Neoliberalism’s Last Stand

1
Biden’s election is an attempt to revive the neoliberal order — one that is doomed to fail.

Hillary Clinton’s ignominious defeat in the 2016 elections has been widely viewed as a referendum on the failure of the neoliberal project. This is in large part because, in contrast to the outsider Donald Trump, Clinton represented the continuation of the same bipartisan establishment that had, for decades, placed the interests of an unbridled capitalist class above the needs of working people. From Ronald Reagan to Bill Clinton, George W. Bush, and Barack Obama, the program of globalization, free markets, financialization, deregulation, and austerity had been, with few exceptions, hegemonic.

Since the 2008 crash, however, neoliberalism, as both an ideology and an economic project, has been in crisis, a crisis that shows signs of spreading into all aspects of American political life. This is one reason why an arrogant billionaire who pledged to “make America great again” could eke out an Electoral College victory against the establishment’s candidate. And why he almost managed to win a second term despite miserably failing to deliver on that promise. Although Trump’s xenophobic and nationalist rhetoric clearly represented a break with the neoliberal establishment, in practice his policy turned out to be pretty closely aligned with it. With the exception of his foreign and domestic trade policy, Trump governed much like Republicans before him, gutting regulations, slashing taxes on corporations and the wealthy, and preparing the ground for further fiscal austerity.

Joe Biden, like Hillary Clinton, is also widely, and correctly, perceived as a representative of the political establishment. This time around, however, after four years of controversy, political polarization, a bungled pandemic response, and mass social unrest, the Democrats won the Electoral College by exactly the same margin as they lost it in 2016. This zigzagging back and forth from right-wing populist to establishment technocrat is emblematic of the ongoing elements of organic crisis currently developing in the United States. But this does not necessarily mean that people were voting for neoliberalism or even for the establishment. On the contrary, the U.S. political regime’s two-party structure almost guarantees that the real needs of the U.S. working class are never fully represented in such elections. For most of the U.S. electorate, Biden was the candidate not of neoliberalism, but of stability and of normalcy, an old and well-lit port in a political storm of historic proportions. But neither he nor the U.S. political-economic system is equipped to create that stability. In this respect, Biden’s presidency may signal the beginning of the end of the neoliberal project. How long it can be sustained and what might replace it, however, are open questions.

The Last Neoliberal?

While it’s clear that many voters who chose Biden were actually casting their ballot against the disgusting politics of the Trump administration and not in favor of Biden’s establishment politics, his election nonetheless represents perhaps the last opportunity for the ruling class to salvage what little is left of the wreckage of the neoliberal project. And in several ways Biden is the perfect man for that job. A business-friendly fiscal conservative with a long track record of supporting corporate bailouts, Biden is precisely what the capitalist class needs right now. It is no surprise then that Wall Street investors contributed five times as much to his campaign as Trump’s in the leadup to the election, or that he received the endorsement of two national chambers of commerce and hundreds of leading Republicans.

This backing from the capitalist class and the Right shows that there is still considerable bipartisan support for the neoliberal project despite its slow unravelling. These sectors of the ruling class are banking on Biden to reestablish some kind of social and economic stability through a combination of corporate stimulus spending and austerity, like what we saw after the 2008 crash.

If Biden’s record is any indication of how he will govern, it looks as though he will not disappoint his corporate benefactors. Indeed, although Biden campaigned on a platform that included some begrudging concessions to the progressive wing of the Democratic Party, his entire political career has been a testament to the kind of across-the-aisle bargaining that defined Obama’s presidency. A consummate politician and an expert in the art of bipartisan compromise, he was one of the first of the New Democrats — also known as the “Third Way” — who moved the party to the right in the early 1990s. He is also a well-known and enthusiastic deficit hawk who regularly supported balanced budget legislation and who, as recently as 2007, said he supported raising the retirement age for Social Security benefits. He advocates corporate-friendly free trade agreements and strongly supported NAFTA and the Trans-Pacific Partnership. And, as Branko Marcetic has painstakingly detailed, he is a transparently transactional politician with strong ties to the banking and credit card industries, to Washington lobbyists, and to the financial sector. As Obama’s vice president, he was also, and perhaps most importantly from the perspective of the capitalist class, part of an administration that oversaw the biggest corporate bailout in U.S. history.

