usable neoliberalism_April 17.pdf

Neoliberalism: A usable definition Cornel Ban Boston University Paper presented at the ENLIGHTEN workshop at Copenhagen Business School October 16, 2016 Abstract This paper proposes a usable definition of neoliberalism that avoids its excessively narrow and broad definitions and, hopefully, the intellectual confusion that surrounds this popular term. As such, it focuses on economic theories and schools of thought as the core of neoliberal coordinative discourse, with Spain, the IMF, Romania and Brazil providing the main illustrations. By calling on political economists to engage more systematically with economic theory and history, the paper defines neoliberalism as a set historically contingent and intellectually hybrid economic ideas and policy regimes derived from specific economic theories whose distinctive and shared goals are financial market credibility, trade and financial openness and the safeguarding of internal and external competitiveness. 1 The conceptual apocalypse of neoliberalism “Neoliberalism” is back in fashion. The term, shunned for decades in mainstream policy circles, was recently used by leading IMF economists in a kind of soft revisionism of mainstream economic thinking1. A slew of books were publish with the disputed word in the title. 2 An insult word deployed by some for economic liberalism and a more analytical term for others, “neoliberalism” was one of the most popular words used in social science during this period. But by the mid to late 2000s conceptual inflation, terminological confusion and fatigue set in. Many scholars felt that the term had become less analytical, a grab-bag of definitions that associate it with a plethora of social facts, from political ideology to a technocratic list of policies and even models of capitalism (Boas and Gans-Morse 2009). Although there is enormous value added in this new wave of literature on neoliberalism, it nevertheless struggles with the tendency to give neoliberalism either a very broad or very narrow definition, generating chains of inconsistencies between policy domains if one goes beyond a single policy area. What most scholars have in mind when using neoliberalism as a body of ideas is either market fundamentalism or some idealized version of neoclassical economics imbued with anti-government fervor. Yet the dominant policy elites in one country can espouse “Chicago school” orthodoxy when it comes to macroeconomic policy, but they may stick to a view of how income, opportunities, and time should be distributed via taxation, public services, and labor market institutions that may be closer to heterodox economics. This paper argues that this view may lead research into an empirical cul de sac where confusion reigns. Far from being an intellectually purist paradigm, neoliberalism is a hybrid set of ideas and institutions that can coexist — albeit uneasily — with a range of very different political projects (from liberal-democracy to political Islam) and economic approaches (from Chinese planning to Scandinavian welfare state). To use Vivien Schmidt’s useful categories, it can cohabit with other communicative and coordinative discourses (Schmidt 2017). But if this is the case, how do we know when a hybrid ceases to be a neoliberal hybrid, its contents dominated by those of neoliberalism’s foils, from Keynesianism to developmentalism? Similarly, defining neoliberalism too broadly risks the “imperial expansion” of its definitional boundaries to the point that in some research even the Communist Party of China is defined as neoliberal (Harvey 2007; Saad-Filho and Yaman 2009; Gereffi 2009). 1 http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm The Lehman crisis and its aftermath have revived interest in studying the emergence, consolidation, crises and resilience of neoliberalism (Ferguson 2010; Brenner et al 2010; LeBaron 2010; Duménil, and Lévy 2011; Crouch 2011; Amable 2011; Centeno and Cohen 2012; van Appeldoorn et al 2012; Bohle and Greskovits 2012; Peck and Theodore 2012; Williamson 2012; Cahill 2013; Manalansan 2013; Hilgers 2013; Jessop 2013; Schmidt and Thatcher 2013; Hall and Lamont 2013). 2 2 To address this question, the paper proposes an empirically usable definition of neoliberalism. Dietrich Rueschemeyer (2009) defined “usable theory as focused theory frames that formulate problems and point to relevant causal factors and conditions to produce analytically oriented empirical research. focusing on knowledge, norms, preferences, and emotions, and it discusses larger social formations that shape elementary forms of action. In this case, a usable definition of neoliberalism entails the definition of concrete metrics and vocabularies that specify what is core and what is periphery in the concept of neoliberalism and distinguish it from other economic ideas. While neoliberal communicative discourse is harder to pin down, it is easier to meet the benchmarks of usable theory when analyzing neoliberalism as the coordinative discourse “whose technical fine-tuning involves epistemic power over ideas to consolidate intellectual consensus” (Schmidt 2017: 263). This is because this definitional strategy uses specific component parts of neoliberalism that key economic policymakers (and not just other scholars) can understand by virtue of their training or professional experience. The terms “neoliberalism” and “Keynesianism” rarely appear in economic policy reports or economics journals, but “rational expectations,” “real business cycles,” “efficient market hypothesis” and the “new neoclassical synthesis” do. So too do the concepts of Ricardian equivalence, expansionary fiscal contraction and the Laffer curve. To understand what coordinative neoliberalism is, one has to understand what these arcane terms mean, too. As the analysis below shows, political economists often use ahistorical or simply flawed definitions of this ideational corpus. The paper is organized as follows: First, the paper provides a usable definition of neoliberalism and contrasts it with existing definitions in political economy. Next, in order to prevent the boundaries if this definition to melt into fuzziness, it maps out the unique conceptual core of neoliberal economics along a trinity of goals. Third, it introduces an empirically based conceptualization of the internal diversity of neoliberalism as a technical project. In the fourth section the paper uses short case studies to illustrate these varieties of neoliberalism and situations when national translations of neoliberalism yield ideational hybrids whereby neoliberal ideas are dominated by nonneoliberal ones (post-neoliberalism). The final section concludes. What is neoliberalism? It is commonplace