'Neoliberalism' and nonsense

Here's a fun fact: the founder of neoliberalism was a Corbynista.

Well, not exactly a Corbynista. The German sociologist Alexander Rüstow died in 1963, long before Jeremy Corbyn entered Parliament, let alone became Labour leader. But some of the economic policies Rüstow advocated bear a striking resemblance to those pushed by Corbyn today.

Rüstow, according to the valuable research of Oliver Marc Hartwich, was in favour of the nationalisation of rail companies and utilities. He supported an active industrial policy to ease the social impact of economic upheaval. He wanted to reduce inequality through high inheritance taxes. He proposed higher taxes on large companies. "The economy is there for people," Rüstow insisted. Any of that might have come out of Labour's 2017 election manifesto.

From this historical perspective, the cry from Corbyn's intellectual outrider Paul Mason last week that "Labour needs to wage war on EU neoliberalism" sounds pretty strange. Yet, of course, the definition of neoliberalism that Mason is using is different from that put forward by Rüstow in the 1930s.

For Rüstow, neoliberalism was a third way between socialism and British-style laissez-faire economics. It was conceived as a specific cure for late 19th-century German-style corporatism, with its proliferation of cartels. Mason's conception, on the other hand, stems from the theorising of Michel Foucault in the late 1970s, who saw neoliberalism as an ideological project to transform all of society into a giant marketplace.

This freemarket fundamentalist conception of neoliberalism owes more to the thought of Friedrich Hayek and Milton Friedman than Rüstow.

Words can change their meaning, of course. And there's no reason Mason, or anyone else, shouldn't use the modern definition of neoliberalism as a kind of unhealthy fetishisation of markets. After all, this is what most people today understand by the term. Yet it's important to ask whether Mason, and others on the radical left, are justified in describing the EU as part of a neoliberal project - especially when they use this framing to argue that Labour should be wary of joining the EU's single market after Brexit.

With its high levels of social protection, state-owned rail companies, nationalised utilities and banks, various price controls and industrial interventions, the European continent does not, on the face of it, look like the neoliberal hellhole of the leftist imagination. Europe actually seems to be a collection of social democracies and what Peter Hall and David Soskice described as "co-ordinated market economies". Yet, according to Mason, the European "social market economy" is merely "the specific European form of neoliberalism" because "it prefers private over public, vaunts market mechanism over state direction or subsidy, relies on effective competition to make capitalism fairer, rather than strong regulation."

This is rather like arguing a hot bath is merely a warmer form of a freezing cold bath. It's a definition that ignores the experience. Most normal people, when they run a bath for themselves, are concerned with how comfortable it feels when they get in it, rather than which tap most of the water came out of.

The insights of Hayek and Friedman about the utility of markets - in particular the access to the socially dispersed knowledge embedded in them - are valuable. Yet it's also true that a mentality that presents the extension of markets as the answer to every social question is a destructive pathology. The merit of the post-war social democratic settlements of countries like Germany, France, Sweden and the Netherlands is that they have located a reasonable balance between those two extremes. Any theoretical framework that crams Germany's Social Democrats into the same category as the US Republicans or the hardline Thatcherite wing of the Conservative Party has either gone badly awry or is conceptually useless.

Perhaps we can learn a lesson from the genesis of the term neoliberalism. Rüstow's 1930s conception of neoliberalism had a specific social and historical context - the crony capitalism of Wilhelmine (and then Weimar) Germany and the global crisis of free markets and democracy in the wake of the Great Depression. To understand the programme, one has to appreciate the context.

The economically liberalising ethos of the EU's 2007 Lisbon Treaty, which the left revile as one of the supreme works of the neoliberal devil, has a context too: a series of member states with a greater role for the state and social protection than the UK and the US but also structurally higher levels of unemployment. It's not freemarket fundamentalism, for instance, to suggest that French employment laws ought to be reformed for the sake of those younger people who find themselves outsiders in a system designed to protect insiders at all costs. Nor is it wild-eyed neoliberalism, in a single market of 28 member states, each with their own domestic corporate lobbies, to police the granting of state aid.

The problem with the modern Foucauldian definition of neoliberalism is that it ignores context and invites paranoia. The result is that those who advocate a modest extension of markets in some areas cannot be understood as simply attempting to adjust the temperature of society's bath but must be seen as part of a sinister ideological project to atomise humanity.

European leaders have certainly handled the eurozone crisis abysmally, inflicting unnecessary suffering on the likes of Greece and Portugal through excessive public spending cuts and badly designed structural reforms. Domestic fiscal policy in Germany has been, and remains, a disaster zone. There are many reasons for this, but it's simply not credible to argue that these gross failures stem from the same species of ideological extremism that animates libertarian right-wingers in the Anglosphere. The context and the history are separate; the attitudes to markets, the state, inequality and social solidarity are fundamentally different.

It would be tragic if Labour rejected the option of single market membership for the UK after Brexit. And if the party did so on the basis of fallacies about European Union "neoliberalism", it would be farcical.