This posthumous collection of essays provides a valuable assessment of neoliberalism and its weaknesses, and an antidote to some misconceptions, argues Chris Nineham

What we now call neoliberalism was originally known in the West as Thatcherism or Reaganomics after the leaders who pioneered it. It is a free-market phase of capitalism that spread around the world after the economic crisis in the mid-1970s. The title of this book controversially implies neoliberalism is over, though that is not a claim Davidson sticks to in the book. There are many end-of-era signs around us, but this book’s strengths lie in its investigation of the nature of neoliberalism and how it came about, not its possible demise. 

While most on the left have always opposed neoliberalism, there are many different views about what it is and how it happened. These different takes have political implications.

Many left commentators, notably David Harvey and Naomi Klein, have seen neoliberalism as a counterrevolution or a restoration of capitalist power after the post-war decades of welfarism. As Davidson points out, this approach involves a romanticisation of the years of the post-war boom and can all too easily lead to a politics based on nostalgia for a mythical golden age of social democracy (p.176).

The new economic order is often seen – sometimes by the same people – as the result of the victory of free-market ideas as reheated by Milton Friedman and promoted by various right-wing think tanks. This ideas-led view of history tends to lead to a stress on a corresponding, left-wing think-tank response. In this view, what is lacking on the left are visionary ideas, a clear alternative, a high-profile programme of change.

When it comes to the content of neoliberalism, many have argued that it represents a completely new mode of capitalism, with ‘accumulation by dispossession’, ‘financialisation’ or something called ‘immaterial labour’ at its heart.

Views about the impact of neoliberalism on society and people’s ideas tend to be bleak, but those arguing that neoliberalism marked a profound break from the past tend to be at the doomier end of a grim spectrum. They worry about the demise of the working class or of a neoliberal logic coming to dominate people’s thinking. Davidson quotes Andrew Gamble for example, ‘as the capitalist wagon careers out of control down the track, spilling its load and its passengers, there are precious few gravediggers in sight’ (p.178).

Davidson did us a big favour writing this book which has been published posthumously after his untimely death in 2019. Amongst other things, it provides a challenge to the doom mongers and their pessimism. Davidson’s rather round-about style and his use of long quotations from a wide range of commentators, many of whom he disagrees with, don’t make this book an easy read. But it is possible to piece together from it a coherent and extremely valuable account of neoliberalism. I will come later to what I regard as some problems with the account (unsurprising in an unfinished manuscript), but Davidson makes several very important arguments which deserve to be widely understood.

Counter revolution?

Davidson makes the point early in the book that neoliberalism could hardly have been a counterrevolution because it followed the most profitable period of capitalism ever. In Britain and much of the rest of the world, governments of both the left and the right enthusiastically pursued the welfarism of the post-war boom because it worked for them. It provided stability and a skilled workforce needed in a period of rapid accumulation and soaring profits, and as a result helped generate ‘the highest levels of growth in the history of the system’ (p.31).  

The boom wasn’t the result of a deal between capital and labour. Working-class life remained tough throughout the period, despite some real improvements, and there were significant levels of strike action throughout it. It was more the result of capital seeing advantage in state intervention and accommodating limited workers’ aspirations in boom conditions.

Nor, as Davidson shows, was the boom the result of Keynesian pump priming, which only really began as the boom slowed. The underlying cause of the boom was the permanent arms economy, which offset the tendency of the rate of profit to fall by taking a huge amount of accumulated capital out of the system to be spent on arms. It was, however, a period in which the ruling class was prepared to spend a significant amount of taxpayers’ money on health, education and even on nationalising some important industries to stave off opposition and ensure the workforce had necessary skills.

Even here, coercion was an important part of the picture in politics as well as in the factory. The ruling class regularly called social-democratic politicians like Harold Wilson or Francois Mitterrand to order when, in Davidson’s neat phrasing, ‘their policies were perceived, however unreasonably, as being too concerned with defending the interests of their supporters’ (p.67).

A victory of ideas?

