Regime Change in the West?

Aquarter​ of the way through this century, regime change has become a canonical term. It signifies the overthrow, typically but not exclusively by the United States, of governments around the world disliked by the West, employing for that purpose military force, economic blockade, ideological erosion, or a combination of these. Yet originally the term meant something quite different, a widespread alteration in the West itself – not the sudden transformation of a nation-state by external violence, but the gradual installation of a new international order in peacetime. The pioneers of this conception were the American theorists who developed the idea of international regimes as arrangements assuring co-operative economic relations between the major industrial states, which might or might not take the form of treaties. These, it was held, developed out of US leadership after the Second World War, but superseded it with the formation of a consensual framework of mutually satisfactory transactions between leading countries. The manifesto of this idea came in Power and Interdependence, a work co-authored by two pillars of the foreign policy establishment of the time, Joseph Nye and Robert Keohane, whose first edition – it went through many – appeared in 1977. Though presented as a system of norms and expectations that helped assure continuity between different administrations in Washington by introducing ‘greater discipline’ into American foreign policy, Nye and Keohane’s study left no doubt about the pay-off for Washington. ‘Regimes usually are in America’s interest because the United States is the world’s foremost commercial and political power. If many regimes did not already exist, the United States would certainly want to invent them, as it did.’1 By the early 1980s, books along these lines were tumbling off the presses: a symposium entitled International Regimes, edited by Stephen Krasner (1983); Keohane’s own treatise, After Hegemony (1984); and a host of learned articles.

In the following decade this reassuring doctrine underwent a mutation, with the publication of a volume entitled Regime Changes: Macroeconomic Policy and Financial Regulation in Europe from the 1930s to the 1990s, edited by Douglas Forsyth and Ton Notermans – one American, the other Dutch. It retained but sharpened the idea of an international regime, specifying the variant that had prevailed before the war, resting on the gold standard; then the order forged at Bretton Woods, which succeeded it after the war; and finally spelling out the demise of this successor in the 1970s.2 What had replaced the world instituted at Bretton Woods was a set of system-wide constraints affecting all governments, no matter their complexion, consisting of macro-policy packages of monetary and financial regulation that fixed the parameters of possible labour market, industrial and social policies. Where the postwar order had been driven by the aim of assuring full employment, the priority of its sequel was monetary stability. Classical economic liberalism had come to an end with the Great Depression. Postwar Keynesianism had petered out with the stagflation of the 1970s. The new international regime marked the reign of neoliberalism.

Such was the original meaning of the formula ‘regime change’, today all but forgotten, erased by the wave of military interventionism that confiscated the term at the turn of the century. A glance at its Ngram tells the story. Flatlining since its arrival in the 1970s, the frequency of the term suddenly soared in the late 1990s, multiplying sixty times over and becoming, as John Gillingham, an economic historian attached to its earlier sense, remarked, ‘the current euphemism for overthrowing foreign governments’.

Yet the relevance of its original meaning remains. Neoliberalism has not gone away. Its hallmarks are now familiar: deregulation of financial and product markets; privatisation of services and industries; reduction of corporate and wealth taxation; attrition or emasculation of trade unions. The aim of the neoliberal transformation that began in the United States and Britain under the governments of Carter and Callaghan and reached full momentum under those of Thatcher and Reagan was to restore the rates of profit to capital – which had fallen virtually everywhere from the late 1960s onwards – and to conquer the combination of stagnation and inflation that had set in once these rates had dropped.

For a quarter of a century, the remedies of neoliberalism appeared to work. Growth returned, if at a markedly lower pace than in the quarter of a century after the Second World War. Inflation was mastered. Recessions were short and shallow. Rates of profit rebounded. Economists and pundits hailed the triumph of what the future chairman of the Federal Reserve in the United States, Ben Bernanke, extolled as the Great Moderation. The success of neoliberalism as an international system didn’t rest, however, on the recovery of investment to the levels of the postwar era in the West: this would have required an increase in economic demand precluded by the wage repression central to the system. It was built, rather, on a massive expansion of credit – that is, on the creation of unprecedented levels of private, corporate and eventually public debt. In Buying Time, his pathbreaking work of 2014, Wolfgang Streeck describes this as claims on future resources that have yet to be produced; Marx more bluntly called it ‘fictitious capital’. Eventually, as predicted by more than one critic of the system, the pyramid of debt caved in, causing the crash of 2008.