to argue that popular protest, interest group and electoral strategy can prevent some neoliberal ideas from being implemented as policies. Surely, material constraints and local political mediation are important, but as a vast constructivist literature has showed, the specific form that neoliberalism takes among dominant policy elites in a certain country over time cannot be adequately understood if we ignore the economic ideas embraced by the policymakers by virtue of their training or other forms of professional socialization before such potent forms of politics kicked in (see Carstensen and Schmidt 2015; Widmaier 2016; Blyth et al 2016 for overviews). This is a compelling rebuttal to strictly materialist and institutionalist accounts, but the literature remains plagued by low-resolution definitions that lead to widespread dissatisfaction with the use of neoliberalism as a term that illuminates empirical realities. Calls to stop using 3 this term are understandable but they risk throwing out the baby with the proverbial bathwater. Defining neoliberalism as “market fundamentalism” in the footsteps of Bourdieu (1998) Stiglitz (2008) Block and Somers (2014) is quite problematic. Tea Party politicians in the US or center-right economic ministers in the Baltics may, indeed, look like genuine market fundamentalists. Yet, most real-existing neoliberals do not. In Spain, for example, successive Socialist governments of the ’80s and ’90s tried to emulate German fiscal and monetary rigor alongside select supply-side policies of Thatcherite inspiration, yet they argued just as passionately for universal social rights and progressive taxes (Ban 2016). Similar problems emerge if one reduces neoliberalism to a replay of the Gold Standard liberal economic philosophy and neoclassical economics that had prevailed before World War I. Take the example of an article published in a top- tier political science journal (International Organization), in which neoliberalism is defined as “a revived version of classical liberal economics. Three assumptions are widely shared within the consensus, namely that: the market is the most efficient mechanism for allocating scarce resources; free exchange of goods across borders is welfare improving; and market actors have rational beliefs. Three policy recommendations flow from these assumptions: governments should, in general, pursue fiscal discipline; a country’s economic orientation should be outward; and countries should rely on markets for the allocation of goods and resources and for the setting of prices.” (Nelson 2014, 308) Concrete neoliberal theories are certainly steeped in classical liberal and neoclassical economics, but they are not their revived contemporary version. A cursory reading of the current top journals in macroeconomics would reveal that the rational expectations assumption is really not that central to what it means to be a neoliberal today and is not even widely shared among mainstream economists, as it is often assumed. Indeed, once can write papers urging austerity while openly rejecting rational expectations. Likewise, fiscal consolidation is not something everyone— certainly not the IMF economists— would endorse for all countries in times of recession, at least when interest rates are in the zero lower bound and the country in question has fiscal space for a fiscal stimulus (IMF 2008; 2012; Blanchard and Leigh 2013; see Ban 2015 for an overview). “Indeed, neoliberals generally do not believe in the comic- book version of laissez- faire sometimes promoted by the economists. They may profess it to the masses; they may even propound it in Economics 101; but it does not characterize their sophisticated internal discussions, and is belied by their political activities (Mirowski 2013). In reality, these sophisticated internal discussions are less conceptually elegant than many political economists commonly think. Confusion is guaranteed if one goes to Scandinavia, Austria or Slovenia with the definition of neoliberalism as market fundamentalism or neoclassical economics. Policymakers there are famously orthodox on macroeconomic, financial and trade policy, yet they see in politically coordinated 4 industrial relations, generous welfare states and progressive tax systems the means to achieving not just social fairness, but also market competitiveness and credibility. In Korea and Brazil, pro-deregulation ideas cohabit uneasily with structuralist ideas about state-led finance and neo-developmentalism (Ban 2013; Thurbon 2016). In Northern European countries the domestic consensus around orthodox monetary and fiscal policy theories or loosely regulated product markets is textbook neoliberalism. At the same time, their strong welfare state ideologies, tax regimes, and neocorporatist industrial relations are steeped in non- neoliberal traditions (Pedersen 2007). Do these countries live under a neoliberal policy regime or a non- neoliberal one? Open any mainstream economics journal and you will note that “core” neoliberal theories such as rational expectations or real business cycles often coexist-and not always tensely- with Keynesian concepts such as “sticky” wages and prices or “fiscal multipliers.” Confusion grows if one looks at the usual suspects as well. Between 2008 and 2010, the IMF was a supporter of Keynesian demand- side stimulus programs (Ban 2015), and later on it even embraced capital controls and extensive sovereign debt restructuring under certain conditions (Gallagher 2015). Has the enforcer of the Washington Consensus gone Keynesian? How do we make sense of these intellectual and policy mosaics? How do we know that the mosaic is still neoliberal? The conflation of neoliberalism and market fundamentalism also sits uneasily with the extensive interventions of governments to correct and nudge markets, pay for the financial safety nets for TBTF (“too big to fail”) institutions, or institutionalize new forms of economic privilege in the shadow banking sector (Moschella 2016; Helgadottir 2016; Gabor 2016). The dominant thinking in central banks and their organization (Bank of International Settlements) rejects financial market fundamentalism and has pushed for relatively bold reregulation using unorthodox ideas (Gabor 2016; Ban, Seabrooke and Freitas 2016). This definition also clashes with post2008 “interventionist” ideas beyond macroprudential regulation and with the espousal of aggressively countercyclical monetary policies by some systemic central banks (Tsingou and Moschella 2013; Baker 2013; Blyth 2013; Braun 2016). Hybridity matters but it’s not enough to say that neoliberalism is a hybrid and that bricolage is the natural state of knowledge and policy regimes (Carstensen 