American politics. In the United States from the 1920s through the 1980s, communism was regarded as a mortal threat to the American way of life. The power of—and the fear unleashed by—the communist threat is now largely forgotten. Few accounts of neoliberalism treat the fall of the Soviet Union between 1989 and 1991 or the collapse of communism as capitalism’s chief global antagonist as seminal events. But they were.

One consequence of communism’s fall is obvious: It opened a large part of the world—Russia and eastern Europe—to capitalist penetration. It also dramatically widened the willingness of China (still nominally a communist state) to experiment with capitalist economics. Capitalism became global in the 1990s in a way it had not been since prior to the First World War. The globalized and capitalistic world that dominated international affairs in the 1990s and 2000s is unimaginable apart from communism’s collapse.

Another consequence of communism’s fall may be less obvious but is of equal importance: It removed what had been an imperative in America (and in Europe and elsewhere) for compromise between elites and the working classes. A nation once “lost” to communism would never be regained for the capitalist world (or so it was thought). The specter of communist advance impelled capitalist elites in advanced industrial countries, including the United States, to compromise with their class antagonists in ways they would not otherwise have done. A fear of communism made possible the class compromise between capital and labor that underwrote the New Deal order. American labor was strongest when the threat of global communism was greatest. The apogee of America’s welfare state, with all its limitations, was coterminous with the height of the Cold War. After 1991, the year of the Soviet Union’s dissolution, the pressure on capitalist elites and their supporters to compromise with the working class vanished. The dismantling of the welfare state and the labor movement marched in tandem with communism’s collapse.

To argue for communism’s importance is not meant to rehabilitate it as a political movement. Communism was an indefensible system of tyranny. Rather, it is meant to help us to understand the role that communism played in the century when it was a feared force, and then to call on us to reckon with the effects of its sudden and complete disappearance from international and national affairs.

The fall of communism manifested itself not just in the collapse of the Soviet Union but also in the erosion of the emancipatory dreams that had animated leftist movements for 200 years, since the days of the French Revolution. How could one sustain one’s belief in revolution when the greatest experiment in socialist transformation had failed so spectacularly?

Some answered this question by moving away from socialist politics and pouring their emancipatory energies into liberation movements for women, for people of color, for gays. This was not true of leftists writing about neoliberalism, however, for whom capitalism and its evils were always front and center. But the full import of communism’s collapse was not easy for anyone on the left to absorb or analyze.

Will new political movements emerge with the strength to compel a serious redistribution of wealth away from elites and toward the masses without reproducing the tyranny that became so intrinsic to communism? This is one of the key questions of our time.

DSJ: Let’s transition a bit and talk about your notion of a political order. Can you explain this idea, and specifically in reference to your claim that political order entails “the ability of [the] ideologically dominant party to bend the opposition party to its will.” There is a way of reading your book, for instance, that would suggest that at the peak of the neoliberal order, Bill Clinton, rather than Ronald Reagan, did more to advance neoliberalism than anyone else. In what sense is this true?

GG: The phrase “political order” is meant to connote a constellation of ideologies, policies, and constituencies that shape American politics in ways that endure beyond the two-, four-, and six-year election cycles. In the last hundred years, America has had two political orders: the New Deal order that arose in the 1930s and 1940s, crested in the 1950s and 1960s, and fell in the 1970s; and the neoliberal order that arose in the 1970s and 1980s, crested in the 1990s and 2000s, and fell in the 2010s.

At the heart of each of these two political orders stood a distinctive program of political economy. The New Deal order was founded on the conviction that capitalism left to its own devices spelled economic disaster. It had to be managed by a strong central state capable of governing the economy in the public interest. The neoliberal order, by contrast, was grounded in the belief that market forces had to be liberated from government controls that were stymieing growth, innovation, and freedom.

Establishing a political order demands far more than winning an election or two. It requires deep-pocketed donors to invest in promising candidates over the long term, the establishment of think tanks and policy networks to turn political ideas into actionable programs, a political party able to win over multiple electoral constituencies on a consistent basis, a capacity to shape political opinion both at the highest levels (the Supreme Court) and across popular and print media, and a moral perspective able to inspire voters with a vision of the good life. Political orders, in other words, are complex projects that require advances across a broad front.