He is also clear that the impetus for neoliberal reforms didn’t come from free-market ideas as such. As is almost always the case, things in fact happened the other way around. Milton Friedman and his supporters had been promoting free-market dogma on the margins for decades and were pretty much ignored. The ideas only came in from the cold when the ‘mixed economy’ went into crisis in the early 1970s. In those circumstances, the ideas were a useful way of legitimising and encouraging change. The Tory minister Keith Joseph, one of the main champions of the new economics, replied to a journalist who called him a follower of Friedman, ‘the evolution of my views owes little to him’:

‘On the contrary, it stems primarily … from critical re-examination of local orthodoxies in the light of our own bitter experience in the early 1970s … By early this year (1974), we had a historically high rate of inflation, an enfeebled economy, the worst relations with the trade unions in decades, and a lost election with the greatest fall in our share in the vote since 1929. Surely this was sufficient incentive to rethink – we are practical people who judge ideas and policies by results’ (quoted on p.55).

In line with this understanding, Davidson shows that neoliberalism was not a fully rounded programme implemented in one go. It was in fact a series of more or less successful improvisations, some of which, like the policy of tight money or monetarism, were quickly abandoned. Privatisation, on the other hand, which became central to the operation by the late 1980s, was hardly mentioned in Thatcher’s 1979 manifesto.

In wasn’t even Thatcher that really pioneered the new economics. The Labour government of 1976-79 first implemented some of the key planks of the new approach, including a significant level of austerity. Labour’s programme of cutbacks, which resulted in the worst fall in working-class living standards since the Second World War and a massive strike wave, helped to legitimate free-market ideas and expose Labour’s own inability to implement them. As Davidson points out, it was this more than anything that laid the basis for Thatcher’s election victory in 1979 (p.79).

Was it inevitable?

Once they had embraced the new approach after 1974, the right knew they had to prepare for battle. They were aware that when it comes to restoring profitability, the decisive thing was to degrade working-class organisation. Davidson doesn’t make much of the fact that a special policy group chaired by Sir Nicholas Ridley met from at least 1977 to plan an assault on the unions. He is clear, however, that it was the success of this assault and similar set-piece attacks around the world that assured the victory and staying power of the new phase of capitalism. As he says, these successes were by no means guaranteed in advance:

‘victory was achieved not only by the unleashed power of the state – formidable though that was – but also the failure of other unions like the AFL-CIO and the Trade Union Congress (TUC) to give effective support to unions under attack. Ruling classes rightly gambled that that most sections of the trade union bureaucracy would instead give priority to the continued existence of their organizations, however much reduced in power, rather than offering solidarity to those under attack’ (p.77).

What was new?

The deliberate creation of unemployment, the displacement of industry to non-unionised areas and planned assaults on working-class organisation were tactics familiar from previous ruling-class offensives.

There were, however, innovations. These included using the threat of international outsourcing to impose new conditions, privatisation of the housing stock and utilities, the conscious destruction of industries with high levels of labour organisation, using debt as a substitute for wage increases, and the implementation of a new managerial regime based on massive levels of surveillance and regulation.

Neoliberalism also involved deregulation and trade liberalisation, the breaking down of protectionist barriers and restrictions on foreign capital. These measures led to a sharp increase in the globalisation of trade, financial flows and production processes. They also led later to the International Monetary Fund and the World Bank imposing ‘reforms’ on countries in the Global South as a condition of loans.

Davidson makes clear that both privatisation and financialisation have their limits and that even taken together with the capitalist seizure of various common lands and resources in the Global South, they don’t amount to a completely new form of accumulation as Harvey and others have argued. It is true, of course, that privatisation does release resources employed for social ends to be used directly for production of profit. But each privatisation is a once and for all event (p.113).

There has been a huge increase in financial speculation over the last few decades to the point where more profit now tends to be saved than reinvested. This though is a result of relatively low levels of profit in the productive sector. Finance capital is in the end dependent on productive capital for the very simple reason that all capital comes from workers’ labour. In the words of Neil Smith quoted here, ‘Without industry producing commodities for profit, Wall Street would have nothing to invest’ (p.115). Financial speculation, in other words, can increase the profits of one company at the expense of others, but it cannot create new value for the system as a whole.