The crisis that ensued was, as Bernanke confessed, ‘life-threatening’ for capitalism. In magnitude, it was fully comparable to the Wall Street Crash of 1929. Over the next year, global output and world trade fell more rapidly than during the first twelve months of the Great Depression. What followed, however, was not another great depression, but a great recession – a big difference. A starting point for understanding the political position the West is in today is to look back at the sequence of events in the 1930s. When Black Monday hit the American stock market in October 1929, conservative governments were in office in the United States, France and Sweden, while there were social democratic governments in Britain and Germany. All, however, were more or less indistinguishably faithful to the economic orthodoxies of the period: a commitment to sound money – that is, the gold standard – and balanced budgets, policies that simply deepened and prolonged the Depression. It was not until the autumn of 1932 and the spring of 1933, a time-lag of three years or more, that unconventional programmes to combat the situation began to be introduced, first in Sweden, then in Germany and finally in America. These corresponded to three quite different political configurations: the arrival in power of social democracy in Sweden, of fascism in Germany and of an updated liberalism in the United States. Behind each of these lay pre-existent heterodoxies, ready to hand if rulers cared to adopt them, as Per Albin Hansson in Sweden, Hitler in Germany and Roosevelt in America were to do: the Stockholm school of economics descending from Knut Wicksell to Ernst Wigforss in Sweden, Hjalmar Schacht’s valorisation of public works in Germany, and the neo-progressive regulatory inclinations of Raymond Moley, Rexford Tugwell and Adolf Berle – FDR’s original ‘brain trust’ – in the United States. None of these was a fully worked out or coherent system. Schacht in Germany and Keynes in Britain had been in touch with each other since the 1920s, but Keynesianism proper – The General Theory of Employment, Interest and Money didn’t appear until 1936 – was not a direct input into these experiments, though all involved the enhanced role of the state. Such were the scattered technical toolkits of the time.

Three years of mass unemployment had generated powerful ideological forces in each country: a far bolder social democratic reformism in the notion of Folkhemmet, the People’s Home, in Sweden; Nazism, self-described as die Bewegung, the Movement, in Germany; and in the United States the dynamic role of American communism in the unions and among intellectuals, forcing labour and social security reforms on a Democratic administration that of its own volition would have been unlikely to enact them. Finally, in the background of all three developments in the capitalist world loomed the unprecedented success of the Soviet Union in avoiding the slump altogether, with full employment and fast rates of growth, lending attraction to the idea of economic planning across the capitalist world. Nevertheless, it would take a far greater and deeper shock than the crash on Wall Street to put an end to the global depression to which it led and institutionalise the break with the orthodoxies of classical economic liberalism. It was the abyss of the Second World War which did that. By the time peace was restored, no one could doubt that a different international system was in place – combining the gold standard, counter-cyclical monetary and fiscal policies, high and stable levels of employment, and official welfare systems – or the role that Keynes’s ideas played in its consolidation. After 25 years of success, it was the eventual degeneration of this regime into stagflation that unleashed neoliberalism.

The scenario​ following the crash of 2008 differed entirely. In the United States, policy ambulances were on the spot immediately. Under Obama fraudulent banks and insurance companies and bankrupt automobile corporations were rescued with huge infusions of public funds never available for decent healthcare, schools, pensions, railways, roads, airports, let alone income support for the worst-off. A massive fiscal stimulus, ignoring budgetary discipline, was unleashed. To prop up the stock market, under the polite euphemism of Quantitative Easing, money was loosed by the central bank on a massive scale. On the quiet and in defiance of its mandate, the Federal Reserve bailed out not only failing American but also European banks in transactions hidden from Congress and public scrutiny, while the Treasury ensured – in close liaison behind the scenes with the People’s Bank of China – that there was no Chinese faltering in the purchase of T-bonds. In short, once the central institutions of capital were at risk, every shibboleth of neoliberal economics was thrown to the winds, with doses of mega-Keynesian remedies beyond Keynes’s own imagination. In Britain, where the crisis struck quickest in the countries of Europe, these went so far as temporary nationalisation of what the American gift for bureaucratic euphemism termed ‘troubled assets’.

Did all this signify a repudiation of neoliberalism and a turn towards a new international regime of accumulation? In no way. The core tenet of neoliberal ideology, coined by Thatcher, had always lain in the attractively feminine-sounding acronym TINA: There Is No Alternative. Taboo-breaking as the measures to master the crisis looked, and in good part were, judged by neoclassical canons what they essentially amounted to was a mathematical squaring, or cubing, of the underlying dynamic of the neoliberal epoch, namely the continuous expansion of credit above any increase in production, in what the French call a fuite en avant – a flight forward. So, once the measures required by its life-threatening emergency had stabilised the system, the logic of neoliberalism rolled forward again, in country after country.

In Britain, which came first in the process, the ruthless imposition of austerity cut local authority spending to mendicant levels and slashed university pensions. In Spain and Italy, labour legislation was revised to facilitate the summary firing of workers and increase precarious employment. In the United States, drastic reductions in taxes on corporations and the rich were retained, while deregulation accelerated in energy and financial services. In France, historically a laggard in the race to neoliberalism, but now bidding for a place in the vanguard, something like a full Thatcherite programme got underway: privatisation of public industries, legislation to weaken the unions, tax handouts to corporations, winnowing of civil servants, cutting back of pensions, reduced access to universities – seemingly heading for a social showdown along the lines of Thatcher’s crushing of the miners, a turning-point in class relations from which British capital has never looked back.