You might be interested in: The Biden Era Begins

It is possible that Biden’s administration may manage to push through some stabilizing reforms to deal with the ongoing pandemic and the economic fallout from the latest wave of infections — including extending student loan and mortgage relief and enhanced unemployment insurance — but any plans that require major investment or changes to the tax code will likely be off the table, especially if there is a split Congress. Student loan forgiveness, investment in clean energy, a more robust Affordable Care Act, or a public health care option, if passed, will at best be watered-down versions of what Biden proposed on the campaign trail — and will more likely be dead on arrival come January 20. In fact, even before taking office, Biden is already signaling a willingness to compromise with congressional Republicans by encouraging his party to settle for a limited coronavirus relief bill that will not come close to what is needed, will not include any direct aid to families, and would likely include little aid to states in order to avoid massive public-sector layoffs.

But this does not mean there will be no spending, at least not when it comes to the kinds of policies that are most beneficial to business. Indeed, while neoliberalism is often synonymous with austerity and small government, as an ideology it has always been grounded in the idea that the state’s primary purpose is to maintain the health and functioning of the markets. Many corporations, particularly those in the oil, airline, travel, and hospitality industries, have been devastated by the pandemic. Bailing out these corporations in the name of economic stability is precisely the kind of government intervention that neoliberals love. And such a bailout of failing industries is probably one of the first bipartisan actions we can expect from a Biden presidency, a gift to the Wall Street investors who contributed so much to his campaign.

For working people, Biden’s platform promised student loan forgiveness, a higher minimum wage, a public option for health care, and a green jobs program. All these promises, of course, partly depend on the outcome of the Georgia Senate elections. But the biggest obstacle for Biden is really the projected $3.7 trillion deficit that he will inherit. After the major industries have been bailed out and their CEOs have all given themselves nice fat bonuses, the argument will be, as it so often has been, that there is no money left. And what follows will look a lot like the general austerity we’ve had for the last several decades, including reduced spending on education, health, and transportation, and maybe even cuts to Medicare or Social Security, something that Biden has put on the bargaining table many times in his three-decade-long career as a senator. Unless the Democrats win the Senate, there is little expectation that there will be any increased taxes on the very rich, or a significant reduction of the Trump tax cuts, and while an increase of the national minimum wage seems possible — the minimum wage has, after all, lost almost 40 percent of its value since 1968 — it will likely be at a rate that is vastly insufficient for most workers.

Such a likely program of compromises and half measures will only add to the ongoing crisis of delegitimization and polarization that has characterized U.S. politics since the 2008 crash. This will in turn provide fuel for the arguments of both right-wing nationalists and progressive reformists that a new way forward is needed. The problem, of course, is that there is no way forward for progressivism any more than there is for continued neoliberalism. It is unworkable to return to the period of social welfare and relative economic equality and prosperity that existed in the United States after the end of the Second World War. This is because there simply no longer exist the economic and political conditions that made possible such a compromise between capital and the working class.

Capitalism in Decline

On January 20, Biden will be inaugurated amid one of the biggest global economic crises since the Great Depression. The coronavirus and the lockdowns that followed have resulted in historically sharp declines in employment and GDP in countries across the globe, and as a second wave of infections spreads across Europe and the United States, there is every indication that the situation is going to get worse before it gets better. This economic collapse is not, however, merely a product of the pandemic. It is part and parcel of a much bigger, ongoing crisis caused by the global capitalist system’s inability to restore the levels of accumulation and growth of the decades before 2008. As shown in data from the Congressional Budget Office, the great recession created an unusually large and long-lasting “output gap” between actual and potential GDP from 2009 to 2017, and now an even more massive global output gap is growing in the aftermath of the first pandemic wave. As a result of these combined crises, the global economy is experiencing a demand shock, a supply shock, and a financial shock all at once, and Biden is stepping right into the middle of it. The pressure on him to act will be strong, but as we have already shown, the likelihood of any real action on behalf of the working class is slim. And even if Biden were willing to implement the more ambitious demands of the progressives in his party, such as Bernie Sanders and “the Squad,” that would do little to solve the larger economic crisis, which has become a permanent fixture of capitalism.

