by Dr. Jack Rasmus, Z Magazine, December 2019
copyright 2019

\”Hundreds of books and articles, perhaps thousands, have been written to date on the meaning and consequences of what’s called Neoliberalism. But clarity as to what it means, what has driven its evolution for the past four decades, and what’s its likely future trajectory remain insufficient at best.

Critics of Neoliberalism have yet to explain it fully or adequately. They are therefore unable to say little about its future evolution.
Some key questions that remain unanswered are: Has Neoliberalism been unraveling since the 2008-09 recent economic crisis and the slow growth, often stagnant recovery that followed? Is it being restored under Trump? Will it survive the next capitalist crisis almost certain to occur by the early 2020s? What are the material forces maturing within 21st century capitalist economy that will precipitate and drive that next crisis, and will Neoliberalism be able to successfully adapt? If not, what ideas and policies might replace the current Neoliberal era (1979-2019) of capitalism?

Most analyses concur that Neoliberalism represents an economic shift introduced by capitalists and their political elites—initially in the US and UK—in response to the crisis capitalism encountered in the 1970s decade. In other words, it has something to do with capitalist economy in crisis.

Other accounts attempt to explain its origins and evolution primarily from the perspective of an Idea that inspired, defined, and enabled US and UK capitalist-elites’ to respond successfully to the 1970s crisis.

Still others explain Neoliberalism as an historical practice, i.e. as a new regime of policies introduced in the late 1970s in the US and UK—later adopted by other capitalist economies worldwide to varying degree and form—that emphasizes austerity in government spending and reliance in policy matters on free markets.

But all that doesn’t really tell us much. Defined that way leaves its meaning still opaque and ambiguous—and therefore unable to predict where and how Neoliberalism may evolve in the future.

The analysis of Neoliberalism to date has produced so many interpretations, often contradictory, that readers remain confused as to what exactly it means. Is it about introducing free market principles into economic and social policy? Is it about austerity in fiscal spending? Is it just a substitute term for what was formerly referred to as Imperialism abroad and class exploitation at home? As one analysis concluded, “imprecision would seem to characterize its use, sometimes even among those for whom the concept is central to their analysis, and its over-use is seen to have resulted in a loss of analytical value.”

The Ideology of Neoliberalism

According to those approaching Neoliberalism from the perspective of the evolution of an Idea, the Neoliberal Idea originates around mid-10th century among ultra conservative intellectuals like Friedrich Hayek and Milton Friedman in economics; in the philosophy of radical individualism by Karl Popper and Robert Nozick; and in policy proposals from right wing pundits like Charles Krauthammer, William Kristol and Robert Kagan—to name but a few or the more notable.

As these intellectual originators viewed it, their task was to adapt, repackage and resell some of the main tenets of classical liberalism. To plant and nurture the seeds of new ideas, and counterpose those ideas to the prevailing dominant Keynesian economic and otherwise social compact views that prevailed post world war II. The new ideas would be resurrected, classic Liberal ideas adapted to the post-war environment. New ideas that were new-Liberal or Neoliberal, designed to displace the dominant Keynesian-social compact-collectivist ideas of the period and encourage and usher in a new set of policies based on the new ideas that would, in effect, represent pre-Keynesian, pre-social compact ideas once again. It was to be old classic Liberal wine in the new Neoliberal bottle.

But is Neoliberalism actually ‘Liberal’? How does it compare with the classic liberal economic and social theory of the 17th-18th century? Neoliberalism as an Idea claims it is based on classic liberal ideas of free markets and individual freedom. It claims that by adapting classic liberal principles and propositions to new economic and social policies the new policies will succeed in promoting economic growth and stability, whereas the old Keynesian-collectivist policies failed to do so. Thus it is Neoliberal Ideas that drive the eventual policies that came to be known as ‘Reaganomics’ in the US and ‘Thatcherism’ in the UK.

But Neoliberal Ideas have actually little in common with the classical Liberal; and it is an intellectual conceit to argue that Neoliberal Ideas drove and determined the Neoliberal policies that were eventually introduced in the late 1970s-early 1980s. In fact, a reasonable argument may be made to the contrary: it is Neoliberalism in Practice that reached back and adopted Neoliberal Idea propositions in order to justify and legitimize its policies. But what exactly are the basic propositions of Neoliberalism as Idea? What congruence is there between those propositions and the 17th-18th century Classic Liberalism? And do either—i.e. Classic Liberal and Neoliberal Ideas—have anything to do with Neoliberalism in Practice?

The Basic Propositions of Neoliberalism as Idea

• Markets should always be free of government interference and the economy and policies should be based on free markets

• Free markets require deregulation of business, as well as privatization of all public ownership of production of goods or services

• Free markets are always and everywhere more ‘efficient’ than regulated markets or government provided goods and services

• Free trade should always and everywhere govern the exchange of goods and services between economies and countries

• Government should never intervene in markets—whether to provide public works, correct negative ‘externalities’ created by those markets, or even to provide public education, health care, or other services

• Taxes should be cut to stimulate economic growth—especially taxes on business and investors. Cutting taxes creates additional investment and therefore employment and growth

• Government budgets should always be ‘balanced’, avoiding deficits and therefore accumulation of government debt

• To ensure stable economic growth, the money supply should be increased according to a ‘monetary growth rule’—i.e. a set amount every year.