How was all this possible? How could such a traumatic shock to the system as the global financial crisis, and the discredit into which its leading agencies and nostrums inevitably fell, have been followed by so complete a reversion to business as usual? Two conditions were critical to this paradoxical outcome. First, unlike in the 1930s, there were no alternative theoretical paradigms waiting in the wings to dislodge the dominance of neoliberal doctrine and take over from it. Keynesianism, which after 1945 became the common denominator of what had been sifted by the threshing machine of war from the three contending trends of the 1930s, had never recovered from its debacle in the class conflicts of the 1970s. Mathematisation had long anaesthetised much of the discipline of economics against original thought of any kind, leaving such anomalies as the Regulation School in France or the Social Structure of Accumulation school in the US completely marginalised. The neoliberal theorems of ‘rational expectations’ or ‘market clearing’ might now seem foolish, but there was little to replace them with.

Behind that intellectual absence – and this was the second condition for neoliberalism’s apparent immunity to disgrace – lay the disappearance of any significant political movement calling robustly either for the abolition or the radical transformation of capitalism. By the turn of the century, socialism in both of its historical variants, revolutionary and reformist, had been swept clear of the stage in the Atlantic zone. The revolutionary variant: to all appearances, with the collapse of communism in the USSR and the disintegration of the Soviet Union itself. The reformist variant: to all appearances, with the extinction of any trace of resistance to the imperatives of capital in the social democratic parties of the West, which now simply competed with conservative, Christian democrat or liberal parties in their implementation. The Communist International was closed down as early as 1943. Sixty years later the so-called Socialist International numbered in its ranks the ruling party of Mubarak’s brutal military dictatorship in Egypt.

None of this meant, or could mean, that after reigning for a quarter of a century and then suddenly stumbling to its knees, the neoliberal system was left without opposition. After 2008, its accumulated social and political consequences started to come home to roost. Social consequences: a steep and in some cases (the United States and United Kingdom above all) staggering escalation of inequality; long-term wage stagnation; a spreading precariat. Political consequences: wholesale corruption, growing interchangeability of parties, erosion of meaningful electoral choice, declining voter participation – in short, the increasing eclipse of the popular will by a hardening oligarchy. This system now generated its antibody, deplored in every reputable organ of opinion and respectable political quarter as the sickness of the age – namely, populism. The widely differing set of revolts comprised under this label are united in their rejection of the international regime in place in the West since the 1980s. What they oppose is not capitalism as such, but the current socio-economic version of it: neoliberalism. Their common enemy is the political establishment that presides over the neoliberal order, comprising the alternating duo of centre-right and centre-left parties that have monopolised government under its rule. These parties have often, though not always, offered two slightly different variants of neoliberalism: one is disciplinary, and typically more innovative in its initiatives, as with Thatcher and Reagan; the other is compensatory, offering side-payments to the poor that the disciplinary variant withholds, as with Clinton or Blair. Both versions, however, have been unswervingly committed to furthering the common objective of fortifying capital against any untoward shocks.

Neoliberalism, as I have said, forms an international regime: that is, not just a system replicated within each nation-state, but one that binds together and exceeds the different nation-states of the advanced, and less advanced, regions of the capitalist world in the process that has come to be called globalisation. Unlike the various national agendas of neoliberalism, this process was not originally driven by the political intention of power-holders, but followed from the explosive deregulation of financial markets set loose by Thatcher’s so-called Big Bang of 1986. In due course, globalisation became an ideological watchword of neoliberal regimes across the world, since it yielded two enormous advantages to capital at large. Politically speaking, globalisation clinched the expropriation of democratic will that the oligarchic closure of neoliberalism was enforcing domestically. For now, TINA meant not just that policy connivance between centre-right and centre-left at national level largely eliminated any meaningful electoral choice, but also that global financial markets would not permit any deviation from the policies on offer, on pain of economic meltdown. That was the political bonus of globalisation. No less important was the economic bonus: capital could now weaken labour still further, not just by deunionisation, wage repression and precarity, but by relocating production to less developed countries with much lower labour costs, or even simply threatening to do this.