These are much more than technical, economic points. They underline the fact that the main driving force of capitalism in its neoliberal phase remains the extraction of profit from productive human labour, what Marx called exploitation. It is this insight that confirms that however much working patterns and the working class has changed, workers still have an unmatched strategic power to challenge the priorities of the system.

Saved by the social liberals

Just as it coalesced into a semi-coherent project in the 1990s, neoliberalism was running out of rope. In many countries, there had been an electoral reaction that had removed instigating governments. In some, including Britain, where there was a massive upsurge against Thatcher’s hated Poll Tax in 1990, there had been social revolts against the new economic regimes. The project was saved, in fact given a new lease of life, by political processes taking place within social democracy. As Davidson put it:

‘At the very moment neoliberalism consolidated into a coherent programme, it underwent a crucial mutation, which the adherence of previously reformist parties and movements made possible’ (p.89).

Social-democratic parties accepted market logic, but managed to present this surrender in ways which made them seem cutting edge, even progressive. Britain’s Tony Blair was the past master. He mainstreamed the social liberalism of the 1960s, linked it with current youth culture and packaged it all up with the market liberalism of the 1980s in what briefly appeared to be a moment of ‘Cool Britannia’. Other social-democratic parties and governments followed suit.

This proved to be the final stage in the normalisation of neoliberalism. It was no longer an aberration associated with the right but the framework within which politics would henceforth be conducted. As the house journal of neoliberalism the Economist put it, ‘New Labour’s particular brand of free-marketry and social justice is now widely seen as the natural path of British politics and few politicians of any stripe would dare veer far from it.’ (p.102).

The damage done

As Neil Davidson outlines, the results have been devastating. Privatisation has, of course, been a disaster for the huge number of people that relied historically on social housing or welfare. Working conditions have deteriorated everywhere as employers have tried to ramp up the rate of exploitation. Workers’ gains of the 1960s and 1970s had been reversed. By 2007, people were working longer hours than they had been working in the 1950s. The results have been contradictory but miserable:

‘US productivity per worker fell by half between 1973 and the mid 1990s, not because people were working fewer hours, but because more were working longer hours less effectively at more demeaning, dirty, sometimes dangerous and often difficult jobs for lower real wages than most of their parents had worked for’ (p.112).

One result of the attacks on the unions and the relocation of industry has been a big increase in precarious working conditions. Davidson is right to point out, however, that the level of precarity is often overplayed and that precarity has been the normal experience of the working class for most of the history of capitalism.

While it didn’t restore profit rates to anything like post-war boom levels, neoliberalism did manage to restore profitability to levels that have ensured a basic level of investment. At the same time it has generated almost unimaginable increases in inequality. In the US in 1965, the ratio of chief-executive-officer income to that of an average worker was 35:1, by 2005 it had risen to 450:1. In Britain as late as 1988, the average CEO of one of the FTSE100 companies earned ‘only’ seventeen times that of an average worker, by 2008, the figure had shot up to 75.5 times.

The result of all this is a new gilded age in which in the US for example, 20% of the population account for 70% of consumption and therefore have a massively disproportionate effect on the economy. They also have a deep investment in neoliberalism as a system. In the words of Colin Crouch, the new ‘political and economic elites have benefited so much from the inequalities of wealth and power that they will do everything that they can to maintain neoliberalism in general and the finance driven form of it in particular’ (p.124).

This includes a new middle class who have benefitted enormously from the new order, helping to explain the incredible tenacity of neoliberal ideas in the face of the clear evidence of the damage they are doing. As Davidson notes, one of the characteristics of the moment is that all problems that emerge are treated by as symptoms of the fact that neoliberalism hasn’t gone far enough. Even after more than forty years of neoliberal reforms, failures are still put down to intransigent unions, inept bureaucrats and invasive regulations (p.125). Davidson also makes important points about the role this extremely privileged middle class has played in downplaying class and promoting identity politics in the academy, the media and across the professions (p.168).

