The scale and breadth of the 2008 financial crisis were immense; markets and policy makers alike were in turmoil over the crash and the bleak horizon seemed to indicate the death of neoliberalism and deregulation, with the inevitability of future government intervention as a policy counterpart. The instability of markets and the volatility of price structures, financial consensus and macroeconomic policy emerging from the crisis left the political and economic world in desperate search for recovery and rejuvenation. The deleterious symptoms of the 2008 financial crisis would have been – at surface level – legitimate reasons for wholeheartedly rejecting the revered tenets of neoliberalism due to the perceived role of laissez-faire policy trends and the systemic risks of ruggedly competitive free market dynamics. The fact that neoliberalism showed a resilience, even a dominance, in the context of national and supranational policy-making is a clear testament to its strength as both a political and an economic concept.
Focusing on the advantages of neoliberalism as an alternative policy-making paradigm responding to the endogenous and exogenous shocks of sovereign and international debt, consensus was shifting post-crisis towards framing individuals as the primary creators of wealth and competition, thus departing from the narrative of economic 'group-think' that dominated financial regulation prior to 2008, notably within the UK and Europe. The example of the European Union is frequently offered as a supranational institution highlighting shifts in policy-making from Keynesianism to monetarism. Specifically, it is contended that the layering of new institutions onto old ones and the conversion of old institutions which neoliberalism catalysed has given rise to a path dependency, based on ideas such as fiscal consolidation, for the rules of EU monetary policy that will prove difficult to reverse. In this regard, neoliberalism can be regarded as a policy recipe for nation-states worldwide in response to crises. Institutional actors including the IMF, EU Commission and the ECB have propagated this type of policy mirroring at various stages.
American economist Joseph Stiglitz contended in 2008 that ‘the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism’ (Stiglitz, 2008); as attractive a linguistic aphorism as it may be, the prediction proved to be erroneous. In fact, the opposite of this can be said to have materialised. In Thatcher and Schmidt’s 2013 work, the ability of neoliberal logic to blossom in the face internal and external challenges is what constitutes its very resilience. It is for this reason that Marxist scholar Alex Callinicos stated, albeit rather pessimistically, ‘the illusions have survived the bonfire’ (Callinicos, 2010); the ideational influence of neoliberalism has impressively reshaped itself according to the demands of time and place. The inability of governments and supranational institutions to adopt one single formula to insulate themselves from exogenous shocks has meant that neoliberalism – a flexible organism – is for policy-making what rubber is for the contemporary manufacturing world.
Economist Colin Hay helpfully delineates a seven-point list of the principal elements characterizing contemporary neoliberalism; in sum, they concern 1.) the confidence in the market as an efficient mechanism for the allocation of scarce resources 2.) A belief in the desirability of a global trade regime for free trade and free capital mobility 3.) A belief in the desirability, all things being equal, of a limited and non-interventionist role for the state and of the state as a facilitator and custodian rather than a substitute for market mechanisms 4.) A rejection of Keynesian demand-management techniques in favour of monetarism, neo-monetarism, and supply-side economics 5.) A commitment to the removal of those welfare benefits that might be seen to act as disincentives to market participation (in short, a subordination of the principles of social justice to those of perceived economic imperatives) and finally 6.) A defence of labour-market flexibility and the promotion and nurturing of cost competitiveness (Thatcher and Schmidt, 2013). This effectively highlights the unyielding resilience of neoliberalism following the financial crisis due to its internal survival as a concept ripe for pragmatic application at any point in time. From a historical institutionalist perspective, then, neoliberalism as an influencer of policy-making has an undeniable path dependence.
Furthermore, it is important to recognise that the logic of liberalisation has not been restricted to economic policy-making. Indeed, neoliberalism underpinned much of the movement towards national sovereignty and the territorial jurisdiction of markets; an enlightening statistic from the literature is that the proportion of democratic countries in the world more than doubled between 1980 and 2000, while the number of sovereign states in the world also doubled to roughly 200 (Schmidt and Thatcher, 2013).
Despite the various institutional variables interacting with one another in this dynamic, it is incontrovertible to say that the dominance and resilience of neoliberalism as an agenda has set the global trend towards a national and international policy-making consensus based on sovereignty and the logic of the market. As a set of ideas and variations on a theme, it becomes quickly apparent that neoliberalism’s influence on policy-making post-crisis is tied to its ability to speak the language of ‘common sense’ politically and economically, a powerful medium through which to influence the status quo and set the agenda for macroeconomic consensus.
Prior to the 2008 crisis, the inability of Keynesian policies to rectify economic turbulence was lucidly clear; unsurprisingly, disillusionment and lack of faith in the results of current and past policy catalysed the search for new policy-making pastures. In Schmidt and Thatcher’s (2013) contribution to the narrative, they demonstrate that, as well as a broad trend towards political and economic liberalism post-crisis, there has been considerable convergence in national policy-making trajectories. Empirical data in the literature highlights a dramatic shift in North America and Western Europe towards complete financial openness. The empirics of the analysis certainly suggest a resilience of the influence of neoliberalism in policy-making that is unlikely to disappear in the foreseeable future.
Scholars have been able to understand the resilience and continued proliferation of neoliberalism in global policy-making since the financial crisis through the lens of ideational flexibility, universal trends towards open markets and reduced regulation, the inability of Keynesianism to create post-crisis stability and market growth, the desire for internal fluidity in national and supranational policy and the continued survival of the free market in its political dominance. What is consistent throughout the literature and the evolving dialectic is the framing of neoliberalism as an incredibly dynamic, malleable and context-dependent organism, one that shifts and alters according to the political mood and economic constraints. It is for this reason that neoliberalism, along with its contemporary reliance on the logic of markets, continues to persevere in the face of external shocks.