Another aspect of globalisation, however, had a more ambiguous effect. Neoliberal principles stipulate the deregulation of markets: the free movement of all the factors of production – in other words, mobility across borders not just of goods, services and capital, but also of labour. Logically, therefore, it means immigration. Firms in most countries had long utilised migrant workers as a reserve army of cheap labour, where supply was required and circumstances permitted. But for states, considerations of a purely economic kind had to be weighed against those of a more social and political sort. There, significantly, Friedrich von Hayek – the greatest mind of neoliberalism – had early on entered a reservation, a caveat. Immigration, he warned, could not be treated as if it were simply a question of factor markets, since unless it was strictly controlled it could threaten the cultural cohesion of the host state and the political stability of society itself. Here was where Thatcher too drew the line. Yet, of course, pressures for the import or acceptance of cheap foreign labour persisted, even as production was increasingly outsourced abroad, since many services of a menial or disagreeable sort, shunned by locals, could not, unlike factories, be exported, but had to be performed on the spot. Unlike virtually any other aspect of the neoliberal order, no stable establishment consensus was ever reached on this question, which remained a weak link in the chain of TINA.

If we look​ at the populist revolts against neoliberalism, they roughly divide, as everyone knows, into movements of the right and of the left. In that respect, they repeat the pattern of the revolts against classical liberalism after its debacle in the Slump: fascist on the right, social democratic or communist on the left. What differentiates today’s rebellions is that they lack any comparably articulated ideologies or programmes – anything that matches the theoretical or practical consistency of neoliberalism itself. They are defined by what they are against, far more than what they are for. What do they protest against? The neoliberal system of today, as yesterday, embodies three principles: escalation of differentials in wealth and income; abrogation of democratic control and representation; and deregulation of as many economic transactions as is feasible. In short: inequality, oligarchy and factor mobility. These are the three central targets of populist insurgencies. Where such insurgencies divide is over the weight they attach to each element – that is, against which segment of the neoliberal palette they direct most hostility. Notoriously, movements of the right fasten on the last, factor mobility, playing on xenophobic and racist reactions to immigrants to gain widespread support among the most vulnerable sectors of the population. Movements of the left resist this move, targeting inequality as the principal evil. Hostility to the established political oligarchy is common to populisms of both right and left.

Historically, there is a clear-cut chronological divide between these different forms of the same phenomenon. Contemporary populism first emerged in Europe, which still exhibits the widest and most diversified array of movements. There, populist forces of the right date back to the early 1970s. In Scandinavia, these took the form of the libertarian anti-tax revolts of the Progress Parties in Denmark and Norway, founded in 1972 and 1973 respectively. In France, the Front National was founded in 1972, but only achieved modest electoral traction as a nationalist, anti-immigrant party of the right, with a certain working-class appeal and strong racist overtones, in the early 1980s. Later that decade, the leadership of the Freedom Party in Austria was captured by Jörg Haider, who adopted a similar platform, while further north the Sweden Democrats emerged as a grouplet of the far right on much the same xenophobic basis. There were literal neo-fascist elements in the genesis of all three formations, which – once they achieved a significant electoral presence – gradually faded. The 1990s saw the eruption of the Northern League in Italy, which by contrast had anti-fascist roots, the emergence of Ukip in Britain, and the conversion of the once libertarian Danish and Norwegian parties into anti-immigrant forces. At the start of the next decade, the Netherlands produced its own Freedom Party, combining libertarian and Islamophobic outlooks. Ten years later, the Alternative für Deutschland repeated the Dutch pattern in Germany. All of these parties of the right railed against the political corruption and closure of their national establishments, and against the bureaucratic diktats from Brussels of the European Union. All, with the single exception of the AfD (founded in 2013), predated the crash of 2008.

The populist forces of the left are much newer, emerging only since the global financial crisis of 2008. In Italy, the Five Star Movement dates from 2009. In Greece, Syriza, still a tiny grouping when Lehman Brothers collapsed in New York, came onstream as a significant electoral force in 2012. In Spain, Podemos was formed in 2014. Jean-Luc Mélenchon created La France Insoumise in 2016. The timing of this wave makes plain that it is the socio-economic inequalities of neoliberalism, not its weakening of ethno-national boundaries, that has spurred left populism into being. This is a fundamental distinction between the two types of revolt against the current order. It is not, however, an unbridgeable chasm, since there is not just a general overlap in the common detestation of the collusion and corruption of the political establishments in each country, but also in some cases a contiguity in the common defence of threatened welfare systems, and in other cases in concern at the pressures of immigration. Under Marine Le Pen, the Front National was consistently to the left of the French Socialist Party on most domestic and foreign policy issues with the exception of immigration, advancing criticisms of François Hollande’s regime often indistinguishable from those of Mélenchon. Conversely, the Five Star Movement in Italy, whose voting record in parliament was on the whole impeccably radical, repeatedly voiced alarm at the growing influx of refugees into Italy. A further gesture common to virtually all shades of populism in Europe has been rebellion against the blatant confiscation of democracy by the structures of the European Union in Brussels.