2011; Newman and Farrell 2017). For political economists interested in the power of this policy paradigm, the extra mile is represented by the analysis of the main intellectual and policy thrust of that hybrid. For it is this main thrust that cuts down the thicket of editing and grafting exercises and differentiates it from alternative coordinative discourses. The trinity of neoliberalism To avoid this “too broad / too narrow” definitional problem, this book builds on Mark Blyth’s understanding of global neoliberalism as an identifiable set of economic theories plus the policies and institutions that follow from them (Blyth 2002). But, unlike Blyth, who analyzes neoliberalism in a single historical snapshot (its emergence during the 1970s and 1980s), this paper proposes a definition that travels across time. As a coordinative discourse, neoliberalism is hereby defined as a set of historically contingent and intellectually hybrid economic ideas and policy regimes derived from specific economic theories whose distinctive and shared goals are the following: make economic 5 policies have credibility with financial markets, ensure trade and financial openness, safeguard internal and external competitiveness. Elements of competing theories can be edited into local translations only as long as they do not challenge these fundamental goals. No matter how many Keynesian, structuralist, or “populist” impurities are absorbed into these historical hybrids, the end result can still be characterized as neoliberalism if its advocates espouse the need for institutionalized trade/ financial openness, public finances benchmarked by financial market credibility, and growth strategies based on the relative competitiveness of the national economy. Peter Hall (1993) and Mark Blyth (2001) come in handy with their Kuhnian argument that a policy paradigm is as good as its core of key goals. The rest (the policy instruments and the policy settings) can be tinkered with. The significance of this insight, here, is that if we look at the theories that constitute neoliberal economics, from New Classical macro, New Growth theory to the New Neoclassical Synthesis, we note that they all solve economic policy trade offs in favor of the three main goals: (1) trade and financial openness, (2) the benchmarking of economic and social relations by the standards of market competitiveness, and (3) the evaluation of macroeconomic and social policies in terms of their credibility with financial markets. Beyond these goals, everything is up for grabs, and this can help us distinguish between varieties of neoliberal hybrids — as well as between paradigm demise and cases of paradigm calibration (Ban 2015) that yield little more than renewed rounds of intellectual adaptation to new material and political conditions. This trinity is central to neoliberal translations because it disciplines them with marketbased devices, a key aspect of neoliberal ontology (Schmidt and Thatcer 2009). As long as translators stick to these targets, they enable the flow of capital across borders, subjecting the epicenter of local tax-and-spend decisions to the perceptions of financial investors. During crises, adherence to these goals pushes states and societies to adjust through market- based competitive strategies such as deregulation, spending cuts, and wage restraint (internal devaluation). These three benchmarks are critical in “litmus test” situations, when local translators address conflicts between the ideational goals of “source” neoliberalism and the policy goals of non- neoliberal ideas used in local translations. For local hybrids to be considered neoliberal hybrids, the translators must always resolve these trade- offs in favor of the three core neoliberal goals. The domestic translation of neoliberalism can be done via grafting, editing and framing. Grafting is a translation device that associates new economic ideas with preexisting ideas that are relevant for the same issue area of economic policy and make similar prohibitions or injunctions, even as local ideas are reconstructed in accordance with neoliberal ideas. This device enables translators to recycle pre-existing economic ideas that are consistent with neoliberalism. The expected result is the presentation of neoliberal ideas as if they were part of the domestic ideational stock, thus making neoliberalism seem less problematic in the domestic context. But grafting can also change neoliberal ideas by giving birth to hybrids between the local ideational “rootstock” and the neoliberal “stem.” 6 Editing brings to the fore the ability of network participants to devise dynamic interpretations of neoliberal ideas that overcome the problems raised by neoliberalism’s poor domestic resonance with pre-existing economic ideas. Through editing neoliberal economic ideas are transformed by translators in accordance with what they perceive to be domestically dominant ideational conventions. As a translation device, editing is defined as the reformulations of the neoliberal text in terms of its focus, content and meaning. But editing can also entail that contested ideas from the outer boundaries of the neoliberal paradigm can be made to seem uncontested and central to neoliberalism. Editing may produce mistranslations, hybrids and affect pre-existing economic ideas as well. The results of this veritable intellectual bricolage are expected to be highly contextual. Finally, framing is one of the devices of translation through which translators make ideational innovations like neoliberalism seem local by using language and presentation styles that “bridge” domestic historical narratives with neoliberal ones. This translation device allows for a variety of outcomes that can range from the radicalization of ideas to its very opposite. As research on the saints-and sinners politics of the euro shows done by Matthias Matthijs and Kathleen McNamara (2015) shows, the effects of framing tends to be highly consequential for both the high and low politics of the economy. By taking seriously the intellectual heterogeneity and temporally contingent nature of neoliberalism, while specifying the mechanisms of translation, this definition takes us beyond the notion of “opposing paradigms” that sows confusion every time a government with impeccable conservative credentials forgets about “Chicago school” economics and launches Keynesian stimulus programs or directs public money toward the country’s industrial champions. Instead, this definition focuses our attention on the processes by which different economic theories thought to be antagonistic come to be intertwined over time, forming shifting combinations that nevertheless remain geared around a dominant center constituted