But these elements of the Neoliberal Idea have very little to do with Classic Liberalism. And have even less to do with Neoliberalism in actual practice.

The Basic Ideas of Classic Liberalism:

• Markets should be free only to the extent that they fostered superior moral behavior and enable the development of the individual.

• Free markets were more efficient only if they promoted competition among capitalists, resulting in goods being produced at the lowest cost, and therefore lowest price, while providing the greatest possible amount of goods to the greatest number of individuals.

• Not all business activity should be deregulated or privatized. Some things markets would not produce, even if socially necessary and demanded by the public; or they would produce them for only a wealthy minority who might afford them only at the much high prices that markets might have to charge a smaller, privileged number of buyers.

• Markets sometime behave badly and at times must be regulated. Not all government services should be privatized. In fact, services like public education must be provided by government since markets would not find it profitable to provide them.

• Free trade is not always appropriate everywhere. Nor beneficial to all.

• Economic growth is stimulated by raising taxes on business, not cutting taxes. Higher taxes force business to introduce more efficient ways of producing to offset the cost of the tax increase. New technology that results actually increase jobs and stimulate economic growth.

• Budget deficits are justified for purposes of spending on defense, public safety, and critical social services (education) and public works that markets may not provide

• Money is ‘neutral’. An increase in its supply cannot, by itself, lead to economic growth and stability. Growth is generated only by increasing available land, labor, and capital and by raising its productiveness.

A close reading of the actual works of 17th-18th century Classic Liberal economists like Adam Smith, David Hume, and others shows the preceding points represent fundamental ideas of Classic Liberalism. But, as a comparative reading clearly shows, they are in sharp contrast to the basic propositions that define Neoliberalism as of the late 1970s. In short, in so far as classic liberalism is concerned, Neoliberalism is not ‘Liberal’ at all. Neoliberalism is not ‘new’ Liberalism or any kind of Liberalism. What it represents is something quite the contrary.

Comparing Neoliberalism as Idea with Neoliberalism in Practice

But what about Neoliberalism in actual, historic practice? How does it compare—to Classic Liberalism as well as Neoliberalism as Idea? Neoliberalism in Practice differs from both. It is even further removed from Classic Liberalism. And in a number of ways it is even the opposite of Neoliberalism as Idea.

1. First, Neoliberalism in practice is not at all about expanding free markets. There are few, if any, free markets under Neoliberal capitalism. The fiction is created by Neoliberalism as Idea writers is that, just because industry is deregulated and public goods privatized, deregulation is equivalent to the creation of ‘free markets’. Neoliberal capitalism is about the destruction of market competition and the concentration of economic power among fewer and fewer remaining businesses in an industry. It is about eliminating ‘free markets’ whenever and wherever possible. Capitalism always drives toward eliminating competition, and without competition there are no ‘free’ markets in the Liberal sense. So Neoliberalism in Practice is the antithesis of free markets.

It is also different in that, in practice, Governments in the Neoliberal era of capitalism are deeply and increasingly involved in the economy on behalf of capitalist interests in general, and in particular involved in assisting mergers and acquisitions and thus in advancing the concentration of capital and business into fewer producers and sellers. And the larger and fewer the remaining producers, the less ‘efficient’ they become. That is, the higher costs of their production and in turn the higher the prices they charge consumers. Markets in effect become more concentration, less efficient, and less ‘free’ as a consequence of Neoliberalism in Practice.

2. One might add to Neoliberalism’s contribution to ‘micro’ level inefficiency the even more massive macro inefficiency of capitalist Neoliberalism. How efficient is Neoliberal capitalism when it creates economic crashes like 2008-09, when 14 million homeowners in the US alone were foreclosed and lost their homes? Or when 20 million were left unemployed, and then underemployed for years more after 2009. Or when $4T in lost interest income occurred for retirees as a result of the near zero interest rate policy of the central bank, the Federal Reserve, in effect from 2009 to 2016? Or the additional $4T in collapsed retirement benefit program values. Meanwhile the same central bank zero rates resulted, in contrast, to more than a $1T a year on average in stock buybacks and dividend payouts to shareholders every year from 2010 through 2019. Corporations borrowed virtually ‘free’ money at near zero interest rates—either from loans or by issuing corporate bonds—and turned around and distributed most of it to shareholders at the rate of $1T plus a year. Or what of the macro-inefficiency of spending $7 trillion in US war products that were either blown up or dumped in deserts when declared obsolete. The ‘macro-inefficiencies’ of Neoliberal capitalism are massive and almost incalculable in the US economy alone.

In short, there is nothing ‘free’ or ‘efficient’ about markets in the Neoliberal era in practice. The founding intellectuals of Neoliberalism as Idea, when promoting that notion, are therefore simply peddling a lie—i.e. they are promoting the ideology of Neoliberalism not its reality. They are peddling a notion of Neoliberalism that doesn’t exist in the real world of Neoliberal practice. What Neoliberalism in Practice has done is simply used the lie that free markets are more efficient in order to justify and to ‘sell’ the actual policies of industry deregulation and public goods privatizations. In other words, deregulation and privatization have nothing to do with free and efficient markets. The latter are just the intellectual veil, the cover to justify the Neoliberal policy.