For a full seven years after the crash of 2008, however, the political impact of the populist revolts in Europe was quite modest – nothing remotely comparable to the storms that swept through Europe and America in the 1930s. The Northern League and the AfD were stuck below 5 per cent of the vote. Ukip, the Sweden Democrats, the Dutch Freedom Party, the Norwegian Progress Party and the Front National were winning between 10 and 18 per cent of the electorate. All these were populisms of the right. Reaching just over a fifth of the active citizenry were the Freedom Party in Austria and the Danish People’s Party, also on the right, and Podemos on the left. The two most successful populisms were recent creations of the left, in Italy the Five Star Movement gaining a quarter of the votes, in Greece Syriza more than a third.

What​ changed all this were four further events. In Britain, the ruling Conservative Party, under both internal pressure and the threat of losing voters to Ukip, allowed a referendum on membership of the European Union which its leaders assumed would produce a fairly easy victory for the status quo, given that three-quarters of MPs, the totality of high finance and big business, the top levels of trade-union bureaucracy and the massed ranks of the country’s intelligentsia and cultural establishment all favoured continuing membership. To general astonishment, a clear-cut majority of the population voted for exit from Europe, with a much higher turnout than in general elections. Decisive in the result was the revolt of the most abandoned regions and classes of the country against the bipartisan neoliberal establishment that had been continuously in power since the 1990s. This was the first time a populist rebellion became the expression of a political majority in any capitalist country, and in so doing altered the course of its history. It was a revolt orchestrated by forces of the right: Ukip, the traditionalist wing of the Conservative Party and most of the tabloid press. But its success rested on their mobilisation of widespread parts of the population that had in the past been bastions of the labourist left.

A few months later came Trump’s triumph in the US presidential election, for which he had hailed Brexit as a dress rehearsal. His campaign, as distinct obviously from his administration, was undilutedly right-populist in tone and content – chords struck for the last time in his inauguration speech, which combined blistering denunciations of political involution, increasing inequality and loss of national sovereignty with hostility to immigration. His national victory was in a sense accidental: had the Democrats picked virtually any other mainstream candidate less unpopular than Hillary Clinton, he would probably have been defeated. Falling well below an absolute majority, with fewer aggregate votes than Clinton, Trump’s victory not only didn’t reach the same proportions as Brexit, but was dependent for its success on hijacking reflex partisan loyalties among those willing to vote for any candidate provided they were Republican, no matter how otherwise distasteful. Yet Trump’s victory was won not on a single yes/no issue like Brexit but on a broad ideological-political platform, and his support among working-class voters may have been higher than Brexit managed: some 70 per cent of those voting for him lacked a college degree. Nor was this the only populist outbreak in America that year, with Bernie Sanders proving a formidable challenger for the Democratic nomination from the left. If we reckon those from the less privileged classes who cast their ballot for Trump in the presidential election, and those who voted for Sanders in the Democratic primaries as a pro rata percentage of those who did so for Clinton in November, about a third of those who voted in 2016 were susceptible to a populism of the right, and a fifth to a populism of the left.

The next surprise was the performance in the 2017 general election of the Labour Party in Britain under its new leader, Jeremy Corbyn, till then all but universally dismissed as a hopeless, politically incompetent far-left loser. In the event, running a very effective campaign under the populist slogan ‘For the Many, Not the Few’, he got a larger vote than his party had in any of the three preceding elections, depriving the Conservatives of their majority in Parliament, on a platform more explicitly hostile to the neoliberal order than that of any party of comparable weight in Europe. The historical tradition and unaltered nature of British Labourism, both deeply conservative, are far from populist. But a major influx of the young into the party once Corbyn became its leader, which made it for a time numerically the largest political organisation in Europe, was like a sudden, massive injection of an alien strain, pulling it in what in other conditions would have been a left populist direction, not unlike the transformation of Mélenchon’s rather traditionally socialist Parti de Gauche, which he launched in 2008, into the fully-fledged populist France Insoumise of 2016.

In 2018 the highest hurdle yet was jumped in Italy, where two explicitly populist parties, the Five Star Movement on the left and the League on the right, together got 50 per cent of the vote – an earthquake in Italy, and by far the most alarming result yet for the European establishment, since both announced they had no intention of submitting the country to the dictates of any more austerity from Berlin, Paris or Brussels. The Italian election also marked the first time that, when ranged head-to-head, a populism of the left surpassed by a wide margin a populism of the right: 33 per cent for the M5S, 17 per cent for the League. Everywhere else, it was the other way round. In France in 2017, Le Pen’s vote exceeded Mélenchon’s. In Britain, Corbyn was heavily defeated in 2019 by the Conservative demagogue Boris Johnson, flamboyant embodiment of a simulacrum of populism of the right.