Since the first pandemic wave hit the United States in late February, economic activity has fallen dramatically. According to the National Bureau of Economic Research (NBER), the United States’ monthly economic activity peaked in February 2020, marking the end of the longest-recorded U.S. expansion, which began in June 2009. Since then, the United States has experienced two consecutive quarters of decline in GDP and recorded its steepest quarterly drop in economic output on record, a decrease of 9.1 percent in the second quarter of 2020. According to the economist Nick Routley, quarterly GDP had never experienced a drop greater than 3 percent since record keeping began in 1947. Meanwhile, Covid-19–related job losses wiped out 113 straight months of job growth, with total nonfarm employment falling by 20.5 million jobs in April. The impact of job losses was greater for women, nonwhite workers, and precarious workers. This does not mean, however, that we cannot expect to see moments of recovery during or immediately after the pandemic, as has already happened since September in the stock markets and in the third-quarter recovery of GDP. Still, even if that recovery holds in the fourth quarter — and it seems unlikely that it will, thanks to the latest wave of infections and shutdowns — that will leave the U.S. economy at least 3.5 percent smaller than it was at the end of the last year, before the coronavirus outbreak.

Beyond the oscillations of the global and domestic economy in the immediate term, the substratum of the current crisis is much deeper. As the Marxist economist Paula Bach puts it, the strengths that sustained the neoliberal period were severely weakened by the 2008 crisis. The pandemic ultimately deepened those weaknesses:

The truth is that the economic weakness after the 2008–9 crisis annihilated the weak substitute of “progress” offered by neoliberalism in exchange for “globalization” and the destruction of the conquests of the so-called “welfare state.” In some respects, and particularly during the 1990s and 2000s, a number of compensatory factors have acted to fuel the increase — globally and within most countries — of inequality, including: the proliferation of consumer credit (including subprime mortgages); the mitigation of inequality between countries (enabled by the rise of the so-called BRICS); the relative reduction in poverty (as understood in World Bank terms); the “Chinese Dream”; India’s similar dream; and to a certain extent even a Brazilian version; among others. This “devil’s bargain” is what, in the course of the last decade, was watered down first in the “center” and then later in the “periphery.”

In other words, the false “progress” of neoliberal capitalism, sustained across decades of borrowed time, has finally run its course with even more dire consequences for working people and the economy, not to mention the massive destruction of the environment and the proliferation of diseases such as Covid-19.

While a good number of mainstream bourgeois economists are quite pessimistic about the chances of a rapid recovery, and many predict it will be years before sustainable capitalist growth returns, Biden’s victory has excited at least some liberal economists. Their hope is that state intervention, like the policies implemented after the Covid-19 outbreak, can lead to a rapid and relatively painless recovery. The reality, however, is that even with massive state subsidies, the economic numbers are not promising. Perhaps one of the most enthusiastic representatives of this renewed liberal optimism is Paul Krugman, who has argued that Biden’s presidency will help speed along what he sees as a likely rapid and total short-term economic rebound:

What held recovery back after 2008? Most obviously, the bursting of the housing bubble left households with high levels of debt and greatly weakened balance sheets that took years to recover. This time, however, households entered the pandemic slump with much lower debt. Net worth took a brief hit but quickly recovered. And there’s probably a lot of pent-up demand: Americans who remained employed did a huge amount of saving in quarantine, accumulating a lot of liquid assets. All of this suggests to me that spending will surge once the pandemic subsides and people feel safe to go out and about, just as spending surged in 1982 when the Federal Reserve slashed interest rates. And this in turn suggests that Joe Biden will eventually preside over a soaring, “morning in America”-type recovery.

There are at least two problems with this hypothesis. First, the overcoming of the 1982 recession was possible precisely because U.S. capitalism managed to impose the neoliberal offensive, restoring capitalist profitability by privatizing the public sector and destroying state welfare systems and labor unions. Second, as a result of the lessons that the imperialist bourgeoisie took from the crisis of 2008, there is no longer the slightest doubt that massive state intervention is necessary to alleviate the most devastating effects of the pandemic recession. In fact, this element is perhaps what most clearly shows the contradictions of the neoliberal project, which was based, in part, on the drastic reduction of public spending. The question is, of course, state intervention for whom? In 2008, Wall Street investors were bailed out to the tune of more than $700 billion, while unemployment soared and homeowners were largely left to sink under the weight of mortgages they could no longer afford. But even with this massive infusion of cash, the economic recovery is still far below the pre-2008 growth rates, and all signs point to even slower growth going forward. This contradiction reveals the underlying problem facing the U.S. and global economies: capitalism is failing, and it has no plan B.