A key attribute of a political order is the ability of its ideologically dominant party to bend the opposition party to its will. Thus, the Republican Party of Dwight Eisenhower acquiesced to the core principles of the New Deal order in the 1950s, and the Democratic Party of Bill Clinton accepted the central principles of the neoliberal order in the 1990s. Acceptance is never complete; there are always points of tension and vulnerability in a polity as fissiparous as the American one. And yet, the success of a political order depends on its proficiency in shaping what broad majorities of elected officials and voters on both sides of the partisan divide regard as politically possible and desirable.

By the same token, losing the capacity to exercise ideological hegemony signals a political order’s demise. In these moments of decline, political ideas and programs formerly regarded as radical, heterodox, or unworkable are able to move from the margins into the mainstream. This happened in the 1970s, when the breakup of the New Deal order allowed long scorned neoliberal ideas for reorganizing the economy to take root; and it happened again in the 2010s, when the coming apart of the neoliberal order opened up space for Trump-style authoritarianism and Sanders-style socialism to flourish.

In my book, I treat Reagan as the architect of the neoliberal order and Bill Clinton as a key facilitator of that order’s 1990s triumph. The extent to which the Clinton administration signed on to neoliberal projects is rather stunning. In 1993, Clinton signed the NAFTA legislation turning all of North America into a single common market. In 1994, he endorsed the World Trade Organization as an instrument for implementing neoliberal principles internationally. In 1996, Clinton deregulated the telecommunication industry. Soon after, he did the same with the electrical generation industry. And, then, in 1999, he supported Congress’s repeal of the Glass Steagall Act, the New Deal law that had done more than any other to end speculation, corruption, and the boom-bust cycle in America’s financial sector.

In effect, Clinton had become the Democratic version of Eisenhower, the president who arranged his party’s acquiescence to the dominant political order.

DSJ: The young Bill Clinton, of course, has been depicted as a baby boomer who came of age during the heyday of the New Left and 1960s counterculture. You state throughout the book that the New Left provided neoliberalism with a gateway into the Democratic Party. Can you elaborate on this?

GG: If we acknowledge the way in which neoliberalism resuscitated emancipatory yearnings present in classical liberalism, we can begin to understand why certain sections of the New Left and the counterculture would have been drawn to its principles. New Leftists shared with neoliberals a disdain for what both groups regarded as the over-organization and bureaucratization of American society resulting from the New Deal. The New Left revolt against excessive regulation is apparent in Paul Goodman’s cri de coeur, Growing Up Absurd (1960); in the 1962 Port Huron Statement that defined the early goals of the New Left; in the rhetoric that Mario Savio used to frame the ambitions of Berkeley’s 1964 Free Speech movement (the New Left’s first moment of mass protest); in the early cybernetics movement that inspired the likes of Stewart Brand and Steve Jobs to associate the creation of the personal computer with the quest for individual freedom; and in the determination of Ralph Nader and his political allies to “free” the consumer from repressive corporate and government elites.

Freeing the individual and his or her consciousness from the grip of large, stultifying organizations; privileging disruption over order; celebrating cosmopolitanism—and multiculturalism—and the unexpected sorts of hybridities that emerge under these regimes: All of these beliefs, which marinated for years in the political and cultural milieux inspired by the New Left, meshed with neoliberal aspirations, and drew individuals from the left side of the political spectrum to portions of the neoliberal project.

DSJ: On account of the 2007–08 financial crisis, President Barack Obama chose a team of economic advisors made up of Wall Street’s elite. They believed the best way to get the country through the crisis was to prioritize rescuing the banks. You write that even despite steering a $700 billion stimulus package to relieve the suffering of ordinary people, “these efforts were not sufficient to imbue a recovery of the Main Street economy with a robustness that would rival the one already being felt on Wall Street.” You explain that Obama embraced the dominant neoliberal ideology almost out of a sense of necessity. Indeed, Obama said that a more radical decision would have entailed “violence to the social order.” Of course, under Trump, a relief package for Covid was approved that was twice as large as Obama’s. What was it about Obama that compelled him to save rather than to resist the neoliberal political order, especially given what happened after his presidency?

GG: The election of Barack Obama in 2008 unleashed all kinds of hopes for the country’s future. Fourteen years later, we have the advantage of historical perspective. That perspective tells us (or me, in any case), that Obama is best seen as the last president of the neoliberal order, not the first president of a post-racial, progressive age.