by the three goals mentioned above. It is this flexible co-option of competing frameworks that has made neoliberalism more resilient to challenges than classical liberalism ever was (Brenner, Peck, and Theodore 2010a; 2010b; Mirowski 2013). Finally, rather than risk making neoliberalism appear as a seamless and time-invariant construct, this definition is sensitive to the shifting boundaries of neoliberal theories across time. During their postwar marginality, the neoliberal ideas of the Mont Pelerin Society had three strands: “the Austrian- inflected Hayekian legal theory, the Chicago School of neoclassical economics, and the German Ordoliberals” (Mirowski 2013, 42; see also Plehwe 2009). Then, in the 1970s and early 1980s, monetarism, New Classical macro-, and supply- side economics were the ubiquitous symbols of neoliberal economics (Blyth 2001; Widmaier 2003; 2016; Woodford 2009). But contrary to common misconceptions, monetarism failed to survive the mid- 1980s as a unified body of thought and, from the late 1980s onward, neoliberal theory became characterized by an uneasy compromise between New Classical and New Keynesian macroeconomics dubbed the “new neoclassical synthesis.”(Clift and Widmaier 2017). In 7 practice, this synthesis or “mature neoliberalism” (Mirowski 2013) was very much unlike “market fundamentalism” à la Friedrich von Hayek or even Robert Lucas. Rather, a reinforced and increasingly nuanced set of supply- side theories informed conventional thinking on current account positions, taxation, financial regulation, employment, and industrial policy during this consolidation phase of neoliberalism and throughout its post2008 crisis (Widmaier 2003; Woodford 2009; Blanchard et al. 2010; McCombie and Pike 2013; Cencini 2015). Most importantly, this definition does not risk muddying the conceptual waters with its excessive embrace of hybridity, to the point that one no longer knows when a theory is still neoliberal. In all these theories, a strong preference for credibility- maintaining low inflation and budget deficits supersedes concerns about unemployment, leaving labor market liberalization (rather than demand- side policies) to deal with sluggish growth and job performance. Contrary to conventional thinking, which paints neoliberals as timeless clones of Reagan and Thatcher, for quite some time, some prominent mainstream neoliberals have viewed the welfare state as an “automatic stabilizer” of aggregate demand (Ban 2015). What makes one a neoliberal is that, when push comes to shove, one always chooses to be guided by the theory of market credibility and therefore choose social spending cuts even in a recession. Finally, while various forms of open-economy industrial policy or financial regulation can be accommodated within mainstream neoliberalism, they remain severely hamstrung by the resilience of core neoliberal theses about comparative advantage and efficient financial markets. How do these historically variable forms of global neoliberalism “go local”? timeless insights can help with the task of keeping these vast translation possibilities within parsimonious conceptual boundaries. Real-Existing Local Neoliberalism: Embedded or Disembedded? Karl Polanyi (1944) famously argued that the stability of the capitalist system hinges on the extent to which politics can create a balance between market competition and social protection. In international studies, John Ruggie’s term embedded liberalism inaugurated a rich research agenda analyzing the rise and fall of the “tissue of exceptions, expansions and special cases” that circumscribed economic liberalism in the context of the postwar class compromise and its international financial and trade infrastructure (Caporaso and Tarrow 2009, 596). Later, looking at the transformations experienced by the United States and Sweden during the 1980s and early 1990s, Mark Blyth’s Great Transformations (2002) announced the end of embedded neoliberalism and the advent of disembedded liberalism (basically neoliberalism), which aimed at the removal of exactly that “tissue of exceptions, expansions and special cases” which was built during the postwar years. Unlike in postwar social/ Christian democratic Keynesianism, the de facto manifestations of embedded liberalism at the domestic level, in the new thinking capital controls and strict financial regulation were judged self- defeating, full employment was no longer the 8 main goal of economic policy, the imperative of demand- side stabilization of economic cycles became a relic and the idea of class compromise receded in the background. But this was far from being an “end of history” moment. It became clear that liberalism was disembedded at different paces, and in different ways, in different countries and that a considerable part of the tissue in question survived in reconstituted forms. Moreover, the policy and institutional consequences of these different neoliberalisms made a great difference for how people lived under these varied and hybrid regimes. Albeit constrained, redefined, and shrunk by worries about market credibility, vulnerability to an open current account, and concerns about competition across flattened trade barriers, policy regimes as different as social- democracy, progressive liberalism, and the developmental state continued to exist. Consequently, a handful of scholars, also inspired by Polanyi’s concept of embeddedness, began to trace the ways in which social protection can be maintained under neoliberalism. Van Apeldoorn (2001; 2003; 2009, 24– 29) broke fresh ground when he argued that, between the Single European Act (1986) and Maastricht (1992), embedded neoliberalism emerged as the successor to embedded liberalism in the EU. This real-existing neoliberalism differed from the US version of neoliberalism, because it was constructed between the ideational and institutional legacy of social democracy and the needs of European capitalist firms facing increasing global competition. Over time, social protection, economic protection, and economic liberalism were addressed via EU integration, with economic liberalism leading the pack by transferring authority over market competition to the supranational EU level. At this transnational level, it was strengthened and extended by hard legal and policy instruments, while leaving responsibility for social protection to the individual member states. A decade or more on, while macroeconomic policies and structural reforms have become the object of hard rules- based supervision and coercion (particularly within the eurozone), employment and human development performance has been protected only by soft EU instruments such as recommendations via the Open Method of