Pages: 11

The introduction explores the main intellectual underpinnings of “neoliberalism” and defines how the term is used in the rest of this book. Although there is no “Bible” of neoliberalism and the doctrine itself encompasses different schools of thought, it is possible to show that there is a common framework of neoliberal analysis shared by all its proponents despite their apparent differences. Neoliberalism can thus be boiled down to the idea that the state’s function is to provide the institutional framework that allows markets to coordinate economic and social behaviour through a price system governed by competition.

Pages: 14

This chapter sets out to explore two main issues. First, it summarises the key points of monetary theory accepted by most academic economists: the fundamental association between money and debt, the process of money creation in contemporary monetary systems, how the value of money is determined, and how inflation is theorised. Second, it describes the historical roots of monetarism, showing that it is a neoliberal doctrine centred on fighting inflation by depoliticising monetary policy. Thus, although recommendations may differ from one school to another, every neoliberal is a monetarist in that they share a common understanding of the nature of money and inflation.

Pages: 27

This chapter shows how monetarism became dominant in the academic world in the 1970s and in the practice of monetary policy from 1979 to 2008, and how it has been contested since the 2008 financial crisis. The expansion of unconventional monetary policy and increasing tensions between governments and central bank authorities in some countries show that depoliticised monetary policy is no longer ascendant. In the academic world as well, heterodox voices contesting this view have emerged, such as the Modern Monetary Theory (MMT), a post-monetarist approach propounded by Stephanie Kelton, which is described in detail. The last sections of the chapter show that the monetarist approach cannot be challenged without a deeper understanding of the broader neoliberal framework in which it is embedded.

Pages: 19

This chapter proposes an analysis of the pre-neoliberal capitalism of the 1950s and 1960s. Adopting a historical approach, it shows how the wartime economies set up in response to the economic and social crises of the 1930s forced most capitalist countries to implement formal and informal institutions to control the prices of the means of production. This included interest rates, currency exchange rates and the cost of labour, raw materials, and agricultural goods. It also explains how the post-war German economy chose a different path marked by the influence of ordoliberal ideas, and how it benefitted from the economic protection provided by the regulated capitalism prevalent in the rest of the world. Finally, it is shown that, contrary to neoliberal ideas, this “embedded capitalism” proved itself to be largely efficient both socially and economically.

Pages: 19

This chapter analyses the economic and political crises that arose in the 1970s and the reasons why post-war embedded capitalism came to an end. It argues that this upheaval was not the consequence of excessive state regulation and intervention. Rather, the 1970s were marked by economic crisis because prevailing regulations were weakened by changes in the global balance of power and in the economic structures of developed capitalist economies. The second part of the chapter explains how new pro-market institutions were established in the 1980s and 1990s under the pervasive influence of neoliberal ideas. The consequence of this new institutional framework is that the prices of the means of production were no longer politically regulated but came under the ambit of competitive markets.

Pages: 31

This chapter offers an in-depth analysis of the 2008 financial crisis. First, it explains that for neoliberals the main role of financial markets is not to facilitate investment but to price and therefore value the means of production, in order to guide economic decisions. Secondly, it explains how this view has pushed governments to both expand and deregulate financial markets and to favour the securitisation of financial assets such as mortgage loans, and how this policy laid the ground for the development of the subprime crisis. It argues that the subprime crisis was not only the consequence of a sudden drop in the value of some financial assets but rather of the disappearance of the market’s ability to price and value them. This situation pushed public authorities to intervene by buying up these assets in order to give them a price. The last sections of this chapter investigates the reason why central banks had to implement non-conventional monetary policies as a direct response to financial crisis and, from 2009 onward, to help finance recovery programmes, solve the 2011–2015 Eurozone crisis and support public spending during the COVID-19 pandemic.

Pages: 21

This chapter develops two main ideas. First, it investigates how neoliberal economists such as Jean Tirole analyse the financial crisis and its causes. It argues that their main explanation for the collapse of the financial system is the failure of public supervision of financial markets, an explanation that remains within the neoliberal framework. In other words, and contrary to popular belief, the financial crisis has not prompted a revision of the neoliberal doctrine. Secondly, the chapter examines the theoretical limits of the neoliberal view by studying the complex interactions between information and prices. This examination shows why it is not possible to assert that market prices do indeed reflect all available information. An alternative institutional theory of markets is proposed. In its last section, Chapter 6 argues that although the 2021–2022 inflation surge has pushed central banks to adapt their public statements, monetary policy cannot return to monetarism and is likely to stay largely accommodative in the future. This situation effectively marks the end of the neoliberal doctrine.

Pages: 24

The conclusion considers which other regulatory system could take over from neoliberalism. It firstly describes the current context of the global economy, marked by the rise of shortages in energy and consumer goods and the challenge of climate change. The second part of the chapter describes two possible scenarios for a post-neoliberal system, one that could bring about a Chinese or Russian-style neo-feudal regime, and the other, founded on the insights of sociologist Wolfgang Streeck, where neoliberal capitalism would turn itself into a “post-social society” marked by the collapse of most social institutions. The third part of the conclusion proposes a more politically acceptable scenario for a post-neoliberal society. It develops four principles needed to implement an agenda for a democratic economy: (1) responding to the climate emergency and the scarcity of natural resources; (2) determining the role of the market in the economy and society; (3) rethinking the economic role of the state; (4) re-embedding the economy in democracy.