Against the Success of Neoliberalism
Has the US Fed pissed in the swimming pool?
I’ve spent last night and this morning mulling over a piece by Richard Hanania on The Success of Neoliberalism. Gotta hand it to Richard: I like him and his work, and he is probably the only person who could have nearly convinced me of this.
Hence, his idea that neoliberalism was an extraordinary success has been living like a worm in my brain.
Now, sitting at the airport with a flight delay, I thought I’d throw my thoughts together about it.
Hanania’s Argument, in Short
Neoliberalism, Hanania says, wasn’t a con or a moral failure. It was a pragmatic response to the economic stagnation of the 1970s (stagflation, industrial rot, and bloated states).
Governments had grown too big; economies too sluggish. Into that vacuum stepped the market fundamentalists: Milton Friedman and his disciples at U Chicago (Coase, Becker, et al). Their idea was simple: get the state out of the way, let markets do the work, and prosperity will follow.
(I have to disclose, at the outset, that Milton Friedman was the ideological nemesis of Michael Porter, for whom I worked and admired. And not only in theory, but very abstractly in that they were extraordinarily adversarial with each other in real life, too.)
By Hanania’s telling, it worked. The neoliberal “revolution” (first with Reagan and Thatcher, then Clinton and Blair) replaced the Keynesian, government-led order and gave us a quarter-century of steady growth, low inflation, and fewer recessions. He calls this the “Great Moderation.” Western economies stopped convulsing every few years. The US and UK outgrew continental Europe.
Even developing nations that embraced market liberalization (India in 1991, China post-1978, Eastern Europe after the fall of communism) saw their fortunes rise. Poverty fell. Growth soared. The message: markets deliver. Neoliberalism is an overwhelming force of good.
Critics of neoliberalism, Hanania argues, have it backward.
The populists and progressives who now curse neoliberalism are not reacting to economic failures but to cultural dislocation (e.g. loneliness, alienation, moral drift), none of which, he says, are economic problems in the first place.
Neoliberalism fixed the material world; we just moved the battlefield elsewhere, to culture wars and identity politics. And it is not the job of economics to solve these problems.
If anything, he suggests, neoliberalism worked too well: it made us rich and stable enough to get bored of economics. The only serious counterexample he admits is immigration, a genuine political clash between market logic and cultural preference. Everything else, he says, is misdiagnosed nostalgia.
His conclusion is clear:
Neoliberalism succeeded on its own terms: taming inflation, reviving growth, and globalizing prosperity.
Its critics mistake correlation for causation, blaming it for ills it didn’t create.
If there’s a problem today, it’s not that we’ve had too much neoliberalism, but that we’ve drifted from it, through overregulation, protectionism, and the reawakening of state intervention.
In short: Neoliberalism won. We just became ungrateful.
From Success Story to Systemic Mirage
It’s a tidy story, and an appealing one. I’ll admit, for a moment, I had perhaps thought I believed wrongly of neoliberalism for too long.
Hanania’s logic is clean with compelling evidence. Neoliberalism was the medicine for a real crisis, in that it applied its cure, and the patient got better. But the longer I thought about it, the more I moved away from his points.
Against the Great Moderation: Volatility Suppression as Risk Migration
Hanania celebrates the “Great Moderation” as proof that markets, once unshackled from the claws of government inefficiency, self-stabilized.
But the so-called calm was less an economic triumph than a… thermodynamic trick?
A complex system that appears tranquil is often one that has externalized its turbulence.
Neoliberalism didn’t eradicate volatility; it relocated it: from visible, cyclical downturns into invisible balance-sheet fragility.
As I’ve written about recently, deregulation and leverage didn’t erase risk; they buried it in shadow systems: off-balance-sheet vehicles, repo markets, derivatives, and synthetic credit.
The post-1980s financial order didn’t abolish crises; it merely changed their tempo.
Yes, there have been fewer crashes, as Hanania says, but only because each one now absorbs the energy of all the smaller ones that never happened. The “Great Moderation” was not a peace treatise on shocks; rather it is a fucking pressure cooker.
Where mid-century capitalism released tension through frequent, shallow recessions, neoliberalism engineered a structure where imbalances accumulated silently until they could only be purged through catastrophic collapse.
That’s why 2008 wasn’t an outlier, contrary to Hanania’s claim. It was the logical endpoint of a system designed to suppress volatility until it became existential.
Shadow banking functioned as the circulatory system of that illusion: a vast, unregulated labyrinth that multiplied leverage and disguised fragility as liquidity.
Neoliberalism didn’t tame capitalism’s chaos. It delayed it, and made sure that when it came, it would be lethal.
Against the Myth of the Self-Regulating Market: The Hidden State
Hanania claims neoliberalism shrank the state and empowered the market.
But in reality, it did nothing more than re-centralized sovereignty inside central banks.
What disappeared was not government power but its democratic visibility.
Fiscal politics (taxation, wages, redistribution) gave way to monetary governance: interest-rate signalling, liquidity management, and asset-price control.
This is an extremely important, and mostly undiscussed, fact of our contemporary governance structure.
The Keynesian welfare state quietly mutated into what Wolfgang Streeck calls a consolidation state: a regime whose true constituency is not citizens but bondholders. Bonds! Remember those?!
Every downturn became a liquidity event; just as every bailout became a precedent. (And if you’re not mad about this, then you’re sleeping at the wheel: WAKE UP!).