Cracks in the Edifice

The coronavirus pandemic and the social and economic chaos it has engendered reveal both the depth of the capitalist crisis and the ongoing crisis of legitimacy of the U.S. regime. There is simply no way for capitalism to gradually and harmoniously resolve its problems, and the coming period of economic instability will only catalyze further unrest and political polarization. Biden’s government, consequently, will be weak from the beginning. Its main function will be to deal with the decline of U.S. global hegemony and the ongoing economic downturn, and to govern in a relationship of forces marked by the continued influence of far-right nationalism, the unwavering demands of hegemonic capital, and the aspirations of the great laboring masses eager for alternatives to the rampant racism and inequality that American capitalism is based on. In response, we can expect a Biden administration to offer some partial and temporary benefits to the masses that may cushion the immediate effects of the pandemic, but these concessions will do nothing to solve the indelible crisis of capitalism.

How the Left responds to this situation, and where it puts its efforts in preparation for these turbulent times, will have long-term implications for working people in the United States and abroad. While few socialists have any illusions about Biden as a progressive politician, many nonetheless incorrectly advocated a vote for him, some even campaigned for him, and many more still believe that he can be pushed to the left through political persuasion or mass demonstrations and protest. Other less critical supporters of Biden, including Bernie Sanders, members of the Squad, and other Democratic Party progressives, are even more credulous. They believe — now that a Democrat is in office — that the problems of the economy can be solved by simply returning to the Keynesian policies of the postwar period, or a new New Deal of some kind. That expectation is not only inconsistent with the Democratic Party’s long-standing support of neoliberalism, but it is also grounded in political-economic conditions that simply no longer exist and on policies that never really worked. At the same time, the leadership of the DSA is subordinating itself more and more to this reformist policy, embracing the idea that its most important role is to act as the activist base for the left wing of the Democratic Party. The problem is that such a strategy is based on the expectation that capitalism will develop peacefully and without further crises — and there is nothing peaceful in capitalism’s future. This means that there is no time to lose. The Left must stop subordinating itself to the politics of the Democratic Party. We need to prepare ourselves so that, in the next wave of uprisings against police violence and the economic crisis, we can strengthen an independent, revolutionary perspective in the United States.

Such a perspective, however, does not mean renouncing elections. The question is not whether the Left should participate in elections, but rather how to use elections tactically to strengthen the class struggle, and to bring a revolutionary voice for the exploited and oppressed into the bourgeois congresses. Revolutionaries can use elections to make socialist ideas reach millions. The problem is when “electoral work” means strengthening our enemies (the Democratic Party for example), as the DSA has done. Running revolutionary candidates is an important part of the struggle to build up a political party for the working class and the oppressed.

On the other hand, our most urgent task is to build a fighting workers’ movement, following the example of the frontline workers fighting the pandemic. In the months ahead it will also be an essential task to fight the union bureaucracy, which is tied to the Democratic Party. At the same time, we need a revolutionary sector within the anti-racist movement that fights for an anti-capitalist perspective. The Democratic Party and the NGOs working within the BLM movement are enemies of this perspective and must be defeated. That is why we need a revolutionary faction within the movement to fight for democratic self-organization and political independence of the masses.

The depth of the current crisis opens great problems for revolutionary Marxism, but also great opportunities. It would be wrong for socialists to adapt to the liberal, utopian solutions to the crisis currently on offer. Instead, we must prepare, with clear eyes and determined effort, for the challenges that lie ahead for the proletarian revolution in America and the rest of the world.

About author

Jimena Vergara

Jimena Vergara

Jimena is an author of the collection "Mexico en Llamas" and lives and works in New York City.

James Dennis Hoff

James Dennis Hoff

James Dennis Hoff is a writer, educator, and activist. He teaches at The City University of New York.