3. Nor is the Neoliberal idea that tax cuts create jobs and economic growth any more the case in fact. Tax cutting under in the Neoliberal era since 2000 alone has amounted to more than $15 trillion—80% of which has accrued to investors, businesses, and the wealthiest households. In turn, that $15 trillion has resulted in the weakest rate of investment, job creation, wage increases, and general economic growth in the US in the past half century. In other words, business-investor tax cuts did not create jobs. They destroyed them, as tax incentives strongly encouraged US multinational corporations to move operations offshore. Trump’s 2018 tax cuts—the latest iteration of this ‘business tax cuts create jobs’ shell game alone provide another $2 trillion for US multinational corporations over the next decade. They can now produce offshore tax free. Why then should they expand production and jobs in the US, one might ask, when they can henceforth produce offshore and pay no taxes?

4. Neoliberalism as Idea further maintains that free trade should be the norm everywhere. But in Neoliberal Practice free trade means incentives to further move US production offshore. US businesses then produce offshore at lower cost and ship the goods produced back into the US, now without tariffs, for US workers to buy, now with lower paid service jobs replacing the higher paid manufacturing jobs that were offshored due to free trade. Instead of higher wages, workers are now allowed to borrow (credit) to buy the products, incurring debt, the interest of which they now pay banks and stores issuing the credit cards. Free trade also means banks and finance capitalists, who get to borrow at near zero interest rates, invest the money offshore instead of in the US. Free trade is more about such international money flows from the US as it is about goods and product flows produced abroad back to the US. All this is the reality of Neoliberal free trade, compared to the fiction of the Neoliberal Idea of free trade where all parties somehow benefit from free trade—workers, consumers, as well as capitalist producers and bankers.

5. Perhaps nowhere is the distinction between the Neoliberal Idea on deficits and debt greater from the practice of Neoliberalism. The former declares the objective is to balance the budget and reduce government debt; whereas Neoliberalism in Practice is about allowing the uncontrolled escalation of annual budget deficits and therefore government debt. At barely $1 trillion when Neoliberalism in Practice began in 1979-80, deficits and debt had escalated to $4T by 2000, rising to $10T by 2009, and to nearly $23T by year end 2019. Trump 2018 tax cuts and annual war spending escalation will raise debt to more than $35T by 2028.

6. The monetary growth rule of Neoliberalism as Idea also contrasts sharply with the practice of Neoliberalism. Instead of allowing the central bank to slowly and steadily increase the supply of money in the economy according to an objective rule, or fixed formula, the practice of Neoliberalism has been to have the central bank continually inject massive amounts of money into the economy. In times of banking crises and after as well. The result is chronic, low interest rates, which enable lending at low cost to investors and corporations alike, much of which borrowed is then diverted to offshore investments, to re-investment in stock, bond and other financial markets, to distribution to shareholders in the form of stock buybacks and dividend payments, or into merger and acquisition of competitors by businesses. The Idea of Neoliberalism thus has little in common with its practice so far as money is concerned.

What the foregoing paragraphs reveal is that Neoliberalism as Idea has little in common with Classical Liberalism, but even less in common with Neoliberalism as Practice. The function of Neoliberalism as Idea is therefore to provide logic and pro-individual, pro-personal freedom arguments in order to justify the Neoliberal policies that occur in practice—i.e. policies that are often quite contrary to those arguments and that Idea. The practice of Neoliberalism is thus neither classical liberal nor even Neoliberal.

Contrary to many accounts of Neoliberalism, the Idea of Neoliberalism does not give rise to, or enable Neoliberalism as actual historical practice. The role of Neoliberal Ideas is to legitimize—after the fact—the actual policies and practice of Neoliberalism.

A problem with many accounts and analyses of Neoliberalism is that they assume that Neoliberalism as an Idea is what gave rise from the mid-1970s on to Neoliberalism as an actual historical practice. Somehow the ideas are what convince capitalists, their lobbyists, their business organizations, their trade associations, etc. to propose to their political elites in Congress and legislatures the actual Neoliberal policies, The policies are thus a reflection of their ideas. However, as just shown, Neoliberal ideas have little in common with the actual policies and practices of Neoliberalism that get introduced and implemented. So how can the ideas drive the actual historical practice, i.e. the policies, if they are different?

Perhaps the causation is actually the reverse: the policies and practices are developed by the capitalists and their political elites. The ideas of Neoliberalism—a strange amalgam of classic and non-classic liberal propositions—are after the fact then employed as justifications and legitimization of those policies. Embalmed in a veneer of personal freedom, individualism, efficiency, benefits from employment, etc., the dead body of Liberalism is resurrected in decayed form to argue that the corpse is still alive and liberal even though it has long deceased.

Nonetheless, many critics of Neoliberalism simply slip back and forth between the Idea and the Practice of Neoliberalism, with little explanation of how the one, the Idea or the Practice, causally determines the other.