Coordination, a view qualified by research on labor rights in the jurisprudence of the European Court of Justice (Caporaso and Tarrow 2009). Although they did not use the term “embedded neoliberalism,” other political economists have made similar arguments about what realexisting neoliberalism actually means in the European context (Scharpf 2002; Martin and Ross 2004; Hermann 2007; Jones 2013). The term “embedded neoliberalism” also diffused into scholarship dealing with semiperipheral contexts such as Eastern Europe and Latin America. Signal here was the work of Dorothee Bohle and Bela Greskovits (Bohle 2006; Bohle and Greskovits 2007, 445– 448; 2012), who defined embedded neoliberalism as a state- mediated form of social protection7 granted through downward social distribution via the welfare state, as well as through “sheltering inherited domestic and new transnational industries by tariffs, subsidies and special regulations.” In such regimes, while tensions abound in the space between social demands for equality and corporate demands for efficiency, and between the macrostrategies of governments and the micrologic of firms, politics in the age of 9 neoliberalism is still about what kind of compromises can be negotiated. As Jonathan Hopkin and Mark Blyth put it, after looking at several metrics of embeddedness across core and semiperiphery countries. “The choice is not simply to embed or not to embed the market. Markets can be embedded in quite different ways and with different consequences for efficiency and equality. In countries where markets are heavily regulated, both efficiency and equality are difficult to achieve because regulatory arrangements entrench privileges and rentseeking opportunities that systematically favor some groups over others, while burdening the economy with deadweight costs. Where regulation is more market- conforming but markets are embedded through extensive equalizing social transfers, greater efficiency is achieved alongside high equality.” (Hopkin and Blyth 2012, 18). Building upon this work, this paper makes a twofold contribution to these contemporary Polanyian perspectives. The first is to underscore the importance of analyzing the redistribution-embeddedness nexus under neoliberalism when we try to identify the nature of different neoliberal projects. At the center of this endeavor is the repurposing of the state, not its destruction. If Polanyi is right and markets must always be embedded to acquire a modicum of stability, the first task of comparative analysis is to focus on acute trade- offs in moments of domestic economic transformations such as crises. Specifically, if in a specific national policy regime those trade- offs are generally resolved using ideas that maximize the policy space for downward distribution of income and opportunities to compensate society against market dislocations, then, on balance, we are talking about embedded neoliberalism. The downward distribution of opportunities takes place via public health and education and of income via progressive taxation, labor laws, unemployment, and parental and old age benefits, to name but a few. A government’s espousal of the economic ideas that engender such policies and institutions without abjuring the principles of credibility, openness, and competition is understood in the book as measures of embedded neoliberalism. If, on the other hand, policy trade-offs are generally resolved in favor of upward redistribution of income and opportunities (i.e., toward high- income groups and corporations), reshaping the world so as to benefit predominantly their interests while hurting those of lower- income groups, then we are talking about disembedded neoliberalism. Examples include tax cuts that benefit predominantly the higher income percentiles, the political disempowerment of labor union organizations while empowering organized capital, guaranteeing the balance sheets of banks in times of financial crisis, making new markets by privatizing pensions and public services, and so on. Rather than see in social policy a means to compensate society against the adverse effects of the market, the advocates of disembedded neoliberalism see it as just another instrument to stimulate entrepreneurialism by reproducing usable skills. This is an eminently interventionist state, not the minimalist night watchman of libertarian mythology. Empirical studies show that the hallmarks of neoliberalism (trade liberalization, financial liberalization, and macroeconomic orthodoxy) can coexist alongside protectionist measures for local or new transnational industries (Bohle and Greskovits 2012; Kurz and 10 Brooks 2008). But the existence of such measures is not a marker of embedded neoliberalism unless their social purpose is to redistribute the wealth and opportunities produced by the protected industries in order to ensure social cohesion by generating employment opportunities. For example, in Nordic countries, neoliberalism was embedded via strong and universal safety nets accompanied by institutionalized inclusion ensured via democratic neocorporatist systems. In pre- 2010 Southern Europe, embeddedness mixed universal (albeit not very generous) social welfare systems that benefitted all citizens, state- led corporatism and regulated markets that privileged insiders. In the case of Eastern Europe, the dominant form of embedded neoliberalism is exemplified by the case of the Visegrad countries (Hungary, Poland, Slovakia, Slovenia, and the Czech Republic), where economic protectionism for domestic and new transnational corporate sectors coexisted with relatively encompassing systems of social protection, albeit not institutionalized inclusion for all labor sectors. In Slovenia, economic protectionism for domestic firms was merged with one of the most encompassing social welfare and democratic corporatist systems in Europe. In the Baltic countries and Romania however, the ruling ideas tend to be, on balance, of the disembedded neoliberal kind. This is because pivotal policy elites espouse predominantly privatized safety nets and market- based labor relations alongside forms of upward redistribution in favor of new transnational corporate sectors and highincome skilled workers at the expense of lower- income groups. The second contribution is to explore the more indirect possibilities of neoliberalism’s embeddedness, not just the direct ones that the existing literature refers to (economic protectionism and social welfare). In doing so, this book challenges the conventional assumption that neoliberal macroeconomic policy is a form of pure orthodoxy and that embeddedness can only be deployed via direct industrial and social policies. For example, a careful look at