Michael Fry: Neoliberalism should not be a dirty word

It is a political ideology that critics say has had its day, but Michael Fry believes it has been written off too soon

Labels are not always the best guide to what is inside the bottle, especially when they get so scraped and torn that the writing is hard to read. This is true in the supermarkets of politics even more than in the supermarkets of life.

Neither conservatives nor socialists have an especially well-defined product nowadays, let alone a secure customer base. But their problems are as nothing compared with the problems liberals have. For a start, the liberal range puts on offer two quite different and almost opposite kinds of product, on either side of the Atlantic Ocean.

In the United States, Barack Obama is the archetypal liberal, with his combination of big public spending programmes and the breaking down of historic barriers to equality. There were the same kind of liberals in this country, somewhat better defined since they have been calling themselves Liberal Democrats – though even this term is now confused by the policies of the coalition.

In contrast, European liberals see a big state as their enemy, and are prepared to put up with inequality if that is the price of personal freedom in the economic or any other sphere. It is at least a coherent doctrine: interesting, however, that few states have implemented it in its purity. Margaret Thatcher’s Britain came closest, even though she would have been horrified to find herself defined as a European in this or any other sense.

Because of all the confusion, the European sort of liberalism is nowadays more likely to be labelled neoliberalism. That is fair enough, since this liberalism does preserve some old ideas first staked out in the 19th century, lost from view under the collectivism of the 20th century and revived with various novelties added on as the collectivism failed. The relabelling has advantages in two directions. One is that it allows everybody on both sides of the Atlantic to talk about the same thing. The second is that a simple and readily understood concept makes a good Aunt Sally, a target easier to hit for its enemies.

Since the onset of the great financial crash in 2007, the enemies of neoliberalism have had a field day. This whole complex of ideas now faces a continuing torrent of abuse for being the basic cause of all our present woes. These are traced back to the deregulation of financial systems by Mrs Thatcher here, by Ronald Reagan in the US and by many other leaders in all parts of the world.

The neoliberals’ argument seemed at the time to be unanswerable. Free markets were the only economic mechanism that really worked. Nothing else created or distributed wealth on the same scale. Even the communist states of that era were impressed enough to abandon socialism for capitalism, several with success. It might have helped the rich in the first instance but, in the US, President Bill Clinton thought it could help the poor too: hence his invention of sub-prime lending.

Today this cycle of neoliberalism is over. Many of the free markets have collapsed, and economic activities dependent on them have dried up. Mechanisms that once bowled along under their own exuberant self-propulsion seem impossible to crank up again. Every policy that might be chosen in such conditions seems to offer as many drawbacks as hopes. The way things are, it is impossible to see what might bring the global economy back to life.

No surprise, then, to find commentators writing off the whole neoliberal era, from the 1970s to the 2000s, as an insane aberration which has now got its proper comeuppance. You can read plenty of them in the columns of newspapers, including this one. What is Aunt Sally’s answer going to be?

The first is to note that none of the critics has much of an answer either. Some seem to want a sort of Scargillite socialism, others to turn the clock back to before 1979 (winter of discontent, anybody?), while others still at least look forwards – if to a future so mistily utopian as to obscure any actual detail.

This vagueness is in itself grist to the neoliberal’s mill. He (perhaps I had better come clean and say I) will reject any overarching blueprint for society, especially in the form of a master plan or a grand design to be enforced by law. The fact that all such projects, of a socialist or any other kind, seem today so unconvincing is a sign that their era passed with the 20th century. Society cannot be designed like a machine. Even one with fixed goals is bound to get some of them wrong, and will in any case find them overtaken by events sooner or later.

That may seem a merely tactical answer to the critics, but in fact it is a strategic one. For neoliberals the absence of blueprints or fixed goals is a virtue because, in the neoliberal jargon, “process should determine outcome”. By process is meant any aspect of society that is interactive and involves all its members. Parliamentary democracy would be one example, but the market is far better: only two-thirds of the electorate votes (if we are lucky) but everybody goes to market, to buy or sell something, almost every single day. By contrast, how many people would be involved in planning an economy? The number would not even have four digits.

Because the purpose of this general social participation is the fulfilment of wants, we should be happy with the outcome: it means people are satisfying themselves. And if we are against utopias, we should be prepared to let such social development take its own course. We do this anyway in a still liberal country such as Britain.

Who would have thought, only a few decades ago, that premarital cohabitation – living in sin, as they used to call it – would have become the most common way of founding a household? As for gay people, they could not even legally have sex, let alone get married. A free society has resolved these matters for itself. Which group of planners would ever have planned them?

Of course, we cannot exclude the possibility that markets, like all human institutions, will sometimes fail. But when master plans and blueprints fail, they fail for good. Markets redesign themselves and carry on. Neoliberalism will survive our great economic crisis. What it offers as a solution is nothing more than the prospect of trial and error till things start to go right again.

If anybody has a better answer, please send it on a postcard to Downing Street, the White House, the Kremlin, the Great Hall of the People, the United Nations, the European Commission and anybody else who might be interested. But don’t ask for an acknowledgment.