Neoliberalism in Practice

What then are the actual policies associated with actual, historical Neoliberalism? Here too critics of Neoliberalism fail to provide a comprehensive explanation. As noted previously, major attention is given to Neoliberalism as Austerity policy, or as industry deregulation and privatization, or as free trade. But little attention is paid to Neoliberal monetary policy or Neoliberal external policies apart from trade—i.e. currency exchange rate policy or what is called the ‘twin deficits’ policy solution. Nor is much explanation given to how Neoliberal policy promotes the financialization of the global economy, financial deregulation, and cross border money capital flows. While fiscal policy and industrial policy (i.e. deregulation, privatization, de-unionization, wage compression, etc.) are addressed in most accounts of Neoliberalism, not much in the way of analysis and critique is given to External Policy and Monetary Policy. But Neoliberalism in Practice, i.e. as policy, is more than just Fiscal Policy and Industrial Policy.

Neoliberalism in Practice represents a particular policy regime, consisting of Fiscal policy (tax, spending, deficit-debt management), Industrial policy (deregulation, privatization, de-unionization, wage compression, financialization), Monetary policy (excess liquidity injection, chronic low interest rates), and External Policy (trade, low US dollar exchange rate, twin deficits).

Neoliberalism represents a particular mix of these policies. Before Neoliberalism, the four main policy areas also existed but in a different mix and different relationship to each other. It was a different policy ‘regime’.

The policy regime before the Neoliberal policy shift originated in the wake of of the second world war, originating roughly in the period, 1944-53. A still different policy regime was created in the US just prior to world war one, in the period 1908-13. Thus the US experience has been to restructure the economy in a major way at least three times in the last century: 1908-13, 1944-53, and 1979-88. The latter, 3rd restructuring is simply called the Neoliberal. Its policy mix or regime differed from the two prior regimes.

The policy restructuring in all three cases was designed to change policies in order for US capitalism to confront a challenge or crisis. In 1908-13 US capitalism prepared to restructure its economy in anticipation of becoming a more or less equal competitor with the UK and European capital in general on the stage of the world economy after world war one. In 1944-53, capitalists restructured once again as the US became the sole hegemon in the global economy following world war two. Both restructurings represent US capital shifting policy fundamentally in order to confront a major crisis and opportunity. In each case the restructurings were accompanied by a particular policy reordering. That reordering occurred a third time as a response to the crisis of the 1970s, not war. In that sense it differed from the earlier two restructurings and policy shifts.

In the Neoliberal case, the US re-established itself as the hegemon in the global capitalist economy for at least several more decades. Challenges domestically and abroad in the 1970s were successfully contained, and US capital emerged once again globally and internally as the key dominant player in the global economy.

Neoliberalism in Practice—i.e. as a particular new policy mix of the four areas—continued to expand and evolve throughout the 1990s and after 2000. The global crash of 2008-09 halted its development and evolution, however. As argued in this writers’ book, ‘The Scourge of Neoliberalism’, Neoliberal policy evolution hit a wall with the 2008-09 crash. Obama tried but failed to restore it and regain its momentum. Trump’s policies should be viewed as a future attempt to restore Neoliberalism as policy, albeit in a new virulent and aggression form that is still in progress.

Whether Trump will succeed remains to be seen. However, there are fundamental real and material forces in development—involving changes in technology, AI & machine/deep learning, the nature of money, production processes and distribution channels, new business models, product-capital-labor markets, and in political resistance both domestic and foreign—that may well prevent Trump’s restoration attempt.

Over the past four decades Neoliberal policy has evolved and expanded. It has also begun to develop its own internal contradictions—as discussed in more detail in the aforementioned book. As a partial summary of Neoliberalism in Practice at this point, the following elements may be said to now constitute Neoliberalism in Practice as of 2019:

• Social program policy cuts, focused heavily on reducing and eliminating government programs introduced from 1934 through 1965;

• Aggressive deregulation of industries, especially banking & finance, communications, public and private transport, education and healthcare;

• Privatization of employer contributed healthcare and retirement services introduced with the 2nd restructuring, privatization of military services, and privatization of public goods and services including federal lands access;

• Deep reduction of business-investor-wealthy household taxation on profits and capital incomes (interest, dividends, business rent, etc.);

• Chronic escalation of war and defense spending amidst social spending austerity;

• Tolerance of rising budget deficits, the national debt, and interest on that debt;

• Central bank monetary policies based on chronic liquidity injections designed to ensure long term low bank interest rates that subsidize business costs of investment;

• Incremental de-unionization and weakening of collective bargaining, as well as compression of wage incomes;

• Promotion by government of radical changes in the labor markets, creating millions of contingent labor employment, low paid service jobs, atrophy of minimum wages, massive offshoring of manufacturing employment, and encouragement of on-shoring of skilled labor visa policies;

• Substituting free trade for traditional trade policy measures based on tariffs, quotas, and administrative measures as the primary means to maximize US corporate exports;

• Acceptance of US trade deficits in exchange for a ‘twin deficits’ solution ensuring US offshore dollar recycling arrangements with major allies and global trading partners;

• Encouraging a long term low US dollar exchange rate and US money capital outflows and foreign direct investment;

• Promotion of financialization of the US economy at the direct expense of real asset investment based economic growth;

Thus Neoliberalism in Practice is not simply a set of policies associated with social program cutbacks and fiscal austerity, or industry deregulation or privatization, as many identify. It is much broader than that. It represents a basic economic system restructuring that involves a resurgence and aggressive expansion at the expense of both foreign capitalist competitors as well as domestic working classes. It is an attempt to re-establish US economic hegemony in the late 20th century and well into the 21st. In that it succeeded…until the crash of 2008-09, from which it is yet to fully recover.

