We need to do better than neo-liberalism and neo-Marxism

The unexpected popularity of Donald Trump, Bernie Sanders and Jeremy Corbyn has intensified a particular vein of political discussion fixated on neoliberalism vs. neo-Marxism (spruikers call them ‘small-government’ and ‘socialism’). This is very worrying because neither of these collections of ideas is any good and even more than being the antithesis of each other they are the antithesis of good policy. Polarising the political space into a debate between these two ideologies is a complete waste of time because quality left and right wing ideas are to be found elsewhere.

Neoliberalism is often used as a kind of catch-all pejorative to criticise economists and economic ways of thinking about problems. The funny thing is, as an economist, I don’t even know what it means. After a quick poll of my colleagues I discovered they weren’t sure what it meant either. This would all be funny if ‘neoliberal’ wasn’t becoming such a destructive term in our political debate and if supposedly progressive neo-Marxism that markets itself as the antithesis of neoliberalism wasn’t growing in popularity.

When I start to prod about the interwebs trying to figure out what people mean by neoliberalism I tend to come across three vague constellations: Chicago School Economics, Ayn Rand style libertarianism and cronyism. My interpretation of this is thus: what people who hate ‘neoliberalism’ see are groups of bastards, especially captains of industry like the Koch brothers and Murdoch, using the language of economics and liberalism in a simplistic fashion so as to further their interests. Perhaps the clearest examples are trickle-down economics, which is not an idea in economics but the daemon spawn of right wing think tanks and other interest group vehicles; and ‘freedom as an absolute value’, wherein freedom and agency are deliberately conflated because agency for all requires government efforts at redistribution (as Hayek frequently noted).

Crucially, these bastards are only using the language of economics and political theory and not actually fairly representing the theories (or the empirical work around them) that inform their political positions (I have frequently stated that Hayek is the most misrepresented economist and political theorist in history). Those theories, when properly understood and judiciously applied, are at the heart of humanity’s success in the past century. Their perverted shadow images, on the other hand, are very dangerous, as can be seen from runaway inequality in the United States, among many other things.

The unfortunate consequence of this state of affairs is that those on the left who hate bastards on the right conflate mainstream economics and liberal political theory with their shady forms in the rhetoric of said bastards and consequently throw out the liberal economics and political theory baby with the bastard bathwater.

One of my favourite examples of this is a left wing colleague who said to me that economics isn’t good at dealing with externalities. Presumably she was referring to the assumption of ‘no-externalities’ in a lot of neoclassical macro-economics, or the pricing of environmental goods. But let’s step back for a second and remember that externalities are a concept economists invented, principally to deal with pollution.

Similar things happen on the right. People raised in conventional surroundings for whom those environments worked can’t fathom that maybe it doesn’t work for other people and that they perhaps need some institutional support in the form of, for example, gay marriage rights and publically funded mastectomies. People raised middle class and imbued with a strong belief in meritocracy (a critical value for the success of a society) often struggle to fathom that the deck is simply stacked against some people owing to, for example, class, race, gender and sexuality and that they consequently need some redistribution to ensure everyone has equality of opportunity. Such individuals, when confronted with the ignorant rhetoric of much of the modern ‘progressive' left as opposed to the much denser, more challenging but ultimately more persuasive theory and science behind it, react in horror. They consequently throw out the egalitarianism baby with the authoritarian bathwater.

The danger in the polarisation of the debate between neoliberalism and neo-Marxism is that most good policy draws on ideas from both the left and the right. Neoliberals miss all these policy opportunities because they only take the right wing components and neo-Marxists miss them because they only take the socialist elements. Consequently, neoliberals want to make everything like the US at a time when inequality there is rampant, social mobility is deplorable and Congress increasingly dysfunctional, and neo-Marxists want to make the world more like France even as its economy and society grind into an ever tighter gridlock and youth unemployment rockets while all cafes are understaffed. Meanwhile, Denmark, Sweden, Norway and Australia, countries with enviable growth rates, unemployment rates and welfare safety nets, continue to prosper and yet be overlooked because the ideas that inform their policy choices don’t seem to fit into either neoliberalism or neo-Marxism.

Let’s look at some examples. NSW recently moved to privatise its energy infrastructure while maintaining a regulated price on energy. This combines privatisation, a right wing idea, and state control of energy, a left wing idea. It combines efficiency enhancing private sector control of a sector with equity enhancing state control of a sector. Scandinavian countries have extremely fluid labour markets with very little barriers to hiring and firing, but they also have a welfare system that pays close to replacement wages for a brief period while people transition between jobs (the 'flexicurity' system). This ensures that the labour market is dynamic and efficient – a right wing desire that leads to a lot of new jobs being created while obsolete jobs are done away with – and also that people have income security, a key left wing value (the French instead seem fixated on job security and in the process destroy the chances of their youth and migrant populations of ever getting a job in the first place). There are thousands more examples of such innovative, open minded ideas that take the best in right wing and left wing thinking and combine them to create systems that are both efficient and equitable.

The problem with the Bernie Sanders and Jeremy Corbyn campaigns isn’t their sentiment—the world is running away from the disadvantaged. What’s wrong with them is that in their conflation of ‘neoliberalism’ with liberal politics and mainstream economics they lock themselves out of ever coming up with good policies. Consequently, all their policy proposals in the economic and social policy realm are throwbacks to discredited, outmoded ideas like protecting coal mining jobs, closing borders to trade and labour, socialising energy and transport and stymieing all innovation in education by nationalising all schools. The tendency of these campaigns to tar all economic and social policy from those to their right (including some of the NHS's greatest warriors, like Blair) as immoral is intellectual laziness in the extreme. Evil people are very rare. Ignorance is more likely to be a culprit, and then I am left wondering why Sanders and Corbyn are so utterly incapable of reading a single economics textbook or picking up the phone to a left wing trade economist like Krugman.

I’d like to close with a personal anecdote. A few years ago I held similar sentiments to many Sanders and Corbyn sympathisers. I thought the world need more public transport, public health, public education and higher taxes. I thought economics was fundamentally flawed and that economists were obstinately missing a large part of the picture. Most of all, I felt like everyone was bull-shitting me, a sentiment I see in a lot of neoliberals and neo-Marxists. I had the political knowledge to see through a lot of the garbage about freedom coming from the right and the garbage about privilege and kind uncle government coming from the left, but I didn’t have any economic knowledge. So I went and studied economics. And not just a bestseller by Stiglitz (or, God forbid, someone who isn’t even an economist); I did a fucking degree. The most brutal element of that was that I had to do maths, something I hadn't really touched since year 10. Neoclassical economics is a branch of applied math, You can't grasp it's paradigms, especially the strengths and weaknesses of rational choice modelling, unless you do calculus and statistics. 

Now that I can call myself an economist I have discovered that everyone really was bullshitting me, on both the left and the right. Trump, Corbyn, Sanders and co. are not ‘telling it like it is’; they are telling it like it was. The policy solutions to our current problems and the paradigms that will inform socio-economic thinking in the future are more complex than left and right, equity and efficiency, freedom and socialism. They certainly aren’t ‘neo’ anything, but are instead products of the new creative age and its unique challenges and tools. And critically, these solutions and paradigms exist already for those diligent, open-minded and motivated enough to look for them and appreciate the complexity of the problems they address and the sophistication of their answers. I certainly hope Corbyn and Sanders types can step out of their self-righteous and self-indulgent bubbles long enough to discover this.