The reason populism of the right has enjoyed an advantage over populism of the left is not hard to see. In the neoliberal order, inequality, oligarchy and factor mobility form an interconnected system. Populisms of the right and left can, in differing ways, attack the first two with more or less equally uninhibited vigour. But only the right can assail the third with still greater vehemence, xenophobia towards immigrants operating as its trump card. There, populisms of the left cannot follow without moral suicide. Nor can they easily finesse the problem of immigration, for two reasons. It is not pure myth that business imports cheap labour from abroad – that is, workers typically unprotected by citizenship rights – to depress wages and in some cases to take jobs from local workers, whom any left must seek to defend. Nor is it the case that, in a neoliberal society, voters have usually been consulted about either the arrival or the scale of labour from abroad: this has virtually always happened behind their backs, becoming a political issue not ex ante but ex post facto. There is a transatlantic difference here. The negation of democracy that the structure of the European Union has become included from the start denial of any democratic say in the composition of its population. The constitution of the United States, woefully anachronistic in many other respects, is not so radically undemocratic. Historically too, of course, the US is an immigrant society, as no European country has ever been. That means there is a tradition of selective welcome and solidarity for newcomers that doesn’t exist at anything like the same emotional pitch in Europe. But on both sides of the Atlantic, left populism faces the same difficulty. Right populisms have a straightforward position on immigration: bar the door to foreigners and kick out those who shouldn’t be here. The left can have nothing to do with this. But what exactly is its policy on immigration: open borders, or skill tests, or regional quotas, or what? Nowhere has a politically coherent, empirically detailed, candid answer yet been spelled out. So long as that persists, populism of the right is all too likely to retain its edge on populism of the left.

The problem, indeed, is a more general one. No populism, right or left, has so far produced a powerful remedy for the ills it denounces. Programmatically, the contemporary opponents of neoliberalism are still for the most part whistling in the dark. How is inequality to be tackled – not just tinkered with – in a serious fashion, without immediately bringing on a capital strike? What measures might be envisaged for meeting the enemy blow for blow on that contested terrain, and emerging victorious? What sort of reconstruction, by now inevitably a radical one, of actually existing liberal democracy would be required to put an end to the oligarchies it has spawned? How is the deep state, organised in every Western country for imperial war – clandestine or overt – to be dismantled? What reconversion of the economy to combat climate change, without impoverishing already poor societies in other continents, is imagined? That so many arrows remain missing in the quiver of serious opposition to the status quo is not, of course, just the fault of today’s populisms. It reflects the intellectual contraction of the left in its long years of retreat since the 1970s, and the sterility in that time of what were once original strands of thought at the edges of the mainstream. Remedial proposals can be cited, varying from country to country: Medicare for all in the US, guaranteed citizen incomes in Italy, public investment banks in Britain, Tobin taxes in France and the like. But so far as any general, interlocking alternative to the status quo is concerned, the cupboard is still bare. If a populist party or movement comes to power at present, to see the probable outcome we have only to look at the turncoat fate of Syriza in Greece on the left – in opposition a rebel against the diktats of the EU, in office a submissive instrument of it – or on the right, the overnight standardisation of Trump’s first presidency, as he breathed fire against establishment complacency and inequality on Inauguration Day, and did nothing about them once in the White House. Politically speaking, neoliberalism has been in no great danger from either.

Into this scene,​ the Covid virus struck like a bolt of lightning in 2020, forcing lockdowns across the world. Trump and Johnson, riding high a year earlier, were each felled by its impact. Trump would all but certainly have been re-elected that year if his administration had not been hit by the pandemic. Johnson was ousted by his own party in 2022. Under the Covid shockwave, international trade plummeted, and five hundred million jobs were lost worldwide in a few months. In the United States the stock market crashed and gross domestic product suffered its worst drop since 1946, contracting by 3.5 per cent in 2020. In Britain, GDP fell by 10 per cent, in the European Union by 6 per cent. As global supply chains frayed, inflation started to rise across the OECD and with it unemployment. In this emergency, the last year of Trump’s first administration saw a massive fiscal stimulus to prevent a deeper recession. From 2021 onwards, with Biden in the White House, a still larger intervention by the state to stabilise the American economy was set in motion with the so-called Inflation Reduction Act, pumping $750 billion into the economy, with a huge package of state subsidies to encourage new investment, sustain household incomes and alter energy usage; followed by the Chips and Science Act of 2022, which poured another $280 billion of public expenditure into the country’s semi-conductor and allied industries, together with a battery of protectionist measures designed to defeat hi-tech competition from China. This was a programme proudly described by supporters of the Biden administration as a 21st-century version of Roosevelt’s New Deal: its recipes would modernise American industry, help the worst-off and equip the country’s armed forces to combat the threat posed by the rise of China. Many hailed its sweeping statist interventions and embrace of active industrial policies as a break with neoliberalism comparable to and as decisive as Roosevelt’s break with palaeo-liberal doctrines in the 1930s. Others applauded Biden’s revival of the Cold War policy of building alliances against deadly foes abroad, whether around the Black Sea, in the Middle East or in the Far East, in the best spirit of Truman in the 1940s and 1950s.