What’s Missing in Critiques of Neoliberalism

Apart from not adequately addressing the material origins of the restructuring that gives rise to Neoliberalism, critics of Neoliberal policy fail to address key elements of its unique policy and program mix. To begin with there’s the lack of analysis of what’s called external policy—i.e. twin deficits, external debt, currency exchange rates, foreign direct investment and global money capital flows—are often largely missing. Neoliberalism is characterized by a particular set of external policies that differ from prior restructurings.

Consideration of trade or goods flows, and perhaps free trade treaties, are the limited focus of most critiques. Another area where critics fall short is a superficial treatment of Industrial policy. While de-unionization, job offshoring, general wage compression, and industry deregulation are addressed by critics, fundamental developments like the rise of contingent labor and the even more destructive now just emerging phenomenon—artificial intelligence and machine learning—are ignored for their effects on labor markets and the shift in capitalist vs. worker relative power they represent. Also missing, in all but minor terms, is the financialization of the global capitalist economy. Here the role of capital markets, shadow banks, derivatives, the rise of the new global finance capital elite, and the relative shift to financial asset investing, crowding out real investment, are left largely unconsidered; in other words, that which might be classified as the new phase of imperialism and US vs. global capitalist class competition and conflict is not adequately addressed. Not least, what is also missing in most accounts of Neoliberalism is how its advance is closely correlated with the atrophying and decline of Democracy in America—i.e. the norms, practices, parties, the electoral system, and even government institutions.

Dr. Jack Rasmus is author of the just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, October 2019, which is available for purchase at discount from the author’s blog,, and website, Jack hosts the weekly radio show, Alternative Visions, and tweets at @drjackrasmus.

by Dr. Jack Rasmus, Z Magazine, February 2020

The following is a continuation of the analysis of contemporary US Neoliberalism in practice that was begun in Part 1 in the preceding issue of Z Magazine. In Part 2 the arguments is made US Neoliberal policy experienced a crisis in 2008-09 US and the historic weak recovery that occurred thereafter under the Obama regime. The Trump administration should be understood as an effort to restore the Neoliberal offensive in a more virulent, aggressive, ‘2.0’ form.

Once again the four key areas that define Neoliberalism are considered: Fiscal policy, Monetary policy, Industrial policy, and Trade-External policy. And after three years of Trump it has become clear that Trump has restored momentum to Neoliberalism in the US, although only partially and in only select policy areas. The Trump restoration to date is thus incomplete.

In areas of Trade-External policy he has clearly failed to date, clearly succeeded in Fiscal-Tax policy, while in still others—such as Monetary policy—a restoration effort still ‘in progress’. Looking into the future, material forces that have been developing within US and global capitalism make it increasingly unlikely Trump will be able to success in fully restoring US Neoliberal policy momentum such as existed in the 1979-2007 period.

What will follow Trump’s failed restoration is yet to be determined. But whatever it is, it is unlikely to conform to the definition or character of Neoliberalism as it has been known up to now. What follows will either be something more radical and aggressive on behalf of capitalist America—at the expense of American capitalism’s domestic and global challengers—or else a return to a more progressive policy regime that will reverse the worst legacies of Neoliberalism.

(The following analysis of Trump Neoliberalism is an excerpt from the long chapter 8 in ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, by Dr. Jack Rasmus, published by Clarity Press, January 2020.)

Trump’s Reactionary Neoliberalism

Trump’s election and his economic policies that have followed is best understood as a reaction to the Neoliberal policy regime’s failure under Obama to successfully address the economic crisis of 2008-09, both domestically and globally. Furthermore, Trump’s attempt to resurrect Neoliberalism has more in common with the original neoliberal project initiated by Reagan: i.e. in both cases, their economic policies represent an attempt to confront a preceding period of extended stagnation of the US economy. With Reagan, the 1970s economic stagnation and crisis; with Trump, the weakest recovery from recession in the past fifty years that occurred 2008-2016. .
It remains to be seen, however, whether Trump can still succeed in resurrecting neoliberal policies by restoring to full effect the following twelve hallmark characteristics of neoliberal economic policy:

• significant expansion of US war-defense spending;

• subsidization of investors’ and businesses’ profits via business-investor tax cuts;

• shifting of total tax burdens to payroll taxes and other regressive taxes;

• reductions in social program and social benefits spending;

• restructuring of external trade and currency relationships with US global capitalist competitors, allies and adversaries alike;
• expansion of free trade treaties, whether multilateral or bilateral;