The market’s survival depended on continuous intervention: rate cuts, quantitative easing, swap lines. The invisible hand, it turned out, had a central-bank wrist. And was wearing a Patek Philippe.
As Hyman Minsky warned, stability itself breeds fragility. Neoliberalism didn’t abolish socialism; it nationalized risk for the investor class. Austerity for the rest of us. Increased competitiveness for firms, but rescue for capital.
The state didn’t retreat from the market; it moved inside it! What Hanania calls freedom was really the financialization of sovereignty, a world governed not by voters but by the yield curve.
Against the Global Success Story: Fragility as American Export
Hanania points to countries that embraced neoliberal reforms (e.g. India, China, and post-Communist Europe) as evidence that the model lifted billions from poverty. And then he asks: if neoliberalism were so destructive, why do even its critics, countries that never fully adopted it, suffer the same social malaise?
Surely this is indicative of the larger point: neoliberalism was never the problem.
But the answer is simpler, and darker: there is no “outside” to the neoliberal system.
Once monetary power consolidated inside the US Federal Reserve (as I’ve just outlined) and the dollar became the world’s settlement layer, neoliberalism stopped being a set of policies and became the medium through which the global economy breathes.
It ceased to be an ideology that one could pick or choose, and became infrastructure: the water everyone swims in, whether they believe in it or not.
Every tightening and loosening of US monetary policy sends shockwaves through global credit markets. The IMF’s “reform” packages exported not liberalism but liquidity dependence (à la weaponization), forcing nations to open capital accounts, privatize assets, and peg themselves to the dollar’s existence.
What looked like voluntary reform was really monetary colonization (Oh no! Not the “c” word!): a world economy governed by a single balance sheet in Washington.
So when Hanania asks why even “non-neoliberal” societies share neoliberal pathologies (asset bubbles, inequality, alienation, social upset) the answer is that they’re all drinking from the same pool.
And as we all know… once someone pisses in the swimming pool, everyone’s swimming in it.
India, China, Brazil, Poland, each adapted the script to local circumstances, but the operating system never changed. The global order is dollarized, the safety net is the Fed, and the raison d’être is liquidity.
Neoliberalism didn’t win by persuasion; it won by plumbing. And the Fed has the strongest plumbing in the world.
Against the Demand for Proof: Economics as Blind Epistemology
Hanania says critics can’t prove that neoliberalism caused fragility or despair.
Perhaps. But only because economics, as currently constituted, is really fucking dumb. It totally lacks the instruments to see it.
As I’ve written before, the discipline’s models are Newtonian: they assume equilibrium, linear causality, rational agents, and ergodic time. Everything is optimized toward a stable mean. That works fine for predicting the trajectory of a billiard ball; less so for the metastable dynamics of a globalized credit system.
Economics is built to measure first-order variables like inflation and output, not to track how policy decisions echo through balance sheets, feedback loops, and social psychology decades later.
When the system under study is reflexive (when agents change behaviour in response to the model itself) the model collapses entirely. It cannot compute!
This is precisely what neoliberalism produced: a hyper-reflexive environment where markets trade not on fundamentals but on the expectation of policy response. Standard macro can’t detect the pathology because it is part of it. (I hesitate the use the “p” word here… ponzi. But…?)
If you gave the same problem to physicists or ecologists, they’d recognize it instantly: a complex adaptive system suppressing small shocks until a phase change blows the whole thing apart.
The proper analogies aren’t from Friedman or Samuelson but from Prigogine’s dissipative structures, Lorenz’s strange attractors, or Holling’s adaptive cycles in ecology.
Alternative tools already exist, the problem is that they live outside economics:
Agent-based modelling can simulate the emergent behaviour of millions of heterogeneous actors, revealing how leverage or herd psychology create tipping points.
Network theory can map financial interdependence, showing how a single node’s failure (Lehman, Evergrande) propagates across an entire system.
Complexity economics (Santa Fe Institute, W. Brian Arthur) abandons equilibrium altogether, treating markets as evolving ecologies rather than machines.
Nonlinear dynamics and percolation theory can model liquidity crises as phase transitions rather than random shocks.
The point isn’t to romanticize physics; it’s to recognize that the economy behaves more like weather than like geometry. When Hanania insists that the burden of proof lies with critics, he’s assuming a science capable of perceiving what’s at stake. It isn’t.
The absence of proof isn’t vindication.
It’s a failure of instrumentation: a willing (and orchestrated!) blindness built into the discipline that prizes neoliberalism as its masterpiece.
Against the Verdict of Success: The Calm Before the Quake
Hanania concludes that neoliberalism “worked.” But what if it merely deferred collapse?
It bought forty years of calm by stacking risk beneath the floorboards (sovereign debt, climate externalities, asset inflation, and institutional exhaustion).
The apparent stability of the neoliberal era wasn’t peace; it was pressure management. Each cycle of rescue and reflation only transferred fragility upward, concentrating it in ever-larger institutions, ever-more-indebted states, ever-thinner margins of error.
The ideology that promised to depoliticize economics has delivered permanent crisis management. We no longer govern markets; we conduct them. Crisis to crisis, bailout to bailout, liquidity drip to liquidity drip.
The state that was meant to wither away now lives on a ventilator of its own making.
Neoliberalism didn’t end the cycle. It stretched it to breaking point! Fewer crashes, yes, but each one more existential than the last.
The next failure will not be a downturn; it will be a systems event.
Hanania calls that success, sure.
But I suspect instead that neoliberalism will be remembered not for how long it lasted, but for how suddenly it didn’t.