real- existing neoliberalism(s) shows that monetary and fiscal policies can provide social and economic protection, albeit in indirect ways . Regarding monetary policy, the central banks of the United States and some noneurozone member states (e.g., the UK and Hungary) used economic theories whose implementation shielded their citizens by devaluing currencies and even monetizing state debt. This external devaluation eased pressure on the need to resort to cuts in wages and unemployment benefits as a way to increase exports (i.e., internal devaluation). Conversely, if the export sector is energy intensive, it is currency appreciation that fulfills the same function. When governments face public debt difficulties, national central banks can provide temporary relief by (indirectly) monetizing public debt and acting as a supportive foreign exchange agent for the government, thus preventing the spending cuts that usually fall on social welfare spending (Gabor 2010; 2014; Johnson and Barnes 2015; Blyth 2013; Turner 2016). By specifying rules and limits (often of the numerical type) for when and how much fiscal expansion can take place, this approach remains distinctive from Keynesianism, where fiscal interventions are discretionary. At the same time, by endorsing the state’s responsibility for its overall level of economic activity, embedded neoliberalism is 11 different from ordoliberalism, where the state’s task is to provide stability and predictability (Plehwe 2009; Schmidt and Woll 2013; Nedergaard and Snaith 2014). To put some empirical flesh on the proposed definition consider the economic ideas dominating the knowledge regimes of Spain (directlyembedded neoliberalism), IMF (indirectly embedded neoliberalism) and Romania (disembedded neoliberalism). These two variants of neoliberalism will them be contrasted with a case where neoliberal ideas had been sidelined, at least for a while, by a neo-developmentalist hybrid (Brazil). When neoliberalism goes local Spain: Directly embedded neoliberalism Beginning in the 1970s, a group of Spanish economists who regularly switched hats between their roles as central bankers, academic mandarins, and government bureaucrats acted as the translators of neoliberal theories about fiscal, monetary, and labor market policy. But rather than replicate these ideas in whole cloth, they edited them with select Keynesian ideas about the distribution of the tax burden in society, ordoliberal ideas about the “social market economy,” and structuralist ideas about “industrial champions.” Indeed, some of the most radical propositions of the neoliberal revolution were edited out. Most importantly, Spain’s most influential translators of neoliberalism never embraced the New Classical thesis on the irrelevance of all countercyclical macroeconomic interventions. Several years before the new neoclassical synthesis sealed the compromise between New Keynesians and New Classicals, leading neoliberals sought a synthesis between Keynesianism, monetarism, and New Classical macroeconomics. In so doing, they did a grafting of neoliberalism on a social-democratic reading of German Ordoliberalism, with its ideas about the imperative of building a social market economy as a means to generate social peace and support for capitalism. Editing made it possible that the same government that was obsessed with the war on inflation threw subsidies at high achievers, bankrolled incentives for industrial diversification and put brakes on private mergers and acquisitions that threatened its stakes in industrial champions. Key neoliberal advocates tried to demonstrate the possibility of a synthesis between the ideas of the neoclassical-Keynesian synthesis, monetarism and rational expectations, a position that enabled the survival of progressive taxation and the resistance to supply-side tax policy in Spanish neoliberalism. Moreover, the same academic mandarins and policy gurus who proclaimed the end of neoKeynesianism also made the case for tax policies that were more an extension of the ideational consensus of “embedded liberalism” than they were reverberations of the supply- side tax theory du jour. There is no doubt that orthodox neoliberals would raise eyebrows at the argument that since market mechanisms alone are unable to deliver a robust catch- up economic performance, the state has to step in to invest in social services and social dialogue institutions, while also sheltering competitive domestic industries and banks deemed able to take Spain into the “First World.” Yet this was precisely the view that local policy economists endowed with impeccable neoliberal credentials when it was proposed (and implemented). Finally, through framing, neoliberalism was presented by leading Spanish economists as the natural sequel to the modernization of the national 12 economy, a process that was associated with two macrostabilization reforms adopted in 1959 and 1977, respectively. Neoliberalism indeed “went native” in Spain, and not always in ways in which most neoliberal economists would have approved at the critical juncture when this event took place during the late 1970s and through the 1980s. IMF: Indirectly embedded neoliberalism Select strands of Keynesian thinking deemed acceptable by mainstream economics today (Seabrooke et al 2015) can also embed neoliberal fiscal policy. The new doctrine of the IMF is that during recessions when interest rates are close to zero (making further monetary policy easing irrelevant) and the government has fiscal space (i.e., it does not struggle with high debts and deficits), the government should increase spending on highemployment infrastructure projects, social services, and tax relief for the lower rungs of the income distribution. In the medium term, the objective remains balanced budgets, and therefore as long as one acts within the fiscal space, one remains a neoliberal. If, however, the fiscal space is exhausted, then fiscal austerity has to be adopted to reassure investors (Ban 2015; van Gunten 2015; Moschella 2016). Again, because the neoliberal emphasis on financial market confidence is the ultimate arbiter of the conditions under which non- Keynesian ideas and policies can be deemed legitimate, such modifications remain within the domain of neoliberalism, albeit a neoliberalism of the embedded kind. While the disembedded neoliberalism of the pre-2008 IMF was sanguine about the positive effects on growth of spending- based fiscal adjustments introduced immediately (front- loaded), embedded neoliberals reject the expansionary austerity hypothesis and settle for the more jaded (tragic even) kind of perspective that austerity is a contractionary fiscal policy that one needs to adopt in order to avoid being