• long term low dollar exchange rate to maximize profits of US multinational corporations’ offshore operations and competitiveness of US corporate exporters;

• continuation of the ‘twin deficits’ solution to enable financing of ever larger US budget deficits and national debt;

• continuation of central bank policies ensuring chronic low interest rates via traditional bond buying operations, and/or Quantitative Easing (QE), to subsidize profits of the private banking system and financial markets;

• expansion of industry deregulations and privatizations of public goods, services and programs;

• destruction of unions and collective bargaining to compress nominal wage and negotiated fringe benefits;

• wage compression by means of delay of minimum and protective wage legislation inflation adjustments, by encouragement of growth of contingency labor employment, by offshoring of jobs, by encouraging displacement of labor with capital by automation, and by policies permitting importation of lower paid skilled labor by H1-B and L1-2 visas;

These are the major policy offensives that together have defined the US neoliberal policy regime since 1980. They are policies that in turn have facilitated the induced restructuring of US capitalist economic relations in the Neoliberal era— with both other capitalist economies as well as with US domestic non-capitalist groups and classes. Not least, they are also the policies that brought about the deleterious conditions faced by large masses of working people, which were responsible for Trump’s election victory.

Trump’s Neoliberalism: Successes, Failures, Work Still In Progress

After nearly three years of Trump policy initiatives it is evident that several of the key elements of neoliberal economic policy have been successfully resurrected and restored by Trump after the crisis of neoliberal policy experienced post-2008. These are:

• business-investor tax cutting,

• defense-war spending escalation,

• industry deregulation and privatizations, and

• labor compensation compression and union destruction.

The restoration of other neoliberal elements is a work still in progress:

• the restoration of chronic low interest rates (i.e. central bank monetary policy) and

• ensuring a low US dollar valuation (i.e. exchange rate policy).

But still other neoliberal policies thus far have been proving difficult for Trump to restore. These include, in particular:

• deep cuts to entitlement and other social program spending,

• the restructuring of US trade relationships, and

• ensuring the continuation of the ‘twin deficits’ solution required to continue to successfully finance US budget deficits and the US national debt.

Trump’s failure to restore neoliberal policy across all these fronts simultaneously is in part due to the fundamental contradictions between the four dimensions that constitute the Neoliberal policy mix and regime—i.e. fundamental contradictions lie at the heart of the neoliberal policy regime itself.

But Trump’s failure to date is not due only to these fundamental contradictions between Neoliberal policies. It is also due to the resistance, both domestic and foreign, that Trump’s attempted restoration has been generating, both home and abroad. Trump has launched a more aggressive, virulent form of neoliberalism in his effort to continue an ultimately untenable neoliberal policy regime for yet another decade. Hence, it’s a nastier, 2.0 version, introduced in the increasingly desperate effort to overcome the neoliberal contradictions and the resistance to it.

Trump Neoliberalism: Restructuring Economic & Social Relations

Trump’s more aggressive, nastier form of Neoliberalism requires not only launching new neoliberal initiatives—like global trade restructuring—but also requires fundamental structural change in US political-governmental institutions and US political culture.. Political change under Neoliberalism is thus necessary in order to achieve more aggressive economic policy objectives.

In other words, just as Neoliberal policy evolution drives economic restructuring, and economic restructuring requires ever more aggressive Neoliberal policy—so too does Neoliberal policy in turn drive political restructuring in order to address the resistance to its continuation as it becomes more virulent and aggressive.

Late stage neoliberal evolution thus requires a change in the relations within and between formal US government institutions (Congress, Executive, Judiciary), between the electorate and those institutions, within and between traditional political parties, and between new political rules and norms and traditional civil liberties and democratic practices protected by the Bill of Rights. Change in international political institutions is also driven by the effort to make way for, extend and expand Neoliberalism. Institutions like the IMF, World Bank, NATO, G7, G20, and national security arrangements among US and its allies, etc., become targets for restructuring by the US as the American empire reacts to its waning influence and power on the global stage.

Has Trump Restored Neoliberalism?

After nearly three years in office, Trump’s restoration of the Neoliberal policy regime is a mixed picture. On the one hand, Business-Investor tax cuts and War-Defense spending fiscal policies have clearly been set back on an accelerating growth course established under George W. Bush. In fact, they are being pursued even more aggressively. What we have here is clearly a more virulent Neoliberalism 2.0. The faltering of War-Defense spending under Obama—which was necessary to justify an even greater $1.-$1.5 trillion reduction in social program discretionary spending—has been especially restored. In addition, Trump’s tax cuts have exceeded in two years what Obama had achieved in eight. So its restoration—and then some—with regard to these two Neoliberal policies.

A similar case may be made for Trump’s Industrial Policy as it applies to deregulation and privatization. Other elements of Industrial Policy represent more of a continuation of preceding trends prior to Obama, and an elimination of Obama’s softer approach in some areas of wage, de-unionization, and other industrial policy programs. While Obama slowed and in some cases rolled back the privatization of public lands and public goods, Trump has succeeded in reversing those rollbacks. On the other hand, Obama was an advocate of privatizing education through Charter schools and his ‘No Child Left Behind’ program. Nor did he lift a finger to defend the attack on teachers unions and collective bargaining in the public sector. Industrial policy associated with wage compression and jobs under Trump represents a return, after Obama, to blocking federal and other legislated wage minimums, while reigniting the Neoliberal attack on reducing eligibility for overtime pay. But wage levels for most workers consistently fell under Obama, and under Trump have proved the same even as the high end of wage earners may have improved under Trump.

