The end of neoliberalism?

I just read the first two chapters of a book used by one of the econ profs here at Bentley to introduce neoliberalism.  The first chapter distinguishes neoliberalism from the classical liberalism of Adam Smith that lasted until the Great Depression, the pragmatic liberalism of Keynes that lasted between the Great Depression and the economic shocks of the late 70s, and libertarianism in general.  Chapter Two talks about how Reagan and Thatcher  (and to some extent Fraser and Mulroney of Australia and Canada respectively) trumpeted the idea of neoliberalism and initiated it quite effectively.  It also describes how Reagan implemented it through supply side economics while Thatcher implemented it through monetarism.  It also contrasts their neoliberalism from the neoconservatives like Irving Kristol who had a similar economic philosophy but a very different way of looking at the rest of government’s role.  Counter to their political and economic philosophies, neither was able to rein in spending, in Reagan’s case because of the arms race with the Soviets and in Thatcher’s case because of the National Health Service. 

The crash of 2007 seemed to signal the end of the neoliberal era.  The GOP was rejected and Obama and the democrats took over.  The administration presumed a mandate to increase spending (although that was actually started by Bush) to stimulate the economy. They also tried to implement a more centralized, interventionist kind of governance (although this was stymied by GOP senate filibuster and now the GOP majority in the House).  

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I bring this up today because of President Obama’s State of the Union address and his rhetoric on taxation. And the thought that it isn’t either activist government of the progressives or the laissez faire government of the neoliberals that seem to make any difference.  It is the quality of the implementation.  Reagan succeeded at first, which wasn’t too surprising considering how high inflation was, and how hard the Fed under Paul Volcker worked to fight it.  But then foreign policy was his undoing (economically speaking – it was a great result that the Berlin Wall fell). 

With Obama, I think he had the right idea in stimulus, at least for that time, and it worked a little bit.  But it skyrocketed the deficit much more than is justified by the weak growth we got out of it.  He spent the money increasing consumption rather than investment.  So the money got spent, stimulating the economy, but then was gone (much of it to China for electronics and apparel).  

It is too bad that politics and extreme wings of both parties seem to screw us up every time.  It seems like we are always so close to doing things right.  We get Presidents with visionary ideas and good motives.  But then politics gets in the way.  Or perhaps extremist ignorance and confirmation bias.  If a little of a policy seems to work, then more must be better. 

In my idealistic vision, I imagine a Constitutional Convention just like we had back when we converted the Articles of Confederation into the US Constitution.  The realist in me knows that it would be quickly hijacked by lobbies, special interests, and extremists.  But I just imagine some new Thomas Jeffersons, James Madisons, Alexander Hamiltons, emerging from the grassroots (or netroots) and transforming Washington into a working government again and trampolining the US back to a “light unto the nations” that it has historically been.