locked out of sovereign bond markets because of the schizophrenia of bond investors. Furthermore, to cushion the effects of contractions, embedded neoliberals generally attempt to delay (or backload) austerity as much as market sentiment allows, promising medium- term fiscal adjustment frameworks in the meantime. Even if market sentiment is hostile, embedded neoliberals are recognized for their determination to distribute the costs of adjustments progressively by balancing expenditure cuts with revenue increases, making public wage cuts weigh most heavily upon the highest earners and shielding benefit cuts against the most vulnerable (Ban 2015; Hinterleitner and Sager 2016; Lütz 2016). If, indeed, most of this fiscal revisionism comes from within the Fund, one can use content and organizational analysis to assess the strength of the revisionists in the hierarchy of this international financial institution. By looking at the bureaucratic positions of the hundreds of economists involved in this debate, it was demonstrated that revisionists had the support of the top brass and staffed the bulk of the research apparatus of the Fund, whereas the orthodox were squeezed in less consequential middle positions. It’s not enough to say that neoliberalism is a hybrid (Ban 2015). Romania: Disembedded neoliberalism Neoliberal ideas also went local in Romania, but not before they were subject to a neardeath experience. Unlike in Spain, after the end of authoritarianism there As a result, the 13 dominant voice in the corridors of power was that of elites who tried to graft select neoliberal ideas onto a robust local developmentalist one. The result was two varieties of neodevelopmentalism, one that was more open to the “core” of neoliberal transition economics and which shaped policy between 1990 and 1992, and another (in power between 1992 and 1996) that was more skeptical of neoliberalism and more invested in statist logics. The first postcommunist government grafted the orthodox goal of macroeconomic stabilization onto a developmentalist one: state- led industrial recovery. The second espoused ideas that entailed a set of arguments that endorsed such nonneoliberal ideas as the doubling of public investment, public purchases of domestic industrial goods, subsidized credit to industry, the defense of sectors considered strategic for industrial policy, capital controls to manage a dual exchange rate, and so on. When the IMF or the central bank pushed the neodevelopmentalists to decide between these two goals, they chose the developmentalist one. In effect, it was as if the neodevelopmentalists let unorthodox ideas devour the orthodox ones in the hybrid they created. In 1996, the neodevelopmentalists left the political scene for good, ushering in a generation of neoliberals. By the late 1990s and early 2000s, IOs, transnational research programs, and access to Western- licensed graduate programs provided the cause of neoliberalism in Romania with a critical mass of translators of neoliberal theories. These economists quickly took much of the neoliberal model as “fact,” but they also scrutinized some of its implications and wove together a network of conceptual relations between neoliberalism and other schools of thought (institutionalism, structuralism). The EU accession process from the early 2000s generally strengthened this neoliberal hybrid despite the purported “embedded” nature of neoliberalism at the EU level. Unlike in Spain, however, the result was a variant of neoliberalism that was much less concerned with balancing marketization and social protection than it was with maximizing the space for market mechanisms, with a smattering of state- protected corporate rents on the side. Its advocates radicalized some of the “classic” neoliberal positions on taxation, income redistribution, and industrial policy while facing no opposition from the EU. The structuralist tradition, for example, was used to bolster calls for a local version of neoliberal shock therapy that left very little space for protecting the economically disenfranchised. Also unlike Spain, where economists retained skepticism toward market-fundamentalist ideas culled from the margins of the international economics profession, in Romania such ideas were incorporated into mainstream economics as uncontested scientific facts, enabling the adoption of a very regressive tax regime. In so doing, Romanian elites often changed the “original” neoliberal text by grafting on it their own innovations, mixed it with alternative economic frameworks (institutionalism, structuralism), and worked to “black-box” the differences between neoliberal prescriptions for developed capitalist states and neoliberal transition economics. They also drew on domestic historical narratives and political frames to make neoliberal arguments resonate in a country that had not known economic liberalism. The result of this bricolage was a reading of neoliberalism that was in between the crude market 14 fundamentalism espoused in the region by Estonian president Mart Laar, and the “Third Way” neoliberalism pioneered by Spanish Socialists. Finally, the Romanian translators of neoliberalism bridged neoliberal skepticism about state ownership and intervention in the economy with postcommunist elite discourses that presumed communist cultural pathologies of Romanian workers. Such pathologies, the argument went, could only be remedied by harsh market discipline and foreign ownership of the industry. Brazil: neo-developmentalism In contrast to these varieties of neoliberalism, Brazil under the Lula and Rousseff presidencies illustrates a process whereby the neoliberal trinity of goals is broken and a new hybrid takes over. According to its advocates, neo-developmentalism entails a new form of state activism. Its core is a national capitalist development program meant to guide the transition of developing countries away from the policy thinking shaped by neoliberal economic thinking. The main goals of this program of national capitalist development is the achievement of full employment in conditions of price and financial stability, be it at the cost of compromises on competitiveness and openness. In terms of its intellectual lineage, neo-developmentalism shares a number of characteristics with ISI or ‘old’ developmentalism. The first is the assumption that the world economy consists primarily of nation states that compete with each other through their firms, an assumption that entails the espousal of varying degrees of economic nationalism. But rather than lead to some variant of ISI, in the case of neodevelopmentalism economic nationalism means the adoption of a development strategy that allows domestic firms to seize global