But there are three area of Neoliberal Policy where Trump restoration has clearly been failing to date. He has not been able to achieve even token reductions in social program spending and other non-defense discretionary spending. He has clearly been willing to forego those cutbacks in exchange for agreement by Democrats to allow his escalating War-Defense spending. Nor has he been willing to take on a fight to cut mandatory spending programs like social security retirement and Medicare as yet. Should he win another term in office, however, that attack is almost guaranteed as forthcoming after 2020.

His two highly successful restorations—i.e. War-Defense spending and Business-Investor ta cutting—combined with failure to cut social program-nondefense discretionary spending has resulted in a rapid rise of $1 trillion dollar annual budget deficits and accelerating US national debt. That too must be acknowledged as a failure at Neoliberal restoration.

The two areas of Neoliberal Policy where Trump’s restoration has failed most dramatically to date, however, are Monetary Policy and External Policy—the latter in particular with regard to trade relations restructuring and ensuring a low dollar exchange rate. Neoliberal Monetary Policy defined as ensuring chronic, long term low Federal Reserve interest rates might be called a fight over policy in process. Thus neither Monetary Policy nor External (especially trade) Policy to date represent a restoration of Neoliberalism by Trump by any definition.

The question is whether the contradictions inherent in these various elements of Neoliberal policy will, or even can be, overcome. As the beginning of this chapter indicated, Trump has clearly successfully restored some of the key elements of Neoliberal policy regime, has just as clearly failed to restore other elements, and other key elements remain a ‘work in progress’. Some long standing contradictions within Neoliberal Policy that have been there since the beginning under Reagan still remain—such as the difficulty achieving Neoliberal external/trade policy objectives without undermining Neoliberal fiscal and monetary policy elements; or new contradictions emerging and intensifying—such as the growing contradictions within fiscal policy between deficits & debt financing, on the one hand, and Neoliberal tax cutting and defense spending on the other. Or within Neoliberal monetary policy—in the form of central bank engineering lower interest rates while still selling Treasuries at an attractive rate yield in order to finance budget deficits. Contradictions within Neoliberal external/trade policy are also growing—such as keeping the dollar exchange rate low while simultaneously raising tariffs, even as the latter slows the global economy and raises demand (and therefore value) of the dollar.

Another long standing contradiction inherent in Neoliberalism since the beginning, under Reagan, has been the inability of U.S. capitalist economy to reconcile rising War-Defense spending with business-investor tax cutting while deepening Austerity in social program expenditures. Domestic resistance has prevented the latter, except for a brief period during the last crisis in 2011-13 under Obama. Neoliberalism’s ‘alternative solution’ to this was to establish the ‘twin deficits’ that would in effect provide the revenues (from borrowing) to cover the deficits created by Neoliberal continued War-Defense escalation and ever greater Business-Investor tax cutting. But this fiscal policy contradiction solution, by means of External policy (running trade deficits and introducing free trade agreements), has spawned a further and perhaps even more serious contradiction: namely, rising global capitalists’ opposition to Trump’s trade wars policy which itself threatens the twin deficits solution to the fiscal policy contradiction.

Thus domestic US popular opposition to austerity in social spending (which will certainly intensify should austerity apply to mandatory social programs like social security), on the one hand, and capitalist competitor opposition to Trump Neoliberal trade policy, on the other, together represent a political reflection of the contradictions that exist today within the Neoliberal policy regime and the opposition to which it gives rise. Neoliberalism cannot have it three ways: it can’t have social program austerity amidst escalating War-Defense spending and Business tax cutting. It can’t have its cake and eat it without having a bad bout of deficit-debt indigestion. And its effort to restore US hegemony via External policy (aka trade restructuring) may no longer be possible either. If so, the US twin deficit will be the eventual casualty.

Overlaid on all this is the realization that Neoliberal Monetary Policy has run its course and is exacerbating all of the above. Neoliberal low interest rates—so important to US multinational corporations’ foreign profits realization and to a low dollar exchange rate—appears increasingly unsustainable. Neoliberal Monetary Policy since the mid-1980s has been in the service of providing low cost money for US business, low dollar valuation for US multinational corps, cheap money for US bankers and borrowers, and a source of annual trillion dollar income redistribution for capitalist investors via stock buybacks and dividend payouts. In short, it has subsidized capital to the tune of trillions of dollars—in the process artificially boosting financial asset markets and speculative profits. In so doing, however, the chronic nearly four decades of cheap money & credit (and therefore the massive debt increase) ultimately engineered by the Federal Reserve and other central banks, has in effect ‘broken the back’ of monetary policy as a force for stimulating the real economy during periods of economic slow growth and recession. The chronic long term and artificially low interest rates have had several effects. One is provoking intensified inter-capitalist competition in the form of ‘competitive devaluations via central bank monetary policy’.