Mainstream opinion, not only in America but equally and often even more ardently in Europe, greeted the results of this change as little less than a miracle. The most influential and intelligent mass periodical in the capitalist world, functioning at times as a semi-official adviser to it, the Economist magazine in London, could celebrate the American economy with a special report last October as ‘the envy of the world’, whose post-pandemic dynamism had ‘left other rich countries in the dust’. Commentators in the US itself extolled Biden’s capable suppression of inflation, his administration’s caring measures for the less well-off, its progressive inter-ethnic policies of ‘diversity, equity and inclusion’. In both Europe and America, there was applause for its firmness in standing shoulder to shoulder with Israel in Gaza, and with Ukraine. Alas, American voters were less impressed. By summer last year Biden had become so discredited that his own party forced him to drop his bid for re-election, in much the same way as the Conservatives had ejected Johnson in Britain, leaving Kamala Harris, his hapless vice president, to be thrashed in November by Trump, who won a larger majority than in 2016.

What Trump’s second presidency will mean for America, and the world, remains indeterminate, given the long-standing gap between his words and his deeds. At home, he might no more keep his electoral promises this time, to impose tariffs of 60 per cent on all goods from China and to deport all eleven million illegal immigrants in the United States, than he kept his promises last time to rebuild America’s crumbling infrastructure and construct an uncrossable wall along the whole Mexican border. Yet given Republican control of both Houses of Congress for at least two years, he is more likely to act on some of his promises than discard all of them, and in matters of trade to force allies as well as adversaries to pay greater monetary tribute to America than in the past. Abroad, he could stop the war in Ukraine by cutting off all aid to Kyiv, or he could escalate it, if Russia declines the terms on which he hopes to bring the fighting to an end. He believes in the advantage of being unpredictable, and certainly the European Union, Britain and Japan, even if they dislike what he does, are too weak as subordinate partners to deflect him from it.

The government of Germany – the strongest power in Europe – collapsed the day after Trump was elected, when Scholz dismissed his finance minister and lost the third party on which his coalition depended. No such event had ever occurred in the Federal Republic before. New elections have doubled the vote of the AfD to a fifth of the electorate, yielding another establishment coalition rushing to ram through higher defence spending in a Bundestag voters have just rejected, in yet one more demonstration of how little European elites care about the democracy they volubly proclaim. In France, the government appointed by Macron after his defeat at the polls last summer collapsed within a couple of months, overthrown by a combination of right and left opposition in the National Assembly, in a revolt the country has known only once before, more than sixty years ago. Few believe its precarious successor, resting on a grudging co-option of the Socialist Party, will last very long. In short, Trump’s version of right-wing populism, abominated by half the country as a deadly threat to democracy, has taken over in Washington at a moment of institutional disarray in Berlin and Paris, and with a government in London that is now even less popular than the discredited opposition it routed a short while ago. Everywhere the scene is one of instability, insecurity, unpredictability. ‘All is disorder under the heavens,’ and there is little sign of a return to order, as understood by those accustomed to rule the West.

Where amid this turmoil does neoliberalism stand? In emergency conditions it has been forced to take measures – interventionist, statist and protectionist – that are anathema to its doctrine, yet without losing its grip on the minds of policymakers, or giving way to any coherent alternative vision of the way an advanced capitalist economy should be run. Despite the dramatic departures from the pure milk of Hayekian or Friedmanite recipes, little has changed in the underlying drivers and contradictions of the system it has created. While US GDP fell by some 4.3 per cent during the Great Recession after the crash of 2008 and two-thirds of the working population of the OECD endured flat or falling real incomes, overall growth has resumed, if at levels still well below those claimed in China, while inequality has continued to increase. In the United States, the gap between the spending of the richest and poorest layers of the population is the largest ever recorded. Above all, however, what unleashed the crisis of 2008 has been made good by more of the same. The obese share of finance in American GDP has not dropped, it has increased. The American government’s deficit has tripled in the last decade. In the same period, public debt in the United States has jumped by $17 trillion, an increase equivalent to that in the previous 240 years. In the OECD as a whole, total sovereign debt, which stood at $26 trillion in 2008, has more than doubled, soaring to $56 trillion in 2024. An international regime which a decade ago capsized and all but drowned in the sea of debt it had created, is drenching itself with a still larger flood of debt, with no end in sight.