economies of scale and technological updating processes, but also innovation policy and an activist trade policy targeted at strong intellectual property regimes and investment opportunities for domestic firms. The second commonality is an understanding of economic development as a structural process. This entails commitment to the mobilization of all available labor resources, increasing productivity in each industry and the steady transfer of finance to high wage and high value added sectors. On other fronts, the differences with old developmentalism are more marked. Unlike the protectionism and export pessimism of old developmentalists, neo developmentalists think that since middle-income countries have overcome the infant industry stage, protectionism should be scrapped and the goal of the open economy should be accepted as fundamental. This acceptance is predicated on important interventionist compromises, however. The goal of the open economy should be complemented by the goal of using industrial policy to increase the share of medium and high value added products and services. This is to be done through industrial policies targeted at firms judged to be able to compete internationally While there is no manifest consensus among neodevelopmentalists on the weight of market-conforming industrial policies versus market making ones, the Sao Paolo manifesto contributes to this debate by stressing the macroeconomic dimension of industrial policy. Drawing on a mix of post-Keynesian and structuralist thinking in economics, its signatories argue that ‘the demand side is where the major growth bottlenecks unfold’ and that ‘in developing countries there are two additional structural tendencies that limit demand and investment: the tendency of wages 15 to increase at rates below the growth of the productivity, and a structural tendency to overvaluation of the nominal exchange rate’ (Sao Paolo Manifesto, 2010). To address the first predicament they advise the adoption of increasing the legal minimum wage, cash transfers to the poor, and a government guarantee to provide employment at a living wage. And to address exchange rate overvaluation and fluctuations in market sentiment, neo-developmentalists suggest that economic development should be financed essentially with domestic savings. Finally, contrary to the old developmentalist complacency towards inflation, the neodevelopmentalists join the orthodox in upholding an unwavering inflation aversion. Yet, unlike the orthodox, neo-developmentalists think that this objective should not come at the cost of high interest rates. The goal of macroeconomic stability found in the Washington Consensus is complemented with a firm commitment to full employment and a more progressive distribution of income. The orthodox faith in untrammelled free trade is replaced with acceptance of capital controls, conservative foreign indebtedness ratios and the accumulation of domestic public savings in order to increase the investment rate. Based on these ideas, Brazilian policy elites built an incipient policy regime that recovered the state as a focal point in development, while staying away from the more heavy-handed and exclusionary aspects of ‘old’ developmentalism. On the macroeconomic front, the goal of macroeconomic discipline emphasized by the Washington Consensus has been maintained. Commitment to this goal has been particularly steady in monetary policy, where inflation-targeting and central bank independence remain central to Brazil’s macroeconomic policy regime. By contrast, the goal of full employment that has been so central to neo-developmentalism has not been brought on a par with macroeconomic discipline. Nevertheless, since 2006 fiscal policy has been edited with a complex array of policies aimed at expanding investment and aggregate demand, an important concern in neo-developmentalist macroeconomics. Moreover, during the economic crisis, the government used its control over federal public banks to run an off-the-books stimulus camouflaged as credit policy alongside an official stimulus package in order to help close the Keynesian “output gap” (Ban 2013). Dependent on high commodity and reliant on a crumbling set of institutions and constituencies, Brazil’s neo-developmentalism is currently being undone by a political coalition wedded to the economic ideas of disembedded neoliberalism. Conclusions This paper proposes a usable definition of neoliberalism that avoids its excessively narrow and broad definitions and, hopefully, the intellectual confusion that surrounds this popular term. As such, it focuses on economic theories and schools of thought as the core of neoliberal coordinative discourse, with Spain, the IMF, Romania and Brazil providing the main illustrations. By calling on political economists to engage more systematically with economic theory and history, the paper defines neoliberalism as a set historically contingent and intellectually hybrid economic ideas and policy regimes derived from specific economic theories whose distinctive and shared goals are financial market 16 credibility, trade and financial openness and the safeguarding of internal and external competitiveness. The main benefit of this definitional approach is that it closes the current gap between how political economists views the world of economics and how this world views itself. This is an important gain for political economists because it equips their political economy research with the disposition and analytical repertoire to interpret and quantify neoliberal economics as an elite coordinative discourse while specifying the translation mechanisms that explain its variation across time and space. The historical evidence suggests that neoliberalism does not lie on its deathbed every time its adherents in government face a crisis of legitimacy. For that to happen, its three goals (openness, competitiveness and credibility) must cease to be the fulcra of economic policy in core countries that have been neoliberalism’s historical originators and exporters. One can speculate that given the global centrality of Washington and its economic expert networks in the spread and resilience of neoliberalism worldwide, the election of Donald Trump and his promise to violate a central goal of neoliberalism (trade openness) may turn out to be as decisive for the erosion of this paradigm as the election of Ronald Reagan was for its ascent. Yet, if the thesis presented here holds any water and if the Trump moment is a harbinger of American decline, then one could anticipate that most of the rest of the world would probably move on, driven by the localized neoliberal hybrids cemented into place during America’s hegemonic decades. 17