In the 1930s decade, competitive devaluations by government declaration or fiat played a major role in preventing the global capitalist economy from economic recovery from depression. Today the same is occurring, but through the intermediary of central bank monetary policy. As the US attempts to drive interest rates down, other world economies do the same and more so by central bank rate policies as well. The result is currency instability outside the US and capital flight to the US as other currencies fall. That capital flight’s destination drives up the value of the dollar. And that disrupts US trade restructuring objectives. So the nearly four decades of US central bank massive liquidity injections in the economy, designed to drive down interest rates, actually results in a rising dollar instead of its decline in response to interest rate cuts.

What the foregoing represents is that Neoliberal Monetary Policy increasingly contradicts Neoliberal trade restructuring and low dollar neoliberal policy objectives. Just as contradictions prevent the three objectives of Neoliberal Fiscal Policy, so too is Neoliberal Monetary Policy today serving as a contradiction to Neoliberal trade restructuring. The reflection of this contradiction on a personalities level is Trump’s simultaneous attacks on China president, Xi, as the US is thwarted in trade restructuring, and on US Federal Reserve chair, Jerome Powell, as he is blocked in the area of driving down interest rates.

Contradictions of Neoliberalism

At the highest level, Neoliberal Fiscal, External, Industrial, and Monetary Policies are ‘out of synch’. Or, more accurately, are increasingly in contradiction to one another. Ultimately this combined ‘grand contradiction’ is due to the financial restructuring and globalization of the international capitalist system since the 1980s, as well as the multiple other material forces that have been evolving within global capitalism during its current four decade Neoliberal phase. In other words, the evolution of the US and global capitalist economy itself is at the heart of the growing contradictions within the Neoliberal policy mix. This is no different than prior capitalist policy regimes that arose in the early and mid-twentieth centuries in the US. The new policy mix, associated with the prior natural restructuring of capitalism, at first serves to integrate and stabilize that restructuring. But the policy mix eventually comes into contradiction with the real evolution of the capitalist system. Under the new natural restructuring and changes in the system the prior new (now old) policy regime becomes a drag on the continued evolution of the system. It slows its growth. It destabilizes both its real and financial sectors. Capitalist agents—i.e. investors, corporate leaders, politicians and policy makers come to realize a more structural change must occur in the policy regime as well. Thus the 1907-16 policy regime, new at the time, eventually no longer serves its purpose. It gives way, after a crisis period, to a new and different 1944-53 policy regime. And that too begins to serve its purpose, as it did by the 1970s, to be replaced by the Neoliberal policy regime that followed.

The question today is whether the Neoliberal policy regime has now ‘run its course’. If not, then perhaps the Trump restoration might be successful. But if Neoliberalism has reached ‘the end of its rope’ (meaning it no longer continues to serve capitalist expansion and interests), then the Trump current attempt to restore Neoliberalism—even in a more aggressive 2.0 version—is doomed to fail.

In the 1970s decade, a particular evolution of material forces gave rise to, and drove the evolution, the Neoliberal policy regime from roughly 1978 up to the onset of the crisis of 2008-09. Some of the forces that gave rise to Neoliberalism are inherent to the evolution of capitalism itself—i.e. are thus ‘natural’. Others are due to changes in the character of US capitalism brought about by Neoliberal Policy—i.e. are ‘induced’. How then might have these ‘old’ material forces changed over the past four decades of Neoliberal policy regime hegemony? What new material forces have already emerged since 2000? Or are about to emerge next decade? What might these various material forces look like in the decade to come? Will they render Neoliberal Policies increasingly contradictory in the 2020s decade ahead, and therefore make Neoliberal policies even more ineffective? And more contradictory? To put it alternatively, will the new emerging material forces result in the continued, and even more fundamental, failure of Trump policies; and any similarly-minded successors to Trump attempting to restore the Neoliberal policy regime?

It is becoming increasingly cleaer that the material forces—whether old, new, and emerging—likely present a challenge that Neoliberalism cannot resolve. That means the new policy mix of the 2020s will be even more aggressive and violent in its implementation and effect than has Trump’s 2.0 failed restoration thus far. Or, whatever replaces Neoliberalism as we have known it, will be fundamentally different, including perhaps more progressive than imagined.

(Note: Part 3 in this series, ‘The Scourge of Neoliberalism’, will address the material and technological changes that have been developing in recent decades within US and global Capitalism—i.e. forces that constitute a source of contradictions that, next decade, will result in the demise of the Neoliberal policy regime that has dominated US Capitalism since the late 1970s).

Dr. Jack Rasmus
January 2020

Dr. Rasmus is the author of the ‘Scourge of Neoliberalism’, published by Clarity Press, January 2020, and other recent books on late US and global capitalism, including ‘Central Bankers at the End of Their Ropes’, ‘Systemic Fragility in the Global Economy’, ‘Looting Greece: A New Financial Imperialism Emerges’, Obama’s Economy: Recovery for the Few’, and Epic Recession: Prelude to Global Depression. Dr. Rasmus’ website is, his blog, and his twitter handle is @drjackrasmus.