Hollow politics

Despite anti-state rhetoric, the state hasn’t shrunk in the neoliberal years, it has instead been partially repurposed to serve the immediate interests of big capital more directly. The idea that economic intervention by the state could or should have progressive social aims such as full employment or decent social services has all but disappeared. Politicians have become a professional caste increasingly remote from the people they are supposed to represent and for whom purely capitalist conceptions of the national interest have become unchallengeable. In the words of Peter Mair quoted by Davidson, ‘parties have become agencies that govern – in the widest sense of the word – rather than represent; they bring order rather than give voice’ (quoted on p.107) As Davidson himself puts it:

‘Debates therefore have the quality of a shadow play, an empty ritual in which trivial or superficial differences are emphasized in order to give an impression of real alternatives’ (p.164).

As politics has become more technical, the civil service has become ever more politicised and completely committed to the fiction of market choice. Davidson uses the example of Mervyn King’s rejection of then prime minister Gordon Brown’s suggestion to use tax cuts or increased spending to stimulate the economy (p.166).

The resulting depoliticization of the public realm and the atomisation of society has led to increased repression and surveillance. ‘Where state ownership retreated, state control advances’ (p.155).

While Davidson’s account of the toxic impact of neoliberalism on working-class life and organisation is powerful, one of the great strengths of this book is that he is alert to the downsides of modern developments for the ruling class. Davidson is right to point out that ‘Neoliberal regimes are increasingly displaying an uncritical adherence to the short term wishes of particular business interests (p.158). In the process they are weakening their own ability to defend their collective interest. The distinction between the ruling class and the business community has to some extent broken down, leading to an end of the practice of the ruling class operating on a timescale of decades rather than years. The surrender of social democracy to the market creates a suffocating feeling of consensus in the mainstream, but it also weakens a safety mechanism that has served the establishment well over the last one hundred years and more.

The glaring omission in the book is any serious examination of the international aspects of what has happened during a period of what is often described as ‘globalisation’. One of the myths about the period promoted at the start of this century by left-wing commentators including Michael Hardt and Toni Negri was that capitalism had overcome its international contradictions and morphed into a seamless empire. Subsequent history has proved them embarrassingly wrong.

The period of neoliberal domination has coincided with a return to open imperial aggression as the US has tried to destroy disobedient governments and frighten off competitors. The result has been a series of devastating wars, the growing isolation of the Western alliance and mass anti-war and anti-imperialist campaigning in many parts of the world.

This leads to another problem; the approach to resistance. To his credit, Davidson is clear that the misery generated by neoliberalism has created deep bitterness and anger. In particular, he points to the paradox at the heart of modern right-wing politics. There is a contradiction between trying to promote the free market and the heartland at the same time. He quotes US commentators to make the point: ‘The more successful the [Republican] Party is at implementing its economic creed, the more quickly it devours its demographic base’ (quoted p.142).

He also recognises that there has been a rise in protest during the later neoliberal years. But like so many left commentators on these subjects, he seriously downplays the actual level of resistance. I could find no mention of the anti-capitalist movement that exploded round the world at the turn of the century, little on the anti-war movement that generated the world’s biggest global protests in 2003, nothing on the Occupy movement and accompanying anti-austerity revolts or on the revolutionary wave that shook the Middle East in 2011. Nothing either on the new radical electoral parties from Respect to Die Linke, Podemos, the Left Bloc and Syriza that emerged in Europe this century, which, whatever their weaknesses, also bore witness to an emerging anti-neoliberal mass consciousness.

As a result, Davidson’s discussion of revolutionary possibilities remains both abstract and rather narrow, tending to focus on the strengths of the weaknesses of the trade-union movement and on the dangers of reformism. This misses the central fact of the emergence of massive, popular, sometimes insurgent movements against austerity and war in so many parts of the world. As Vincent Bevans points out in his book If We Burn, the second decade of the twenty-first century saw the biggest upsurge of mass protest in world history. It is to this more than anything that the left needs to turn its attention.