So​ are we finally witnessing the arrival of a regime change in the West, one already announced many times this century? That’s the message of the recent bestseller by an eminent American historian sympathetic to Biden, The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary Gerstle, who suggests that from different directions Sanders and Trump dealt such effective blows to Hillary Clinton’s embodiment of neoliberalism that the way was cleared under Biden for the balance between rich and poor in American society to start being altered, and the benefits of government-directed industrial policy to become visible to millions.3 Conceding that ‘vestiges of the neoliberal order will be with us for years and perhaps decades to come,’ he nevertheless ends with the firm pronouncement that ‘the neoliberal order itself is broken.’ In some ways a yet harsher indictment of the socio-economic balance sheet since Reagan comes from a former admirer of the Gipper, the Indian American banker Ruchir Sharma, formerly chief global strategist at Morgan Stanley, in What Went Wrong with Capitalism.4 Its leitmotif is that ‘the periodic financial crises – erupting in 2001, 2008 and 2020 – now unfold against the background of a permanent, daily crisis of colossal capital misallocation,’ the result of enormous infusions of easy money injected into the advanced economies by central banks to prop up steadily declining rates of growth. Such state-dispensed torrents of cash are the ultimate, overriding truth of the period. Sooner or later, Sharma warns, a momentous shock to the system is bound to come. What remedy would that bring? Sharma’s answer: return to a smaller state and tighter money, the classic recipe of Mises and Hayek – neoliberalism rendered whole once more.

Such contrasting verdicts are not in themselves such a novelty. Eric Hobsbawm was proclaiming ‘The Death of Neoliberalism’ back in 1998. A dozen years later Colin Crouch, no less averse to it as a system, reached the opposite conclusion, entitling his book on its misadventures The Strange Non-Death of Neoliberalism, a judgment he reiterated a year ago in a text headed ‘Neoliberalism: Still to shrug off its mortal coil’. These were the conclusions of a declared enemy of the neoliberal order. A committed exponent of it, Jason Furman – special assistant to Bill Clinton, chairman of the Council of Economic Advisers for Obama, admirer of the Walmart model of management – is of the same mind. In a leading article in Foreign Affairs entitled ‘The Post-Neoliberal Delusion’, he delivers a vigorous riposte to thinkers like Gerstle, attributing the Democrats’ loss of the White House to the folly of abandoning orthodox economic discipline with vast, incontinent programmes of spending that failed to achieve their goals. Laying out the costs and returns of Biden’s tenure with a wealth of damaging detail, Furman reports: ‘Inflation, unemployment, interest rates and government debt were all higher in 2024 than they were in 2019. From 2019 to 2023, inflation-adjusted household income fell, and the poverty rate rose.’ ‘Despite efforts to raise the child tax credit and the minimum wage,’ he goes on, ‘both were considerably lower in inflation-adjusted terms when Biden left office than when he entered. For all the emphasis he placed on American workers, Biden was the first Democratic president in a century who did not permanently expand the social safety net.’ Conclusion: ‘Policymakers should never again ignore the basics in pursuit of fanciful heterodox solutions.’ What was spurned as neoliberal orthodoxy is alive and well, and offers the only way forward.

An international regime being lowered into the ground, or rising anew like Lazarus? The stand-off in such expert verdicts has its correlate in the political landscape, where the conflict between neoliberalism and populism, the adversaries that have confronted each other across the West since the turn of the century, has become steadily more explosive, as events of the past weeks show – even if, for all its apparent compromises or setbacks, neoliberalism retains the upper hand. The first has survived only by continuing to reproduce what threatens to bring it down, while the second has grown in magnitude without advancing in meaningful strategy. The political deadlock between the two is not over: how long it will last is anyone’s guess.

Does that mean that until a coherent set of economic and political ideas, comparable to Keynesian or Hayekian paradigms of old, has taken shape as an alternative way of running contemporary societies, no serious change in the existing mode of production can be expected? Not necessarily. Outside the core zones of capitalism, at least two alterations of great moment occurred without any systematic doctrine imagining or proposing them in advance. One was the transformation of Brazil with the revolution that brought Getúlio Vargas to power in 1930, when the coffee exports on which its economy relied collapsed in the Slump and recovery was pragmatically stumbled on by import substitution, without the benefit of any advocacy in advance. The other, still more far-reaching, was the transformation after the death of Mao of the command economy in China in the Reform Era presided over by Deng Xiaoping, with the arrival of the household responsibility system in agriculture and the ignition by township and village enterprises of the most spectacular sustained burst of economic growth in recorded history – this too was improvised and experimental, without pre-existent theories of any kind. Are such cases too exotic to have any bearing on the heartland of advanced capitalism? What made them possible was the magnitude of the shock and depth of the crisis each society had suffered: the Slump in Brazil, the Cultural Revolution in China – tropical and oriental equivalents of the blows to occidental self-assurance in the Second World War. If disbelief that any alternative is possible were ever to lapse in the West, the probability is that something comparable will be the occasion of it.