In a recent essay published in The Monthly, Australian Prime Minister, Kevin Rudd, pronounces the death of neoliberalism. Rudd argues that the current global financial crisis exposes the failings of neoliberalism and that the world is now witnessing the re-emergence of social democracy. This article takes issue with these claims. It is argued that, by characterizing neoliberalism as solely an ideology, Rudd misses the crucial role played by the state under neoliberalism. Thus the mere 'return to regulation' is not, in and of itself, evidence of the abandonment of neoliberalism by policy makers. It is further argued that the policy agenda of Rudd's own government provides little evidence of a retreat from neoliberalism - indeed key aspects of the neoliberal agenda are clearly evident in the actions and rhetoric of the current Australian government.
In a recent essay published in The Monthly, Australian Labor Prime Minister, Kevin Rudd, pronounces the death of neoliberalism. Rudd argues that the current global financial crisis exposes the failings of neoliberalism, which he also refers to as 'free-market fundamentalism, extreme capitalism and excessive greed' (2009, 20). 'In the past year', writes Rudd, 'we have seen how unchecked market forces have brought capitalism to the precipice' (Rudd 2009, 22). As a consequence, the 'ideological legitimacy' of neoliberalism is now destroyed (Rudd 2009, 29). In rejecting neoliberalism, Rudd argues that social democratic governments such as his own, and in the USA under the leadership of the Obama administration, are uniquely placed to guide the global economy through the current period of crisis. Only social democracy, Rudd states, can marry 'properly regulated', but competitive, markets, with 'a commitment to fairness for all' (Rudd 2009, 21).
Rudd's essay is worth taking seriously not merely because it is a rare example of a national leader engaging directly with philosophical and political economic debates, nor simply because it has also been condensed and republished in the French newspaper, Le Monde. The primary significance of Rudd's argument lies in the fact that it reflects the tenor of many interpretations of the current economic crisis: that the crisis demonstrates the failure of neoliberal capitalism, and state bail outs of financial markets signal its death. For example, French President, Nicholas Sarkozy, proclaimed 'Laissez-faire is finished'. British commentator, Will Hutton (2008), argues that policy responses to the financial crisis mark a return to Keynesian-style 'managed capitalism'.
It is therefore useful to put these claims to the test and to ask: is neoliberalism history?
Neoliberalism in Theory and Practice
The conclusions reached by Rudd, Sarkozy, Hutton, and many others, that neoliberalism is history, are based upon an understanding of neoliberalism as constituted by a retreat of the state. According to this logic, the return of regulation, such as the nationalisation of major financial institutions, necessarily marks the end of neoliberalism. As Rudd argues, 'With the demise of neoliberalism, the role of the state has once more been recognized as fundamental' (2009, 25).
Arguments such as these treat neoliberal theory, and the policy practices of neoliberal governments, as synonymous. Yet there are significant differences between neoliberal theory and practice. Most importantly, the state has been central to the neoliberal project. To identify the implications of the current crisis for neoliberalism, it is necessary to distinguish between neoliberal theory and practice and then reflect upon how the balance of political economic forces might shape future policy outcomes.
A useful starting point is the relationship between the theoretical prescriptions of neoliberalism's proselytisers, and the implementation of neoliberalism as policy. Neoliberal theory draws upon the writings of economists such as Milton Friedman and Friedrich von Hayek, who advocated a radical winding back of the size and scope of government. …