To handle the economic crisis, Obama turned to a team of advisors, including Timothy Geithner, Lawrence Summers, Peter Orszag, and Michael Froman, quite similar in policy orientation to the Rubin team that had overseen the Democratic Party’s assent to the neoliberal order in the 1990s. They decided not to punish the large banks whose misdeeds had brought on the crisis but to focus instead on restoring them to financial health and security as quickly as possible. Thus, no banks were nationalized or broken up, and no bankers were sent to jail for their misdeeds. There was not even a public shaming that would have occurred had banking executives been forced to run the gauntlet of congressional hearings.

Meanwhile, millions of Americans were losing their jobs and their homes. The gap between rich and poor widened during Obama’s first term, with the income of the top 1 percent of American income earners increasing by more than 30 percent while the bottom 99 percent had to settle for a raise too small to matter. Main Street Americans noticed that elites had been restored to financial health and security while they had not.

By temperament, Obama was a cautious man. Moreover, the burden of restoring to health a shattered global financial system was immense. But the more important point to make here is a different one: namely, that the neoliberal order was still hegemonic, constraining Obama’s sense of the choices available to him.

DSJ: There is a big debate on the left today regarding the question of whether the neoliberal age is coming to an end. Trump, the rise of Bernie Sanders, Biden’s Build Back Better Act, China’s rise, and the Russian invasion of Ukraine can all be used in various ways to defend this view. You agree with this perspective. What are your essential reasons for doing so?

GG: Donald Trump and Bernie Sanders were inconsequential political figures during the order’s 1990s heyday. That the two became in the 2010s the two most dynamic forces in American political life provides the best evidence that the neoliberal order was losing its hold. It was no longer constraining political choice.

Other evidence for the neoliberal order’s fracturing can be gleaned from a brief look at the erosion of support for four key planks of the neoliberal “freedom” agenda: the free movement of goods, people, information, and capital.

On the free movement of goods: During the neoliberal heyday, protectionism was a dirty word, not to be uttered by those pursuing high political office. Now it is favored by many on the right as well as on the left.

On the free movement of people: Thirty-five million people came to America between the 1960s and 2000s. Now the talk is all about walls and borders.

On the free movement of information: The instantaneous transmission of vast amounts of data and opinion to every corner of the world had been crucial to neoliberalism’s globalizing project. Now China, Russia, Turkey, and other countries are seeking to insulate their information systems from international “contamination.”

On the free movement of capital: This freedom has been the one most resistant to controls. But the actions recently taken by Western governments against Russia as well as against its oligarchs living abroad—freeing or seizing assets, denying the state and its people the opportunity to move money from one country to another or to convert their funds from one currency to another—constitute a major strike against that freedom.

Day by day, now, a new world is taking shape. Elements of neoliberalism will survive this transition. But neoliberalism as a political order is finished.

DSJ: Doesn’t Biden’s lackluster presidency give you reason to reconsider your prediction?

GG: An administration that has sought to enact the most far-reaching set of social programs since the New Deal should not be described as lacking in luster. It has lacked political power—its majority in the Senate hanging, as we all know, by (a Joe Manchin) thread. Biden himself may be lacking in personal luster, but we should resist the temptation—ever present in our social media age—to judge a leader exclusively by superficial characteristics. Biden has real strengths. He grasps the significance of this historical moment. He has assembled a good team. He has opened his administration to the left in ways that few previous Democratic administrations have done. The patchy record of his legislative achievements to date has less to do with his own limitations than with a set of tough circumstances that would bedevil even the best Democratic president imaginable: not just slim majorities in Congress but an opposition party that has become scandalously indifferent to the welfare of American democracy and a virus that everywhere in the world has eluded the best-intentioned efforts to subdue it. These are difficult times in which to govern.

Biden may fail. If he does, would it mean that an argument for the fall of the neoliberal order should be reconsidered? Not at all. A rising political order centering on Trump-style authoritarianism would mark the end of the neoliberal order just as surely as one centered on Biden-style progressivism. The United States may also be in the midst of an extended period of dysfunction that will forestall the establishment of a new political order, left or right. But one thing is clear: the neoliberal heyday has passed. In the 1990s and 2000s, America was unabashed in its celebration of free markets, of a globalizing world without borders, and of an era of personal freedom powered by the IT revolution. We no longer live in that world.